By providing feedback to customers on home electricity and natural gas usage with a focus on peer comparisons, utilities can reduce energy consumption at a low cost. We analyze data from two large-scale, random-assignment field experiments conducted by utility companies providing electricity (the Sacramento Municipal Utility District [SMUD]) and electricity and natural gas (Puget Sound Energy [PSE]), in partnership with a private company, Opower, which provides monthly or quarterly mailed peer feedback reports to customers. We find reduction in energy consumption of 1.2% (PSE) to 2.1% percent (SMUD), with the decrease sustained over time (7 months [PSE] and 12 months [SMUD]).
We report strong OLS and instrumental variable evidence that an overall corporate governance index is an important and likely causal factor in explaining the market value of Korean public companies. We construct a corporate governance index (KCGI, 0~100) for 515 Korean companies based on a 2001 Korea Stock Exchange survey. ln OLS, a worst-to-best change in KCGI predicts a 0.47 increase in Tobin's q (about a 160% increase in share price). This effect is statistically strong (t=6.12) and robust to choice of market value variable (Tobin's q, market/book, and market/sales), specification of the governance
Should the buyer of a customized good use competitive bidding or negotiation to select a contractor? To shed light on this question, we consider several possible determinants that may influence the choice of auctions versus negotiations. We then examine a comprehensive data set of private sector building contracts awarded in Northern California during the years 1995-2000. The analysis suggests a number of possible limitations to the use of auctions. Auctions may perform poorly when projects are complex, contractual design is incomplete, and there are few available bidders. Furthermore, auctions may stifle communication between buyer and sellers, preventing the buyer from utilizing the contractor's expertise when designing the project. Some implications of these results for procurement in the public sector are discussed.
To say that positive political theory (PPT) scholarship on the hierarchy of justice is theory rich and data poor is to make a rather uncontroversial claim. For over a decade now, scholars have offered intriguing theoretical accounts aimed at understanding why lower courts defy (comply with) higher courts. But only rarely do they subject the accounts to rigorous empirical interrogation. The chief obstacle, it seems, is the lack of a reliable and valid measurement strategy for placing judges of lower courts and justices of higher courts in the same policy space. Without such a strategy, we can systematically test few, if any, hypotheses flowing from PPT models of the judicial hierarchy. With such an approach not only can we investigate the implications of these models, we can assess many others flowing from the larger PPT program on judging, as well. It is to the challenge of scaling judges and justices (as well as legislatures and executives) that we turn in this article. We begin by explicating our measurement strategy, and then by explaining its advantages over previous efforts. Next we explore the results of our approach and provide a descriptive look at data it yields: a "Judicial Common Space" (JCS) score for all justices and judges appointed since 1953. The last section offers three applications designed to shore up the suitability and adaptability of the JCS for a range of positive projects on the courts.
Pyramidal organizational structures are common throughout the world. This article considers an explanation for pyramids built by the state: separating firms from political interference. Although intermediate pyramidal layers insulate managers from a pyramid's top owners and hence induce agency costs, they also minimize political costs of state intervention. All else equal, the optimal division of power between the government and the managers should be the point at which the marginal agency costs are equal to the marginal political costs. Our empirical results, based on hand-collected data for 742 local government-owned Chinese business groups are generally in line with this hypothesis.
We study the effects of noncompetition agreements by analyzing time-series and cross-sectional variation in the enforceability of these contracts across US states. We find that tougher noncompetition enforcement promotes executive stability. Increased enforceability also results in reduced executive compensation and shifts its form toward greater use of salary. We further show that stricter enforcement reduces capital expenditures per employee. These results are consistent with a model in which enforceable noncompetition contracts encourage firms to invest in their managers' human capital. On the other hand, our findings suggest that these contracts also discourage managers from investing in their own human capital and that this second effect is empirically dominant.
In recent decades, there has been a wide-ranging global movement towards constitutional review. This development poses important puzzles of political economy: Why would self-interested governments willingly constrain themselves by constitutional means? What explains the global shift toward judicial supremacy? Though different theories have been proposed, none have been systematically tested against each other using quantitative empirical methods. In this article, we utilize a unique new dataset on constitutional review for 204 countries for the period 1781-2011 to test various theories that explain the adoption of constitutional review. Using a fixed-effects spatial lag model, we find substantial evidence that the adoption of constitutional review is driven by domestic electoral politics. By contrast, we find no general evidence that constitutional review adoption results from ideational factors, federalism, or international norm diffusion.
Despite having adopted the political institutions of established democracies, democratizing countries display a systematically different pattern of fiscal outcomes. This article attributes these differences to the low credibility of electoral promises in new democracies. We study a model of electoral competition where candidates have two costly means to make themselves credible: spending resources to communicate directly with voters and exploiting preexisting patron-client networks. The costs of building credibility are endogenous and lead to higher targeted transfers and corruption and lower public good provision. The analysis demonstrates that in low-credibility states, political appeals to patron-client networks may be welfare enhancing, but in the long run, they delay political development by discouraging direct appeals to voters that are essential for credible mass-based political parties. The model explains why public investment and corruption are higher in younger democracies and why democratizing reforms had greater success in Victorian England than in the Dominican Republic. (JEL D720, H110, H300, H400, H500, O100)
Abstract We analyze the “sequential exchange” problem in which traders have imperfect information on earlier contracts. We show that under sequential exchange, it is in general not possible to simultaneously implement two key features of markets—specialization between asset ownership and control, and impersonal trade. In particular, we show that in contrast with the conventional wisdom in economics, strong property rights—enforceable against subsequent buyers—may be detrimental to impersonal trade because they expose asset buyers to the risk of collusive relationships between owners and sellers. Finally, we provide conditions under which a mechanism that overcomes the trade-off between specialization and impersonal trade exists. We characterize and discuss such mechanism. Our results provide an efficiency rationale for how property rights are enforced in business, company and real estate transactions, and for the ubiquitousness of “formalization” institutions that the literature has narrowly seen as entry barriers. (JEL D23, D83, K11, K22)
Abstract Supreme Court justices employ law clerks to help them perform their duties. We study whether these clerks influence how justices vote in the cases they hear. We exploit the timing of the clerkship hiring process to link variation in clerk ideology to variation in judicial voting. To measure clerk ideology, we match clerks to the universe of disclosed political donations. We find that clerks exert modest influence on judicial voting overall, but substantial influence in cases that are high-profile, legally significant, or close decisions. We interpret these results to suggest that clerk influence occurs through persuasion rather than delegation of decision-making authority. (JEL K00, D72)
Abstract Principal–agent problems can reduce gains from exchange available in long distance trade. One solution historically used to mitigate such problems is multilateral punishment, whereby groups of principals jointly punish cheating agents by giving them bad reputations. But how does such punishment work when there is uncertainty regarding whether an agent actually cheated or was just the victim of bad luck? And how might such uncertainty be mitigated—or exacerbated—by non-observable, pro-social behavioral characteristics? We address these questions by designing a simple modified trust game with uncertainty and the capacity for principals to employ multilateral punishment. Our experimental results indicate that a modest amount of uncertainty has little effect on overall welfare: while part of the surplus is destroyed by uncertainty, principals are also more willing to trust agents with bad reputations, thereby increasing the frequency of welfare-enhancing exchange. (JEL C91, C92, D02, D83, F10, N70)
Abstract This paper studies optimal organization structures in multidivisional organizations with more than two divisions. The decisions of individual divisions need to be adapted to local conditions but also be coordinated. Information about local conditions is held by division managers who communicate strategically. In this setting, in addition to centralized and decentralized organizations, a hierarchical organization may arise in which divisions are organized into groups, and decisions are made by group managers. Our central result is that when the needs for coordination are intermediate, such a hierarchical organization performs better than centralization or decentralization. We then compare Ms-form hierarchy (in which mutually more dependent divisions are grouped together) and Mw-form hierarchy (in which mutually less dependent divisions are grouped together). Somewhat surprisingly, an Mw-form is sometimes preferred over an Ms-form hierarchy. (JEL D23, D83, L23)
Abstract We study wage adjustment during the recent crisis in Italy using a unique dataset on immigrant workers that includes those employed in formal and informal sector. We find that before the crisis immigrants’ wages in the formal and informal sectors moved in parallel (with a 15% premium in the formal labor market). During the crisis, however, formal wages did not adjust down while wages in the unregulated informal labor market fell so that by 2013 the gap had grown to 32%. The difference was particularly salient for workers in occupations where the minimum wage is likely to be binding, and in “simple” occupations where there is high substitutability between immigrant and native workers. Calibrating a simple partial equilibrium model of spillovers between formal and informal markets, we find that less than 10% of workers who lost a formal job during the crisis move to the informal sector. We also find that if the formal sector wages were fully flexible, the decline in formal employment would be in the range of 1.5–4.5%—much lower than 16% decline that we observe in the data. (JEL E24, E26, J31, J61)
Abstract A major factor that contributes to persistent gender variation in labor market outcomes is women’s traditional role in the household. Child-related absences from work imply that women accumulate less job experience, are more prone to career discontinuities and, hence, suffer a motherhood penalty. We highlight how the gender-driven career/family segmentation of the labor market may create a normative justification for parental leave rules as a means to enhance efficiency in the labor market and alleviate the gender wage gap. (JEL D82, H21, J31, J83)