Knowledge that Transforms

The large literature on labor‐market rent sharing consists of closed economy analyses. In this article we examine whether profits are shared across borders and also conditioned by international linkages that help shape economic openness. In a sample of 1,014 Canadian manufacturing union contracts from 1980 through 1992, we find that U.S. industry profitability affects Canadian wage outcomes and that the pattern of rent sharing varies significantly across international linkages, including multinational ownership, union type, and trade barriers. There seems to be international rent sharing, with profit sharing across borders conditioned by firm‐ and industry‐level institutions.

This article studies a particular kind of gaming responses to explicit incentives in a large government organization. The gaming responses we consider occur when agents strategically report their performance outcomes to maximize their awards. An important contribution of this work is to examine whether this behavior diverts resources (e.g., agents’ time) from productive activities or whether it simply reflects an accounting phenomenon. We evaluate the efficiency impact of the behavior we identify and find that it has a negative impact on the true goal of the organization.

To get a more complete picture of how labor supply is affected by economic incentives, the effects on absenteeism should be taken into account. In particular, absenteeism due to sick leave can be considerable. We examine whether the level of sick leave compensation affects sick leave behavior. Using long time series data (1955–99) for Sweden with numerous changes of the compensation level, we generally find strong effects. Reforms implying more generous compensation for sick leave tend to be associated with permanent increases in sick leave, and vice versa. These findings are reinforced in a panel study covering the 1983–91 period.

In the Netherlands, the average exit rate out of welfare is dramatically low. Most welfare recipients have to comply with guidelines on job search effort that are imposed by the welfare agency. If they do not, then a sanction in the form of a temporary benefit reduction can be imposed. This article investigates the effect of such sanctions on the transition rate from welfare to work using a unique set of rich register data on welfare recipients. We find that the imposition of sanctions substantially increases the individual transition rate from welfare to work.

This paper reviews the extant empirical studies of financial innovation. Adopting broad criteria, the authors found just two dozen studies, over half of which (fourteen) had been conducted since 2000. Since some financial innovations are examined by more than one study, only fourteen distinct phenomena have been covered. Especially striking is the fact that only two studies are directed at the hypotheses advanced in many broad descriptive articles concerning the environmental conditions (e.g., regulation, taxes, unstable macroeconomic conditions, and ripe technologies) spurring financial innovation. The authors offer some tentative conjectures as to why empirical studies of financial innovation are comparatively rare. Among their suggested culprits is an absence of accessible data. The authors urge financial regulators to undertake more surveys of financial innovation and to make the survey data more available to researchers.

This paper assesses the current state of evidence on the impact of trade policy reform on poverty in developing countries. There is little empirical evidence addressing this question directly, but a lot of related evidence on specific aspects. We summarize this evidence using an analytic framework addressing four key areas: economic growth and stability; households and markets; wages and employment and government revenue. Twelve key questions are identified and empirical studies and results are discussed. We argue that there is no simple generalizable conclusion about the relationship between trade liberalization and poverty, and the picture is much less negative than is often suggested. In the long run and on average, trade liberalization is likely to be strongly poverty alleviating, and there is no convincing evidence that it will generally increase overall poverty or vulnerability. But there is evidence that the poor may be less well placed in the short run to protect themselves against adverse effects and take advantage of favorable opportunities.

For the last ten years environmentalists and the trade policy community have engaged in a heated debate over the environmental consequences of liberalized trade. The debate was originally fueled by negotiations over the North American Free Trade Agreement and the Uruguay round of GATT negotiations, both of which occurred at a time when concerns over global warming, species extinction and industrial pollution were rising. Recently it has been intensified by the creation of the World Trade Organization (WTO) and proposals for future rounds of trade negotiations. The debate has often been unproductive. It has been hampered by the lack of a common language and also suffered from little recourse to economic theory and empirical evidence. The purpose of this essay is set out what we currently know about the environmental consequences of economic growth and international trade. We critically review both theory and empirical work to answer three basic questions. What do we know about the relationship between international trade, economic growth and the environment? How can this evidence help us evaluate ongoing policy debates? Where do we go from here?

Experimental economists are leaving the reservation. They are recruiting subjects in the field rather than in the classroom, using field goods rather than induced valuations, and using field context rather than abstract terminology in instructions. We argue that there is something methodologically fundamental behind this trend. Field experiments differ from laboratory experiments in many ways. Although it is tempting to view field experiments as simply less controlled variants of laboratory experiments, we argue that to do so would be to seriously mischaracterize them. What passes for “control” in laboratory experiments might in fact be precisely the opposite if it is artificial to the subject or context of the task. We propose six factors that can be used to determine the field context of an experiment: the nature of the subject pool, the nature of the information that the subjects bring to the task, the nature of the commodity, the nature of the task or trading rules applied, the nature of the stakes, and the environment that subjects operate in.

This paper examines the importance of format in aid programs, focusing on state appropriations to public postsecondary institutions. These funds subsidize costs for in-state students, but they may also influence choices between institutions due to their in-kind format. Using the conditional logistic choice model and extensive match-specific information, the paper approximates the choice between nearly 2700 college options to examine the effect of several dissimilar state systems. The results suggest that the level and distribution pattern of subsidies strongly affect decisions. If the aid could instead be applied to any in-state college, up to 29% more students would prefer to attend private four-year colleges.