INFORMATION DISCLOSURE POLICIES: EVIDENCE FROM THE ELECTRICITY INDUSTRY

While theory suggests that information programs may correct market failures and improve welfare, the empirical impacts of these policies remain undetermined. We show that mandatory disclosure programs in the electricity industry achieve stated policy goals. We find that the proportion of fossil fuels decreases, and the proportion of clean fuels increases in response to disclosure programs. However, the programs may produce unintended consequences. For example, programs may make “clean” firms cleaner, while leaving “dirty” firms relatively unchanged. If the marginal benefits of pollution abatement are larger at dirty firms than at clean firms, disclosure programs may induce inefficient abatement allocations. (JEL D83, Q58, D21)     

THE LONDON BOMBINGS AND RACIAL PREJUDICE: EVIDENCE FROM THE HOUSING AND LABOR MARKET

This paper investigates the impact of the London bombings on attitudes toward ethnic minorities, examining outcomes in housing and labor markets across London boroughs. We use a difference‐in‐differences approach, specifying “treated” boroughs as those with the highest concentration of Asian residents. Our results indicate that house prices in treated boroughs fell by approximately 2% in the 2 years after the bombings relative to other boroughs, with sales declining by almost 6%. Furthermore, we present evidence of a rise in the unemployment rate in treated compared to control boroughs, as well as a rise in racial segregation. (JEL J15, J71, R21)     

COMPETITION AND BIDDING BEHAVIOR: SOME EVIDENCE FROM THE RICE MARKET

When objects have uncertain value, the net effect of competition in sealed-bid auctions is ambiguous. The risk of succumbing to the "winner's curse" generally causes bidders to exhibit a non-aggressive response in addition to the standard competitive effect. Sellers can influence the size of the nonaggressive effect by responding to the value uncertainty. This paper focuses specifically on individual bidding behavior in a rice auction market in which sellers issue a product-quality guarantee. The empirical evidence supports my hypothesis that such a guarantee negates the significance of the nonaggressive bidder response.     

STRICT PRODUCT LIABILITY AND SAFETY: EVIDENCE FROM THE GENERAL AVIATION MARKET

This paper examines the impact of a strict product liability standard on the accident rate in the general aviation (GA) industry. Liability expenses increased by 775% between 1976 and 1986, reducing the sales of new GA aircraft by 90% and increasing the age of the GA fleet. Using both aggregate and model‐specific data, our results indicate that the increase in the age of the GA fleet increased the accident rate by 25%–35% during 1981–2000. In addition, the higher price of GA aircraft boosted sales of homebuilt planes, which have higher accident and fatality rates than GA aircraft. (JEL K13, L62, L15)     

ENGLISH PROFICIENCY AND LABOR MARKET PERFORMANCE: EVIDENCE FROM THE ECONOMICS PROFESSION

This article investigates whether the global spread of the English language provides an inherent advantage to native English speakers. This question is studied within the context of the economics profession, where the impact of being a native English speaker on future publishing success is examined. English speakers may have an advantage because they are writing in their native language, the quality of writing is a crucial determinant of publishing success, and all the top economics journals are published in English. Using a ranking of the world's top 2.5% of economists, this article confirms that native English speakers are ranked 100 spots higher (better) than similar non‐native English speakers. A variety of extensions examine and dispel many other potential explanations. (JEL A11, J44, F66)     

CORRUPTION,PRODUCT MARKET COMPETITION,AND INSTITUTIONAL QUALITY: EMPIRICAL EVIDENCE FROM THE U.S. STATES

This article argues that the effect of corruption on competition is dependent on the institutional environment. When institutions are relatively efficient, observed corruption is likely to be associated with relatively less competition. Conversely, in areas with low quality institutions (e.g., excessively burdensome regulations), corruption may lead to relatively more competition. I employ unique data on competition, corruption, and institutional quality across U.S. states from 1997 to 2009 and report that a higher level of corruption is associated with relatively more competition in states with low levels of institutional quality. However, as institutional quality improves, the effect of corruption worsens. Thus, institutional quality is a fundamental determinant of the corruption‐competition relationship. Improving institutional quality, while at the same time reducing corruption, will increase competition and likely improve economic outcomes. (JEL D73, O17, L26)     

DURABLE GOODS PRICE CYCLES: THEORY AND EVIDENCE FROM THE TEXTBOOK MARKET

We study the pricing policy of a monopolist selling a durable good with the features of a textbook. We assume buyers differ in their valuation of the good and propensity to resell, and identify the possibility of a positive relationship between the quantity of used goods and the price of a new good, and also a higher price for new goods in the last period before a new edition is introduced. Our empirical analysis supports this model: textbook prices increase as the share of used textbooks increases and the end of the current edition approaches. (JEL D420, L120)     

THE EXTENT OF THE MARKET AND INTEGRATION THROUGH FACTOR MARKETS: EVIDENCE FROM WHOLESALE ELECTRICITY

We document the influence of factor markets in determining the extent of the market, appealing to the Mundell hypothesis that trade in goods and factor markets are substitutes. We confirm this influence using the U.S. wholesale market for electric power. Although the Eastern, Western, and Texas regions cannot trade electricity, inputs such as natural gas move freely across these regions. Through a set of price transmission ratios, and a supply model for natural gas, we find regional electricity shocks do propagate across regions. We conclude output markets institutionally in autarky achieve modest degrees of economic integration through factor markets. (JEL C32, L94, Q41)     

A COMMENT ON COMPETITION AND BIDDING BEHAVIOR: SOME EVIDENCE FROM THE RICE MARKET

In testing agents' responses to increased competition in sealed-bid first price-rice auctions, Meyer [1988] makes two erroneous assumptions: (1) that agents know ex ante the number of bidders in the auction, and (2) that firms forecast resale prices with information unavailable at the time of the auction. These two misspecifications are identified and corrected. A probit model provides a forecast of market competition, and agents' bids are modeled as a function of expected competition and factors affecting the value of each rice lot. The bias toward zero in Meyer's estimated coefficient on market competition is reduced.     

VOUCHERS,PUBLIC SCHOOL RESPONSE,AND THE ROLE OF INCENTIVES: EVIDENCE FROM FLORIDA

This paper analyzes the incentives and responses of public schools in the context of an educational reform. Much of the literature studying the effect of voucher programs on public schools has looked at the effect on student and mean school scores. This paper tries to go inside the black box to investigate some of the ways in which schools facing the Florida accountability‐tied voucher program behaved. Schools getting an “F” grade for the first time were exposed to the threat of vouchers, but did not face vouchers unless and until they got a second “F” within the next 3 years. In addition, “F,” being the lowest grade, exposed the threatened schools to stigma. Exploiting the institutional details of this program, I analyze the incentives built into the system and investigate the behavior of the threatened public schools facing these incentives. There is strong evidence that they did respond to incentives. Using highly disaggregated school‐level data, a difference‐in‐differences estimation strategy as well as a regression discontinuity (RD) analysis, I find that the threatened schools tended to focus more on students below the minimum criteria cutoffs rather than equally on all. Second, consistent with incentives, the threatened school improvements were, by far, the largest in writing. These results are robust to controlling for differential preprogram trends, changes in demographic compositions, mean reversion, and sorting. These findings have important policy implications. (JEL H4, I21, I28)     

MARKET ENTRY MODE: EVIDENCE FROM THE GOLDEN AGE OF HOLLYWOOD

I examine international market entry modal choice using novel data sources on the early years of the U.S. motion picture industry. These data detail how studios built out their international distribution networks and give unusual access to revenues generated across modes. Motion picture exporters used a variety of entry modes: exports, licensed agents, and offices. Studios opened offices in distant, large markets first and used these markets as platforms to build out their distribution network. This pattern indicates that directed search for export customers is important. Offices generated more total revenue than licensed agents. They allowed headquarters to monitor employees through strict control of financial assets, limiting the diversion of intellectual property. (JEL F14, F21, L22, L24, L82)     

THE IMPACT OF SCHOOL RACIAL COMPOSITIONS ON NEIGHBORHOOD RACIAL COMPOSITIONS: EVIDENCE FROM SCHOOL REDISTRICTING

I use data surrounding public school redistricting to study how school racial compositions affect neighborhood racial compositions. This redistricting followed from the end of court‐ordered busing for racial desegregation, significantly changing the racial composition of the assigned school for many neighborhoods. Over a 5‐year period, the impact of an increase in the percent black of the assigned elementary school on the percent black of the neighborhood was positive. The effects increased over time, consistent with a simple model of short‐run neighborhood racial dynamics. These results have implications for potential effects of school racial desegregation policy changes on neighborhood racial compositions. (JEL H75, I28, R23)     

EFFECTS AND VALUE OF VERIFIABLE INFORMATION IN A CONTROVERSIAL MARKET: EVIDENCE FROM LAB AUCTIONS OF GENETICALLY MODIFIED FOOD

Food products containing genetically modified (GM) ingredients have entered the market over the past decade. The biotech industry and environmental groups have disseminated conflicting private information about GM foods. This paper develops a unique methodology for valuing independent third-party information in such a setting and applies this method to consumers' willingness to pay for food products that might be GM. Data are collected from real consumers in an auction market setting with randomized information and labeling treatments. The average value of third-party information per lab participant is small, but the public good value across U.S. consumers is shown to be quite large. ( JEL C91, D12, D82)     

REPUTATION EFFECTS IN THE MARKET OF CERTIFIERS: EVIDENCE FROM THE AUDIT INDUSTRY

Certifiers verify unobserved product characteristics for buyers and thereby alleviate informational asymmetries and facilitate trade. When sellers pay for the certification, however, certifiers can be tempted to bias their opinion to favor sellers. Indeed, accounting scandals and inflated credit ratings suggest sellers may prefer to select dishonest certifiers. I test this proposition by estimating the effect of adverse quality signals on audit demand. Exploiting the natural experiment of Arthur Andersen's demise, I find that auditors with worse quality signals experience a fall in demand. This suggests that reputation effects are at work even in the presence of conflicts of interest. (JEL L15, L8, M4)     

THE EFFECT OF LEGALIZING RETAIL MARIJUANA ON HOUSING VALUES: EVIDENCE FROM COLORADO

Does legalizing retail marijuana generate more benefits than costs? This paper provides a first step toward addressing that question by measuring the benefits and costs that are capitalized into housing values. We exploit the time‐series and cross‐sectional variations in the adoption of Colorado's municipality retail marijuana laws (RMLs) and examine the effect on housing values with a difference‐in‐differences strategy. Our estimates show that the legalization leads to an average 6% increase in housing values, indicating that the capitalized benefits outweigh the costs. In addition, we find suggestive evidence that this relatively large housing value appreciation is likely due to RMLs inducing strong housing demand while having no discernible effect on housing supply. Finally, we show that the effect of RMLs is heterogeneous across locations and property types. (JEL K20, R28)     

FORCED INFORMATION DISCLOSURE AND THE FALLACY OF TRANSPARENCY IN MARKETS

A theory advanced in regulatory hearings holds that market performance will be improved if one side of the market is forced to publicly reveal preferences. For example, wholesale electricity producers claim that retail electricity consumers would pay lower prices if wholesale public utility demand is disclosed to producers. Experimental markets studied here featured decentralized, privately negotiated contracts, typical of the wholesale electricity markets. Two conclusions emerge: (1) such markets generally converge to the competitive equilibrium and (2) forced disclosure works to the disadvantage of the disclosing side. Information disclosure would result in higher wholesale and thus higher retail electricity prices. (JEL L50 , L94 , D43 )     

SUPERSTITION IN THE HOUSING MARKET

We provide the first solid evidence that Chinese superstitious beliefs can have significant effects on house prices in a North American market with a large immigrant population. Using real estate data on close to 117,000 house sales, we find that houses with address number ending in “4” are sold at a 2.2% discount and those ending in “8” are sold at a 2.5% premium in comparison to houses with other addresses. These price effects are found either in neighborhoods with a higher than average percentage of Chinese residents, consistent with cultural preferences, or in repeated transactions, consistent with speculative behavior. (JEL D03, R2, Z1)     

EFFICIENCY EFFECTS OF EXCLUSIVE TERRITORIES: EVIDENCE FROM THE INDIANA BEER MARKET

The welfare effects of vertically imposed exclusive territories and the appropriate antitrust policy toward them have long been debated. This paper sheds light on the exclusive-territory controversy by examing the effects of Indiana's 1979 ban on the grant of exclusive territories to beer wholesalers. Using time-series data for 1948–1990 we find the ban reduced beer consumption in Indiana by 6 percent. Coupled with previous evidence that Indiana's ban reduced price, our results suggest that exclusive territories in the beer industry increase demand and enhance welfare by stimulating the provision of dealer services.     

EXPERT OPINION AND PRODUCT QUALITY: EVIDENCE FROM NEW YORK CITY RESTAURANTS

We analyze whether consumers' quality perception and/or producer investment of New York City restaurants, measured by Zagat scores, responds to newly appearing expert opinion, measured by Michelin scores. Answering this question is of general economic interest as it applies to all markets with information asymmetries. Employing a difference‐in‐differences approach as well as a propensity score matching approach we find significant Michelin treatment effects on food and décor quality. Based on these changes, we find a Michelin‐induced price increase of approximately 30% per Michelin star. To examine whether the improved food and nonfood quality is based on restaurant investments or is merely imagined, we analyze nonfood investments by referring to Wine Spectator wine list awards. Our analysis suggests that Michelin‐reviewed restaurants are significantly more likely to invest in their wine list than others. As a result, Michelin reviewed restaurants are more likely to improve food and nonfood (esp. décor) quality leading to significant price increases. However, while restaurants that increase prices only due to décor and service improvements are more likely to go out of business, food improvements appear to secure a restaurant's survival. (JEL D11, L15, L66)     

LABOR CONTRACTS AND FLEXIBILITY: EVIDENCE FROM A LABOR MARKET REFORM IN SPAIN

This paper evaluates the effects of a labor market reform in Spain that removed restrictions on fixed‐term or temporary contracts. Our empirical results are based on longitudinal firm‐level data that cover observations before and after the reform. We posit and estimate a dynamic labor demand model with indefinite and fixed‐term labor contracts, and a general structure of labor adjustment costs. Experiments using the estimated model show important positive effects of the reform on total employment (i.e., a 3.5% increase) and job turnover. There is a strong substitution of permanent by temporary workers (i.e., a 10% decline in permanent employment). The effects on labor productivity and the value of firms are very small. In contrast, a counterfactual reform that halved all firing costs would produce the same employment increase as the actual reform, but much larger improvements in productivity and in the value of firms. (JEL J23, J32, J41)