Fairly safe
On sweatshop jobs and decent work
Nancy Chau
Journal of Development Economics, forthcoming
Abstract:
This paper argues that while rooting out sweatshop conditions raises unemployment, the potential gains include an increase in decent work employment, a pro-worker shift in distribution, and an improvement in overall efficiency. In a search model of employment inspired by firm- and household-level evidence about the harm that sweatshop conditions pose to workers' capability to be productive at work and to be vertically mobile, this paper unpacks the irony of job losses and efficiency gains by examining equilibria where, unless regulations are in place, employers tolerate unproductive sweatshop conditions, and where workers accept insufficiently compensating sweatshop wages.
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Disruptive Change in the Taxi Business: The Case of Uber
Judd Cramer & Alan Krueger
NBER Working Paper, March 2016
Abstract:
In most cities, the taxi industry is highly regulated and utilizes technology developed in the 1940s. Ride sharing services such as Uber and Lyft, which use modern internet-based mobile technology to connect passengers and drivers, have begun to compete with traditional taxis. This paper examines the efficiency of ride sharing services vis-à-vis taxis by comparing the capacity utilization rate of UberX drivers with that of traditional taxi drivers in five cities. The capacity utilization rate is measured by the fraction of time a driver has a fare-paying passenger in the car while he or she is working, and by the share of total miles that drivers log in which a passenger is in their car. The main conclusion is that, in most cities with data available, UberX drivers spend a significantly higher fraction of their time, and drive a substantially higher share of miles, with a passenger in their car than do taxi drivers. Four factors likely contribute to the higher capacity utilization rate of UberX drivers: 1) Uber’s more efficient driver-passenger matching technology; 2) the larger scale of Uber than taxi companies; 3) inefficient taxi regulations; and 4) Uber’s flexible labor supply model and surge pricing more closely match supply with demand throughout the day.
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A spatial analysis of incomes and institutional quality: Evidence from US metropolitan areas
Jamie Bologna, Andrew Young & Donald Lacombe
Journal of Institutional Economics, March 2016, Pages 191-216
Abstract:
We use the Stansel (2013) metropolitan area economic freedom index and 25 conditioning variables to analyze the spatial relationships between institutional quality and economic outcomes across 381 U.S. metropolitan areas. Specifically, we allow for spatial dependence in both the dependent and independent variables and estimate how economic freedom impacts both per capita income growth and per capita income levels. We find that economic freedom and per capita income growth and income levels are directly and positively related. Furthermore, we find that the total (direct plus indirect) effects on all metropolitan areas are positive and larger in magnitude than the direct effects alone, indicating that freedom-enhancing reforms in one metropolitan area lead to positive-sum games with neighboring metropolitan areas.
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Product Liability versus Reputation
Juan José Ganuza, Fernando Gomez & Marta Robles
Journal of Law, Economics, and Organization, forthcoming
Abstract:
Market reputation is often perceived as a cheaper alternative to product liability in the provision of safety incentives. We explore the interaction between legal and reputational sanctions using the idea that inducing safety through reputation requires implementing costly “market sanctioning” mechanisms. We show that law positively affects the functioning of market reputation by reducing its costs. We also show that reputation and product liability are not just substitutes but also complements. We analyze the effects of different legal policies, and namely that negligence reduces reputational costs more intensely than strict liability, and that court errors in determining liability interfere with reputational cost reduction through law. A more general result is that any variant of an ex post liability rule will improve the functioning of market reputation in isolation. We complicate the basic analysis with endogenous prices and observability by consumers of the outcome of court’s decisions.
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Simplification of Privacy Disclosures: An Experimental Test
Omri Ben-Shahar & Adam Chilton
University of Chicago Working Paper, January 2016
Abstract:
Simplification of disclosures is widely regarded as an important goal and is increasingly mandated by regulations in a variety of areas of the law. In privacy law, simplification of disclosures is near universally supported. To guide this simplification, various “Best Practices” presentation techniques have been recommended, aimed at transforming privacy notices into clear and accessible information aids for consumers. In addition, some have proposed “Warning Labels” designed to familiarize consumers with only a short list the least expected privacy practices. But do such simplifications actually inform consumers and prevent unwise behavior? Since this question has not been rigorously studied, we conducted a survey experiment designed to test whether simplifying privacy disclosures affects respondents: (1) comprehension of the disclosure; (2) willingness to disclose personal information; and (3) expectations about their privacy rights. Our results reveal that none of the simplification techniques help inform respondents or affect their behavior. They call into further question the wisdom of focusing much regulatory effort on improved disclosures.
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Does antitrust policy promote competition?
Robert Lawson & Ryan Murphy
Applied Economics Letters, forthcoming
Abstract:
Using new measures of the scope and strength of antitrust policies, we find no evidence that more robust antitrust regimes correlate with more intense local competition or less corporate dominance. The results cast doubt on the common textbook assumption that antitrust policies improve levels of competition.
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Economic Freedom and Crashes in Financial Markets
Benjamin Blau
Utah State University Working Paper, December 2015
Abstract:
Using a unique empirical approach that accounts for the possibility that financial market crashes are endogenously determined by market structures, this study examines how economic freedom contribute to crashes in financial markets. On one hand, economic freedom might provide an unregulated framework that contributes to the likelihood of crashes. On the other hand, economic freedom may mitigate regulatory uncertainty thus providing a level of transparency that reduces the likelihood of crashes. Results in this study provide strong support for the latter idea as countries with higher economic freedom experience lower probabilities of market crashes and more positive skewness in asset returns. A closer examination of the data suggest that the components of economic freedom that contribute most to the reduction in crash risk is the level of free trade and, to some extent, the strength of property right protection.
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Efficiency and regulation: A comparison of dairy farms in Ontario and New York State
Peter Slade & Getu Hailu
Journal of Productivity Analysis, February 2016, Pages 103-115
Abstract:
We study the cost efficiency of dairy farms operating under two different regulatory regimes. While neo-classical economic theory suggests that farms should maximize their efficiency regardless of their regulatory system, we find that farms operating in a more regulated environment have, on average, a lower cost efficiency. Differences in cost efficiency are primarily explained by allocative decisions — farms in the more regulated environment are overcapitalized and overly reliant on homegrown feed. Efficiency is estimated using bootstrapped data envelopment analysis and a stochastic distance function. We discuss the implications of these results for welfare and policy.
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Hidden Baggage: Behavioral Responses to Changes in Airline Ticket Tax Disclosure
Sebastien Bradley & Naomi Feldman
Federal Reserve Working Paper, December 2015
Abstract:
We examine the impact on air travelers of an enforcement action issued by the U.S. Department of Transportation (DOT) in 2012 requiring that domestic air carriers and online travel agents incorporate all mandatory taxes and fees in their advertised fares. Consistent with the literature on tax salience, we find quasi-experimental evidence that the more prominent display of tax-inclusive prices is associated with a reduction in tax incidence on consumers, and this effect varies non-monotonically with market concentration. Ticket revenues are commensurately reduced, while passenger demand and average per-passenger tax revenue between origin and destination airport-pairs likewise decline following the introduction of full-fare advertising.