Research Seminars

This paper analyzes the link between effort and distributive preferences in an environment, in which effort does not affect the amount to be distributed. We propose a model that suggests that such a link is bidirectional. People adapt their distributional choices to their performance in a self-serving way, but they also exert effort in line with their distributive preferences. The literature has documented a link running from effort to distributive preferences. We provide evidence of the reverse relationship: individuals who make egalitarian choices later make less effort than people who behave selfishly. Our results thus provide one explanation for self-serving assessments of fairness documented in the literature and place distributive preferences among the determinants of effort and productivity.

Abstract: In this project, we aim to experimentally examine the trade-off between the loss of information and the loss of control that arises in organizations when subordinates are granted decision-making authority. Employees' discretion over the choice of a project is often justified in that it may allow the organization to make use of the employee's superior information about the right course of action. These benefits may be undermined by (i) the existence of a conflict of interest between the employer and the employee; (ii) the parties' inability to write a complete contract. The employer may be concerned about the loss of control, which arises when the employee abuses his authority to make decisions that are not in the best interest of the organization. The organizational optimal response will be that of limiting the agent's discretion, thereby giving rise to a loss of information, namely in some occurrences, the organization cannot make use of the agent's superior information. We argue that limiting the employees' discretion may signal the employer's distrust and may bring about a non-material loss to the employees, making them willing to retaliate by making suboptimal choices. Anticipating this, the employer may decide to grant the employees full discretion, signaling her trust in the hope that the employees will pursue the common good.
(Joint work with Philip Brookins, Claudia Cerrone and Alessandro De Chiara.) 

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Abstract: The effects of research and development (R&D) subsidies on patenting are heterogeneous in nature. Moreover, endogeneity caused by a multi-step selection of grant applicants makes empirical evaluation difficult. We use a unique dataset on the evaluation of grant applications and a novel instrumental variable identification strategy, which originates from the grant evaluation process. WE estimate the causal effects of R&D subsidies in the Czech Republic over 2011-2014 on patenting in the next three years. We exploit the random assignment of experts, who evaluate grant applications, and their leniency to give higher scores as an instrumental variable. As a result, we show that R&D subsidies have a strong positive mid-term effect on the propensity to apply for patents and the number of patent applications. R&D subsidies lead to the patent applications of higher quality, i.e. firms are more likely to apply for patents of invention than utility models. The main findings are driven to a large extent by firms with higher prior research intensity.

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We provide a new measure of work motivation and show that motivation shapes the effects of team incentives and observation by peers on performance. In particular, we measure motivation to work hard as the deviation from the money-maximizing benchmark in a real-effort experiment. While we find that average output increases in response to team incentives and observation, we find that highly motivated workers do not respond. The reason is that highly motivated workers already work hard and increasing effort even further is very costly to them.

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This paper examines the impacts of extremely hot and cold days on mortality in Russia, using a 25-year regional panel data. Unlike other studies, the sequence of those extreme days is also taken into account, that is, the impacts of both single and consecutive (i.e. heat waves and cold spells) extreme days are estimated simultaneously. We demonstrate the importance of accounting for the sequence of extreme days. We also disentangle the impacts of those extremes by age and gender. The findings suggest that single hot days increase mortality, while single cold days do not affect mortality. On the other hand, both consecutive hot and consecutive cold days increase mortality in females and males for all age groups, although males are affected more severely. Overall, consecutive days with extreme temperatures impose considerable costs to society in terms of years of life lost. Thus, ignoring the sequences of extreme days that are likely to increase in the future because of climate change may have critical implications for mitigation policies.

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Abstract: Regulatory investigations by Self-Regulatory organizations (SROs) have been recognized to usually be cheaper than investigations by the government. However, in practice, oversight by an SRO is mostly still supplied with forms of governmental oversight. The government may exert oversight over the SRO itself, a construction referred to as “meta-regulation" or "co-regulation", or over the members of the SRO. Indeed, the overall performance of SROs has been mixed and theoretical models show that SROs have incentives to set lax standards or cover up detected violations. However, some research indicate that meta-regulation, oversight of the SRO itself, may nonetheless not be necessary in some settings. Using a costly-state-verification model, DeMarzo et al. (2001; 2005) show that when the government implicitly threatens to perform additional investigations of the SROs members, a relatively "good" outcome can be established as an equilibrium. In this "good" outcome, the SRO chooses to follow high performance standards in order to pre-empt any of the (relatively costly) governmental investigations. As a result, no costly governmental investigations of the SRO's members take place, and no meta-regulation of the SRO is necessary.
I extend this model to include plausible settings where the actual rigor of oversight by the SRO can be verified only ex-post. I show that in such settings, the SRO may have incentives to announce stricter regimes than it effectively implements and that, as a result, a "bad", Pareto-inefficient outcome is established as an equilibrium. In the "bad" outcome, the SRO relinquishes all oversight to the government. The predictions of this model are supported by experimental tests. The "good" equilibrium can be re-established as an equilibrium with sufficient meta-regulation of the SRO. The results thus indicate a continuing need for meta-regulation in these settings. This form of meta-regulation may be of a relatively light-handed nature, limited to verifying and sanctifying that the SRO implements its announced policies.

In this project, we investigate the effect of children’s development on parental labor market outcomes. Using an instrumental variable approach and accounting for sample selection, we find that mothers of boys with development difficulties (but not fathers) significantly reduce weekly working hours during the first three years of school. In contrast, mothers of girls with development problems reduce working hours only during the first year of school but increase their hours later on. We find that the reduction in working hours is associated with a fall in weekly earnings, although our estimates lack precision. Investigating potential channels, we find evidence that mothers increase the general time spend with their children as a response to reduced working hours. We do not find evidence, however, that the extra time is of higher quality.

We ran a population-level randomized field experiment to ascertain whether a costless manipulation of the informational content (restricted or enhanced information) and the framing (gain or loss framing) of the invitation letter to the national breast cancer screening program affects the take-up rate. Our experiment involved more than 6,000 women aged 50- 69 targeted by the screening program of the Province of Messina in Sicily, randomly assigned to receive different invitation letter formats. Using administrative data from the Local Health Authority archives, we show that giving enhanced loss-framed information about the risks of not having a mammography increases take-up rate by about 25 percent with respect to all other treatments (no information; restricted gain-framed information; restricted loss-framed information; enhanced gain-framed information). Results are stronger for subjects living farther away from the screening site. For them, the manipulation may indicate higher perceived risks of negative outcomes that makes it worthwhile to participate in the screening program, in spite of longer travel time.

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In this paper we study the effects of acute stress on individual financial speculative behavior using a controlled laboratory experiment with 208 men and women. We employ a recently introduced measure that captures individual speculative behavior, the Speculation Elicitation Task, and an efficient stress-inducing procedure, the Trier Social Stress Test for Groups, and we pay special attention to the gender-specific effects. Our design allows for a separation of the main channels behind the treatment effects. We observe strong gender differences: The treatment – stress-inducing – procedure increases men's willingness to speculate compared to control men, but it decreases it for women by about the same amount. As we do not observe any change in the task-specific risk-preferences, concentration, and only a little change in the strategic expectations of shift in others' behavior and in beliefs, we conclude that the behavioral change is driven by the change in preferences, although in the opposite directions for both genders. The analysis of salivary cortisol and subjective mood shows that the subjects were under a considerable level of stress.

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Year 2018 marked the 40th anniversary of the first ever Tax Evasion Game published in the Journal of Public Economics by Friedland, Maital, and Rutenberg. This game has since been the subject of many other publications (more than 140 articles). In the present study, we collect more than 60 datasets recreating a Tax Evasion Game and run a meta-analysis on more than 220,000 observations and 15,000 subjects. The aim here is to set the impact of three types of variables (public policy, experimental context and sociodemographic of participants) on lab tax compliance.
The public policy variables are: tax rate, tax regime (progressive or proportional taxes); type of audit (endogenous or random audit); audit probability; fine size, and amnesty. The experimental variables are: framing of the experiment (loaded or not); way to ask for compliance in the instructions (relaxed or not); origin of income (earned or windfall); nature of income (self-employed or salaried job); redistribution to participants, public good fund, and pool of subjects (students or taxpayers). The sociodemographic variables are: age; gender; income; and studies.

What makes couples with daughters more likely to divorce than couples with sons? Using Dutch registry and U.S. survey data, we show that daughters are associated with higher divorce risks, but only when they are 13-18 years old. These age-specific results rule out explanations involving overarching son preferences and selection. Our findings are consistent with causal mechanisms involving relationship dynamics in families with teenage children. Survey evidence buttresses this interpretation. Subsample analyses show that the magnitude of the effect is linked to parental gender norms and that the effect is absent for fathers who grew up with sisters.

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Mathias Czaika is a Professor in Migration and Globalisation at Danube University Krems in Austria. Mathias was formerly Director of International Migration Institute (IMI) at the University of Oxford in the UK.

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Whether it is copyright infringement, hate speech or terrorist content, Internet intermediaries like Facebook, Twitter or YouTube are expected to essentially do the government's job -- enforcing the law. The legal scheme under which a lot of such delegated enforcement takes place is often referred to as notice \& takedown. According to empirical evidence, it leads to over-notification, over-compliance by providers and under-assertion of rights by affected content creators. We re-create these existing problems in a laboratory and then test a mechanism to address two of them: the overcompliance by providers, and the lack of complaints by creators. Through experiment, we show that our proposed solution gives more power to the users, who realize higher profits due to an improved accuracy of providers' assessment of content and leads to a significant reduction in over-compliance by providers.

We experimentally examine the effects of varying time pressure on the likelihood that two players coordinate on a label salient focal point in a coordination game. We consider both payoff-symmetric and payoff-asymmetric coordination games. In symmetric games there are no effects of time pressure on overall earnings and efficiency, since almost everyone coordinates on the focal point, regardless of how much time they have to decide. In asymmetric games we observe that higher time pressure only weakly significantly increases overall coordination, but it becomes significantly more likely that any coordination is on the focal outcome, so changes in time pressure also affect the distribution of the surplus.

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This paper studies the long-term effect of radiation on cognitive skills. We use regional variation in nuclear fallout caused by the Chernobyl disaster in 1986, which led to a permanent increase in radiation levels in most of Europe. To identify a causal effect, we exploit the fact that the degree of soil contamination depended on rainfall within a critical ten-day window after the disaster. Based on unique geo-coded survey data from Germany, we show that people who lived in highly-contaminated areas in 1986 perform significantly worse in standardized cognitive tests 25 years later. This effect is driven by the older cohorts in our sample (born before 1976), whereas we find no effect for people who were first exposed during early childhood. These results are consistent with radiation accelerating cognitive decline during older ages. Moreover, they suggest that radiation has negative effects even when people are first exposed as adults, and point to significant external costs of man-made sources of radiation.

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On its websites WageIndicator invites web visitors to complete a survey on work and wages. This multi-country, multilingual survey is posted continuously in all 92 countries with a national WageIndicator website. These websites are frequently visited by people looking for information about wages, labour law, collective agreements, and alike (almost 40 million visitors in 2017). The data of the web survey has been used to analyse a range of topics. A study of health workers showed that the main migration pattern is to countries where the same language is spoken, followed by migration to neighbouring and former colonizing countries. Out-migrated health workers earn more and work fewer hours than comparable workers in source countries. Another study showed that wage dispersion among observationally similar workers is due to the intensity of tasks within occupations, though workers in high-wage occupations are less defined around a typical worker than those in other occupations. Other findings relate to variation in collective bargaining coverage, the gender pay gap, the structure of minimum wages around the world, self-identification of occupation in web surveys, and an informality-index for Sub-Saharan countries.

Bio: Prof. Kea Tijdens is a research coordinator at the University of Amsterdam/Amsterdam Institute for Labour Studies, and a scientific coordinator of WageIndicator Foundation.

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Prisoners are often stigmatized after their release which contributes to recidivism. However, little is known if and how much their beliefs are affected already before release: if a feeling of stigma arises during incarceration. In a lab-in-the-field experiment, we study if inmates expect to be stigmatized by people outside of prison in a standard trust game (and triple dictator game) and if it is reflected in their trustworthiness. Next, we test if a light-touch psychological intervention — self-affirmation — can mitigate the assumed impact of stigma, looking at the role of risk preferences and competitive confidence. In both games, senders are non-prisoners and receivers are 297 inmates from fifteen medium to high-security Czech prisons. We manipulate if the prison identity is revealed to senders or not, and inmates interact with both types in a within-subject design. Contrary to our expectations, inmates do not feel stigmatized as they expect to receive a higher transfer in the trust game when their prison identity is revealed. It can be fully explained by higher expected altruism in the dictator game. Inmates, however, do not send back more when their identity is revealed. Looking at the heterogeneity across types of prisoners, inmates not participating in any long-term prison-provided treatment drive the differences in beliefs. Unsurprisingly, self-affirmation does not affect trustworthiness nor beliefs when stigma is absent. Our results point to a more nuanced view on the stigmatization of prisoners: even though prisoners may expect statistical discrimination, they do not expect taste-based discrimination.

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Economists have found mixed evidence on what happens when the number of police increases. On the one hand, more law enforcers means a higher probability of detecting a crime, which is known as the monitoring effect. On the other hand, criminals incorporate the increase into their decision-making process and thus may commit fewer crimes, constituting the deterrence effect. This study analyzes the effects of an increase in the number of on-field college football officials, taking players as potential criminals and officials as law enforcers. Analyzing a novel play by play dataset from two seasons of college football, we report evidence of a monitoring effect being present in the overall dataset. This effect is mainly driven by offensive penalties which are called in the area of jurisdiction of the added official. Decomposition of the effect provides evidence of the presence of the deterrence effect in cases of penalties with severe punishment or those committed by teams with moderate to high ability, suggesting that teams are able to strategically adapt their behavior following the addition of an official.

Paper

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Abstract: Although little is known about the support for gender quotas in hierarchical relationships, they are implemented in many organizations. We conduct a representative survey and a novel set of laboratory experiments to study opinions on gender quotas for managers and how they influence wage setting and worker effort. Our findings reveal that opinions and workplace reactions depend on the environment in which gender quotas are introduced. In our survey, we observe that the approval rating of gender quotas is low if there is no disadvantage against women in the manager selection process, even if they address gender differences in performance. Complementing this evidence, in our experiments we observe that quotas in such environments lead to lower wage and effort levels. However, in an environment where women are disadvantaged because of a biased selection process, we observe a high approval rating for quotas and that they increase wage and effort levels. Our results suggest that it is important to evaluate the existence and nature of disadvantage in the specific labor market before implementing gender quotas.

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Abstract: I compare lying behavior in a real-effort task in which participants have control over outcomes and a task in which outcomes are determined by pure luck. Participants lie significantly more in the random-draw task than in the real-effort task, leading to the conclusion lying about luck is intrinsically less costly than lying about performance.

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Abstract: Buyers are often concerned about the adequateness of the design of the goods they procure. To reduce the probability of a design failure, buyers may try to motivate the sellers to make relationship-specific investments. In this paper I study how courts’ decisions affect sellers’ cooperative investment and buyers’ specification of the good. In assigning liability for a defective design, in some countries courts examine how much real authority the seller had in performing the work, instead of considering how formal authority was contractually allocated between the parties. I show that this approach induces the sellers to invest, albeit suboptimally, but leads the buyers to inefficiently under-specify the design of the good. I find that this approach can also make it harder to sustain optimal relational contracting, leading to the conclusion that it cannot be justified on efficiency grounds.

Paper

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Authors: Martin Adler (VU Amsterdam), Stefanie Peer (WU Vienna), Tanja Sinozic (ITA, Vienna)

Abstract: This paper aims at providing an overview of the public finance implications of autonomous-connected-electric and shared vehicles (ACES). Fuel and vehicle taxation currently generate 5-10% of federal and up to 30% of local tax revenue in OECD countries. The pending introduction of ACES is expected to have significant impacts on (among others) fuel consumption, travel demand, and car ownership structures, infrastructure requirements, and as a consequence also on fiscal revenues and expenditures. We argue that the increased demand for mobility due to the availability of affordable ACES will render the introduction of targeted taxes in line with ‘user pays’ and ‘polluter pays’ principles necessary, and also feasible, through the digitalization of mobility systems and other innovations such as ubiquitous GPS tracking of vehicles. Moreover, we emphasize the (changing) relevance of different governance layers: with targeted taxation schemes and declining federal tax revenues from fuel, registration and circulation taxes, local governance entities are expected to increase in relevance. 

The ability of a tax authority to successfully collect taxes depends critically on both its relationship with the taxpayers and how strongly these taxpayers are committed to contributing to the common good. We present evidence on a new non-intrusive approach aimed at fostering the commitment to pay taxes. Using a between-subject design in a unique field setting, we experimentally test whether tax compliance can be increased by linking a voluntary promise of timely payment to a reward. We measure the change induced by an additional compliance promise through identifying the pure reward effect. We find that although previously compliant taxpayers are more likely to make a promise, the commitment to do so can improve payment behaviour. This effect, however, is strongly dependent on the type of reward to which the promise is linked. Compliance only increases when the reward is non-financial. No compliance effect is observed if cash is offered in return for promise fulfillment.

Link to paper: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2887289

(Coffee and cake will be available from 13:45 with the seminar starting promptly at 14:00)

Abstract: In the context of ongoing discussion on the changing nature of union power resources, this presentation will discuss selected trade union strategies adopted in Poland in the last decade with an aim of increasing their associational and (to the extent it was possible) structural power resources and, by these means, to reinforce their positions as the actors of industrial relations. The reference point for the lecture will be selected observations derived from the EC project PRECARIR and NCN-DFG project PREWORK both tackling the issue of the growth of precarious work in Poland from the perspective of workers and unionists themselves. The lecture will start from an overview of trade union situation in Poland in the context of: (a) the political-economic regime and its evolution after 1989 and, in particular, in the last decade, against the comparative background of selected other Central and Eastern European countries; (b) the labour market changes, in particular the spectacular rise of temporary Labour Code and non-Labour Code contracts; (c) the changes of  workers’ attitudes towards trade unions as documented by existing surveys and authors’ own research. In the main part of the lecture, I will discuss selected innovative union practices in Poland, including trade union organizing of precarious employees, mass media campaigns, street protest  (worker-citizens) actions and  making use of political instruments to better regulate employment conditions of precarious workers. Again, selected examples from other CEE countries will be given as the context for the discussion of the Polish case. In concluding discussion, I will attempt to assess intended and unintended outcomes of union practices with regards to the collective situation of workers, the position of trade unions and the political impact of union strategies in the country.

https://scholar.google.com/citations?user=SEK3hv4AAAAJ&hl=en

As a consequence of World War II, Austria was divided into four different occupation zones for 10 years. Before tight travel restrictions came into place, about 11 percent of the population residing in the Soviet zone moved across the demarcation line. We exploit this large internal migration shock to further our understanding of why economic activity is distributed unevenly across space. Our analysis shows that the distorted population distribution across locations has fully persisted until today (60 years after the demarcation line become obsolete). An analysis of more direct measures of economic activity shows an even higher concentration in the former non-Soviet zone. This gap in economic activity is growing over time, mainly due to commuting streams out of the former Soviet zone. This shows that a transitory shock is capable of shifting an economy to a new spatial equilibrium, which provides strong evidence for the importance of increasing returns to scale in explaining the spatial distribution of economic activity.

Link to paper: https://econpapers.repec.org/paper/innwpaper/2016-23.htm

Every organization rests on hierarchical structures. In organizations hierarchies are essential to structure and delegate which agent is responsible for which kind of task, but also which agent in the organization is required to report to other members of the organization. In the present study, we experimentally study reporting behavior in three-person coordination games. Subjects report the outcome of a private die-roll to their group. If all three reports are identical, payoffs are realized. We vary the reporting hierarchies, i.e., whether all subjects report simultaneously, as in flat hierarchies, or sequentially, as in steep hierarchies. We observe the highest levels of dishonest overreporting in flat reporting hierarchies. Our results show that honest leaders in steep hierarchies can induce honest follower behavior. In additional treatments, we investigate different motives for leaders to behave honest. Taken together, our results highlight the critical role of reporting hierarchies and leadership in shaping honesty in organizations. 

We study how the availability and use of an institution a financial sanction affects trust, trustworthiness, and moral intentions towards co-ethnics and non-co-ethnics using an economic experiment run with 420 adult males from peri-urban areas in Afghanistan. In contrast to previous studies on the behavioral effects of financial incentives, our subjects have little experience with formal institutions. We use a trust game with a requested back-transfer in which the investor can choose to impose a financial sanction for non-compliance. The sanction is costly to the trustee but cost-less to the investor. While sanctioning increases back-transfers in cross-ethnic pairs, it does not in co-ethnic pairs. Our results suggest that financial sanctions may crowd out moral incentives more strongly among one's own group, but have a much smaller behavioral effect when applied to individuals from a different ethnic group. The results have important implications for understanding how formal institutions affect cooperation in ethnically heterogeneous settings.

Many online markets encourage traders to make good after an unsatisfactory transaction by offering the opportunity to withdraw negative reputational feedback in a dispute resolution phase. Motivated by field evidence and guided by theoretical considerations, we use laboratory markets with two-sided moral hazard to show that this option, contrary to the intended purpose, produces an escalation of dispute. The mutual feedback withdrawal option creates an incentive to leave negative feedback, independent of the opponent’s behavior, to improve one’s bargaining position in the dispute resolution phase. This leads to distorted reputation information and less trust and trustworthiness in the trading phase. Buyers who refuse to give feedback strategically, even when it comes at a personal cost, mitigate the detrimental impact. It is also mitigated in markets with one-sided moral hazard and a unilateral feedback withdrawal option. 

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Road congestion and travel delays are a major obstacle to efficient transportation. We estimate the marginal external time cost of motor vehicle travel as well as the public-transit induced reduction in motor vehicle congestion for the city of Rome. We estimate the marginal external cost of car flow introducing an approach which allows for endogeneity and other statistical issues caused by reverse causality –.i.e. a situation where an increase in travel time results in a decrease in transport flow, a phenomenon sometimes labelled as hypercongestion, We make use of a quasi-experimental approach employing public transit strikes to account for endogeneity issues. The motor vehicle’s marginal external time cost is 4.1 minutes per kilometer during peak hours, which is substantial as it is about four times its marginal private time cost. By supplying public transit, motor vehicles’ travel time is reduced by 0.14 minutes per kilometer during peak hours. The external benefits of public transit justify current subsidy levels to public transit and suggest that even larger subsidies would be welfare improving. Large welfare gains could be achieved by bus-lanes and road pricing that would decrease congestion and increase public transit use.

The presentation shows recent evidence about the existence and size of contagion from the U.S. stock market to six Central and Eastern European stock markets. A novel approach to the measurement of contagion is presented, that examines how volatility shocks in the U.S. stock market impact emerging stock markets in Europe. We will discuss whether stock markets in Europe are sensitive to the occurrence of un-expected negative events in the U.S., i.e. whether events in the U.S. are contagious. Finally, some implications are discussed, particularly to portfolio diversification opportunities.