Feet vs. ballots in local policy choices

When you are unhappy about public policy where you are you can either influence it by voting, or you can vote with your feet and move to an area that follows your ideals. But what if you could do both? It is not obvious that this would be welfare improving as the fact that one can move away makes that poorer choices could be offered. And moving implies costs that can be substantial.

Alessandro Innocenti and Chiara Rapallini take the experimental approach. They compare two games, one where dictators impose local payouts and people can move, and one where people vote on payouts and then can decide to move. It appears voting with the opportunity of moving is better than only moving, which makes sense if there are no moving costs: it gives more degrees of freedom and better outside options. And this is what Tiebout's theory was all about. However, I would have loved to see results of experiments with moving costs. This makes people captive, and strategies become more complex as arbitrage by moving is more difficult.

Are hot teachers better teachers?

It is well known that beautiful and tall people have better lives and are better paid. This is especially thought to be true in activities where skills are relatively unimportant. What about economics professors?

Anindya Sen, Marcel Voia and Frances Woolley use the hotness indicators from student evaluations at ratemyprofessor.com in Ontario and find hot economics university professors are paid a whooping 10% more than their less attractive counterparts. Not only is this a large number, it also runs counter to previous results that such effects are limited to unskilled professions. This effect is especially strong for men and not present for women, Indeed women who negotiate hard are not deemed attractive.

In addition, hotter teachers also get better student evaluations, even after controlling for all what the authors could put their hands on. For other indicators of professor productivity, it turns out that hotness affects positively women for citations, although this could be due to a few highly cited women (citation counts are always very skewed). But neither men nor women publish significantly more when hot, but they tend to attract more co-authors. I really need to be careful with my appearance.

What inflation target to set

Central banks, implicitly or explicitly, set targets for the inflation rate, usually in the form of an interval. What determines this interval and its mid-point? Theory tells you that larger economic fluctuations should leads to wider intervals and less central bank independence should like to higher targets.

Roman Horváth and Jakub Matějů set out to verify this by way of questionnaires to central bankers and sifting through official publications. They gather data from 19 countries, including how the targets have changed through history and confirm the conjectures above. They also find that targets seem to accommodate inflation expectations and follow world inflation. Interestingly, the party in power does not matter, even for less independent central banks. But one aspect that is not covered and I have always wondered about is how the dominant dogma would matter. Indeed, if a central bank believes in activist policy, it would presumably allow for a wider target interval. Or a neo-classical central banker would want a very low target inflation.

Publish school performance information!

Schools strongly resist the publication of their performance, officially because they have special circumstances that justify their ranking, and those circumstances get overlooked. However, as I reported before, evidence from the Netherlands showed that publishing school rankings forced the worst school to improve, and they do improve. But maybe the circumstances in the Netherlands are special.

Simon Burgess, Deborah Wilson and Jack Worth exploit a natural experiment in Britain: Wales suppressed the publication of school rankings in 2001, while England kept it. Using a difference-in-difference analysis, they show, oh surprise, that the performance of Welsh students regressed significantly, based on national exams. Only the top 25% schools escape this debacle. In addition, they find no indication of changes in stratification across schools in Wales, which invalidates further the argument that publishing rankings exacerbates school disparities through self-sorting of students. What is then a good argument for withholding school performance information?

Does part-time employment increase firm productivity?

In many countries, encouraging part-time work is seen as a way to reduce unemployment, as the a job is split among several people, and as a way to keep mothers on the job and thus preventing loss of human capital. Firms do not like these policies because they perceive that part-time workers are less productive due to the time lost during the daily settling in routine and the transitions between shifts. However, some argue that shorter work time allows workers to work more intensely.

Annemarie Nelen, Andries De Grip and Didier Fouarge look at this from the firms' perspective and sift through the evidence using records from the Dutch pharmacy sector. By estimating production functions, they find that part-time work in fact increases productivity. The reason is that part-time workers allow the firm to allocate labor where is the most urgently needed, for example during lunch breaks or to fill the difference between opening hours and work hours. So, at least in the retail sector, part-time work is a benefit. I wonder though about manufacturing and office work.

How to best increase organ donations

There is currently an increasing shortage of organs available for transplantation. This is due to a reduction in traffic fatalities, the main provider of healthy organs, and an exploding demand from patients. An economist would say here that there is a classic case of rationing because the price is too low (at zero) and one should let patients pay for organs. But as this is viewed as unethical, we will have to live with rationing and waiting lists, unless one can bring more people to donate organs. This brings up the question why people donate, and in particular why there is altruism. This question is still puzzling, as altruism may emerge from a combination of sense of duty, coaxing, reciprocity, tradition, social pressure, and others.

Juan Cabasés and María Errea try to sort this out by focusing on blood and living organ donation. They model the decision process of the potential donor that in particular factors in some negative effect of donation. Then they administer a questionnaire and test their theory. The survey allows to highlight the attitude towards donating, which in theory corresponds in part to the degree of altruism. But it appears the perceived cost of donating is much more important, as well as information about the need for donations. This shows that in order to encourage more donations, information campaigns may be quite effective, and maybe rationing or a proper market would not be necessary.

Addendum: I forgot to mention a caveat the authors neglect: The survey is administered to staff of an university. Such employees, I believe, are more altruistic than average.

Ethics in Economics

Ethical behavior in the Economics profession has so far never been codified or even much thought about. Indeed, economists have the reputation to be easy to buy, just ask any lawyer needing a "expert" to testify. But the recent movie Inside Job has brought to the general public the issue of conflict of interest in the profession, and the American Economic Association seems to have finally picked up the ball. As it is set to draw a code of ethical standards for the profession (New York Times article), one has to evaluate the large task ahead given the many ways in which economists have breached basic scientific conduct guidelines, with rather small consequences. Let me quickly go through a serious of examples to show how little unethical behavior has been sanctioned so far.

The prime example is, of course, the case of Andrei Shleifer, Harvard professor who was a major consultant for the Russian government during the massive privatization of its state-owned industry. Shleifer amassed substantial wealth during this process in ways many think where not legitimate, and in particular the US Department of Justice thought so. In the end, Harvard paid much of the fines, Shleifer is still a professor there and probably one of the richest people in the profession (more).

Or Florencio Lopez-de-Silanes, coincidentally student and frequent co-author of Shleifer, who as director of the Yale Center for Corporate Governance ironically double-billed US$150'000 worth of travel expenses. He was fired despite tenure, but landed on his feet, still active in the profession as a professor in France. (more).

A bit too frequently, the issue is that if someone gets caught with the hand in the cookie jar, he just resigns and lands a job elsewhere where no one suspects anything. The next examples are not documented online or in print, so I will not give names.

Professor A has help full-time appointments at two universities, with none of the two knowing about it. Colleagues grew suspicious when Prof. A would have strange schedules, rearrange classes in odd ways and never be available. The scheme was finally discovered after a few years, and Prof A was summarily fired. However, a few years later he was again holding two full-time positions at different universities...

PhD student B gets caught in massive plagiarism, we are talking here about copy-and-pasting a dozen full articles. Administrators get alerted and promise to dismiss the student. Student B still graduated with a PhD and is now a "respected" free-lance analyst.

PhD student C gets caught copy-and-pasting the entirety of a term paper from a published article. During the investigation it turns out Student C is a repeat offender, the teacher in the previous case failed to follow the proper procedure, Summarily dismissed, the student enrolls in another PhD program and is now close to graduate and already has a research job.

Professor D publishes as sole author the term paper of a student. Gets caught and dismissed. Moves to another country and now holds a chair.

Professor E plagiarizes and gets caught. Is asked to leave from a well-respected US department, applies for a well-endowed chair in another country. The university is impressed to see a candidate of such prestige and hires Professor E, oblivious to the baggage.

Is the AEA going to be able to take care of all these cases? Most likely not, as it is going to focus on conflict of interest. For the other cases, it is going to argue that every university has internal procedures to enforce ethics and in particular plagiarism. But as I showed with the cases above, this is of little use when offenders can simply walk away and act like a virgin elsewhere.

RePEc has a new initiative that would take care at least of the plagiarism cases by exposing them. As the blog post explains, the goal is the shame plagiarizing authors (after proper procedures have been followed) as was as shaming administrations in imposing proper sanctions. I applaud this initiative and I hope it will set an example and reduce the staggering among of plagiarism going on, and perhaps instill more ethical behavior into economists.