We present incentivized panel data measuring risk preferences of subsistence farmers from across Ethiopia, and pair them with rainfall data. We use these data to test the hypothesis that risk preferences may adapt to the environment of the decision maker. We find rainfall shocks to decrease risk tolerance for the same individuals over time. We also find that historical rainfall characteristics and geographical features can explain 40% of the variation in preferences across individuals. The time-changing effects are perfectly aligned with the geographical effects we document, painting a unified and highly coherent picture. This provides the first real world evidence that preferences may systematically adapt to the environment of the decision maker.
{"title":"Environmental Adaptation of Risk Preferences","authors":"Salvatore Di Falco, Ferdinand M. Vieider","doi":"10.1093/ej/ueac030","DOIUrl":"https://doi.org/10.1093/ej/ueac030","url":null,"abstract":"\u0000 We present incentivized panel data measuring risk preferences of subsistence farmers from across Ethiopia, and pair them with rainfall data. We use these data to test the hypothesis that risk preferences may adapt to the environment of the decision maker. We find rainfall shocks to decrease risk tolerance for the same individuals over time. We also find that historical rainfall characteristics and geographical features can explain 40% of the variation in preferences across individuals. The time-changing effects are perfectly aligned with the geographical effects we document, painting a unified and highly coherent picture. This provides the first real world evidence that preferences may systematically adapt to the environment of the decision maker.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"55 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-05-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"82327048","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A buyer wants to purchase an innovative good from a seller. Both parties are risk-neutral, and payments from the buyer to the seller must be non-negative. After the contract is signed, the seller privately observes a signal, which may be informative about the seller’s costs. We compare two contracting regimes. In the case of specific performance, the courts enforce the contractually specified trade level. In the case of at-will contracting, the seller is free to walk away from the contract after observing the signal. The optimal regime from an economic efficiency point-of-view depends on the informativeness of the signal.
{"title":"How (Not) to Purchase Novel Goods and Services: Specific Performance versus At-Will Contracts","authors":"P. Schmitz","doi":"10.1093/ej/ueac024","DOIUrl":"https://doi.org/10.1093/ej/ueac024","url":null,"abstract":"\u0000 A buyer wants to purchase an innovative good from a seller. Both parties are risk-neutral, and payments from the buyer to the seller must be non-negative. After the contract is signed, the seller privately observes a signal, which may be informative about the seller’s costs. We compare two contracting regimes. In the case of specific performance, the courts enforce the contractually specified trade level. In the case of at-will contracting, the seller is free to walk away from the contract after observing the signal. The optimal regime from an economic efficiency point-of-view depends on the informativeness of the signal.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"30 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-04-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75590401","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study provides evidence that strong kin networks are detrimental for democratic participatory institutions and that the medieval Catholic Church's marriage regulations dissolved Europe's clan-based kin networks, which contributed to the emergence of participatory institutions. I show that weak ancestral kin networks are positively associated with ethnicities’ democratic traditions in the past and countries’ democracy scores today. At the same time, medieval Church exposure predicts weak kin networks across countries, European regions and ethnicities. In a historical difference-in-difference analysis, I provide evidence that exposure to the Church contributed to the formation of medieval communes – self-governed cities with participatory institutions. Moreover, within Christian Europe, stricter regional and temporal marriage prohibitions are associated with commune formation. Lastly, I shed light on one mechanism, civicness, and show that weak kin networks are associated with more political participation.
{"title":"Kin Networks and Institutional Development","authors":"Jonathan F. Schulz","doi":"10.1093/ej/ueac027","DOIUrl":"https://doi.org/10.1093/ej/ueac027","url":null,"abstract":"\u0000 This study provides evidence that strong kin networks are detrimental for democratic participatory institutions and that the medieval Catholic Church's marriage regulations dissolved Europe's clan-based kin networks, which contributed to the emergence of participatory institutions. I show that weak ancestral kin networks are positively associated with ethnicities’ democratic traditions in the past and countries’ democracy scores today. At the same time, medieval Church exposure predicts weak kin networks across countries, European regions and ethnicities. In a historical difference-in-difference analysis, I provide evidence that exposure to the Church contributed to the formation of medieval communes – self-governed cities with participatory institutions. Moreover, within Christian Europe, stricter regional and temporal marriage prohibitions are associated with commune formation. Lastly, I shed light on one mechanism, civicness, and show that weak kin networks are associated with more political participation.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"7 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-04-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"79156401","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A model is presented where the welfare of contributors to a public good can increase when they face an adversary who ex post sabotages their efforts. It is a best response for the adversary to maximally sabotage the smallest effort, thus increasing a defector's marginal product of effort. This creates a kink in the individual contributor's payoff function around the equilibrium effort, which can lock contributors into exerting high effort. For a sufficiently large degree of complementarity between the contributors’ efforts, the adversary increases contributors’ welfare. This result is robust when departing from several simplifying assumptions of the model.
{"title":"Threat of Sabotage as A Driver of Collective Action","authors":"K. De Jaegher","doi":"10.1093/ej/ueac023","DOIUrl":"https://doi.org/10.1093/ej/ueac023","url":null,"abstract":"\u0000 A model is presented where the welfare of contributors to a public good can increase when they face an adversary who ex post sabotages their efforts. It is a best response for the adversary to maximally sabotage the smallest effort, thus increasing a defector's marginal product of effort. This creates a kink in the individual contributor's payoff function around the equilibrium effort, which can lock contributors into exerting high effort. For a sufficiently large degree of complementarity between the contributors’ efforts, the adversary increases contributors’ welfare. This result is robust when departing from several simplifying assumptions of the model.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"139 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80552814","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Despite increasing climatic variability and frequent weather shocks in many developing countries, there is little evidence on effective policies that help poor agricultural households manage risk. This paper presents experimental evidence on a programme in rural Nicaragua aimed at improving households’ risk-management through income diversification. The intervention targeted agricultural households exposed to weather shocks and combined a one-year conditional cash transfer with vocational training or a productive investment grant. We identify the relative impact of each complementary package based on randomized assignment and analyse how impacts vary by exposure to exogenous drought shocks. The results show that both complementary interventions provide protection against weather shocks two years after the programme ended. Households that received the productive investment grant also had higher average consumption levels. The complementary interventions facilitated income smoothing and diversification of economic activities, as such offering better protection from shocks compared to beneficiaries of the basic conditional cash transfer and control households. Relaxing capital constraints induced investments in non-agricultural businesses, while relaxing skills constraints increased wage work and migration in response to shocks. These results show that combining safety nets with productive interventions relaxing skill or capital constraints can help households become more resilient and manage climatic variability.
{"title":"Transfers, Diversification and Household Risk Strategies: Can productive safety nets help households manage climatic variability?","authors":"K. Macours, Patrick Premand, Renos Vakis","doi":"10.1093/ej/ueac018","DOIUrl":"https://doi.org/10.1093/ej/ueac018","url":null,"abstract":"\u0000 Despite increasing climatic variability and frequent weather shocks in many developing countries, there is little evidence on effective policies that help poor agricultural households manage risk. This paper presents experimental evidence on a programme in rural Nicaragua aimed at improving households’ risk-management through income diversification. The intervention targeted agricultural households exposed to weather shocks and combined a one-year conditional cash transfer with vocational training or a productive investment grant. We identify the relative impact of each complementary package based on randomized assignment and analyse how impacts vary by exposure to exogenous drought shocks. The results show that both complementary interventions provide protection against weather shocks two years after the programme ended. Households that received the productive investment grant also had higher average consumption levels. The complementary interventions facilitated income smoothing and diversification of economic activities, as such offering better protection from shocks compared to beneficiaries of the basic conditional cash transfer and control households. Relaxing capital constraints induced investments in non-agricultural businesses, while relaxing skills constraints increased wage work and migration in response to shocks. These results show that combining safety nets with productive interventions relaxing skill or capital constraints can help households become more resilient and manage climatic variability.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"53 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-03-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"72818532","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
E. Gsottbauer, Daniel Müller, Samuel Müller, S. Trautmann, Galina Zudenkova
Are individuals of higher socio-economic status less ethical than those of lower status? Highly popularised research findings claim that this is the case. This paper provides evidence against this claim, based on data from two large survey experiments with more than 11,000 participants. We prime social status in two heterogeneous samples of the German population and then elicit ethical behaviour in an incentivised experimental task. Thus, our data allows us to study both correlation (using demographic data) and causality (using the priming). Our study rejects the claim that higher social status individuals are less ethical on both accounts.
{"title":"Social class and (un)ethical behaviour: Causal and correlational evidence","authors":"E. Gsottbauer, Daniel Müller, Samuel Müller, S. Trautmann, Galina Zudenkova","doi":"10.1093/ej/ueac022","DOIUrl":"https://doi.org/10.1093/ej/ueac022","url":null,"abstract":"\u0000 Are individuals of higher socio-economic status less ethical than those of lower status? Highly popularised research findings claim that this is the case. This paper provides evidence against this claim, based on data from two large survey experiments with more than 11,000 participants. We prime social status in two heterogeneous samples of the German population and then elicit ethical behaviour in an incentivised experimental task. Thus, our data allows us to study both correlation (using demographic data) and causality (using the priming). Our study rejects the claim that higher social status individuals are less ethical on both accounts.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"3 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-03-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89082574","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Vincent J. Geloso, Phillip W. Magness, J. Moore, Philip Schlosser
Piketty and Saez (2003) found a pronounced U-curve pattern of American income inequality since 1917, displaying a precipitous decline during World War II to a level that would hold until 1980. We offer revisions to their income inequality estimates prior to 1960 with three important findings. First, Piketty and Saez overstate inequality levels in this period. Second, the decline during WWII was smaller than depicted. Third, the Great Depression, rather than WWII, played the more significant role. These findings indicate a need to reevaluate commonly held assumptions about the evolution of inequality during the period of the ‘Great Leveling,’ as well as the nature of its posited relationship to tax policy.
{"title":"How pronounced is the U-curve? Revisiting income inequality in the United States, 1917-1960","authors":"Vincent J. Geloso, Phillip W. Magness, J. Moore, Philip Schlosser","doi":"10.1093/ej/ueac020","DOIUrl":"https://doi.org/10.1093/ej/ueac020","url":null,"abstract":"\u0000 Piketty and Saez (2003) found a pronounced U-curve pattern of American income inequality since 1917, displaying a precipitous decline during World War II to a level that would hold until 1980. We offer revisions to their income inequality estimates prior to 1960 with three important findings. First, Piketty and Saez overstate inequality levels in this period. Second, the decline during WWII was smaller than depicted. Third, the Great Depression, rather than WWII, played the more significant role. These findings indicate a need to reevaluate commonly held assumptions about the evolution of inequality during the period of the ‘Great Leveling,’ as well as the nature of its posited relationship to tax policy.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"72 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-03-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"73477297","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper examines the effect of the early adoption of technology on the evolution of human capital and industrialization. We argue that mechanical skills and competence were a main determinant of the location of industry on the eve of the Industrial Revolution. It concentrates on the case of millwrights, eighteenth century specialists in advanced carpentry and hydraulic machinery. Millwrights were a key part of the upper-tail of the distribution of mechanical abilities. Their emergence was determined by the early adoption of watermills in the Middle Ages as recorded in the Domesday Book survey (1086). Their location displays considerable persistence.
{"title":"The Wheels of Change: Technology Adoption, Millwrights, and the Persistence in Britain's Industrialization","authors":"Joel Mokyr, A. Sarid, Karine van der Beek","doi":"10.1093/ej/ueab102","DOIUrl":"https://doi.org/10.1093/ej/ueab102","url":null,"abstract":"\u0000 This paper examines the effect of the early adoption of technology on the evolution of human capital and industrialization. We argue that mechanical skills and competence were a main determinant of the location of industry on the eve of the Industrial Revolution. It concentrates on the case of millwrights, eighteenth century specialists in advanced carpentry and hydraulic machinery. Millwrights were a key part of the upper-tail of the distribution of mechanical abilities. Their emergence was determined by the early adoption of watermills in the Middle Ages as recorded in the Domesday Book survey (1086). Their location displays considerable persistence.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"17 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-02-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74470690","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
While religions frequently preach preferential treatment of fellow believers, the magnitude and economic implications of religiosity-based discrimination are largely unknown. Religiosity is often confounded with ethnicity, but it varies even within ethnicities and religious denominations. It is also seldom observed in administrative data. This paper exploits a setting that avoids these limitations. We analyse grading decisions in national matriculation exams in Israel, exploiting unique features that reveal student religiosity to the graders, and grader religiosity to the researcher. We find evidence of ingroup bias between religious and non-religious groups, but in our setting this effect is very small. There seem to be two main reasons. First, religious ingroup bias is limited to male graders only. Moreover, patterns of bunching in the grade distribution suggest the bias is primarily due to the religious—rather than secular—men. This is a small fraction of the grader population. A second potential reason is that many graders live in integrated communities. Our evidence suggests that living and working in close proximity to people with different levels of religiosity attenuates discrimination.
{"title":"Discrimination Between Religious and Non-Religious Groups: Evidence from Marking High-Stakes Exams","authors":"Victor Lavy, Edith Sand, Moses Shayo","doi":"10.1093/ej/ueac014","DOIUrl":"https://doi.org/10.1093/ej/ueac014","url":null,"abstract":"\u0000 While religions frequently preach preferential treatment of fellow believers, the magnitude and economic implications of religiosity-based discrimination are largely unknown. Religiosity is often confounded with ethnicity, but it varies even within ethnicities and religious denominations. It is also seldom observed in administrative data. This paper exploits a setting that avoids these limitations. We analyse grading decisions in national matriculation exams in Israel, exploiting unique features that reveal student religiosity to the graders, and grader religiosity to the researcher. We find evidence of ingroup bias between religious and non-religious groups, but in our setting this effect is very small. There seem to be two main reasons. First, religious ingroup bias is limited to male graders only. Moreover, patterns of bunching in the grade distribution suggest the bias is primarily due to the religious—rather than secular—men. This is a small fraction of the grader population. A second potential reason is that many graders live in integrated communities. Our evidence suggests that living and working in close proximity to people with different levels of religiosity attenuates discrimination.","PeriodicalId":85686,"journal":{"name":"The Economic journal of Nepal","volume":"38 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2022-02-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78362719","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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