herding with and without payoff externalities an internet experiment most real world situations that are susceptible to herding are also characterized by direct payoff externalities yet the bulk of the theoretical and experimental literature on herding has focused on pure informational externalities in this paper we experimentally investigate the effects of several different forms of payoff externalities e g network effects first mover advantage etc in a standard information based herding model our results are based on an internet experiment with more than 6000 subjects of which more than 2400 participated in the treatments reported here including a subsample of 267 consultants from an international consulting firm we also replicate and review earlier cascade experiments finally we study reputation effects i e the influence of success models in the context of herding

the wisdom of the minority we consider a simple variant of the canonical model of social learning and show that in many situations it is optimal for an agent to abandon her own information and follow the minority rather than the majority this possibility depends on two economically meaningful requirements agents are differentially informed and observe only the number of agents having chosen each option such as consumers observing only market shares we show that minority wisdom arises when information is sufficiently heterogeneous and the well informed are not overly abundant yet the conditions necessary are not overly restrictive in fact it is possible for the minority to be wise even when the minority consists of a lone dissenter and a majority of citizens are well informed

racing to the bottom or climbing to the top economic globalization and collective labor rights this article explores the impact of economic globalization on workers rights in developing countries the authors hypothesize that the impact of globalization on labor rights depends not only on the overall level of economic openness but also on the precise ways in which a country participates in global production networks using a new data set on collective labor rights the authors test these expectations their analysis of the correlates of labor rights in 90 developing nations from 1986 to 2002 highlights globalization s mixed impact on labor rights as climb to the top accounts suggest foreign direct investment inflows are positively and significantly related to the rights of workers but at the same time trade competition generates downward race to the bottom pressures on collective labor rights the authors also find that domestic institutions and labor rights in neighboring countries are important correlates of workers rights

a statistical model for multiparty electoral data we propose an internally consistent and comprehensive statistical model for analyzing multiparty district level aggregate election data this model can be used to explain or predict how the geographic distribution of electoral results depends upon economic conditions neighborhood ethnic compositions campaign spending and other features of the election campaign or characteristics of the aggregate areas we also provide several new graphical representations for help in data exploration model evaluation and substantive interpretation although the model applies more generally we use it to help resolve an important controversy over the size of and trend in the electoral advantage of incumbency in great britain contrary to previous analyses which are all based on measures now known to be biased we demonstrate that the incumbency advantage is small but politically meaningful we also find that it differs substantially across the parties about half a percent for the conservatives 1 for the labor party and 3 for the liberal party and its successors also contrary to previous research we show that these effects have not grown in recent years finally we are able to estimate from which party each party s incumbency advantage is predominantly drawn

cross sided liquidity externalities we study the empirical relevance of the participation externality between liquidity suppliers makers and demanders takers i e whether liquidity demand attracts or reduces liquidity supply and vice versa we use exogenous shocks to exchange fees and technology as experiments to identify cross sided complementarities between liquidity suppliers and demanders in the u s equity market we find that the externality is large and positive on average however the externality is negative in periods of high adverse selection we quantify the economic significance of the externality by evaluating an exchange s revenue after a fee change the internet appendix is available at https doi org 10 1287 mnsc 2016 2658 this paper was accepted by lauren cohen finance

going global in groups structural transformation and china s special economic zones overseas summary china s special economic zones helped the country industrialize by attracting foreign investment in 2006 beijing initiated an overseas trade and cooperation zone program assisting chinese companies to invest abroad while also building china s soft power through the transfer of a key component of china s development success little is known about the 19 zones approved so far under this program or the impact they are likely to have on structural transformation and industrial development in their host countries this paper identifies the 19 zones and their proposed locations the process of selection developers implementation and the chinese incentive regime it then focuses on the african zones using a typology of factors that have proven critical for zone development in the past the paper evaluates the potential of these zones for fostering structural transformation in africa

aggregate information cascades abstract we introduce a new model of aggregate information cascades where only one of two possible actions is observable to others agents make a binary decision in sequence the order is random and agents are not aware of their own position in the sequence when called upon they are only informed about the total number of others who have chosen the observable action before them this informational structure arises naturally in many applications our most important result is that only one type of cascade arises in equilibrium the aggregate cascade on the observable action a cascade on the unobservable action never arises

trade based diffusion of labor rights a panel study 1986 2002 this article investigates the nature of the linkages between trade and labor rights in developing countries specifically we hypothesize that a california effect serves to transmit superior labor standards from importing to exporting countries in a manner similar to the transmission of environmental standards we maintain that all else being equal the labor standards of a given country are influenced not by its overall level of trade openness but by the labor standards of its trading partners we evaluate our hypothesis using a panel of 90 developing countries over the period 1986 2002 and we separately examine the extent to which the labor laws and the actual labor practices of the countries are influenced by those of their export destinations we find that strong legal protections of collective labor rights in a country s export destinations are associated with more stringent labor laws in the exporting country this california effect finding is however weaker in the context of labor rights practices highlighting the importance of distinguishing between formal legislation and actual implementation of labor rights

child labor cause consequence and cure with remarks on international labor standards although the literature on child labor is enormous it lacks a common theoretical foundation in this paper analytical survey of this field is provided keeping in mind that this is an area where the primary reason for theorizing is ultimately to influence policy overall it is noted that the literature on child labor is an illustration of abundance and anarchy although empirical writings on child labor are numerous they are not usually founded on theory it is argued that there is much that can be done in curbing the issue of child labor several theories were studied in this paper including collaborative intervention such efforts include public action which alters the economic environment such that the parents of their own accord prefer to withdraw the child from labor force another strategy involves the government a legal intervention is enforcing a total ban on the subject although such interventions have good intentions some of them may not be feasible in general it is better to take economy wide measures against child labor and if there is to be a sector specific ban it should be based on the working conditions of that sector rather than the destination of the goods

word of mouth communication and social learning this paper studies the way that word of mouth communication aggregates the information of individual agents we find that the structure of the communication process determines whether all agents end up making identical choices with less communication making this conformity more likely despite the players naive decision rules and the stochastic decision environment word of mouth communication may lead all players to adopt the action that is on average superior these socially efficient outcomes tend to occur when each agent samples only a few others i introduction economic agents must often make decisions without knowing the costs and benefits of the possible choices given the frequency with which such situations arise it is understandable that agents often choose not to perform studies or experiments but instead rely on whatever information they have obtained via casual word of mouth communication reliance on this sort of easily obtained information appears to be common in circumstances ranging from consumers choosing restaurants or auto mechanics to business managers evaluating alternative organizational structures this paper studies two related environments in arguing that individuals reliance on word of mouth communication has interesting implications for their aggregate behavior first motivated by the diffusion of new technologies we consider a choice between two competing products with unequal qualities or payoffs and show that the structure of communication is important in determining whether the population as a whole is likely to learn to use the superior product second we consider a choice between two products or practices that are equally good and ask whether consumers are likely to herd onto a single choice or whether diversity will obtain even in the long run we explore the implications of word of mouth communication in a simple nonstrategic environment there is a large population of identical players each of whom repeatedly chooses between two possible actions each player s payoff is determined by his own

trading human rights how preferential trade agreements influence government repression a growing number of preferential trade agreements ptas have come to play a significant role in governing state compliance with human rights when they supply hard standards that tie material benefits of integration to compliance with human rights principles ptas are more effective than softer human rights agreements hras in changing repressive behaviors ptas improve members human rights through coercion by supplying the instruments and resources to change actors incentives to promote reforms that would not otherwise be implemented i develop three hypotheses 1 state commitment to hras and 2 ptas supplying soft human rights standards not tied to market benefits do not systematically produce improvement in human rights behaviors while 3 state commitment to ptas supplying hard human rights standards does often produce better practices i draw on several cases to illustrate the processes of influence and test the argument on the experience of 177 states during the period 1972 to 2002 i would like to thank mike colaresi dan drezner david lake lisa martin walter mattli john meyer mark pollack erik voeten jim vreeland and two anonymous reviewers for their detailed and thoughtful comments on various drafts of this manuscript as well as the many other people who have helped me by asking hard questions along the way i would also like to thank michael barnett charles franklin and jon pevehouse for advice during the dissertation research that supports this article and alexander h montgomery for assistance in data management all faults are my own for generous assistance in the collection of data i thank the national science foundation ses 2cdz414 and ses 0135422 john meyer and francisco ramirez for support during the writing of the article i thank nuffield college at oxford university and most importantly lynn eden and stanford s center for international security and cooperation

social learning through endogenous information acquisition an experiment this paper provides a test of a theory of social learning through endogenous information acquisition a group of subjects face a decision problem under uncertainty subjects are endowed with private information about the fundamentals of the problem and make decisions sequentially the key feature of the experiment is that subjects can observe the decisions of predecessors by forming links at a cost the model predicts that the average welfare is enhanced in the presence of a small cost our experimental results support this prediction when the informativeness of signals changes across treatments behavior changes in accordance with the theory however within treatments there are important deviations from rationality such as a tendency to conform and excessive link formation given these biases our results indicate that subjects would except when faced with a small cost have been better off not forming any links this paper was accepted by teck ho behavioral economics

the shanghai effect do exports to china affect labor practices in africa summary to investigate whether africa s exports to china influence labor practices in africa we reconsider the debate over trade s influence on regulatory standards in exporting countries the first generation of trade regulation scholars asked whether high levels of exports influenced regulatory standards of exporting countries with inconclusive results the second generation of scholarship focused not on how much a country exported but to whom it exported identifying a california effect by which firms and consumers in mostly developed importing countries projected their high regulatory standards on less developed export partners structural change especially the rise of china as a major importer poses a challenge to these optimistic findings drawing on insights from the analysis of compositional data this paper introduces a third generation of trade regulation research which suggests examining not only with whom a country trades but also how the composition of markets in a country s export basket reshuffles over time specifically we explore the possibility of a shanghai effect whereby african countries begin to reflect the lower labor standards of china which has emerged as a major destination for their exports we show that when a country increases exports to china the net effect on domestic labor standards depends critically on the labor practices of other export destinations compositionally displaced by china exports our analysis of a panel of 49 african countries for the period 1985 2010 produces a small continent wide estimate of china s negative influence on african labor practices in sample simulation at the country level uncovers a moderate shanghai effect for a handful of countries only

market behavior in a clearing house one of the most fundamental market mechanisms is the clearing house where orders are accumulated over time and the market is cleared periodically the issue addressed in this study is the statistical behavior of the market under this neutral mechanism in the framework of a tractable stochastic model which captures the underlying uncertainties and indivisibilities in the demand and supply schedules applying renewal theory we derive closed form results for the behavior of prices and quantities and pursue the implications of the possibility of no trade and the multiplicity of market clearing prices

tripling africa s primary exports what how where abstract income growth in africa that is high enough to achieve the internationally agreed development goals implies a rise in the region s per capita income by the early 2020s to about latin america s current level the paper shows that such income growth would be associated roughly with a nine fold increase in africa s manufactured exports but also with a tripling of its primary exports which in absolute terms would account for two thirds of the increase in the region s total exports focusing on the demand potential for such an increase in africa s primary exports the paper argues that rising global demand from sustained rapid growth in natural resource poor asian countries particularly china provides sizeable new opportunities for africa s primary exports in africa extractive industries are poised best to benefit directly from china s rising imports while exporters of agricultural products are more likely to benefit indirectly from rising world market prices associated with asia s growing prim

observational learning under imperfect information abstract we explore bayes rational sequential decision making in a game with pure information externalities where each decision maker observes only her predecessor s binary action under perfect information the martingale property of the stochastic learning process is used to establish convergence of beliefs and actions under imperfect information in contrast beliefs and actions cycle forever however despite the stochastic instability over time the private information is ignored and decision makers become increasingly likely to imitate their predecessors consequently we observe longer and longer periods of uniform behavior punctuated by increasingly rare switches

do economic problems at home undermine worker safety abroad a panel study 1980 2009 do economic downturns in the global north undermine worker safety in the global south literature suggests that bilateral trade linkages lead to the diffusion of good labor standards from importing countries of the global north to exporting countries of the global south the crucial mechanism is the ability and willingness of importing firms to deploy their market leverage and ask for improved labor standards from their overseas suppliers yet cost cutting pressures emanating from economic downturns might lead the same importing firms to give lower priority to worker safety in their overseas supply chains when importing firms demand price reductions overseas suppliers might respond by reducing wages ignoring safety regulations and working their labor force for longer hours the observable implication is that worker safety in the global south may deteriorate during economic downturns in their export markets located in the global north we evaluate our hypothesis using a panel of 83 developing countries for the period during 1980 2009 and find that economic downturns in developed country markets are associated with significant increases in non fatal occupational injury rates in developing countries the injury increasing effect is more pronounced in developing countries with weak workers rights protection

taking the road less traveled by does conversation eradicate pernicious cascades abstract we offer a model in which sequences of individuals often converge upon poor decisions and are prone to fads despite communication of the payoff outcomes from past choices this reflects both direct and indirect action based information externalities in contrast with previous cascades literature cascades here are spontaneously dislodged and in general have a probability less than one of lasting forever furthermore the ability of individuals to communicate can reduce average decision accuracy and welfare

bayesian learning in social networks we study the perfect bayesian equilibrium of a sequential learning model over a general social network each individual receives a signal about the underlying state of the world observes the past actions of a stochastically generated neighbourhood of individuals and chooses one of two possible actions the stochastic process generating the neighbourhoods defines the network topology we characterize pure strategy equilibria for arbitrary stochastic and deterministic social networks and characterize the conditions under which there will be asymptotic learning convergence in probability to the right action as the social network becomes large we show that when private beliefs are unbounded meaning that the implied likelihood ratios are unbounded there will be asymptotic learning as long as there is some minimal amount of expansion in observations we also characterize conditions under which there will be asymptotic learning when private beliefs are bounded

trade openness foreign direct investment and child labor summary the skeptics of globalization argue that increased trade openness and foreign direct investment induce developing countries to keep labor costs low for example by letting children work this article argues that there are good theoretical reasons why globalization might actually have the opposite effect we test this with various measures of child labor and provide the first analysis of foreign investment in addition to trade we present evidence that countries that are more open to trade and or have a higher stock of foreign direct investment also have a lower incidence of child labor this holds for the labor force participation rate of 10 14 year old children the secondary school nonattendance rate and a count measure of economic sectors with child labor incidence as the dependent variables globalization is associated with less not more child labor

influential listeners an experiment on persuasion bias in social networks abstract this paper presents an experimental investigation of persuasion bias a form of bounded rationality whereby agents communicating through a social network are unable to account for repetitions in the information they receive we find that after repeated communication within a social network social influence depends not only on being listened to by many others but also on listening to many others we show that persuasion bias can be viewed as an extreme case of a generalized boundedly rational updating rule in which agents receive more or less attention depending on how many other agents they listen to the results indicate that behavior in the experiment is consistent with an updating rule according to which agents social influence is proportional to their indegree

the gravity of china s african export promise africa s largest trade partner china criticised for exchanging resources for manufactures has promised to increase imports and optimise the structure of trade with africa using a gravity model of china s imports for the years 1995 2009 we explore potential dynamics for this promise uniquely accounting for market economy recognition and taiwan recognition the former is associated with increased imports while the latter effect is ambiguous and statistically insignificant comparison of projected against actual imports across three growth path aligned economic geography typologies resource rich landlocked and resource poor coastal and resource poor sets out china s imports trends in an abstract framework of african export potential we find not only under importing across a majority of resource poor countries we also find that current trade policy is the least applicable to these comparatively poor exporters trade with china if the latter are to serve a broader catalytic role in africa s regional industrial transformation as compared to the role of coastal and resource poor countries in regional economic transformation in asia and latin america china africa trade and investment policies may need additional thinking