Research Seminars

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. 

Paper (pdf)

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.

The talk focuses on the results of modeling stock market networks.  In the first part of the talk, general principles of network construction are introduced and several common widely used graph-theoretic algorithms for suitable subgraph selection, such as minimum spanning trees and planar maximally filtered graphs are confronted with their economic  rationale. Next, several econometric approaches to the construction of correlation based networks are presented, including DCC-MVGARCH and Granger causality. Finally, in its empirical part, the talk presents selected results on various approaches to the modelling of specific stock market networks.

This paper analyzes the interaction between migrant networks and linguistic distance in the location decisions of migrants to the European Union at the regional level. We find that networks have a positive effect on location decisions while the effect of linguistic distance is, as expected, negative. We also find a positive interaction effect between the two variables: networks are thus more important the larger the linguistic distance between the home and host countries, and the negative effect of linguistic distance is smaller the larger the network size.

European policy has focused in recent decades on liberalising Europe’s railway systems with a view to promoting competition and enhancing the performance of railways. Whilst legislation on passenger competition has moved more slowly than in freight, the 4^th Railway package envisages competition becoming much more extensive in the passenger sector in the coming years; covering both commercial services and public service contracts. In this presentation we ask what lessons can be learnt from Britain which has implemented the most ambitious reforms of the passenger rail sector, with all services (commercial and public service) being subject to competitive tendering – supplemented to a small degree (currently) by open access competition on long distance routes. Britain has taken a different approach to those countries within Europe that have opened their passenger markets to competition - most notably Sweden and Germany. These differences are important because they enable us to study the impact of competitive tendering and open access under a different set of circumstances to the wider European experience; and thus to draw a richer set of lessons about what works and in what circumstances. Britain also has a twenty year period over which the evidence can be documented and assessed, during which time the model has been reviewed and changed several times. Even the current position does not seem to be the final equilibrium, and the paper therefore also asks what directions future policy should take in Britain and what the lessons may be for other countries.

Britain largely privatised its bus network following the Transport Act of 1986 and its rail network over the period 1994-7, but in very different ways. Whilst the bus network was completely deregulated, leaving commercial operators free to compete on the road and to choose their own routes, timetables and fares, rail passenger services were largely franchised, with controls on fares, frequences and the degree of on track competition. The experience of these two alternative approaches to privatisation will be reviewed and conclusions drawn on their effectiveness.

We investigate the role of industrial structure in labor productivity growth in U.S. cities between 1880 and 1930.  We find that increases in specialization were associated with faster productivity growth but that diversity only had positive effects on productivity performance in large cities.  We interpret our results as demonstrating the importance of Marshallian externalities. Industrial specialization increased considerably in U.S. cities at this time, partly as a result of improved transportation, and we estimate that this brought significant gains in labor productivity.  The American experience suggests that wider economic benefits of transport infrastructure investment in developing countries could be important.

We analyze individual levels of life satisfaction in Slovakia, after that country adopted the Euro, following a spirited debate. We gauge the psychological cost of transition to the new currency by comparing individual life satisfaction, not only before and after Euro introduction, but by comparison with individuals with similar characteristics in the neighboring Czech Republic, which did not adopt the Euro. Both countries were economically and politically integrated for decades, and share similar macroeconomic indicators just before the currency change in Slovakia. We find evidence of substantial psychological costs of currency transition, which are especially important for the old, the unemployed, those with low education and in households with children. We believe these results suggest the importance of information and enlightened debate before a sweeping change in economic context such as the adoption of a new currency.

We use satellite data on forest cover along national borders in order to study the determinants of deforestation differences across countries. We combine the forest cover information with data on homogeneous response units, which allow us to control for cross-country geoclimatic differences when assessing the drivers of deforestation. Income per capita appears to be the most robust determinant of differences in cross-border forest cover and our results present evidence of the existence of decreasing effects of income on forest cover as economic development progresses. 

We investigate whether Google searches can be used to forecast stock returns. We find that short-term (daily and weekly) increase in search activity leads to negative excess stock returns with subsequent reversal, whereas long-term (quarterly) increase in search activity leads to long-lasting positive returns.  The connection between searches and subsequent returns is much stronger for smaller companies. Finally, we examine a trading strategy based on our findings and notice that our strategy outperforms a passive strategy even after taking transaction costs into account.

In most OECD-countries, immigrants have lower employment and higher unemployment than natives. On average, the gap in labor market outcomes is larger in countries with more immigrant friendly attitudes. To explain this pattern, this paper developes a theory based on labor market institutions and welfare state institutions. In countries where labor market institutions give native workers more influence, and where the social safety net is more generous, native workers face less direct wage competition from immigration. As a result, the general population is more immigrant friendly and income inequality is dampened, but empoyment among immigrants suffer thwarting the potential economic benefits from immigration (and in some cases immigration becomes a financial burden for the public sector). The theory is confirmed using data for 21–28 OECD countries using OLS-regressions and Bayesian model averaging over all 512 theoretically possible model specifications to cope with the model selection problem which is particularly severe in small samples where the number of suggested explanations is high. The unemployment gap is bigger in countries where collective bargaining agreements cover a larger share of the labor market, and the employment gap is bigger in countries with more generous social safety nets. The education of immigrants and migrant integration policies have no explanatory value. Finally, the prediction that countries with smaller labor market gaps have higher income inequality is also supported by the data.

A recent debate in the forecasting literature revolves around the inability of macroeconometric models to improve on simple univariate predictors, since the onset of the so called Great Moderation. This paper explores the consequences of equilibrium indeterminacy for quantitative forecasting through standard reduced form forecast models. Exploiting U.S. data on both the Great Moderation and the preceding era, we first present evidence that (i) higher (absolute) forecastability obtains in the former rather than the latter period for all models considered, and that (ii) the decline in volatility and persistence captured by a finite-order VAR system across the two samples need not be associated with inferior (absolute or relative) predictive accuracy. Then, using a small-scale New Keynesian monetary DSGE model as laboratory, we generate artificial datasets under either equilibrium regime and investigate numerically whether (relative) forecastability is improved in the presence of indeterminacy. It is argued that forecasting under indeterminacy with e.g. unrestricted VAR models entails misspecification issues that are generally more severe than those one typically faces under determinacy. Irrespective of the occurrence of non-fundamental (sunspot) noise, for certain values of the arbitrary parameters governing solution multiplicity, the pseudo out-of-sample VAR-based forecasts of inflation and output growth can outperform simple univariate predictors. For other values of these parameters, by contrast, the opposite occurs. In general, it is not possible to establish a one-to-one relationship between indeterminacy and superior forecastability, even when sunspot shocks play no role in generating the data. Overall, our analysis points towards a 'good luck in bad policy' explanation of the (relative) higher forecastability of macroeconometric models prior to the Great Moderation period.

Presentation adds to the research on the role of the housing sector in transition countries. The East European Housing Model (Hegedüs and Tosics, 1996) summarizes the main characteristics and elements of the housing system in the centrally planned economy, which was a social-economic system with high job security, low – highly subsidized – housing costs, and small income differences. The crucial question is how East European Housing Model has changed after the transition. Is it possible to define a post-socialist housing model or is the emerging new housing model similar to one of existing housing models in the developed world?

The Czech Republic is a country with a strong attachment of women to the labor market but one of the longest paid parental leave durations. Using a difference-in-differences methodology, we study the effect of two reforms of duration of parental allowance on the labor market status of mothers 2-7 years after childbirth. While the 1995 reform prolonged parental allowance from 3 to 4 years and the 2008 reform introduced a flexible schedule that allowed shortening of leave from 4 to 2 or 3 years, both reforms kept the job protection period at 3 years, allowing us to study the impact of monetary incentives setting aside changes in job security. We find that the 1995 reform prolonged the parental leave of at least one third of mothers and shifted the post-leave unemployment spell to the time when a child turns 4, while the 2008 reform achieved a reversal of the impact of the 1995 reform, but only to a lesser extent.

Previous research has established that good-looking political candidates win more votes. We extend this line of research by examining differences between parties on the left and on the right of the political spectrum. Our study combines data on personal votes in real elections with a web survey in which 2,513 non-Finnish respondents evaluated the facial appearance of 1,357 Finnish political candidates. We find that political candidates on the right are better looking in both municipal and parliamentary elections and that they have a larger beauty premium in municipal, but not in parliamentary, elections. As municipal candidates are relatively unknown, the beauty-premium gap indicates that voters - especially those to the right - use beauty as a cue for candidate ideology or quality in the municipal elections.

We examine the relationship between information and price dispersion in the retail gasoline market. We first show that the clearinghouse models in the spirit of Stahl (1989) generate an inverted-U relationship between information and price dispersion. Past empirical studies of this relationship have relied on (intertemporal) variation in internet usage and adoption to measure the number of consumers that have access to the clearinghouse. We construct a new measure of information based commuter data from Austria. Regular commuters can freely sample gasoline prices on their commuting route, giving us spatial variation in the share of informed consumers. We use detailed information on gas station level price to construct various measures of price dispersion. Our empirical estimates of the relationship are in line with the theoretical predictions.

The Czech population is one of the most equal societies in terms of households' disposable incomes and has the lowest level of relative poverty in Europe. We ask if the Czech tax and benefit system helps to achieve this low inequality and poverty. We test this hypothesis with the best available data on households from the Czech Statistical Office - the Survey of Income and Living Conditions (SILC) for direct taxes and social benefits combined with the Household Budget Survey (HBS) for indirect taxes. We thus combine detailed data on household's income and expenditure for the first time. We show that market income, especially due to the inclusion of pensions, is quite egalitarian. We find that the narrowly defined tax-benefit system (direct taxes and social benefits) actually does not change the poverty rate, while the indirect taxes increase it. The Czech tax and benefit system thus does not seem to contribute to the one of the world's lowest levels of relative poverty and inequality. We further provide the first estimates of the redistributive effectiveness of a number of social and tax policies. Among other findings, we show that aid in material need benefits are the most effective in decreasing poverty gap and income inequality, while the child allowance is the largest benefit in terms of coverage of poor individuals.

We report the results of a simple statistical choice task based on independent and identically distributed (iid) variables. In our experiment subjects were asked to bet on the future performance of players in a coin toss task. Subjects exhibit a strong, irrational bias towards placing their bets on players with a good guessing history in the coin toss task. We also show that the result cannot be attributed to confusion induced by the BDM mechanism. Subjects' elicited preferences are compatible with prescriptive luck beliefs. That is, the idea that luck is a somehow deterministic and personal attribute.

The talk will explore quadratic hedging of derivatives in a complete and incomplete financial market. Starting with a discrete-time setting we will provide several numerical illustrations one of which leads to the famous Black-Scholes formula in the continuous-time limit . The talk is based on joint work with Jan Kallsen and Stephan Denkl of CAU Kiel.

This paper uses a laboratory experiment to analyse the effect that transactions costs and inertia have on charitable giving. We conjecture that transaction costs are likely to have a greater effect on donations if the solicitations are received when potential donors are busy (when the opportunity cost of time is high) as opposed to when they have time on their hands to donate (when the opportunity cost of time is low). If donations do not have to be made immediately, inertia could also become a factor as people might intend to give, but then postpone making the payment until they have more time, and having postponed making the donation once, keep doing so until the opportunity to donate has passed. We find that introducing a transaction cost to a standard Dictator Game with charity as a recipient, and manipulating whether the donation can be made when we know subjects have time on their hands, reduces donations providing evidence of a transaction cost effect. Some weak evidence is found that giving people more time to donate reduces donations, which is consistent with an inertia effect.