Volunteering and the strategic value of ignorance

Private provision of public goods often takes place as a war of attrition: individuals wait until someone else volunteers and provides the good. After a certain time period, however, one individual may be randomly selected. If the individuals are uncertain about their cost of provision, but can find out about this cost ahead of the volunteering game, a strategic value is attached to the information, and individuals may prefer not to learn their cost of provision. If the time horizon is sufficiently short, in equilibrium only one individual may acquire information about his cost. For a long time horizon, acquiring information is strictly dominant. The time limit is an important instrument in influencing the efficiency of the volunteering game.     

ALLIANCES IN THE SHADOW OF CONFLICT

Victorious alliances often fight about the spoils of war. This article presents an experiment on the determinants of whether alliances break up and fight internally after having defeated a joint enemy. First, if peaceful sharing yields an asymmetric rent distribution, this increases the likelihood of fighting. In turn, anticipation of the higher likelihood of internal fight reduces the alliance's ability to succeed against the outside enemy. Second, the option to make nonbinding nonaggression declarations between alliance members does not make peaceful settlement within the alliance more likely. Third, higher differences in the alliance players' contributions to alliance effort lead to more internal conflict and more intense fighting. (JEL D72, D74)     

Role of National Divorce Rates in Moderating the Association Between Marriage Duration and Body Mass Index

The aim of this study was to investigate the moderating effects of the national divorce rate on the association between body weight and marriage duration. Previous studies argued that a high divorce rate at country level reduces the body weight of married people because of an increased risk of a return to the marriage market. To examine the association in question, this study used retrospective data from 14,083 middle-aged individuals in Europe. For women the divorce rate, the percentage change, and the trend of change did not moderate the positive association between body mass index and marriage duration. In contrast, for men a high divorce rate and a steady decline over time positively moderated the relation between body mass index and marriage duration.     

Enriching Absorptive Capacity through Social Interaction

Absorptive capacity is frequently highlighted as a key determinant of knowledge transfer within multinational enterprises. But how individual behaviour translates into absorptive capacity at the subsidiary level, and how this is contingent on subsidiaries' social context, remains under‐addressed. This not only limits our understanding of the relationship between individual‐ and organizational‐level absorptive capacity, but also hampers further research on potentially relevant managerial and organizational antecedents, and limits the implications we can draw for practitioners who seek to increase their organization's capacity to put new knowledge to use. To address this shortcoming we conduct an in‐depth comparative case study of a headquarters‐initiated knowledge transfer at two subsidiaries of the same multinational enterprise. The findings demonstrate that social interaction is a prerequisite for subsidiary absorptive capacity as it enables employees to participate in the transformation of new knowledge to the local context and the development of local applications. The findings also illustrate how organizational conditions at the subsidiary level can impact subsidiary absorptive capacity by enabling or constraining local interaction patterns. These insights contribute to the absorptive capacity literature by demonstrating the scale and scope of social interaction as a key link between individual‐ and organizational‐level absorptive capacity.     

Subjective Quality of Life of Young Europeans. Feeling Happy but who Knows why?

Latest developments in modern societies have altered living circumstances. Upcoming insecurities concerning employment and family relationships make life more and more incalculable. Especially young adults throughout the modern world are forced to rethink their life concepts and to desist from the lives of former generations. As difficulties to achieve a successful life increase, one could assume that the young are confronted with the impossibility of feeling happy and satisfied with their lives anymore. Yet, latest social surveys prove wrong. Although increasing unemployment, lower net income and single parenthood make life more difficult for the young, they still enjoy very high subjective quality of life in comparison to the older population. Throughout the paper I argue that it is not the objective conditions that make young adults (15–29 years old) feel overwhelmingly happy. Looking for other sources of explanation of high quality of life among people aged 29 or below, I argue for indicators of social embeddedness as being influential on their assessment of life. But again, the proportion of explained variance is smaller compared to older people. With the help of empirical data taken from the European Social Survey I highlight the differences in life circumstances between the young and the total population. Concerning occupation, habitation (kind of inhabited household) and financial situation, most of the young live under different situations compared to the adult world. But surprisingly, the rates of perceived high quality of life among the young do not vary to such a large extent as among the adults. I show that young adults, often damned to fail social demands because of their withdrawal from social life, are still the most happy in modern (more and more individualizing?) societies. But it gets more difficult to account for the reasons of their happiness.     

Understanding Mechanisms Underlying Peer Effects: Evidence From a Field Experiment on Financial Decisions

Using a high‐stakes field experiment conducted with a financial brokerage, we implement a novel design to separately identify two channels of social influence in financial decisions, both widely studied theoretically. When someone purchases an asset, his peers may also want to purchase it, both because they learn from his choice (“social learning”) and because his possession of the asset directly affects others' utility of owning the same asset (“social utility”). We randomize whether one member of a peer pair who chose to purchase an asset has that choice implemented, thus randomizing his ability to possess the asset. Then, we randomize whether the second member of the pair: (i) receives no information about the first member, or (ii) is informed of the first member's desire to purchase the asset and the result of the randomization that determined possession. This allows us to estimate the effects of learning plus possession, and learning alone, relative to a (no information) control group. We find that both social learning and social utility channels have statistically and economically significant effects on investment decisions. Evidence from a follow‐up survey reveals that social learning effects are greatest when the first (second) investor is financially sophisticated (financially unsophisticated); investors report updating their beliefs about asset quality after learning about their peer's revealed preference; and, they report motivations consistent with “keeping up with the Joneses” when learning about their peer's possession of the asset. These results can help shed light on the mechanisms underlying herding behavior in financial markets and peer effects in consumption and investment decisions.     

Financing Unemployment Benefits: Dismissal versus Employment Taxes

Abstract. This paper investigates the effects of using dismissal taxes to finance unemployment benefits. We compare dismissal and employment taxes in a model with search frictions. Employment taxes give rise to externalities because firms do not take into account the effects their dismissal decisions have on others. These externalities can be tackled by using dismissal taxes to finance unemployment insurance. Taking into account the budget for unemployment insurance, employment taxes can be reduced by more than is necessary to offset the adverse effect of dismissal taxes on the value of the firm. The introduction of dismissal taxes leads to higher job creation and lower unemployment.