1,721,099 research outputs found
The political economy of (de)regulation: Theory and evidence from the US electricity industry
Full text linkThe choice of whether to regulate firms or to allow them to compete is key. If demand is sufficiently inelastic, competition entails narrower allocative inefficiencies, but also smaller expected profits, and thus weaker incentives to invest in cost reduction. Hence, deregulation should be found where cost reduction is less socially relevant and consumers are more politically powerful, and it should produce lower expected costs only when investment is not sufficiently effective. These predictions hold true under several alternative assumptions and are consistent with data on the deregulation initiatives implemented in 43 US state electricity markets between 1981 and 1999 and on the operating costs of the plants that served these markets. Crucially, these empirical results help rationalize the slowdown of the deregulation wave and are robust to considering the other determinants of deregulation emphasized by the extant literature, i.e. costly long-term wholesale contracts and excessive capacity accumulation
Property rights, transaction costs, and the limits of the market
Full text linkTo clarify the determinants and interaction of property rights and transaction costs, I study the design of the property rights on either a good whose consensual transfer entails a transaction inefficiency or an upstream firm’s input whose random cost is nonverifiable and ex ante non-contractible. More disperse traders’ valuations and larger odds that the upstream party can appropriate the quasi-rent induced by contract incompleteness produce more severe transaction inefficiencies and larger incomplete contracting costs, respectively. Larger transaction costs, in turn, induce weaker property rights because of the trade-off between inefficient exclusion from trade/innovation and expropriation. These implications survive when some transactors have more political influence on institutional design, or I consider the disincentive effect of weak property rights. Furthermore, they are consistent with the interplay among proxies for the availability of technological progress, severity of transaction costs and strength of property rights for 139 countries observed between 2006 and 2018
Endogenous Institutions and Economic Outcomes
Full text linkTo evaluate the relative importance of a culture of cooperation and inclusive political institutions, I divide Europe into 120 km×120 km grid cells, and exploit the exogenous variation in both institutions created by medieval history. I document strong first-stage relationships between present-day norms of respect and trust and the severity of consumption risk—i.e. climate volatility—over the period 1000–1600 and between the inclusiveness of present-day regional political institutions and the factors that raised the returns on elite-citizenry investments—i.e. terrain ruggedness and direct access to the coast. Building on these first stages, I show that only culture has a first-order effect on income, even after controlling for country fixed effects, proxies for the alternative roles of the excluded instruments, factors modulating the roles of institutions, and intermediate outcomes. Two possible explanations for these results are that more inclusive regional political institutions might have impeded, in the early modern era, state-building and market integration, and that in modern representative democracies, they are irrelevant in easing the monitoring of politicians by voters when the latter are not morally compelled to punish political malfeasance or the former have weak civic virtues. Macro and micro evidence supports these ideas
Endogenous (in)formal institutions
No full textThe paper provides a formal framework identifying both the origins and interaction of a culture of cooperation and inclusive political institutions. When elite members and citizens try to cooperate in sharing consumption risk and joint investment, the elite enacts democracy to convince the citizens that a sufficient part of the investment return will be shared via public spending and thus, they should cooperate. In addition, cultural accumulation rises with the severity of consumption risk at its moderate values and then drops at its high values making cheating too appealing. Finally, the citizens may over-accumulate culture to credibly commit to cooperating in investment at its intermediate values threatening democracy. These predictions are consistent with novel data on 90 European historical regions spanning the 1000–1600 period. Reforms towards tighter constraints on the elite's power were driven by the potential for Mediterranean trades. Moreover, the activity of both the Cistercians and the Franciscans, our proxy for the citizens’ culture, has an inverted U-shaped link with the temperature volatility. Finally, the shift of long-distance trades towards the Atlantic fostered the Franciscans’ spread in the Mediterranean, where they organized micro-credit activities reinforcing the citizenry-elite partnerships
Combining social sciences, geoscience and archaeology to understand societal collapse
Full text linkDespite its apparently obvious conclusion that adverse environmental conditions must produce economic and institutional crises, the "collapse archaeology" literature has been criticized for its lack of a formal theory, a credible measurement strategy and a proper understanding of the roles of environmental shocks. To tackle this issue, we propose to combine a time inconsistency theory of state formation and evolutiondi.e., state-building, institutional proxies based on this model and highly granular simulated climate data. To clarify our proposal, we apply it to the study of state-building in Bronze Age Mesopotamia, and we show that moderate droughts shaped these economies directly via deteriorated production conditions as well as indirectly via institutional resilience.& COPY; 2023 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/)
Young people' s willingness to pay for environmental protection
No full textThe cost of the ongoing degradation of natural capital will inevitably be borne by the younger generations. And, as the wave of school strikes for action against climate change have proved, they do not want their voice to be ignored. Discrete Choice Experiments are increasingly used for the valuation of environmental goods, but they have never been conducted with minors. We designed and administered such an experiment to elicit the willingness of children and teenagers, aged 8-19, to pay for environmental projects. The results suggest that their marginal willingness to pay is higher for projects in their own country (Italy) and that the utility of environmental protection is greater for girls and for teenagers. We also find that a pro-environmental attitude reduces the likelihood of the individual's opting for continuation of the status quo. Our results suggest that children and adolescents have definite economic preferences for environmental protection and that they are similar to those of adults. These findings are relevant to policy decisions dealing with environmental conservation
Young people' s willingness to pay for environmental protection
No full textThe cost of the ongoing degradation of natural capital will inevitably be borne by the younger generations. And, as the wave of school strikes for action against climate change have proved, they do not want their voice to be ignored. Discrete Choice Experiments are increasingly used for the valuation of environmental goods, but they have never been conducted with minors. We designed and administered such an experiment to elicit the willingness of children and teenagers, aged 8–19, to pay for environmental projects. The results suggest that their marginal willingness to pay is higher for projects in their own country (Italy) and that the utility of environmental protection is greater for girls and for teenagers. We also find that a pro-environmental attitude reduces the likelihood of the individual's opting for continuation of the status quo. Our results suggest that children and adolescents have definite economic preferences for environmental protection and that they are similar to those of adults. These findings are relevant to policy decisions dealing with environmental conservation
Endogenous property rights and the nature of the firm
Full text linkWhile focusing on residual control rights, the propertyrights theory of the firm overlooks that the legal protec-tion of each party’s input shapes itsex postbargainingpower. To evaluate this issue, we assume that the propertyrights on the inputs are selected by a legislator to maxi-mize full investment and, conditional on this goal beingreached, minimize inefficient deviations to intermediateinvestment profiles. Our model delivers three key novelimplications. First, the strength of a party’s propertyrights is related negatively to the strength of its residualcontrol rights and determines entirely itsex anteincen-tives to invest. Second, the legislator tends to protecta firm less when its default payoff under its preferredownership structure is larger and when its contributionto the relationship is the greatest. Finally, the extent ofintegration falls weakly with the default payoffs and dis-plays an inverted U-shaped link with the intensity of thedownstream firm’s investment activity. Crucially, thesepredictions are consistent with the relationships betweenproxies for the strength of the downstream firms’ propertyrights and firms’ presence in the value chain, and measuresof asset specificity and R&D intensity for 119 countriesobserved over the 2006–18 period
Divergence and convergence at the intersection of property and contract
No full textIn this Article, we study rules that solve the conflict between the original owner and an innocent buyer of a stolen or embezzled good. These rules balance the protection of the original owner's property and the buyer's reliance on contractual exchange, thereby addressing a fundamental legal and economic trade-off. Our analysis is based on a unique, hand-collected dataset on the rules in force in 126 countries. Using this data, we document and explain two conflicting trends. There is a large amount of first-order divergence: both rules that apply to stolen goods and those that apply to embezzled goods vary widely across countries. Yet, there is also remarkable second-order convergence: virtually all legal systems protect the innocent buyer more strongly if the good was embezzled (rather than stolen) and if she purchased it in an open market, at an auction, or from a professional seller (as opposed to a private sale). We show that, while divergence is attributable to varying cultural values, convergence can be rationalized using a classic functional approach: these rules harmonize the owner's incentives to protect property and the buyer's incentives to inquire about title
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