market shares and price quality relationships an econometric investigation of the u s automobile market the objective of this paper is to investigate the role of marketing competition in the northamerican automobile market this is accomplished by estimating a market share demand function the main difficulty with the analysis of demand for automobiles is heterogeneity of model types quality differences among different models both at a point in time and through time cannot be ignored since price and sales depend on them one way to remedy this situation is to apply the hedonic method by regressing the price of a model on its characteristics in this way the implicit prices for each of the qualitative attributes are derived and then used free of quality differences in the second stage estimation of a market share demand function there has been considerable interest in estimating demand functions for automobiles however most of the previous research has focused on total automobile demand in this approach equations on total sales are estimated without taking into account differences in quality characteristics of different model types these studies usually relate the depreciation of the service level of the currently held stock of automobiles to the demand for new stock this leads to a very general stock adjustment 7 or generalized acceleration framework 10 the best known time series studies of the aggregate automobile demand using different variants of this approach are those of chow 2 suits 15 wykoff 19 and westin 18 the estimates of price elasticities from these studies are about 1 and income elasticities range from 1 5 to 4 previous research on automobile demand allowing for qualitative differences in characteristics among different models is much less extensive the most important research effort in this direction is the paper by cowling and cubbin 4 they explained market share movements for different car manufacturers by changes in quality adjusted prices using data from england for the period 1957 1968 their quality adjusted price vector is proxied by the residuals from hedonic price regressions using the data on manufacturer s models the idea that the residuals from the regression of prices of differentiated goods on their qualitative attributes are the quality adjusted prices was suggested by griliches 8 cowling and cubbin used as their quality adjusted price for a specific manufacturing firm the mean residual computed by taking into account all the models offered by

setting standards for credible compliance and law enforcement in this paper we examine the setting of optimal legal standards to simultaneously induce parties to invest in care and to motivate law enforcers to detect violators of the law the strategic interaction between care providers and law enforcers determines the degree of efficiency achieved by the standards our principal finding is that some divergence between the marginal benefits and marginal costs of providing care is required to control enforcement costs further the setting of standards may effectively substitute for the setting of fines when penalties for violation are fixed in particular maximal fines may be welfare reducing when standards are set optimally nous considerons dans cet article la determination en information incomplete de normes legales optimales pour a la fois inciter les citoyens a faire preuve de diligence prevention et motiver les agents de la paix a veiller au respect des lois l interaction strategique entre citoyens et agents de la paix determine l efficacite des normes choisies notre resultat principal est a l effet qu un ecart entre benefices marginaux et couts marginaux de la diligence est necessaire afin de reduire les couts d application des lois de plus les normes peuvent etre un substitut aux amendes lorsque les penalites pour infraction sont fixes des amendes maximales peuvent en particulier etre contre indiquees lorsque les normes sont optimalement determinees

education and invention abstract modern growth theory puts invention on the center stage inventions are created by individuals raising the question of whether we can increase the number of inventors to answer this question we study the causal effect of msc engineering education on invention using data on u s patents finnish inventors and the distance to the nearest technical university as an instrument we find a positive effect of engineering education on the propensity to patent and a negative ols bias our counterfactual calculation suggests that establishing three new technical universities resulted in a 20 increase in the number of uspto patents by finnish inventors

legal standards enforcement and corruption stricter laws require more incisive and costlier enforcement because enforcement activity depends both on available tax revenue and the honesty of officials the optimal legal standard of a benevolent government is increasing in per capita income and decreasing in officials corruption in contrast to the tollbooth view of regulation the standard chosen by a self interested government is a non monotonic function of officials corruption and can be either lower or higher than that chosen by a benevolent regulator international evidence on environmental regulation shows that standards correlate positively with per capita income and negatively with corruption consistent with the model s predictions for benevolent governments jel d73 k42 l51

legal uncertainty as a welfare enhancing screen consider legal uncertainty as uncertainty about the legality of a specific action in particular suppose that the threshold of legality is uncertain i show that this legal uncertainty raises welfare legal uncertainty changes deterrence in opposite directions the probability of conviction increases for firms below the threshold while the probability of conviction decreases for firms above the threshold hence legal uncertainty acts as a welfare enhancing screen and increases welfare legal uncertainty discourages some actions with low private benefits while it encourages other actions with high private benefits

breaking the law when others do a model of law enforcement with neighborhood externalities abstract a standard assumption in the economics of law enforcement is that the probability of a violator being punished depends only on the resources devoted to enforcement however it is often true that the productivity of enforcement resources decreases with the number of violators in this paper an individual who violates the law provides a positive externality for other offenders because the probability of being punished decreases with the number of individuals violating the law this externality explains the existence of correlation between individuals decisions to break a law the model evaluates the implications when determining the socially optimal enforcement expenditure focusing specifically on the case of neighborhood crime in particular using a parametrized functional form i show that neighborhood externalities will enhance or impede enforcement depending on the crime rate

innovation in israel 1968 1997 a comparative analysis using patent data abstract the israeli high tech sector is widely regarded as a hotbed of cutting edge technologies and as the growth engine of the israeli economy in the 1990s and beyond in this paper we present a close up portrait of innovation in israel for the past 30 years with the aid of highly detailed patent data we use for that purpose all israeli patents taken in the us over 7000 as well as us patents and patents from other countries for comparative purposes the time path of israeli patenting reveals big jumps in the mid 1980s and then again in the early 1990s reflecting underlying shocks in policy and in the availability of relevant inputs israeli ranks high in terms of patents per capita compared to the g7 the asian tigers and a group of countries with similar gdp per capita finland is strikingly similar taiwan s patenting has grown extremely fast and is now on par with israel south korea is rapidly closing the gap the technological composition of israeli innovations reflects quite well worldwide technological trends except that computers and communications the fastest growing field in the us has grown even faster in israel the weak side resides in the composition of israeli assignees the actual owners of the intellectual property rights just 35 of israeli patents were assigned to israeli corporations a much lower percentage than in most other countries relatively large shares went to foreign assignees to universities and the government and to private inventors on the other hand israeli patents are of good quality in terms of citations received and getting better over time us patents command on average more citations but not in computers and communications or in biotechnology and israeli patents are significantly better than those of the reference group of countries

semiparametric reduced form estimation of tuition subsidies the goal of this paper is to use a semiparametric reduced form model to estimate the effects of various tuition subsidies this approach expands on the tuition subsidy example in ichimura and taber 2000 in a number of dimensions it has become common practice in the empirical literature to refer to any nonstructural empirical analysis as reduced form this is not the traditional sense of the phrase a classic reduced form analysis see e g marschak 1953 first specifies a structural model and then derives the reduced form parameters in terms of the structural parameters while many recent studies have asserted to taking a reduced form approach the structural parameters while many recent studies have asserted to taking a reduced form approach the structural model which the reduced form model should correspond is rarely specified we explicitly specify a structural model and use the implied reduced form structure to estimate the effect of tuition subsidy policies specifying the underlying model has the advantage of being explicit about the assumptions that justify the analysis this avoids rosenzweig and wolpin s 2000 criticism of work on natural natural experiments that often leaves these conditions implicit our structural model is based on the model studied by keane and wolpin 1999 it is highly nonlinear and allows for more unobserved heterogeneity than the typical simultaneous equations framework that most previous work has used in reduced form estimation using hte specified structural model we examine the assumptions discussed in ichimura and taber 2000 to justify reduced form estimation of the policy effects this abstract was borrowed from another version of this item

organized crime corruption and punishment we analyze an oligopoly model in which differentiated criminal organizations globally compete on criminal activities and engage in local corruption to avoid punishment when bribing costs are low that is badly paid and dishonest law enforcers work in a weak governance environment and the rents from criminal activity are sufficiently high we find that increasing policing and sanctions can generate higher crime rates indeed beyond a threshold further increases in intended expected punishment create incentives for organized crime to extend corruption rings and ensuing impunity results in a fall of actual expected punishment that yields more rather than less crime

optimal deterrence with legal defense expenditure i introduction in this article we consider a justice system which makes both type i errors sometimes convicting the innocent and type ii errors sometimes acquitting the guilty and in which legal defense expenditure on behalf of the accused can reduce their probability of conviction such expenditure has a private value but its social value is less clear we address two sets of issues first do individuals accused of crimes take socially optimal decisions about their expenditure on legal defense and if not what are the implications for public policy in terms of the regulation of defense expenditure or its provision by the state second what are the implications of legal defense expenditure for optimal deterrence policy in much of the literature on optimal deterrence welfare is the unweighted sum of the expected utilities of honest and dishonest individuals becker 1968 polinsky and shavell 1979 with such an efficiency oriented welfare function the only socially relevant aspects of legal defense are its effect on deterrence and its cost because defense expenditures reduce the probability of punishment of dishonest individuals they reduce the expected sanction on dishonest individuals and thus reduce deterrence however when there are type i errors honest individuals face the risk of wrongful arrest and conviction 1 defense expenditure by them increases the rewards for honesty what matters for deterrence are the effects of defense expenditure on the difference between the expected utility of honest and dishonest individuals we show that permitting defense expenditures may increase deterrence as compared with a system in which no such expenditure is permitted we also show that the level of defense expenditure chosen by accuseds is not efficient the private value of legal defense expenditure is the reduction in the probability of conviction both honest and dishonest individuals choose their expenditure when accused to maximize their expected utility the marginal effect of defense expenditure on the expected utility of honest and dishonest individuals at the privately optimal levels is zero consequently marginal changes in defense expenditure at the private optimum have no effect on deterrence because they do not change the difference between the expected utilities of honest and dishonest individuals but defense expenditures do have a positive marginal social cost so that the marginal private and social values of defense expenditure are different and there is scope for regulation to improve on the market equilibrium there is a commonly held view that type i and type ii errors have a direct effect on social welfare rather than an indirect one through their effect on deterrence the view is reflected in blackstone s remark that it is better that ten guilty persons escape than that one innocent suffer volokh 1997 174 2 with a justice oriented welfare function reflecting concern with type i and ii error as well as with individuals expected utilities increases in defense expenditure by the honest reduce type i errors and thereby ceteris paribus increase welfare increases in defense expenditure by the dishonest increase type ii errors and thereby directly reduce welfare with a justice oriented welfare function honest individuals spend too little on defense if the social cost of a type i error is greater than the fine imposed if the individual is convicted the marginal social value of defense expenditure by the dishonest is always negative at their privately optimal level the canonical result in efficient deterrence policy is the becker 1968 demonstration that because fines have a positive deterrent effect but a zero marginal social cost the optimal policy is to increase them to a level that leaves convicted accused with zero wealth there are few examples of deterrence regimes that use maximal fines and the becker result has generated a large literature that suggest reasons why the efficient fine should not bankrupt convicted accused garoupa 1997 polinsky and shavell 2000

regulatory errors optimal fines and the level of compliance abstract this paper shows that with a hierarchical structure of enforcement regulatory errors cause the optimal penalty to be non maximal even if offenders are risk neutral and fines are pure transfers and the private benefit from violation is strictly less than the social cost for all individuals in contrast with error free monitoring no finite fine is optimal within the same hierarchical structure also full compliance is an equilibrium outcome in the presence of errors whereas in the absence of errors the regulator can achieve only partial compliance

demand equations for individual new car models estimated using transaction prices with implications for regulatory issues the economic impact of the automobile industry on the u s economy hardly needs to be emphasized taking into account related and feeder industries such as rubber steel zinc it has been estimated that one business in six is automobile related over the last 20 years the auto industry has been subject to increasing regulation laws have been passed which require manufacturers to install certain safety equipment and pollution control equipment and recently have mandated that fuel efficiency cafe standards be met on average by the fleet of cars sold by each manufacturer 2 the impact of these cafe standards is enormous currently the domestic auto manufacturers have plans to spend over 40 billion dollars to essentially redesign all of their models 3 the effects all these regulations have had and will have on the health and structure of the u s automobile industry has been the subject of much debate auto manufacturers have argued that 1 consumers do not value the safety and pollution control equipment and that therefore the expense of such equipment merely hurts their sales 4 and 2 due to the differential ability of the four major auto companies to meet any given standard the imposition of them disrupts the competitive market relationships which exist between the companies advocates of these regulations on the other hand view the u s auto industry as resisting change in order to protect its profits

why higher punishment may reduce deterrence abstract assuming that the willingness to find a potentially innocent defendant guilty is decreasing in punishments we derive two results deterrence is decreasing when punishments are too high and deterrence maximizing punishments tend to increase in the quality of legal systems

avoidance screening and optimum enforcement a standard assumption in the economic literature on crime and punishment is that fines are costless transfers given this assumption several economists have argued that it is optimal to set the fine for engaging in a proscribed activity as high as possible the argument is a simple one raising the probability of a fine is costly since it requires devoting more resources to monitoring and apprehending individuals in contrast raising the magnitude of a fine is costless therefore the least costly way to achieve a given expected fine is to set the fine as high as possible presumably equal to the offender s wealth and adjust its probability so that the desired expected fine is obtained

enforcement costs and the choice of policy instruments for controlling pollution i introduction when evaluating policy instruments for controlling pollution analysts generally agree that economic incentives are superior to direct controls in terms of minimizing abatement costs however when it comes to minimizing enforcement costs there is no such agreement some analysts such as freeman et al 1973 and anderson et al 1977 argue that economic incentives would be much easier to enforce than direct controls while others such as drayton 1978 argue that they would be virtually unenforceable the debate typically centers on technical difficulties in continuously monitoring emissions and to a lesser extent on political and legal issues related to the assessment of penalties 1 an issue that has not been examined is whether there are economic reasons for enforcement costs to vary across policy instruments although there is now a sizable economic literature on the problem of noncompliance with pollution control policies there have been no attempts to formally compare enforcement costs across policy instruments 2 accordingly the purpose of this note is to examine whether there are economic grounds for arguing that enforcement costs would be lower for economic incentives than direct controls 3 the policy instruments compared are marketable permits or emissions taxes and uniform standards the instruments are compared in a setting where the penalty schedule is previously specified by some judicial or legislative body and the regulator s enforcement policy is limited to the choice of audit frequency the analysis is based on the premise that for any policy instrument that targets emissions the regulator will have to periodically monitor emissions and assess penalties for noncompliance the relevant question then is whether less frequent monitoring would be required to ensure compliance with economic incentives casual analysis suggests this should be the case economic incentives minimize aggregate abatement costs and lower abatement costs imply lower costs to firms of complying this should imply in turn that less stringent enforcement is needed to achieve compliance this argument although intuitively appealing is flawed using a simple model of pollution control with costly enforcement i show that enforcement costs narrowly defined may be higher for economic incentives for purposes of exposition the result is established in a setting where the regulator ensures each firm is fully compliant however as shown in the appendix the result generalizes to the more realistic setting where firms are partially compliant ii the model consider a group of n risk neutral firms emitting a single pollutant for simplicity the damages from the pollutant are assumed to depend only on total emissions each firm s abatement costs are given by a strictly convex function c sub i x sub i that is decreasing in emissions x sub i the firm s maximum emissions level is denoted mathematical expression omitted and is defined by mathematical expression omitted with probability p sub i a regulator audits each firm and measures its emissions if the regulator finds the firm s actual emissions x sub i exceed its allowed emissions s sub i the firm is assessed a fine of f x sub i s sub i as is common in the literature on enforcement i assume the fine schedule is previously specified e g by a legislative body 4 thus the regulator can choose the probability with which it audits firms but not the fine it assesses for noncompliance i assume the fine schedule is such that both the total fine and marginal fine are increasing in the violation size x sub i s sub i f prime is greater than 0 and f prime prime is grater than 0 because the regulator is assumed to ensure full compliance no violations occur and no fines are collected therefore enforcement costs consist solely of auditing or monitoring costs to simplify the analysis the cost of conducting an audit a is assumed to be the same across firms

a penny for your quotes patent citations and the value of innovations the use ofpatents in economic research has been seriously hindered by the fact that patents vary enormously in their importance or value and hence simple patent counts cannot be informative about innovative output the purpose of this article is to put forward patent counts weighted by citations as indicators of the value of innovations thereby overcoming the limitations of simple counts the empirical analysis of a particular innovation computed tomography scanners indeed shows a close association between citation based patent indices and independent measures of the social value of innovations in that field moreover the weighting scheme appears to be nonlinear increasing in the number of citations implying that the informational content of citations rises at the margin as in previous studies simple patent counts are found to be highly correlated with contemporaneous rd however here the association is within afield over time rather than cross sectional

the returns to education macroeconomics we offer an extensive summary and a critical discussion of the empirical literature on the impact of human capital on macro economic performance with a particular focus on uk policy we also highlight methodological issues and make recommendations for future research priorities taking the studies as a whole the evidence that human capital increases productivity is compelling though still largely divided on whether the stock of education affects the long run level or growth rate of gdp a one year increase in average education is found to raise the level of output per capita by between three and six percent according to augmented neo classical specifications while leading to an over one percentage point faster growth according to estimates from the new growth theories still over the short run planning horizon four years the empirical estimates of the change in gdp are of similar orders of magnitude in the two approaches the impact of increases at different levels of education appear to depend on the level of a country s development with tertiary education being the most important for growth in oecd countries education is found to yield additional indirect benefits to growth more preliminary evidence seems to indicate that type quality and efficiency of education matter for growth too

educational reform ability and family background in this paper we evaluate the impact of a major school reform that took place in the 1950s in sweden on educational attainment and earnings the reform which has many common elements with reforms in other european countries including the uk consisted of increasing compulsor schooling imposing a national curriculum and abolishing selection by ability into academic and non academic streams at the age of 12 comprehensive school reform our data combines survey data with administrative sources we find that the reform increased both the educational attainment and the earnings of children whose fathers had just compulsory education however the earnings of those with educated parents declined possibly because of a dilution of quality at the top end of the education levels the overall effect of the reform was however positive

school tracking and intergenerational income mobility evidence from the finnish comprehensive school reform abstract this paper estimates the effect of a major education reform on intergenerational income mobility the finnish comprehensive school reform of 1972 1977 replaced the old two track school system with a uniform nine year comprehensive school and shifted the selection of students to vocational and academic tracks from age 11 to age 16 we estimate the effect of this reform on the intergenerational income elasticity using a representative sample of males born between 1960 and 1966 the identification strategy relies on a differences in differences approach and exploits the fact that the reform was implemented gradually across the country during a six year period the results indicate that the reform reduced the intergenerational income elasticity by 23 from the pre reform elasticity of 0 30 to post reform elasticity of 0 23

to comply or not to comply pollution standard setting under costly monitoring and sanctioning in this paper we characterize optimal regulatory policies composed of a pollution standard a probability of inspection and a fine for non compliance in a context where both monitoring and sanctioning are socially costly and the penalty may include gravity and non gravity components at the regulator s discretion under given penalties the optimal policy entails compliance with the standard as long as a quite intuitive condition is met non compliant policies may include standards even below the pollution levels that minimize the sum of abatement costs and external damages interestingly the appropriate structure of the penalty under non compliance is highly progressive while the best possible shape of the fine under compliance is linear if the regulator is entitled to choose the structure of the fine linear penalties are socially preferred and the optimal policy induces compliance

the intergenerational effects of parental higher education evidence from changes in university accessibility abstract we examine the causal relationship between the educational attainment of parents and that of their children using quasi experimental variation from changes in parents access to university generated by the geographical expansion of the finnish university system between the late 1950s and early 1970s our results suggest that for the children of parents affected by the changes in university accessibility there is a strong positive spillover effect of around 0 5 from parent s to child s attained years of education our analyses using alternative parental and child outcomes suggest that the effect of parental education is partly driven by assortative mating and may also be related to children s improved school performance

the optimal use of fines and imprisonment abstract this paper examines the use of fines and imprisonment to deter individuals from engaging in harmful activities these sanctions are analyzed separately as well as together first for identical risk neutral individuals and then for two groups of risk neutral individuals who differ by wealth when fines are used alone and individuals are identical the optimal fine and probability of apprehension are such that there is some underdeterrence if individuals differ by wealth then the optimal fine for the high wealth group exceeds the fine for the low wealth group when imprisonment is used alone and individuals are identical the optimal imprisonment term and probability may be such that there is either underdeterrence or overdeterrence if individuals differ by wealth the optimal imprisonment term for the high wealth group may be longer or shorter than the term for the low wealth group when fines and imprisonment are used together it is desirable to use the fine to its maximum feasible extent before possibly supplementing it with an imprisonment term the effects of risk aversion of these results are also discussed

automobiles and implicit markets an estimate of a structural demand model for automobile characteristics economists have always found it difficult to investigate the demand for the automobile good due to its heterogeneity in this paper the automobile is treated as a differentiated product and a two step approach is used to estimate a system of structural demand equations for automobile attributes the obtained results are statistically sound and in conformity with theoretical expectations this should be taken as an indication of the validity and robustness of the procedure used in this analysis

program duplication in higher education is not necessarily bad abstract public systems of higher education have recently attempted to cut costs by providing financial incentives to cut duplicated programs i e programs that are offered at different institutions we study the profit and welfare effects of reducing program duplication against the background of a funding system reform in flanders belgium we find that dropping duplicated programs at individual institutions tends to be socially undesirable due to the students low willingness to travel to other institutions and to the limited fixed cost and variable cost savings furthermore we find that the financial incentives offered to drop programs may be very ineffective leading to both undesirable reform and undesirable status quo these findings emphasize the complexities in regulating product diversity in higher education and serve as a word of caution towards the various decentralized financial incentive schemes that have recently been introduced