The Economic Journal Current Issue

17 Apr 2019

Competitive Pressure Widens the Gender Gap in Performance: Evidence from a Two-stage Competition in Mathematics

Iriberri N, Rey-Biel P.

In two-stage elimination math contests, participants from four different age groups compete to pass from stage 1 to stage 2 and later to be among the winners. Although female participants have higher maths grades at school the gender gap reverses in the two stages of the contests. More importantly, following the same individual participant across different stages, we find that the gender gap in performance increases from stage 1 to stage 2. The increase in female underperformance is attributed to higher competitive pressure and alternative explanations based on selection, discrimination and differences in reaction to increasing difficulty are ruled out.
16 Aug 2018

Can Internal Migration Foster the Convergence in Regional Fertility Rates? Evidence from 19th Century France

Daudin G, Franck R, Rapoport H.

This article offers an explanation for the convergence of fertility rates across French départements in the second half of the 19th century that emphasises the diffusion of information through internal migration. It tests how migration affected fertility by building a decennial bilateral migration matrix between French départements for 1861–911. The identification strategy uses exogenous variation in transportation costs resulting from the construction of railways. The results suggest that the convergence towards low birth rates can be explained by the diffusion of cultural and economic information pertaining to low-fertility behaviour by migrants, especially by migrants to and from Paris.
16 Aug 2018

Distributional Implications of Joint Tax Evasion

Nygård O, Slemrod J, Thoresen T.

Both buyers and sellers of goods and services may benefit from letting their economic transactions go unrecorded for tax purposes. The supplier reduces his tax burden by underreporting income and sales, whereas the consumer may gain from buying a non-taxed lower-priced product. The distributional implications of such joint tax evasion depend on the amounts evaded, on where the evaders on both sides of the market are found in the income distribution, and on how the financial gain is split. Our empirical investigations show that the tax evasion-controlled estimate of income inequality in Norway exhibits more income dispersion than official estimates.
05 Aug 2018

Local Industrial Shocks and Infant Mortality

Benshaul-Tolonen A.

Local industrial development has the potential to improve health and well-being, while also damaging health through exposure to harmful pollution. It is an empirical question which of these effects dominate. Exploiting the quasi-experimental expansion of African large-scale gold mining, I find that local infant mortality rates decrease by more than 50% alongside rapid economic growth. The instantaneous reduction is comparable to overall gains in infant survival rates in the study countries from 1970 to today. The results are robust to migration. Local industrial development – despite risk of pollution – may be an effective tool to reduce infant mortality in developing countries.
05 Aug 2018

Perception-theoretic Foundations of Weighted Utilitarianism

Argenziano R, Gilboa I.

We provide a microfoundation for a weighted utilitarian social welfare function that reflects common moral intuitions about interpersonal comparisons of utilities. If utility is only ordinal in the usual microeconomic sense, interpersonal comparisons are meaningless. Nonetheless, economics often adopt utilitarian welfare functions, assuming that comparable utility functions can be calibrated, using information beyond consumer choice data. We show that consumer choice data alone are sufficient. As suggested by Edgeworth (1881), just noticeable differences (JNDs) provide a common unit of measure for interpersonal comparisons of utility differences. We prove that a simple monotonicity axiom implies a weighted utilitarian aggregation of preferences, with weights proportional to individual JNDs.
02 Aug 2018

Accountability with Large Electorates

Aytimur R, Bruns C.

We show that ignorant voters can succeed in establishing high levels of electoral accountability. In our model, an incumbent politician is confronted with a large number of voters who receive fuzzy private signals about her performance. A sampling effect enables the incumbent to form a precise estimate of the median voter's signal, and the resulting level of accountability is as if the incumbent faced a perfectly informed social planner. Public information or ideological preferences can impair the beneficial impact of the sampling effect on accountability; overconfidence of voters can restore the full benefit of the sampling effect.
31 Jul 2018

Eliciting and Aggregating Information By Sortition in Collective Choice

Saran R, Tumennasan N.

We study the effectiveness of sortition to elicit and aggregate information that is dispersed among groups of individuals facing a collective choice problem. Sortition is the process of selecting decision-makers by a kleroterion (lottery machine). In environments with private consumption, we identify a large class of kleroteria that is as effective as direct democracy in (fully) implementing social choice functions. Examples include an opinion poll, where a random sample of two (or more) individuals are selected from each group, and ‘oligarchy with random audit’, where the group leaders are ‘audited’ by a randomly selected individual.
27 Jul 2018

Can Fixed-term Contracts Put Low Skilled Youth on a Better Career Path? Evidence from Spain

García-Pérez J, Marinescu I, Vall Castello J.

By reducing the commitment made by employers, fixed-term contracts can help low-skilled youth find a first job. However, the long-term impact of fixed-term contracts on these workers’ careers may be negative. Using Spanish social security data, we analysed the impact of a large liberalisation in the regulation of fixed-term contracts in 1984. Using a cohort regression discontinuity design, we find that over the first 10 years in the labour market, the reform reduced the number of days worked (by 4.9%) and earnings (by 9.8%). Over 27 years of labour market career, yearly earnings losses amount to a persistent 7.3%.
11 Jul 2018

Taxation, Innovation and Entrepreneurship

Gersbach H, Schetter U, Schneider M.

We explore optimal and politically feasible growth policies consisting of basic research investments and taxation. We show that the impact of basic research on the general economy rationalises a taxation pecking order with high labour taxes and low profit taxes. This scheme induces a significant proportion of agents to become entrepreneurs, thereby rationalising substantial investments in basic research fostering their innovation prospects. These entrepreneurial economies, however, may make a majority of workers worse off, giving rise to a conflict between efficiency and equality. We discuss ways of mitigating this conflict, and thus strengthening political support for growth policies.
01 Jul 2018

Vog: Using Volcanic Eruptions to Estimate the Health Costs of Particulates

Halliday T, Lynham J, de Paula Á.

The negative consequences of long-term exposure to particulate pollution are well established but a number of studies find no effect of short-term exposure on health outcomes. The high correlation of industrial pollutants complicates the estimation of the impact of individual pollutants on health. In this study, we use emissions from Kīlauea volcano, which are uncorrelated with other pollution sources, to estimate the impact of pollutants on local emergency room admissions and a precise measure of costs. A one standard deviation increase in particulates leads to a 23–36% increase in expenditures on ER visits for pulmonary outcomes, mostly among the very young.
29 Jun 2018

Nonprofit Tax Exemptions, For-profit Competition and Spillovers to Community Services

Harrison T, Seim K.

We investigate the importance of nonprofit tax exemptions to the structure of local fitness markets and to the nonprofit's decision to complement fitness offerings with youth programming. We estimate an equilibrium model of market structure of nonprofit and for-fitness centres. Our results suggest that the two ownership types serve different customer bases. We predict that a revocation of tax exemptions would lower nonprofit entry by 26%, leaving for-profit entry unaffected. This decline in nonprofit entry derives primarily from fitness facilities that jointly operate a youth programme. Tax exemptions thus aid in both the provision of the primary and auxiliary services.
29 Jun 2018

Public Goods Provision with Rent-extracting Administrators

Cagala T, Glogowsky U, Grimm V, et al.

This article studies public goods provision when contributors repeatedly interact with rent-extracting administrators. Our main finding is that the presence of an administrator reduces contributions but only because rent extraction lowers the marginal per capita return of investing in the public good. Analysing the interactions between the contributors and the administrator, we demonstrate that rent-extraction and cooperation shocks trigger short-run adjustments in agents’ behaviour. However, shocks do not have permanent effects. This explains the long-run resilience of cooperation to rent extraction. We also show that cooperative attitudes and trust explain the heterogeneity in the short-run volatility of public goods provision.