A surprisingly large amount of otherregarding behavior is the common finding of experiments on bargaining, public goods, and trust. Elizabeth Hoffman et al. ( hereafter, HMS ) ( 1996 ) have provided an insightful analysis of why experimental results deviate from game theoretic predictions in dictator games. The authors conclude that individuals’ dispositional knowledge about social norms and reciprocity is activated by decreasing social distance even though the dictator game explicitly excludes reciprocal sanctioning possibilities by experimental design. We challenge this conclusion. While HMS (p. 654) define social distance to be ‘‘the degree of reciprocity that subjects believe exist within a social interaction,’’ we argue that social distance influences otherregardedness independent of any norms of social exchange. When social distance decreases, the ‘‘other’’ is no longer some unknown individual from some anonymous crowd but becomes an ‘‘identifiable victim’’ (Thomas C. Schelling 1968). In order to discriminate between reciprocity-based and identifiabilitybased other-regardedness, we also used the dictator game and varied the degree of social distance. An anonymous treatment is com-
Discrepancies in International Data: An Application to China-Hong Kong Entrepot Trade by Robert C. Feenstra, Wen Hai, Wing T. Woo and Shunli Yao. Published in volume 89, issue 2, pages 338-343 of American Economic Review, May 1999
Scale economies and agglomeration externalities are alleged to be important determinants of economic growth. To assess these effects, we outline and estimate a microfoundations model based on a dynamic cost function specification. This model provides for the separate identification of the impacts of externalities and cyclical utilization on short- and long-run scale economies and input substitution patterns. We find that scale economies are prevalent in U.S. manufacturing, cost savings and scale effects often attributed to internal inputs may be due to external factors, and supply-side agglomeration effects are greater than demand-side, especially in the long run.
Increased concem by policy makers with the threat of global climate change has brought with it considerable attention to the possibility of encouraging the growth of forests as a means of sequestering carbon dioxide (National Academy of Sciences [NAS], 1992; James P. Bruce et al., 1996).1 The Kyoto Protocol to the United Nations Framework Convention on Climate Change (1997), which establishes emission reduction targets for the United States and other industrialized nations, states that carbon sequestration can be used by participating nations to achieve their targets. Moreover, even before the Kyoto agreement, this approach had become an explicit element of both U.S. and intemational climate policies (U.S. Department of Energy, 1991; United Nations General Assembly, 1992; William J. Clinton and Albert Gore, 1993). This high level of interest has been due, in part, to: suggestions that sufficient lands are available to use the approach to mitigate a substantial share of annual carbon dioxide (C02) emissions (Greg Marland, 1988; Daniel A. Lashof and Dennis A. Tirpak, 1989; Mark C. Trexler, 1991); and claims that growing trees to sequester carbon is a relatively inexpensive means of combating climate change (Roger A. Sedjo and Allen M. Solomon, 1989; Daniel J. Dudek and Alice LeBlanc, 1990; NAS, 1992). In other words, the serious attention given by policy makers to carbon sequestration can partly be explained by (implicit) assertions about respective marginal cost functions. I develop and demonstrate a method by which the costs of carbon sequestration can be estimated on the basis of evidence from landowners' behavior when confronted with the opportunity costs of alternative land uses. The simplest of previous economic analyses derived single point estimates of average costs associated with particular sequestration levels (Marland, 1988; Sedjo and Solomon, 1989; Dudek and LeBlanc, 1990; Edwin S. Rubin et al., 1992; Omar Masera et al., 1995). Often it has been assumed that land (opportunity) costs are zero (G. van Kooten et al., 1992; J. K. Winjum et al., 1992; New York State Energy Office, 1993; Robert K. Dixon et al, 1994). Another set of studies-essentially engineering/costing has constructed marginal cost schedules by using information on revenues and costs of production for altemative uses on representative types or locations of land, and then sorting these in ascending order of cost (Robert J. Moulton and Kenneth R. Richards, 1990; Richards et al., 1993). Simulation models include a model of the lost profits due to removing land from agricultural production (Peter J. Parks and Ian W. Hardie, 1995), a mathematical programming model of the agricultural sector and the timber market (Richard M. Adams et al, 1993), a related model incorporating the effects of agricultural price support programs (J. M. Callaway and Bruce McCarl, 1996), and a dynamic simulation model of forestry (Susan Swinehart, 1996). Lastly, an analysis by Andrew J. Plantinga (1995) adopts land-use elasticities from an econometric study to estimate sequestration costs. We draw on some of the best features of the previous studies, including the carbon levelization method of Moulton and Richards * John F. Kennedy School of Government, Harvard University, 79 John F. Kennedy Street, Cambridge, MA 02138, and Resources for the Future. Richard Newell supplied excellent research assistance; and valuable comments on a previous version were provided by Lawrence Goulder, William Nordhaus, Andrew Plantinga, Kenneth Richards, two anonymous referees, participants in seminars at the Universities of California at Los Angeles and Santa Barbara, the University of Maryland, the University of Michigan, the University of Texas, Harvard University, Stanford University, Yale University, Resources for the Future, and the National Bureau of Economic Research. The author alone is resDonsible for any errors. 1 After fossil-fuel combustion, deforestation is the second largest source of carbon dioxide emissions. Estimates of annual global emissions from deforestation range from 0.6 to 2.8 billion tons, compared with slightly less than 6.0 billion tons annually from fossil-fuel combustion, cement manufacturing, and natural gas flaring, combined (R. A. Houghton, 1991; T. M. Smith et al., 1993).
This paper employs a simple theoretical model of labor allocation within rural households given existing land arrangements in an attempt to explain why rural Chinese do not fully participate in labor migration. It first explores the mechanisms by which individual household and community characteristics affect the migration decision. Empirical results are then presented to substantiate the derived hypotheses. The paper further explores the question of whether the migration decision is permanent by analyzing the responses of household consumption to income from migration. (EXCERPT)
In an influential paper, Avinash Dixit (1987) considers a class of symmetric two-player contests in which each player’s effort, xi, influences the probability of winning a prize valued at K . 0. Letting p( x1, x2) denote the probability 1 that player 1 wins, the expected payoffs of the two players are p1 5 p( x1, x2) K 2 x1 and p2 5 [1 2 p( x1, x2)]K 2 x2. Dixit’s main result is that if there is perfect symmetry between the players and each player’s effort has a positive but diminishing marginal effect on his or her probability of winning, i.e.,
In this paper we study the quantitative impact of marginal tax rates on the distribution of income. Our methodology builds on computable general-equilibrium framework. We find that distortions from marginal tax rate changes of the sort implied by the Tax Reform Act of 1986 have sizable effects on income inequality in a reasonably quantified life-cycle setting: In our model rate changes alone capture half the increase in the pretax Gini that actually occurred between 1984 and 1989.
This paper considers whether the paucity of bank branches in heavily African-American communities and the lack of a robust AfricanAmerican banking sector may be among the factors impeding these communities' economic development. While activists often claim that these factors reduce credit flows in African-American communities, there are reasons to think that such claims may lack merit. For one thing, technological advances have permitted banks to make loans geographically distant from their branch offices and also have allowed many nonbanks to enter credit markets. Further, many immigrants, especially from East Asia, have succeeded on the basis of informal financial arrangements nurtured in ethnic enclaves. Therefore, informal intraethnic resources, not banks per se, may be the key to ethnic groups' access to credit and capital. Ethnic enclaves are of undoubted historical importance for many ethnic groups, but they may no longer be an important forn of social organization (Roger Waldinger, 1993). Timothy Bates ( 1997), in turn, has shown that successful Asian-American small businesses rely more on equity capital and formal financial institutions' credit than on family or lending-circle funds. Are formnal banking structures important in minorities' access to credit? This question is answered here by examining recent experience in multi-ethnic Los Angeles. Los Angeles has seen a sizable inflow of Asian immigrants, who no longer cluster in the inner city but have been expanding into suburban communities. Several Asian ethnoburbs (Wei Li, 1997) have arisen, in part due to the formal economic institutions spawned by ethnic business networks, including many Asian-American banks (Yu Zhou, 1996). Dymski et al. (1998) suggest the termn ethnobank to denote banks that are owned or controlled by members of ethnic minority groups and which primarily provide financial services to ethnic businesses and residents. Why might ethnobanks play a special role in ethnic communities' economic activities? Until the Civil Rights era, etimic banks fell into two categories: African-American banks focused on customers left unserved because of segregation and racial discrimination (Lisa Ammons, 1996) while Asian-American banks supported exportimport activities (Peter Kwong, 1987). Civilb rights laws and desegregation made mainstrea banks more accessible to minority customers. Before deregulation and the informationprocessing revolution, banks delivered credit and other financial services through multipurpose branches; these solved the principal-agent problems inherent in credit contracts by building up localized knowledge rooted in sustained bank-customer relationships. But banks have increasingly established centralized loandecision processes emphasizing standardized public information, not informal private information. For many banks, bank branches are now primarily venues for selling financial products, not hubs for gathering information and making loan decisions. Consequently, banks now open and maintain branches in what Angela Chang et al. ( 1997) ternm rational herding' pattems; t Discussants: Robert Avery, Federal Reserve Board; Elijah Brewster, Federal Reserve Bank of Chicago; Darryl Getter, U.S. Naval Academy; Sonya Williams Stanton, Ohio State University.
The industrial revolution in several East Asian countries over the last three decades is one of the most important economic events in the postwar era. Several recent growthaccounting exercises have found that their extraordinary rate of output growth was due primarily to an equally impressive rate of factor accumulation, with little due to technological progress (see Alwyn Young, 1992, 1995; Jong-Il Kim and Lawrence Lau, 1994; Susan Collins and Barry Bosworth, 1996 ) . Since these studies suggest that factor accumulation has been the lead actor in East Asia’s growth, many economists have reached the conclusion that the industrial revolution in East Asia can largely be explained in terms of transition dynamics in a neoclassical growth framework (see e.g., Paul Krugman, 1994; N. Gregory Mankiw, 1995). If this view is correct, the lesson from East Asia’s experience is that there are no easy solutions for a poor country that seeks to join the league of wealthy nations. Low levels of investment and education may be the result of bad policies. But once proper policies are enacted, a poor country faces the grim prospect of a further decline in its already low standards of living as it devotes more resources to investment and education. The central point of this paper is that, if East Asia’s growth was largely driven by capital accumulation with little technological progress, the return to capital should have fallen dramatically as capital accumulation encounters diminishing returns. For example, the capital–output ratio for Korea computed from the national accounts has increased at an average rate of 3.4 percent per year from 1966 to 1990 while that of Singapore has increased at an average rate of 3.7 percent per year from 1968 to 1990. By dividing the share of payments to capital in total income by the capital–output