The Economic Journal Current Issue

21 Feb 2019

Corrigendum: Redistribution Without Distortion: Evidence from an Affirmative Action Programme at a Large Brazilian University [https://doi.org/10.1111/ecoj.12578]

Estevan F, Gall T, Morin L.

The original version of this article omitted an acknowledgement of the contribution of the provider of the dataset. This has now been corrected online and in print.
07 Jul 2018

Does Oil Promote or Prevent Coups? The Answer is Yes

Nordvik F.

Abstract
A large literature investigates the relation between oil and conflict, yet no empirical study has found any link between oil and coups d’état. Using a new data set on oil production separated into onshore and offshore volumes, oil price shocks are seen to promote coups in onshore-intensive oil countries, while preventing them in offshore-intensive oil countries. A likely mechanism is that onshore oil motivates military build-ups, while offshore oil does not. From a political leader's point of view, a large military is a double-edged sword because it may turn against him and stage a coup.
29 Jun 2018

Effect of Income on Trust: Evidence from the 2009 Economic Crisis in Russia

Ananyev M, Guriev S.

Abstract
This article draws on a natural experiment to identify the relationship between income and trust. We use a unique panel data set on Russia where GDP experienced an 8% drop in 2009. The effect of the crisis had been uneven among Russian regions because of their differences in industrial structure inherited from the Soviet period. After instrumenting average regional income by Soviet industrial structure, we find that 10% decrease in income is associated with a five percentage point decrease in social trust. We also find that post-crisis economic recovery did not fully restore pre-crisis trust level.
28 Jun 2018

How Women's Rights Affect Fertility: Evidence From Nigeria

Godefroy R.

Abstract
This article estimates the impact on fertility of a 1999 reform that reduced litigants’ rights for Muslim women in certain states of Nigeria. Using data from Demographic and Health Surveys, I find that, where enforced, the Reform increased the yearly probability of giving birth by 0.026. This effect stems from both a shift of fertility decisions within marriage towards husbands’ preferences and an increase in the probability of being married. The change in marital status alone may explain 60% of the total increase in fertility. I also find that the enforced Reform increased women's labour supply.
27 Jun 2018

Explaining the Unexplained: Residual Wage Inequality, Manufacturing Decline and Low-skilled Immigration

Gould E.

Abstract
This article investigates whether the increasing ‘residual wage inequality’ trend, which is responsible for most of the wage inequality phenomenon, is related to manufacturing decline and the influx of low-skilled immigrants. The analysis exploits variation across locations in the United States, and shows that a shrinking manufacturing sector increases inequality. This effect strengthens with an influx of low-skilled immigrants. Similar results are found for the increasing return to education and the decline in the employment rate. The evidence suggests that manufacturing decline is producing downward pressure on the relative wages of workers at the low end of the income distribution.
27 Jun 2018

At the Root of the North–South Cooperation Gap in Italy: Preferences or Beliefs?

Bigoni M, Bortolotti S, Casari M, et al.

Abstract
The sharp gap in development between the North and the South of Italy represents a paradigmatic case of persistent within-country disparities. The evidence suggests that this gap could depend on a difference in the ability to cooperate. We investigate experimentally three possible sources of this difference, and find that Northerners and Southerners share the same pro-social preferences, but differ both in their belief about cooperativeness and in the aversion to social risk, respectively, more pessimistic and stronger among Southerners; intervention or events that reduced pessimistic beliefs should directly boost cooperation.
12 Jun 2018

Optimising Criminal Behaviour and the Disutility of Prison

Mastrobuoni G, Rivers D.

Abstract
We use rich microdata on bank robberies to estimate individual-level disutilities of imprisonment. The identification rests on the money versus apprehension trade-off that robbers face inside the bank when deciding whether to leave or collect money for an additional minute. The distribution of the disutility of prison is not degenerate, generating heterogeneity in behaviour. Our results show that unobserved heterogeneity in robber ability is important for explaining outcomes in terms of haul and arrest. Furthermore, higher ability robbers are found to have larger disutilities, suggesting that increased sentence lengths might effectively target these more harmful criminals.
11 Jun 2018

Homophily and the Persistence of Disagreement

Melguizo I.

Abstract
This article studies the persistence of disagreement using a dynamic model in which individuals update their attitudes by averaging those of others with whom they relate. Individuals establish homophilous relations and thus favour others with similar (dichotomous) attributes. Attributes determine the intensity of relations to the extent to which there is a substantial difference in attitudes between the two groups of individuals possessing and lacking them. The main finding is that disagreement, which materialises in two different groups of thinking, persists if and only if individuals develop sufficiently intense relations over time with others similar in one specific attribute. Relations with dissimilar others deteriorate and thus these two groups emerge.
08 Jun 2018

Standard Setting Organisations and Standard Essential Patents: Voting and Markets

Spulber D.

Abstract
The analysis provides conditions under which standard setting organisations (SSOs) choose efficient technology standards. I introduce a two-stage game with both voting and market competition. In equilibrium, standards and market outcomes are efficient even with market power from scarce capacity and standard essential patents (SEPs). I show that a drastic innovation with SEPs generates greater social welfare than a less efficient standard without SEPs. A key finding is that voting power and market power have counterbalancing effects. The discussion helps explain empirical observation of differences in SSO voting rules, intellectual property (IP) rules, membership and alliances.
08 Jun 2018

Stochastic Complementarity

Manzini P, Mariotti M, Ülkü L.

Abstract
The Hicksian definition of complementarity and substitutability may not apply in contexts in which agents are not utility maximisers or where price or income variations, whether implicit or explicit, are not available. We look for tools to identify complementarity and substitutability satisfying the following criteria: they are behavioural (based only on observable choice data); model-free (valid whether the agent is rational or not) and they do not rely on price or income variation. We uncover a conflict between properties that it is arguably reasonable for a complementarity notion to possess. We discuss three different possible resolutions of the conflict.
07 Jun 2018

Colonial Legacy, State-building and the Salience of Ethnicity in Sub-Saharan Africa

Ali M, Fjeldstad O, Jiang B, et al.

Abstract
African colonial history suggests that British colonial rule may have undermined state centralisation due to legacies of ethnic segregation and stronger executive constraints. Using micro-data from anglophone and francophone countries in sub-Saharan Africa, we find that anglophone citizens are less likely to identify themselves in national terms (relative to ethnic terms). To address endogeneity concerns, we utilise regression discontinuity by focusing on observations near anglophone–francophone borders, both across countries and within Cameroon. Evidence on taxation, security and the power of chiefs also suggests weaker state capacity in anglophone countries. These results highlight the legacy of colonial rule on state-building.
27 May 2018

Commodity and Token Monies

Sargent T.

Abstract
A government defines a dollar as a list of quantities of one or more precious metals. If issued in limited amounts, token money is a perfect substitute for precious metal money. Atemporal equilibrium conditions determine how quantities of precious metals and token monies affect an equilibrium price level. Within limits, a government can peg the relative price of two precious metals, confirming Fisher's (1911) response to a classic criticism of bimetallism. Monometallism dominates bimetallism according to a natural welfare criterion.
24 May 2018

Discount Rates of Children and High School Graduation

Castillo M, Jordan J, Petrie R.

Abstract
We present direct evidence that children who are unwilling to wait for a larger reward and instead prefer a small one earlier (i.e. they have a higher discount rate) are less likely to graduate from high school. Using an incentivised experiment to measure the discount rates of 878 children, we find large effects on human capital accumulation – a one standard deviation increase in the discount rate decreases the probability of graduating from high school by four percentage points. Importantly, the impact of a child's discount rate is distinct from behavioural problems (e.g. disciplinary referrals), academic achievement, risk attitudes, demographics and household environment. Consistent with the existence of non-pecuniary costs to finishing high school, impatient children with poor academic achievement are significantly less likely to graduate than impatient children with high achievement.
23 May 2018

The Effects of a Maternity Leave Reform on Children's Abilities and Maternal Outcomes in Chile

Albagli P, Rau T.

Abstract
This article studies a change in paid maternity leave entitlements in Chile. We exploit a reform that increased paid leave from 12 to 24 weeks for mothers of children born on 25 July 2011 or later. We estimate the effects of reform exposure on different children and maternal outcomes finding significant and positive effects on children's cognitive abilities, especially for those with less educated mothers. There is an increase in the probability of breastfeeding at least six months and breastfeeding durations. Maternal stress exhibits a significant reduction and there is an increase in employment of exposed mothers after maternity leave.
22 May 2018

The Price Impact of Extreme Weather in Developing Countries

Heinen A, Khadan J, Strobl E.

Abstract
We examine the impact of extreme weather on consumer prices in developing countries by constructing a monthly data set of potential hurricane and flood destruction indices and linking these with consumer price data for 15 Caribbean islands. Our econometric model shows that the price impact of extreme weather events can be large. To illustrate potential welfare losses due to these price effects, we combine our estimates with price elasticities obtained from a demand system and with event probabilities for Jamaica. Our results show that while expected monthly losses are small, rare events can cause large falls in monthly welfare due to price increases.