ANTITRUST TREATMENT OF NONPROFITS: SHOULD HOSPITALS RECEIVE SPECIAL CARE?

Nonprofit hospitals receive favorable tax treatment in exchange for providing socially beneficial activities. Extending this rationale suggests that nonprofit hospital mergers should be evaluated differently than mergers of for-profit hospitals because suppression of competition may also allow nonprofits to cross-subsidize care for the poor. Using detailed California data, we find no evidence that nonprofit hospitals are more likely than for-profit hospitals to provide more charity care or offer unprofitable services in response to an increase in market power. Therefore, we find no empirical justification for applying, as some courts have suggested, different antitrust standards for nonprofit hospitals. (JEL I11, L1, L44)     

FUNDING FORMS,MARKET CONDITIONS,AND DYNAMIC EFFECTS OF GOVERNMENT R&D SUBSIDIES: EVIDENCE FROM CHINA

We examine various factors that influence the effects of government‐subsidized research and development (R&D) programs on firm productivity. Based on a panel dataset of Chinese firms, we find the effects of the Innovation Fund for Small and Medium Technology Based Firms (Innofund) are dynamic over time and are heterogeneous depending on funding forms and the level of marketization and economic development across regions. In general, Innfound has significant and positive effects on firm productivity in both the short and long run. However, the short‐term effects of Innofund are stronger than the long‐term ones. Additionally, the positive effects of Innofund are stronger for firms backed by interest‐free bank loans than those supported by appropriation. Meanwhile, Innofund has stronger positive effects in provinces that are less market‐oriented or less developed economically. Finally, the short‐term effects of Innofund stay stronger than the long‐term ones even after we control the funding forms and the market conditions across regions. Identification and selection concerns are addressed through the propensity score matching approach and two‐stage estimation. (JEL G28 O38 H76)     

MARRIAGE MARKET MATCHING AND CONSPICUOUS CONSUMPTION IN CHINA

Visible expenditures which convey higher socioeconomic status may help individuals differentiate themselves in the marriage market when there is competition for partners and imperfect information. We examine a unique dataset of automobile purchasers in China to investigate the extent to which skewed sex ratios influence expenditure decisions for this highly visible commodity. Using a triple difference approach, we show that unmarried male consumers who face an unfavorable sex ratio purchase more expensive, luxury vehicles than their married peers. Lower income borrowers and those residing in regions with the worst sex ratios exhibit the largest relative degree of conspicuous consumption. In addition to the direct cost of consumption signaling, we demonstrate that this behavior generates negative externalities in the form of lower average fuel economy and higher average vehicle weight. As it has worsened sex ratios, status competition and the associated negative repercussions we identify represent unintended consequences of China's one child policy. (JEL O12, E21, J12)     

CONTRACT DESIGN AND SELF‐CONTROL WITH ASYMMETRIC INFORMATION

We study optimal contracting by a monopolistic seller of investment goods to a time‐inconsistent consumer and, in doing so, introduce asymmetric information to the model of DellaVigna and Malmendier (2004) . We find (1) the below‐marginal‐cost‐pricing rule may fail for a low‐value consumer; (2) the firm's profit is no longer unaffected by the consumer's short‐run impatience, as the latter is sophisticated. We find that there is an important threshold value of short‐run patience. When the consumer's short‐term patience is below this level, then, as the patience increases, the firm suffers. When the consumer's short‐run patience is above this threshold, then, as it increases, the firm benefits. Finally, we show that unlike monopoly, perfect competition with asymmetric information achieves the first‐best outcome. (JEL D03, D82, D91)     

FINANCE-INEQUALITY NEXUS: THE LONG AND THE SHORT OF IT

Financial development affects income inequality differently in the short and in the long term. Investigating OECD countries from 1870–2011, we find in the short run, an improvement in financial development tends to reduce inequality, while in the long run, more finance contributes to more inequality. The short-run effect concurs with theories advocating financial development increases the availability of financial services, primarily for the poor. However, this effect becomes nil within a few years. Results thus imply that policies aimed at reducing inequality through improving access of the poor to finance need to be carefully designed to ensure longevity of impact. (JEL O15, O16, D31, G20, E44)     

PARTY AFFILIATION AND PUBLIC SPENDING: EVIDENCE FROM U.S. GOVERNORS

This paper investigates whether the party affiliation of governors (Democrat or Republican) has an impact on the allocation of state expenditures. Exploiting gubernatorial election results from 1960 to 2012 and a Regression Discontinuity Design (RDD), we find that Democratic governors allocate a larger share of their budget to health/hospitals and education sectors. We find no significant impact of the political party of governors on total spending, only on the allocation of funds. The results are robust to a wide range of controls and model specifications. (JEL D72, H75, H72)     

THE CONSEQUENCES OF (DE)REGULATION ON EMPLOYMENT DURATION AND EFFICIENCY: AN EXPERIMENTAL STUDY

If the future market wage is uncertain, engaging in long‐term employment is risky, with the risk depending on how regulated the labor market is. In our experiment long‐term employment can result either from offering long‐term contracts or from repeatedly and mutually opting for rematching. Treatments differ in how regulations restrict the employer's flexibility in adapting the employment contract. All treatments allow for longer contract duration as well as for mutually opting to be rematched. Effort is chosen by employees after a contract is concluded. Treatments vary from no contract flexibility to no restriction at all. Will more (downward) flexibility be used in ongoing employment but reduce labor market efficiency? And will regulation crowd out long‐term employment, in the form of long‐term contracts or voluntary rematching? (JEL C72, C90, F16, J21, J24, L10)     

UNDERSTANDING THE COSTS OF CONSUMER DURABLE ADJUSTMENTS

This article examines whether adjustment frictions help account for the patterns of household consumption expenditures observed in the Consumer Expenditure Survey, namely, that the variance of log durable expenditure is four times larger than that of log nondurable expenditure for annual data and this gap substantially widens for quarterly data. Estimating a structural model of household consumption with nondurable and durable goods with the simulated method of moments, I find that the fixed costs associated with durable adjustments are important in matching the cross‐sectional moments. Using the estimated model, I also examine the response of nondurable and durable expenditures to income shocks. (JEL D12, D91, E21)     

PERSISTENCE OF POLITICIANS AND FIRMS' INNOVATION

We empirically investigate whether the persistence of politicians in political institutions affects the innovation activity of firms. We use 12,000 firm‐level observations from three waves of the Italian Observatory over Small and Medium Enterprises, and introduce a measure of political persistence defined as the average length of individual political careers in political institutions of Italian municipalities. Using death of politicians as an exogenous source of variation of political persistence, we find a robust negative relation between political persistence and the probability of process innovation. This finding is consistent with the view that political stability may hinder firms' incentive to innovate to maintain their competitiveness, as long as they can extract rents from long‐term connections with politicians. (JEL D22, D72, O31)     

THE POWER OF THE LITTLE BLUE PILL: INNOVATIONS AND IMPLICATIONS OF LIFESTYLE DRUGS IN AN AGING POPULATION

The launch of Viagra in April 1998 led to a historically unprecedented high usage of erectile dysfunction (ED) drugs. We test whether Viagra's introduction significantly influenced outcomes for its target population such as sexually transmitted disease (STD) rates of older men, as well as its nontarget populations, such as divorces, natality, the distribution of the age spread within couples, female STDs, and sexual assault rates. We find causal evidence that Viagra's introduction increased gonorrhea rates in older men by 15%–28%. We find no significant evidence of any effects on other variables. We take this as evidence that this lifestyle drug causes significant changes in choices only which affect short‐term outcomes, while long‐term planned decisions are unaffected. Overall, we find that the welfare impacts of Viagra with respect to our outcomes of interest are positive and large. (JEL I1, J1, O33)     

CAN MONETARY POLICY INFLUENCE LONG‐TERM INTEREST RATES? IT DEPENDS

Can monetary policy influence long‐term interest rates? Studies that have tackled this question using vector autoregressions (VARs) generally find that monetary policy's influence on long‐term interest rates is small and often statistically insignificant. Other studies, however, using a single‐equation approach, have found a robust relationship. Our study sheds new light on this question by estimating the effect of monetary policy shocks on long‐term interest rates in a VAR with long‐run monetary neutrality restrictions. We find that U.S. monetary policy can strongly influence long‐term interest rates, but only when the Federal Reserve has inflation‐fighting credibility and is able to firmly anchor inflationary expectations. (JEL E43, E51, E52)     

Expenditure Flows Near Widowhood

Using data from the 1980–2001 Consumer Expenditure Surveys, we investigate how impending widowhood affects households’ expenditure patterns. We find that total annual expenditures are $4,027 higher for about-to-be-widowed households compared to otherwise comparable continuously married couples. Within subcategories, expenditures average $4,108 higher for the miscellaneous subcategory which includes expenditures on funerals/burials. We conclude that differences in the needs-adjusted incomes of married and widowed households may be partly a function of pre-widowhood differences in their expenditure patterns that lead about-to-be-widowhood households to draw down on financial wealth.     

MEASURING CONSUMER EXPENDITURES WITH PAYMENT DIARIES

Payment diaries measure consumer expenditures by tracking authorization of payments by instrument (cash, check, debit or credit card, etc.). Three notable results emerge from comparing the 2012 Diary of Consumer Payment Choice (DCPC) to other estimates of consumer expenditures: (1) DCPC payments are 75% higher than Consumer Expenditure Survey estimates; (2) DCPC consumption estimates are 17% higher than comparable personal consumption expenditure estimates; and (3) DCPC payments roughly equal comparably adjusted National Income and Product Accounts personal disposable income. The DCPC's relative success stems from measuring expenditures aggregated into lumpy payments (“shopping baskets”), relatively low respondent burden, and effective random sampling. (JEL E21, D12, D14)     

EXPERTS AND THEIR RECORDS

A market where short‐lived customers interact with long‐lived experts is considered. Experts privately observe which treatment best serves a customer, but are free to choose more or less profitable treatments. Customers only observe records of experts' past actions. If experts are homogeneous there exists an equilibrium where experts always choose the customer's preferred treatment (play truthfully). Experts are incentivized with the promise of future business: new customers tend to choose experts who performed less profitable treatments in the past. If expert payoffs are private information, experts can never always be truthful. But sufficiently patient experts may be truthful almost always. (JEL C73, D82)     

DEREGULATION AND THE RELIGIOUS MARKET IN TAIWAN: A Research Note

The religious economy model predicts that when encountered with competition, loosely organized religions will fail or will be transformed into congregational religions. Over time, competition will drive congregational religions to establish an extended relationship with their consumers by generating exclusivist claims and exclusivist socialization. And thus exclusive religion tends to occupy the biggest market share. This model, however, has rarely been tested empirically. By analyzing religious trends in Taiwan after the deregulation of the late 1980s, we find that state suppression contributed to the weakness of organized religion while enhancing the popularity of unchurched congregational religions in Taiwan. We also find that deregulation is associated with the rise of organized and congregational faiths. But whether or not these newly organized religions become exclusive or not needs further studies. Implications of the findings for future research are offered.     

COOPERATION SPILLOVERS AND PRICE COMPETITION IN EXPERIMENTAL MARKETS

Firms often cooperate explicitly through activities such as research joint ventures, while competing in other markets. Cooperation in research and development can allow firms to internalize the external benefits of knowledge creation and increase the returns from research and development (R&D) expenditures. Such cooperation may spill over to facilitate collusion in the market, however, potentially lowering welfare and efficiency. This paper uses a laboratory experiment to examine if sellers successfully coordinate to fund a joint research project to reduce their costs, and how this collaboration affects their pricing behavior. The experiment includes control treatments with separate R&D cooperation and markets. Our results show that although participants usually cooperate when given an opportunity, cooperation is observed less frequently when they also compete in the market. Communication improves cooperation in all environments, particularly when the market is present. Nevertheless, the data provide no evidence of seller collusion in the market. (JEL D43, D71, H40, O3)     

AIRLINE PRICING BEHAVIOR UNDER LIMITED INTER‐MODAL COMPETITION

This paper empirically analyzes airline pricing for short‐haul flights in contexts with no credible threat of inter‐modal competition. To this end, we explore the southern Italian market since it is less accessible by other transport modes and thus fares are the direct outcome of air‐related competition. We show, in fact, that market power matters, depending on the level of intra‐modal competition, and that airlines apply differentiated mark‐ups. Besides, consistent with the implementation of inter‐temporal price discrimination (IPD), we find a non‐monotonic inter‐temporal profile of fares with a turning point included in the interval of the 43rd to 45th days before departure. Finally, we provide evidence that in more competitive markets, airlines are more likely to engage in IPD. (JEL L11, L13, L93)     

UNDEREMPLOYMENT AND RACIAL COMPETITION IN LOCAL LABOR MARKETS

The primary concern in this paper is to analyze the effects of black population concentration on black and white men's relative and absolute underemployment levels in labor market areas while controlling for the degree of occupational segregation by race. We draw hypotheses from two primary bodies of research; one literature focuses on general racial competition and the other considers competition to be more limited. Our findings that racial inequality in underemployment levels increases with blacks' population share are most consistent with the general competition model. However, we also find some support for the limited competition model which holds that not all whites benefit from increased competition with blacks. Finally, we find that occupational segregation helps to determine the form that racial discrimination in employment adequacy takes. Where occupational segregation is high, black men hold relatively more low-wage jobs, but where occupational segregation is low, they experience higher levels of unemployment and more disadvantage relative to whites.     

Habitat Maintenance and Local Economic Ethics in Rural Atlantic Canada

Inspired by Jane Jacobs's writing on “habitat maintenance,” this paper seeks to identify the ethics that sometimes compel rural residents to act in ways that preserve their communities in the long run, despite short‐term incentives to do otherwise. Data from focus groups in four rural Atlantic Canadian communities suggest shared ethics around entrepreneurship, market competition, buying local, and subsistence, some of which underlie the rural practices and perspectives that appear, to some outsiders, as irrational and “backwards.” Understanding these ethics and the practices they incite as components of habitat maintenance—and judging them by their situated pragmatism rather than their fit with the placeless ideologies of growth‐centric global capitalism and competitiveness—highlights their rationality and utility. Findings could help direct discussions of rural economic development toward notions of prosperity, sustainability, and economy that fit better with rural realities.     

Exploitation in Contemporary Capitalism: An Empirical Analysis of the Case of Taiwan

Abstract

Using data for manufacturing firms in Taiwan, we developed a measure of exploitation and analyzed its prevalence in the labor force. Our results indicated that almost two-thirds of the firms in our sample exploit at least some of their workers. For these firms, the average profit rate is 34 percent, but three-fourths of this figure derives from the expropriated wages of their workers. Female and blue-collar workers are the largest groups that are underpaid relative to their productivity (that is, exploited). Managers, professionals, and workers with seniority are not exploited by our definition because our data showed that these groups are paid according to the market value of their productivity, at least on average. Our analysis demonstrates the feasibility of the empirical investigation of exploitation, which should be further considered in future research.