The Economic Journal Current Issue

13 Aug 2019

Do Female Executives Make a Difference? The Impact of Female Leadership on Gender Gaps and Firm Performance

Flabbi L, Macis M, Moro A, et al.

We investigate the effects of female executives on gender-specific wage distributions and firm performance. Female leadership has a positive impact at the top of the female wage distribution and a negative impact at the bottom. The impact of female leadership on firm performance increases with the share of female workers. We account for the endogeneity induced by non-random executives’ gender by including firm fixed-effects, by generating controls from a two-way fixed-effects regression and by using instruments based on regional trends. The findings are consistent with a model of statistical discrimination in which female executives are better at interpreting signals of productivity from female workers. This suggests substantial costs of women under-representation among executives.
24 May 2019

Are Donors Afraid of Core Costs? Economies of Scale and Contestability in Charity Markets*

Perroni C, Pogrebna G, Sandford S, et al.

We study contestability in charity markets where non-commercial, not-for-profit providers supply a homogeneous collective good through increasing-returns-to-scale technologies. Unlike in the case of for-profit competition, the absence of price-based sales contracts for charities means that fixed costs can translate into entry barriers, protecting the position of an inefficient incumbent; or, conversely, they can make it possible for inefficient newcomers to contest the position of a more efficient incumbent. Evidence from laboratory experiments show that fixed-cost driven tradeoffs between efficiency and perceived risk can lead to inefficient technology adoption.
17 May 2019

Asymmetric Consumption Effects of Transitory Income Shocks*

Christelis D, Georgarakos D, Jappelli T, et al.

We use the responses of a representative sample of Dutch households to survey questions that ask how much their consumption would change in response to unexpected, transitory income shocks (positive or negative). The questionnaire also distinguishes between relatively small income changes (a one-month increase or drop in income), and relatively larger ones (equal to three-months' income). The results are broadly in line with models of intertemporal choice with precautionary saving, borrowing constraints and finite horizons.
16 May 2019

Acts of God? Religiosity and Natural Disasters Across Subnational World Districts*

Sinding Bentzen J.

Religious beliefs potentially influence individual behaviour. But why are some societies more religious than others? One possible answer is religious coping: individuals turn to religion to deal with unbearable and unpredictable life events. To investigate whether coping can explain global differences in religiosity, I combine a global dataset on individual-level religiosity with spatial data on natural disasters. Individuals become more religious if an earthquake recently hit close by. Even though the effect decreases after a while, data on children of immigrants reveal a persistent effect across generations. The results point to religious coping as the main mediating channel, but alternative explanations such as mutual insurance or migration cannot be ruled out entirely. The findings may help explain why religiosity has not vanished as some scholars once predicted.
16 May 2019

The Causal Effect of Military Conscription on Crime*

Hjalmarsson R, Lindquist M.

We study the causal effect of mandatory military conscription in Sweden on the criminal behaviour of men born in the 1970s. We find that military service significantly increases post-service crime (overall and across multiple crime categories) between the ages of 23 and 30. These results are driven primarily by young men who come from low socioeconomic status households and those with pre-service criminal histories, despite evidence of a contemporaneous incapacitation effect of service for the latter group. Much of this crime-inducing effect can be attributed to negative peer effects experienced during service. Worse post-service labour market outcomes may also matter.
23 Apr 2019

Neighbourhood Ethnic Composition and Social Participation of Young People in England

Fumagalli E, Fumagalli L.

We analyse how neighbourhood ethnic diversity and segregation affect adolescents’ social participation in England. We distinguish between participation in ‘purposeful activities’—such as sports and volunteering—and hanging around with friends. We suggest a novel identification strategy to address the problem of endogeneity of ethnic diversity and segregation. We find that ethnic diversity decreases hanging around, while ethnic segregation increases it. No effects on participation in purposeful activities are found.
05 Apr 2019

Low Reserve Prices in Auctions*

Hu A, Matthews S, Zou L.

A standard result in auction theory is that a seller’s profit-maximising reserve price is no less than his own value for the good. In practice, however, reserve prices often appear to be less than sellers’ values. This article revisits the theory of optimal reserves in the context of second-price auctions. The main result is that an optimal reserve is less than the seller’s value if the bidders are sufficiently risk averse and if their values are sufficiently interdependent. The resulting outcome may approximate that of an auction without reserve, i.e., an absolute auction.
03 Apr 2019

Utility, Risk and Demand for Incomplete Insurance: Lab Experiments with Guatemalan Co-Operatives

McIntosh C, Povel F, Sadoulet E.

We play a series of incentivised laboratory games with risk-exposed co-operativised Guatemalan coffee farmers to understand the demand for index-based rainfall insurance. We estimate an explicit utility curve for every player and hence predict expected utility demand under counterfactual scenarios. Using these estimates, we provide a precise money-metric decomposition of the extent to which the low observed demand for index insurance is driven by expected utility theory, or by behavioural issues arising from a prospect-style utility structure. Our results suggest that consumers value probabilistic insurance using a prospect-style utility function that is concave both in probabilities and in income.
02 Apr 2019

The Sources of Growth in a Technologically Progressive Economy: The United States, 1899–1941

Bakker G, Crafts N, Woltjer P.

We develop new aggregate total factor productivity (TFP) growth estimates for the USA between 1899 and 1941, and sectoral estimates at the most disaggregated level so far, 38 industries. We include hard-to-measure services, and a refined measure of sectoral labour quality growth. The resulting data set supersedes Kendrick (1961), showing TFP growth lower than previously thought, broadly based across industries, and strongly variant intertemporally. The four ‘great inventions’ that Gordon (2016) highlighted were important but less dominant in TFP growth than their predecessors in the British industrial revolution. The findings also make it unlikely the 1930s had the twentieth century's highest TFP growth.
08 Jan 2019

Expectations-Based Reference-Dependence and Choice Under Risk

Freeman D.

This article characterises the behavioural content of a model of choice under risk with reference-dependent preferences and endogenous expectations-based reference points based on the preferred personal equilibrium model of Kőszegi and Rabin (2006). The combination of reference-dependent preferences and endogenous reference points leads to violations of the Independence Axiom and can also lead to violations of the Weak Axiom of Revealed Preference. An axiomatic characterisation shows that the model places testable restrictions on choice under risk.
18 Dec 2018

Bonuses and Promotion Tournaments: Theory and Evidence

Ekinci E, Kauhanen A, Waldman M.

Standard models of promotion tournaments do not distinguish between wages and bonuses and thus cannot explain variation in the use of bonuses. We combine classic and market-based tournament theories to develop a model in which wages and bonuses serve distinctly different roles. We use this model to derive testable predictions which we test employing both a single firm data set and a data set encompassing a large segment of the Finnish economy. Our empirical analysis supports the testable predictions and shows that our theoretical approach better matches the data than alternative theories of bonus determination based on arguments already in the literature.