the impact of climate on the law of one price a test using north american food prices from the 1920s using grocery price data for over 100 urban locations across the us and canada from the 1920s we show that deviations from the law of one price lop were strongly related to climate differences the effect of climate has a large impact on the elasticity of deviations from lop with respect to distance while having no impact on the border effect we then test a counterfactual to show that the relationship between deviations from lop and temperature does not hold when historical temperature data are replaced with contemporary this is evidence that climate impacts production l impact du climat sur la loi du prix unique un test utilisant les prix de la nourriture en amerique du nord dans les annees 1920 a l aide de donnees sur les prix de la nourriture dans les epiceries dans plus d une centaine de villes aux etats unis et au canada dans les annees 1920 on montre que les deviations par rapport a la loi du prix unique lpu sont fortement reliees aux differences dans le climat l effet du climat a un grand impact sur l elasticite des deviations par rapport a la lpu par rapport a la distance mais aucun impact sur l effet de frontiere on utilise alors un test contrefactuel pour montrer que la relation entre les deviations par rapport a la lpu et la temperature ne tient pas quand on remplace les temperatures historiques par les temperatures contemporaines ceci montre que le climat a un impact sur la production

the motivation and bias of bureaucrats many individuals are motivated to exert effort because they care about their jobs rather than because there are monetary consequences to their actions the intrinsic motivation of bureaucrats is the focus of this paper and three primary results are shown first bureaucrats should be biased second sometimes this bias takes the form of advocating for their clients more than would their principal while in other cases they are more hostile to their interests for a range of bureaucracies those who are biased against clients lead to more efficient outcomes third self selection need not produce the desired bias instead selection to bureaucracies is likely to be bifurcated in the sense that it becomes composed of those who are most preferred by the principal and those who are least preferred

the role of wages and auditing during a crackdown on corruption in the city of buenos aires abstract we study the prices paid for basic inputs during a crackdown on corruption in the public hospitals of the city of buenos aires argentina during 1996 97 we find a well defined negative effect on the measures used to capture corruption prices paid by hospitals for basic homogeneous inputs decrease by 15 percent during the first 9 months of the crackdown after this period prices increase but they are still 10 percent lower than those prevailing before the crackdown relative to the precrackdown period higher wages play no role in inducing lower input prices when audit intensity can be expected to be maximal during the first phase of the crackdown but have a negative and well defined effect when audit intensity takes intermediate levels the last phase of the crackdown controlling for fixed effects we find that the wage elasticity of input prices exceeds 20 these results are consistent with the standard model of bribes of gary becker and george stigler

dynamic reform of public institutions a model of motivated agents and collective reputation abstract state capacity is optimized when public institutions are staffed by individuals with public service motivation however when motivated agents value the collective reputation of their place of employment steady state equilibria with both high and low aggregate motivation reputation in the mission oriented sector exist reforming a low motivation institution requires a non monotonic wage path since the effect of higher wages on motivation is negative for a high reputation institution but positive for a low reputation institution a transition to a high reputation steady state requires an initial wage increase to crowd motivated workers in followed by a wage decrease to crowd non motivated workers out

participating in african monetary unions an alternative evaluation abstract this paper complementary to that of devarajan and de melo deals with the development strategies and performances of 12 franc zone african countries 11 of them gathered in two monetary unions during 1960 1981 beside the actual rate of growth the relative growth performance is considered this performance measured as a residual of a regression on exogenous factors factors independent of economic policy appears to be close to the average performance of other developing countries and better than that of other african countries the results are explained by the direct influence of the foreign exchange regime of the zone and by its impact on economic policy economic policies of individual countries show however some substantial degree of autonomy

how important is pro social behaviour in the delivery of public services a number of papers have suggested that pro social behaviour in the workplace may be sensitive to the institutional environment but there is little empirical research that attempts to test this directly using data on worker behaviour this is the aim of this paper we show that individuals in the non profit sector are significantly more likely to do unpaid overtime than those in the for profit sector however we find no evidence of adjustment along either the extensive or intensive margins when individuals change sectors the results of our analysis therefore point to selection and we find supporting evidence that individuals do self select on the basis of their propensity to donate labour

foundations of dynamic monopoly and the coase conjecture subgame perfect equilibria are characterized for a market in which the seller quotes a price each period assume zero costs positive interest rate continuum of buyers and some technical conditions if buyers valuations are positive then equilibrium is unique buyers strategies are stationary and the price sequence is determinant along the equilibrium path but possibly randomized elsewhere otherwise a continuum of stationary equilibria can exist but at most one with analytic strategies coase s conjecture is verified for stationary strategies reducing the period length drives all prices to zero or the least valuation connections to bargaining models are described journal qf economic literature classification

a theory of collective reputations with applications to the persistence of corruption and to firm quality the paper is a first attempt at modelling the idea of group reputation as an aggregate of individual reputations a member s current incentives are affected by his past behaviour and because his track record is observed only with noise by the group s past behaviour as well the paper thus studies the joint dynamics of individual and collective reputations and derives the existence of stereotypes from history dependence rather than from a multiplicity of equilibria or from the existence of a common trait as is usually done in the literature it shows that new members of an organization may suffer from an original sin of their elders long after the latter are gone and it derives necessary and sufficient conditions under which group reputations can be rebuilt last the paper applies the theory to analyse when a large firm can maintain a reputation for quality 1 collective reputations collective reputations play an important role in economics and the social sciences countries ethnic racial or religious groups are known to be hard working honest corrupt hospitable or belligerent some firms enjoy substantial rents from their reputations for producing high quality products some departments are reported to treat their faculty or students fairly the paper is a first attempt at modelling the idea of group reputation as an aggregate of individual reputations a member s current incentives are affected by her past behaviour and because her track record is observed only with noise by the group s past behaviour as well the paper studies the joint dynamics of individual and collective reputations in a model in which current generations are progressively replaced by new ones and derives the existence of stereotypes from history dependence rather than from a multiplicity of equilibria or from the existence of a common trait as is usually done in the literature see section 2 for a detailed comparison with the literature it shows that new members of an organization may suffer from an original sin of their elders long after the latter are gone and it derives necessary and sufficient conditions under which group reputations can be rebuilt last the paper applies the theory to analyse when a large firm can maintain a reputation for quality let us spell out the building blocks of our theory in more detail a a group s reputation is only as good as that of its members each member is characterized by individual traits such as talent diligence or honesty past individual behaviour conveys information about these traits and generates individual reputations

intrinsic motivation and incentives workers act in the interests of their employ ers for a host of reasons sometimes money is the motivation but often it is because they care about what they do despite the importance of such intrinsic motivation the economic litera ture has offered little in terms of understanding relevant trade offs when alignment of inherent preferences rather than monetary interests is what motivates people 1 instead the literature has focused largely on the efficiency gains that arise from agents sharing the preferences of their employers 2 this paper offers such a theory of intrinsic motivation where firms partially solve agency problems by hiring agents with particu lar preferences unlike the previous literature i show that firms in general hire agents who do not share their interests instead agents are disproportionately motivated to carry out a sub set of what the firm cares about specifically i show that the institution hires the agent with similar preferences to himself only in the limit ing case where the agent s preferences are irrel evant namely when output can be perfectly contracted on instead the optimal response of the institution is to hire biased agents with the degree of bias increasing as contracting mea sures get worse the reason for this is rather simple that jobs within firms are specialized so for example some people make things others design them yet other sell them and so on similarly aca demics do research deans raise money admin istrators do the books social workers provide services to clients while their superiors are charged with cost control etc the principal novelty of this paper is to show how hiring practices and specifically the intrinsic moti vation of those hired changes as the ability to contract worsens in a world where tasks are specialized in doing so it paints a picture of firms responding to noncontractibility by hiring agents with very extreme interests at the cost of their ignoring other aspects of their jobs so for example if the output of a social worker cannot be measured a natural response will be to hire agents who are highly motivated to get benefits to clients at the cost of their ignoring things like cost control simple though this observation is it illustrates a cost to using intrinsic motiva tion namely the endogenous hiring of those who increasingly care only about one aspect of their job in this way the simple model outlined here lays the foundation for a view of poor contracting firms as fiefdoms where those with extreme competing interests reside a point i elaborate on elsewhere prendergast 2008 for a theory of intrinsic motivation to be use ful firms must have some control over it the central assumption here is that firms have some ability to hire employees based on these intrin sic preferences i build a model of an institution that carries out two activities say service pro vision and cost control it employs two agents to do so the tasks are somewhat specialized in that one agent primarily but not exclusively does service provision and the other primarily does cost control the institution has an objec tive that trades off these two components and has a performance measure that can reward agents the firm also chooses whom to hire potential discussant robert gibbons massachusetts institute of technology

a survey of the literature on the optimal peg abstract it is widely agreed that floating is not an appropriate exchange rate policy for most developing countries but in a world of generalized floating the question of exchange rate policy is not resolved by deciding to peg rather than to float it is also necessary to decide to what to peg this is the question of the optimal peg on which a significant literature has emerged since 1976 the present paper provides a survey of that literature section 2 summarizes the principal papers section 3 compares the objectives and rules advocated by different authors section 4 evaluates the alternative approaches arguing that in general the peg should be chosen to stabilize the nominal trade weighted effective exchange rate section 5 considers whether this criterion points to the sdr as a satisfactory peg

exporting to new destinations and the effects of tariffs the case of meat commodities this study uses a random parameter probit estimation to examine the effects of tariff liberalization on the probability of establishing new trading relationships in meat commodities our simulation results indicate that the effects of tariff reductions decrease with distance but increase with the level of development the probabilities of trade increase at an increasing rate with the size of tariff reductions thus justifying calls for ambitious liberalization schemes canada and mexico are the nafta countries that are most likely to export in response to eu tariff reductions on bovine and poultry meats while brazil and argentina emerge as the mercosur countries most likely to penetrate the eu bovine meat market after eu tariff reductions uruguay s probability to export poultry meat is most responsive to eu tariff reductions

identity and the economics of organizations on plebes first day at west point called r day they strip down to their underwear their hair is cut off they are put in uniform they then must address an older cadet with the proper salute and with the statement sir new cadet doe reports to the cadet in the red sash for the first time as ordered plebes must stand and salute and repeat and stand and salute and repeat until they get it exactly right all the while being reprimanded for every tiny mistake in the summary of david lipsky 2003 pp 145 154 who spent four years tracking a company of cadets at west point on r day you surrender your old self in stages but r day is just the beginning of the training and personal re engineering that is to come so that west point graduates emerge four years later as loyal officers in the u s army lipsky shows that despite some failure this tough program is remarkably successful in creating officers with the will to lead in battle economists current picture of organizations and work incentives has no place for the west point program and the motivations it seeks to inculcate in recruits in a standard economic model an individual s preferences are fixed and utility depends only on pecuniary variables the army s aim at west point is to change cadets preferences they wish to inculcate non economic motives in the cadets so that they have the same goals as the u s army alternatively stated the goal of west point is to change the identity of the cadets so they will think of themselves above all else as officers in the u s army they will feel bad about themselves they will lose utility if they fall short of the ideals of such an officer this change in identity

democracy market liberalization and political preferences abstract we estimate the impact of market development and democratization on subjective political preferences we rely on the specific situation of frontier zones and the considerable regional variations in culture and economic development in the countries of the former socialist bloc for identification using a survey conducted in 2006 we find a positive and significant effect of democracy on support for a market economy but no effect of market liberalization on support for democracy hence in contrast with the conventional wisdom concerning the sequencing of political and economic reforms democratization may become a necessary condition to obtain public support for further economic liberalization

one money one market the effect of common currencies on trade currency unions their dramatic effect on international trade a gravity model is used to assess the separate effects of exchange rate volatility and currency unions on international trade the panel data bilateral observations for five years during 1970 90 covering 186 countries includes 300 observations in which both countries use the same currency i find a large positive effect of a currency union on international trade and a small negative effect of exchange rate volatility even after controlling for a host of features including the endogenous nature of the exchange rate regime these effects statistically significant imply that two countries sharing the same currency trade three times as much as they would with different currencies currency unions like the european emu may thus lead to a large increase in international trade with all that that entails andrew rose

public service motivation as an argument for government provision a public service motivation psm inclines employees to provide effort out of concern for the impact of that effort on a valued social service though deemed to be important in the literature on public administration this motivation has not been formally considered by economists when a psm exists this paper establishes conditions under which government bureaucracy can better obtain psm motivated effort from employees than a standard profit maximizing firm the model also provides an efficiency rationale for low powered incentives in both bureaucracies and other organizations producing social services 2000 elsevier science s a all rights reserved

optimal contracting with endogenous social norms research in sociology and ethics suggests that individuals adhere to social norms of behavior established by their peers within an agency framework we model endogenous social norms by assuming that each agent s cost of implementing an action depends on the social norm for that action defined to be the average level of that action chosen by the agent s peer group we show how endogenous social norms alter the effectiveness of monetary incentives determine whether it is optimal to group agents in a single or two separate organizations and may give rise to a costly adverse selection problem when agents sensitivities to social norms are unobservable

the choice of an optimum exchange currency regime for a small economy an econometric analysis abstract this paper investigates empirically the issue of a fixed versus a flexible exchange currency regime for a small economy the west african monetary union the econometric analysis implements a mundellian trade off between economic development and monetary stability which measures the main cost and benefit of the various exchange currency regimes examined the empirical results indicate that the fixed trade weighted basket peg is optimal by the tower and willet criterion and that it meets some of kenen s criteria for an efficient exchange currency regime

north south and distance in the gravity model abstract it is generally assumed that distance in the gravity model strictly reflects frictions impeding bilateral trade however distances north south could also reflect differences in factor endowment that provide opportunities for profitable trade this paper investigates the hypothesis that if we control for distance in the ordinary sense differences north south promote international trade the hypothesis receives ample support moreover the significance of differences north south survives a battery of robustness tests concerning period distinctions between differences in latitude north north north south and south south and controls for other measures of differences in factor endowment such as differences in per capita output and differences in average temperature rainfall and seasonal range in temperature the impact of differences north south on bilateral trade has also been falling this decline in turn might be partly responsible for the weakening of the influence of distance that has been occurring since world war ii this last hypothesis receives confirmation as well finally the paper examines the impact of internal distance and remoteness on trade since both variables are country specific this is done by studying their impact on the country fixed effects themselves in the earlier estimates internal distance turns out to have a far greater impact than remoteness by an order of 10

the distance puzzle and low income countries an update the distance effect measuring the elasticity of trade flows to distance has been found to be rising since the early 1970s in a host of studies based on the gravity model leading observers to call it the distance puzzle however this puzzle is regularly challenged by new developments in the specification of the gravity equation or in its estimations we propose an original survey on the existing methods used to quantify the distance puzzle basically the computation of an average distance of trade a meta analysis on existing gravity papers and the implementation of recent econometric developments all on a well specified gravity equation both in cross section and panel data we apply all these methods to a unique large database 124 countries from 1970 to 2006 it appears that if all these new developments can change the amplitude of the increase in the trade elasticity to distance none solve the distance puzzle we confirm the existence of this puzzle and identify that it only applies to low income countries which exhibit a significant rising distance effect on their trade of around 18 between 1970 and 2006 while the distance puzzle for trade within richer countries disappears

the emergence of political accountability when and how do democratic institutions deliver accountable government in addressing this broad question we focus on the role played by political norms specifically the extent to which leaders abuse office for personal gain and the extent to which citizens punish such transgressions we show how qualitatively distinct political norms can coexist because of a dynamic complementarity in which citizens willingness to punish transgressions is raised when they expect such punishments to be used in the future we seek to understand the emergence of accountability by analysing transitions between norms to do so we extend the analysis to include the possibility that at certain times a segment of voters are behaviorally intolerant of transgressions our mechanism highlights the role of leaders offering an account of how their actions can instigate enduring change within a fixed set of formal institutions by disrupting prevailing political norms we show how such changes do not depend on sun spots to trigger coordination and are asymmetric in effect a series of good leaders can and eventually will improve norms whereas bad leaders cannot damage them jel codes d72 p16 c73 copyright 2013 oxford university press

the impact of international portfolio composition on consumption risk sharing abstract recent empirical work has shown that ongoing international financial integration facilitates cross country consumption risk sharing these studies typically find that countries with high equity home bias exhibit relatively low international consumption risk sharing we extend this line of research and demonstrate that it is not only a country s equity home bias that prevents consumption risk sharing in addition the composition of a country s foreign asset portfolio plays an important role using panel data regression for a group of oecd countries over the period 1980 2007 we show that foreign investment bias has additional explanatory power for consumption risk sharing

social norms and the enforcement of laws we examine the interplay between social norms and the enforcement of laws agents choose a behavior e g tax evasion production of low quality products corruption harassing behavior substance abuse etc and then are randomly matched with another agent there are complementarities in behaviors so that an agent s payoff decreases with the mismatch between her behavior and her partner s and with overall negative externalities created by the behavior of others a law is an upper bound cap on behavior a law breaker when detected pays a fine and has her behavior forced down to the level of the law equilibrium law breaking depends on social norms because detection relies at least in part on whistle blowing law abiding agents have an incentive to whistle blow on a law breaking partner because this reduces the mismatch with their partners behaviors as well as the negative externalities when laws are in conflict with norms and many agents are breaking the law each agent anticipates little whistle blowing and is more likely to also break the law tighter laws banning more behaviors greater fines and better public enforcement all have counteracting effects reducing behavior among law abiding individuals but increasing it among law breakers we show that laws that are in strong conflict with prevailing social norms may backfire whereas gradual tightening of laws can be more effective in influencing social norms and behavior

price and monetary convergence in currency unions the franc and rand zones abstract theory suggests that a currency union will impose significant macroeconomic disciplines on its members the law of one price for example should lead to convergence of price levels at least for what may be regarded as tradeable goods likewise arbitrage would imply convergence of interest rates this paper looks at the two main surviving currency unions the franc and rand zones in africa to see whether and to what extent these generally accepted propositions find confirmation in the data each of the african currency unions has a dominant or core member france in the case of the franc zone and the republic of south africa rsa in the case of the rand zone our focus is on the small members in the periphery and for them there is the additional presumption that inflation and interest rates will be imported from the core despite some rather wide short run divergences and although convergence is slow we find that in the long run consumer price inflation is largely determined in the core the limited evidence available suggests that uncontrolled interest rates also converge to core country levels jel f31

the economics of career concerns part ii application to missions and accountability of government agencies the paper uses a simple multitask career concern model in order to analyse the incentives of government agencies officials incentives are impaired by the agency pursuing multiple missions a lack of focus is even more problematic in the case of fuzzy missions that is when outsiders are uncertain about the exact nature of the missions actually pursued by the agency consequently agencies pursuing multiple missions receive less autonomy the paper further shows that professionalization creates a sense of mission for the agency and that the specialization of officials raises their incentives last the paper compares its predictions with the stylized facts on government bureaucracies 1999 the review of economic studies limited

signaling and screening of workers motivation abstract this paper develops a model in which workers are heterogeneous in their intrinsic motivation to work at a firm we characterise optimal incentive schemes and examine how the firm can attract and select highly motivated workers to fill a vacancy when workers motivation is private information while posting a higher wage increases the probability of filling the vacancy it decreases the expected average quality of job applicants because less motivated workers are induced to apply the optimal wage scheme entails a trade off between the probability of filling the vacancy the rents left to the worker and the expected worker s motivation

measuring internal trade distances a new method applied to estimate provincial border effects in canada in this paper we suggest an improved methodology for comparing the intensity of trade across and within national and provincial boundaries earlier efforts to assess border effects for provinces or for countries without internal trade statistics made fairly arbitrary assumptions about average distances for internal trade flows we improve on earlier efforts by taking more complete account of the distribution of population within each province or country internal distance is estimated as a population weighted average of intra city and intercity distances as well as distances to and within rural areas we find higher estimates of internal distances and hence border effects than found in previous studies

history expectations and leadership in the evolution of social norms we study the evolution of a social norm of cooperation in a dynamic environment each agent lives for two periods and interacts with agents from the previous and next generations via a coordination game social norms emerge as patterns of behaviour that are stable in part due to agents interpretations of private information about the past influenced by occasional commonly observed past behaviours for sufficiently backward looking societies history completely drives equilibrium play leading to a social norm of high or low cooperation in more forward looking societies there is a pattern of reversion whereby play starting with high low cooperation reverts towards lower higher cooperation the impact of history can be countered by occasional prominent agents whose actions are visible by all future agents and who can leverage their greater visibility to influence expectations of future agents and overturn social norms of low cooperation

why do firms have purpose the firm s role as a carrier of identity and reputation abstract this article develops a theory in which a firm s adoption of a prosocial purpose can increase profitability by strengthening employees reputation and identity leading to higher effort and

small is beautiful motivational allocation in the non profit sector we build an occupational choice general equilibrium model with for profit firms non profit organizations and endogenous private warm glow donations lack of monitoring on the use of funds implies that an increase of funds of the non profit sector because of a higher incomein the for profit sector a stronger preference for giving or an inflow of foreign aid worsens the motivational composition and performance of the non profit sector we also analyze the conditions under which donors through linking donations to the motivational composition of the non profit sector non profits themselves through peer monitoring or the government using a tax financed public funding of non profits can eliminate the low effectiveness equilibrium we present supporting case study evidence from humanitarian emergencies and developing country ngo sector and humanitarian emergencies

economics and identity this paper considers how identity a person s sense of self affects economic outcomes we incorporate the psychology and sociology of identity into an economic model of behavior in the utility function we propose identity is associated with different social categories and how people in these categories should behave we then construct a simple game theoretic model showing how identity can affect individual interactions the paper adapts these models to gender discrimination in the workplace the economics of poverty and social exclusion and the household division of labor in each case the inclusion of identity substantively changes conclusions of previous economic analysis

intrinsic motivation and optimal incentive contracts i study the role of intrinsic motivation on optimal incentive contracts agents engage in efforts to generate projects with both financial return and intrinsic value to the agent in a neutral environment where intrinsic motivation has no direct effect on the disutility of effort static contracts are unaffected by intrinsic motivation in contrast the firm s profits from an implicit contract are increasing in the degree to which the agent is intrinsically motivated showing that implicit contracts and intrinsic motivation are complements the results are further extended to consider the role of multiple implicit contracts and product market strategy

evaluating participation in african monetary unions a statistical analysis of the cfa zones abstract thirteen african nations are engaged in two monetary unions with france often referred to as the cfa zone despite the acknowledged benefits of zone membership a convertible currency pooled resources and greater monetary and fiscal discipline several observers have questioned whether particular aspects of the zone such as the lack of autonomy of the two central banks and the surrender of the exchange rate as a policy instrument have impeded its members growth this paper addresses that question by testing whether cfa zone countries had different gnp growth rates from selected comparator countries during 1960 1982 results show that cfa countries grew significantly faster than comparator sub saharan african countries but usually slower and often significantly so than the whole sample of developing countries when the comparison is made by subperiod before and after 1973 cfa countries performance vis a vis that of their comparators improved during the 1973 1982 period casting further doubt on the claim that the monetary union is not functioning adequately

competition and incentives with motivated agents a unifying theme in the literature on organizations such as public bureaucracies and private nonprofits is the importance of mission as opposed to profit as an organizational goal such mission oriented organizations are frequently staffed by motivated agents who subscribe to the mission this paper studies incentives in such contexts and emphasizes the role of matching the mission preferences of principals and agents in increasing organizational efficiency matching economizes on the need for high powered incentives it can also however entrench bureaucratic conservatism and resistance to innovations the framework developed in this paper is applied to school competition incentives in the public sector and in private nonprofits and the interdependence of incentives and productivity between the private for profit sector and the mission oriented sector through occupational choice jel d23 d73 h41 l31 the late twentieth century witnessed a historic high in the march of market capitalism with unbridled optimism in the role of the profit motive in promoting welfare in the production of private goods moreover this generated a broad consensus on the optimal organization of private good production through privately owned competitive firms when it comes to the provision of collective goods no such consensus has emerged debates about the relative merits of public and private provision still dominate this paper suggests a contracting approach to the provision of collective goods it focuses on two key issues how to structure incentives and the role of competition between providers at its heart is the idea that organizations that provide collective goods cohere around a mission 2 thus production of collective goods can be viewed as mission oriented

strengthening state capabilities the role of financial incentives in the call to public service we study a recent recruitment drive for public sector positions in mexico different salaries were announced randomly across recruitment sites and job offers were subsequently randomized screening relied on exams designed to measure applicants intellectual ability personality and motivation this allows the first experimental estimates of i the role of financial incentives in attracting a larger and more qualified pool of applicants ii the elasticity of the labor supply facing the employer and iii the role of job attributes distance attractiveness of the municipal environment in helping fill vacancies as well as the role of wages in helping fill positions in less attractive municipalities a theoretical model guides each stage of the empirical inquiry we find that higher wages attract more able applicants as measured by their iq personality and proclivity towards public sector work i e we find no evidence of adverse selection effects on motivation higher wage offers also increased acceptance rates implying a labor supply elasticity of around 2 and some degree of monopsony power distance and worse municipal characteristics strongly decrease acceptance rates but higher wages help bridge the recruitment gap in worse municipalities

bureaucratic corruption and the rate of temptation do wages in the civil service affect corruption and by how much abstract this paper presents what is to our knowledge the first empirical estimate of the effect of pay in the civil service on corruption first we show that theory is ambiguous on the relationship between civil service pay and corruption then we examine the issue using a new data set on wages for low income countries we find evidence of a statistically and economically significant relationship between relative civil service pay and corruption in regressions based on cross country averages where we control for a wide array of variables the relationship implies that a rather large increase in wages is required to eradicate corruption solely by raising wages

national borders and international trade evidence from the european union in this paper the impact of national borders on international trade within the european union is considered using a gravity model i find that averaged over all eu countries intranational trade is about ten times as high as international trade with an eu partner country of similar size and distance this relatively strong home bias suggests that even within the european union national borders still have a decisive impact on trade patterns jel classification f02 f14 f15 o52 ce memoire examine l impact des frontieres nationales sur le commerce international a l interieur de l union europeenne on montre que en moyenne pour tous les pays de l union europeenne le commerce intranational est a peu pres dix fois plus important que le commerce international avec un pays partenaire de l union europeenne de meme taille et a meme distance ce degre relativement important de preference nationale suggere que meme dans le cadre de l union europeenne les frontieres nationales ont encore un impact determinant sur les patterns de commerce

anti social behavior in profit and nonprofit organizations abstract two types of intrinsically motivated workers are considered good workers care about the mission of an organization whereas bad workers derive pleasure from destructive behavior compared to the case with only good motivated workers the mission oriented sector has to resort to higher monitoring to deter bad workers from entering the sector in equilibrium bad workers work in the for profit sector where they behave like normal people while good workers self select into the mission oriented sector in the profit oriented sector both monitoring and bonus payments for good behavior increase to control the damage caused by bad workers the results of the paper are illustrated by examples from child care and the threat posed by pedophiles in this sector

social norms and economic incentives in firms abstract this paper studies the interplay between economic incentives and social norms in firms we introduce a general framework to model social norms arguing that norms stem from agents desire for or peer pressure towards social efficiency in a simple model of team production we examine the interplay of three types of contracts with social norms we show that one and the same norm can be output increasing neutral or output decreasing depending on the contract multiplicity of equilibria and crowding out effects of steeper incentives can arise

taxes and bribery the role of wage incentives this paper presents a simple model to evaluate alternative payment schemes for tax inspectors in the presence of corruption we consider problems of both moral hazard which arises because taking bribes cannot be observed without costly monitoring and adverse selection since not all potential tax inspectors can be identified as being honest or dishonest we identify three wage regimes first one could pay the same wage that a tax inspector could earn elsewhere his reservation wage second one could pay a wage which solves the moral hazard problem i e deters bribery this we call an efficiency wage by analogy with recent models examined i n macro economics third the government could pay a wage below the reservation wage at which only the dishonest become tax inspectors the capitulation wage we make precise the conditions under which each yields the greatest amount o f tax revenues net o f administrative costs many countries in the developing world are undergoing structural adjustment programmes which require fundamental fiscal changes outside agencies advise restoration of budget balance a task which involves expenditure cuts and tax increases the treatment of public employee pay scales often poses a particular dilemma i n this process wages and salaries are a significant component of government expenditures and one important question concerns the extent to which wages rather than employment cuts should be used to save money there is sometimes a reluctance to advocate wage cuts stemming in part from a feeling that this might impair the performance of the public sector hence tanzi 1990 argues that a policy of wage cutting is likely to increase the inefficiency of public sector employees especially at a time when the public sector is expected to play a larger role in restructuring the economy p 16 in the context of tax collection the issue is particularly pressing given the need to raise more tax revenues a reduction in efficiency in this branch of the government i s likely t o mean that fewer returns are processed and when individuals living standards are squeezed their incentive to accept bribes in lieu o f collecting taxes i s increased o n this count i t i s even sometimes suggested that wages of tax inspectors should be increased to aid the effort to the comments of henry bienen john hey and two anonymous referees have been helpful in revising this paper the authors are also grateful t o the john m olin program for the study o f economic organization and public policy at princeton university and the pew charitable trusts for financial support mclaren also acknowledges support from the international finance section of princeton university none of the above should be implicated in any way see for example goode 1984 chapter 1 3 and gould and amaro reyes 1983

economic growth in africa abstract this paper draws on the recent endogenous growth methodology to study the factors behind differences in per capita growth rates across africa the results indicate that various economic factors including initial conditions investment population growth trade orientation inflation financial development and the growth of the government sector contribute significantly to economic growth in addition to economic variables we find the degree of political freedom to be a significant contributor to economic growth finally we find some evidence that economic growth by the members of the cfa franc zone has not fared well in comparison to other african countries