Up in Your Business
Why High Incentives Cause Repugnance: A Framed Field Experiment
Robert Stüber
Economic Journal, forthcoming
Abstract:
Why are high monetary payments prohibited for certain goods, thereby causing shortages in their supply? I conduct (i) a framed field experiment with a general population sample, and (ii) a survey experiment with this sample and with ethics committees. In the experiment, participants can prohibit others from being offered money to register as stem-cell donors. I document that, whereas the majority of participants do not respond to changes in the incentives (63%) or become more in favour of the offer with higher incentives (20%), a minority of 17% prohibit high incentives. I show that this minority wants to protect individuals who are persuaded by high incentives. I also show that a lottery scheme reduces their objections to high incentives. Finally, I document that the public is much more supportive of high incentives than are ethics committees.
Persistent interaction patterns across social media platforms and over time
Michele Avalle et al.
Nature, forthcoming
Abstract:
Growing concern surrounds the impact of social media platforms on public discourse and their influence on social dynamics, especially in the context of toxicity. Here, to better understand these phenomena, we use a comparative approach to isolate human behavioural patterns across multiple social media platforms. In particular, we analyse conversations in different online communities, focusing on identifying consistent patterns of toxic content. Drawing from an extensive dataset that spans eight platforms over 34 years -- from Usenet to contemporary social media -- our findings show consistent conversation patterns and user behaviour, irrespective of the platform, topic or time. Notably, although long conversations consistently exhibit higher toxicity, toxic language does not invariably discourage people from participating in a conversation, and toxicity does not necessarily escalate as discussions evolve. Our analysis suggests that debates and contrasting sentiments among users significantly contribute to more intense and hostile discussions. Moreover, the persistence of these patterns across three decades, despite changes in platforms and societal norms, underscores the pivotal role of human behaviour in shaping online discourse.
Competitive Effects of T-Mobile/Sprint: Analysis of a “4-to-3” Merger
Thomas Hazlett & Robert Crandall
Clemson University Working Paper, February 2024
Abstract:
Mergers in mobile markets are of keen interest to policy makers and scholars. Because carrier networks are subject to pronounced economies of scale and scope and given that communications regulators create substantial barriers to entry by limiting spectrum allocations for mobile services, wireless services generally exhibit relatively high levels of industrial concentration. Hence, antitrust authorities often struggle with the tradeoff between enhanced scale economies and enhanced market power. Between 2012 to 2016, for instance, four E.U. nations (Austria, Ireland, Germany, and Italy) consummated “4-to-3” mobile mergers while two such combinations were blocked (in Denmark and the U.K.). In the U.S., 4-to-3 transactions were blocked by regulators in 2011 and again in 2014, but a recent merger -- between the No. 3 (T-Mobile) and No. 4 (Sprint) carriers was approved in February 2020. This combination remains a subject of intense debate. We examine post-merger evidence of retail mobile subscription prices, network investment, service quality, market shares, and industry profits in the U.S. mobile communications industry. We conclude that the data are consistent with the thesis that the T-Mobile/Sprint merger produced consumer gains. This outcome is particularly interesting given that the government remedy imposed to mitigate potential anti-competitive merger effects, the creation of a new fourth network (DISH), has produced no plausible pro-competitive impact.
Innovation: The Bright Side of Common Ownership?
Miguel Antón et al.
NBER Working Paper, March 2024
Abstract:
Firms have inefficiently low incentives to innovate when other firms benefit from their inventions and the innovating firm therefore does not capture the full surplus of its innovations. We show that common ownership of firms mitigates this impediment to corporate innovation. By contrast, without technological spillovers, innovation has the effect of stealing market share from rivals; in that case, more common ownership reduces innovation. Empirically, the association between common ownership and innovation inputs and outputs decreases with product market proximity and increases with technology proximity. The sign and magnitude of the overall relationship between common ownership and corporate innovation thus varies considerably across the universe of firms depending on their relative proximity in technology and product market space. These results persist if we use only variation from BlackRock's acquisition of BGI. Our results inform the debate about the welfare effects of increasing common ownership among U.S. corporations.
A Case for Pay Secrecy
Tomer Blumkin, David Lagziel & Yoram Margalioth
American Law and Economics Review, forthcoming
Abstract:
In this paper, we study a labor market setup in which workers exhibit relative remuneration concerns with respect to their peers. We first characterize the optimal labor contract offered by the firm and provide necessary and sufficient conditions for the desirability of incorporating pay-secrecy clauses in such a contract. We then demonstrate that, in contrast to conventional wisdom viewing wage-secrecy arrangements as detrimental for workers, the latter may, in fact, gain from the lack of pay transparency.
How State Occupational Licenses Affect Jobs and Salaries
Christos Makridis & Patrick McLaughlin
George Mason University Working Paper, February 2024
Abstract:
We present new data on regulatory restrictions across states and occupations between 2017 and 2022 to study the labor market effects of occupational licensing. First, we document three stylized facts: (a) regulatory restrictions across states and occupations have grown by nearly a factor of three since 2019, (b) increases in regulatory restrictions are concentrated in occupations with lower median hourly wages and higher within-occupation inequality, and (c) states that expanded regulatory restrictions tend to have lower Republican vote shares. Second, exploiting variation across occupations within the same state and year, we find that a 10 percent rise in regulatory restrictions leads to a 3.3 percent rise in hourly wages but a 4.4 percent decline in employment. Both the employment and wage effects are concentrated in low-wage jobs, as well as among respondents with professional licenses, even after we control for demographic factors and industry differences.
How does worker mobility affect business adoption of a new technology? The case of machine learning
Ruyu Chen, Natarajan Balasubramanian & Chris Forman
Strategic Management Journal, forthcoming
Abstract:
We investigate how worker mobility influences the adoption of a new technology using state-level changes to the enforceability of noncompete agreements as an exogenous shock to worker mobility. Using data on over 153,000 establishments from 2010 and 2018, we find that changes that facilitate worker movements are associated with a significant decline in the likelihood of adoption of machine learning. Moreover, we find that the magnitude of decline depends upon the size of the establishment, the extent of predictive analytics adoption in its industry, and the number of large establishments in the same industry-location. These results are consistent with the view that increases in outward worker mobility increase costs for adoption of a new technology that involves significant downstream investments in the early years of its diffusion.
Whistle-blowing and the incentive to hire
Jef De Mot & Murat Mungan
Economic Inquiry, forthcoming
Abstract:
We consider a previously neglected cost of whistle-blower awards: employers may base their hiring decisions, on the margin, not on the productivity of an employee but rather on the probability that the employee will become a whistle-blower. We develop a three-stage model to examine how productivity losses due to distortions at the hiring stage influence optimal whistle-blower rewards. We characterize optimal rewards for whistle-blowing, and show that when rewards can be chosen according to either the benefits of the employer from offending or the productivity of the worker being hired, productivity-based rewards are superior to benefit-based rewards.
An Economic Approach to Sports Injury Policies
Jeffrey Cisyk & Pascal Courty
Journal of Sports Economics, April 2024, Pages 388-419
Abstract:
We propose an analysis of sports injury policies founded on the assertion that injuries are due to both uncontrollable risks (accidents from participating in sports) and controllable risks (athlete's deliberate choices in risk-taking). We compare the adoption decision of an injury policy made by: (a) a sport's organizer who maximizes welfare, (b) a sport's organizer who fails to account for athletes’ behavioral risk responses, and (c) the athletes themselves. We argue that policies that escalate risk, such as mandatory protective equipment, are over-adopted by the naïve sport organizer and the athletes, while policies that de-escalate risk, such as return-to-play rules, are under-adopted.
Pay Transparency and Entrepreneurship
Longfei Shang & Walid Saffar
Journal of Banking & Finance, May 2024
Abstract:
Using the staggered adoption of U.S. state-level pay transparency laws that improve pay transparency, we find that the probability of high-wage workers becoming entrepreneurs significantly increases following the adoption of such laws. Moreover, the salaries of high-wage workers significantly increase following the laws’ passage. These findings are consistent with theory suggesting that improved pay transparency increases the relative return of entrepreneurship for high-wage workers.
Technological advance, social fragmentation and welfare
Steven Bosworth & Dennis Snower
Social Choice and Welfare, March 2024, Pages 197–232
Abstract:
This paper models the welfare consequences of social fragmentation arising from technological advance. We start from the premise that technological progress falls primarily on market-traded commodities rather than prosocial relationships, since the latter intrinsically require the expenditure of time and thus are less amenable to productivity increases. Since prosocial relationships require individuals to identify with others in their social group whereas marketable commodities are commonly the objects of social status comparisons, a tradeoff arises between in-group affiliation and inter-group status comparisons. People consequently narrow the bounds of their social groups, reducing their prosocial relationships and extending their status-seeking activities. As prosocial relationships generate positive externalities whereas status-seeking activities generate negative preference externalities, technological advance may lead to a particular type of “decoupling” of social welfare from material prosperity. Once the share of status goods in total production exceeds a crucial threshold, technological advance is shown to be welfare-reducing.