you ve got mail a randomized field experiment on tax evasion we report from a large scale randomized field experiment conducted on a unique sample of more than 15 000 taxpayers in norway who were likely to have misreported their foreign income by randomly m

endogenous competence and a limit to the condorcet jury theorem the seminal contribution known as the condorcet jury theorem observes that under a specific set of conditions an increase in the size of a group tasked with making a binary decision guilty or innocent say leads to an improvement in the group s ability to make the correct choice an assumption that is not properly appreciated in the relevant literature is that the competency of the group members is assumed to be exogenous in numerous applications members of the group make investments to improve the accuracy of their decision making e g pre meeting efforts we consider the collective action problem that arises we show that if individual competence is endogenous then increases in the group size encourages free riding this trades off with the value of information aggregation thus the value of the larger group size is muted extensions illustrate that if committee members are allowed to exit not participate the equilibrium committee size is reduced additionally supermajority voting rules encourage investments and consequently individual competence

competition and corporate performance are people right to think that competition improves corporate performance my investigations indicate first that there are some theoretical reasons for believing this hypothesis to be correct but they are not overwhelming furthermore the existing empirical evidence on this question is weak however the results reported here based on an analysis of around 670 u k companies do provide some support for this view most important i present evidence that competition as measured by increased numbers of competitors or by lower levels of rents is associated with a significantly higher rate of total factor productivity growth

the income effect and supplier induced demand evidence from primary physician services in norway a much debated issue within the health economic literature is whether physicians can induce demand for their services the relationship between physicians nonpractice income and supply of primary physician services in norway is examined it is argued that if inducement exists physicians with a low nonpractice income who work in municipalities where competition for patients is high compensate for lack of patients by inducing demand this model is adapted to the institutional setting of the norwegian primary physician services where there is a fixed fee schedule the analyses were performed on a large set of data encompassing all primary care physicians in norway who are remunerated per item of treatment data on output in practice were merged with information about nonpractice income from the tax forms of the physician and her his spouse in municipalities with high physician density nonpractice income had no effect on the number of consultations per physician or on the number of treatment items

market share market value and innovation in a panel of british manufacturing firms this paper examines the empirical relationship between technological innovations market share and stock market value new developments in the estimation of dynamic count data models are used to control for unobserved firm specific heterogeneity we find a robust and positive effect of market share on observable headcounts of innovations and patents although increased product market competition in the industry tends to stimulate innovative activity furthermore the impact of innovation on market value is larger for firms with higher market shares we argue that our results are consistent with models where high market share firms have incentives to pre emptively innovate

the economics of small business finance the roles of private equity and debt markets in the financial growth cycle abstract this article examines the economics of financing small business in private equity and debt markets firms are viewed through a financial growth cycle paradigm in which different capital structures are optimal at different points in the cycle we show the sources of small business finance and how capital structure varies with firm size and age the interconnectedness of small firm finance is discussed along with the impact of the macroeconomic environment we also analyze a number of research and policy issues review the literature and suggest topics for future research

the incidence of secured debt evidence from the small business community critics claim that theories of secured debt fail to explain the widespread use of collateral because they incorrectly predict when a loan will be secured this paper provides the first rigorous statistical test of the transaction cost models of secured debt data from two samples of over 1 000 small business loans generally support the common set of predictions of these theories the incidence of secured debt is positively related to probability of default loan size loan maturity and marketability of assets changes in the legal and economic environment also alter firms decisions regarding the pledging of collateral

geography industrial organization and agglomeration this paper makes two contributions to the empirical literature on agglomeration economies first the paper uses a unique and rich database in conjunction with mapping software to measure the geographic extent of agglomerative externalities previous papers have been forced to assume that agglomeration economies are club goods that operate at a metropolitan scale second the paper tests for the existence of organizational agglomeration economies of the kind studied qualitatively by saxenian 1994 this is a potentially important source of increasing returns that previous empirical work has not considered results indicate that localization economies attenuate rapidly and that industrial organization affects the benefits of agglomeration

collusion and the banking structure of a duopoly the author shows that in credit relationships the choice of a lender may become a determinant of the extent of competition in downstream industries in the presence of imperfect output markets and asymmetric information in financial markets members of an industry may achieve a partial collusion in the output market by borrowing from the same bank in an oligopoly debt is procompetitive as it gives incentives to the borrowing firm to undertake an aggressive output strategy as both firms borrow the industry becomes more competitive and riskier the firms debt value is decreased a common lender can better control these incentive effects and hence limit the extent of competition in the output market

capital structure and product market rivalry how do we reconcile theory and evidence this paper presents empirical evidence on the interaction of capital structure decisions and product market behavior we examine when firms recapitalize and increase the proportion of debt in their capital structure the evidence in this paper shows that firms with low productivity plants in highly concentrated industries are more likely to recapitalize and increase debt financing this finding suggests that debt plays a role in highly concentrated industries where agency costs are not significantly reduced by product market competition following the empirical evidence we introduce the strategic investment effects of debt and argue that this effect in conjunction with agency costs appears to fit the data this abstract was borrowed from another version of this item

are women more risk averse we find that single women exhibit relatively more risk aversion in financial decision making than single men using u s sample data we examine household holdings of risky assets to determine whether there are gender differences in financial risk taking as wealth increases the proportion of wealth held as risky assets is estimated to increase by a smaller amount for single women than for single men gender differences in financial risk taking are also influenced by age race and number of children greater financial risk aversion may provide an explanation for women s lower levels of wealth compared with men s jel j16 d81 g11

product market competition and optimal debt contracts the limited liability effect revisited abstract this paper shows that asymmetric information between lenders and borrowers plays a crucial role in the existence of interactions between financial decisions and output market strategies lenders offer an optimal renegotiation proof financial contract which resembles a standard debt contract computing cournot equilibria debt causes firms to compete less aggressively the usual positive limited liability effect on quantities is offset by a negative one due to endogenous financial costs

technical inefficiency in manufacturing industries this article examines technical inefficiency of manufacturing industry in the united kingdom based on data for 19 023 establishments in 151 industries these data drawn from the annual census of production for 1977 have been used to estimate technical inefficiency in each industry by fitting translog stochastic frontier production functions and decomposing the residuals into two components one measuring inefficiency and the other unobservable random factors the work is the first step in a larger project to explain the sources of technical inefficiency and to compare efficiency between countries similar studies are currently taking place in australia the united states canada japan south korea and norway the first phase of estimation has been completed for the united states caves 1988 for the united kingdom green and mayes 1989 and australia harris 1989

the optimal decision rule for fixed size committees in dichotomous choice situations the general result this paper presents a general pairwise choice framework and derives the optimal decision rule for fixed size committees the main result generalizes a number of earlier results in the subject copyright 1997 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

information aggregation rationality and the condorcet jury theorem the condorcet jury theorem states that majorities are more likely than any single individual to select the better of two alternatives when there exists uncertainty about which of the two alternatives is in fact preferred most extant proofs of this theorem implicitly make the behavioral assumption that individuals vote sincerely in the collective decision making a seemingly innocuous assumption given that individuals are taken to possess a common preference for selecting the better alternative however in the model analyzed here we find that sincere behavior by all individuals is not rational even when individuals have such a common preference in particular sincere voting does not constitute a nash equilibrium a satisfactory rational choice foundation for the claim that majorities invariably do better than individuals therefore has yet to be derived

price regulation and parallel imports of pharmaceuticals abstract this paper studies the effects of price regulation and parallel imports in the on patent pharmaceutical market in a theory model where the producer price is subject to bargaining between the brand name producer and a distributor we show that the effects of stricter price regulation crucially depend on whether the producer faces competition from parallel imports while parallel imports improve the bargaining position of the distributor price regulation counteracts this effect and may even be profitable for the producer we test the implications of our model on a unique dataset with information on sales and prices at both producer and retail level for 165 substances over 4 years 2004 2007 we show that stricter price regulation reduces competition from parallel imports and has no strictly negative effect on producer profits in the presence absence of parallel imports our results suggest that price regulation might improve static efficiency without being harmful for dynamic efficiency in the presence of parallel imports

do physicians financial incentives affect medical treatment and patient health we investigate whether physicians financial incentives influence health care supply technology diffusion and resulting patient outcomes in 1997 medicare consolidated the geographic regions across which it adjusts physician payments generating area specific price shocks areas with higher payment shocks experience significant increases in health care supply on average a 2 percent increase in payment rates leads to a 3 percent increase in care provision elective procedures such as cataract surgery respond much more strongly than less discretionary services non radiologists expand their provision of mris suggesting effects on technology adoption we estimate economically small health impacts albeit with limited precision

patient mobility and health care quality when regions and patients differ in income we study the effects of cross border patient mobility on health care quality and welfare when income varies across and within regions we use a salop model with a high middle and low income region in each region a policy maker chooses health care quality to maximise the utility of its residents when health care costs are financed by general income taxation in equilibrium regions with higher income offer better quality which creates an incentive for patient mobility from lower to higher income regions assuming a prospective payment scheme based on drg pricing we find that lower non monetary administrative mobility costs have i no effect on quality or welfare in the high income region ii a negative effect on quality but a positive effect on welfare for the middle income region and iii ambiguous effects on quality and welfare for the low income region lower monetary mobility costs copayments might reduce welfare in both the middle and low income region thus health policies that stimulate cross border patient mobility can be counterproductive when regions differ in income

the effect of capital market characteristics on the value of start up firms we develop an equilibrium model of contracting bargaining and search in which the relative scarcity of venture capital affects the bargaining power of entrepreneurs and venture capitalists this in turn affects the pricing contracting and value creation in start ups the relative scarcity of venture capital is endogenous and depends on the profitability of venture capital investments entry costs and transparency of the venture capital market supply and demand conditions also affect the incentives of venture capitalists to screen projects ex ante we characterize both the short and long run dynamics of the venture capital industry which provides us with a stylized picture of the internet boom and bust periods our model is consistent with existing evidence and provides a number of new empirical predictions

the electoral dynamics of human development this paper analyses the impact of elections on the dynamics of human development in a panel of 82 countries over the period 1980 2013 the incidence of partisan and political support effects is also taken into account a gmm estimator is employed in the empirical analysis and the results point out to the presence of an electoral cycle in the growth rate of human development majority governments also influence it but no clear evidence is found regarding partisan effects the electoral cycles have proved to be stronger in non oecd countries in countries with less frequent elections with lower levels of income and human development in presidential and non plurality systems and in proportional representation regimes they have also become more intense in this millennium

product market competition and the financing of new ventures this paper examines the interaction between venture risk product market competition and the entrepreneur s choice between bank financing and venture capital vc financing under bank financing a debt type contract emerges as optimal which allows the entrepreneur to retain full control of the venture and thus yields strong effort incentives as long as the entrepreneur can service the debt repayment however this leads to liquidation in the case of default making the venture s success quite sensitive to exogenous even temporary shocks that may hinder debt repayment under vc financing an equity type contract emerges as optimal although it is not sensitive to exogenous shocks this contract requires the entrepreneur to share a fraction of the rents with the financier thus yielding lower effort incentives for the entrepreneur there exists a threshold level of venture risk such that bank financing is optimal if and only if venture risk is below that threshold product market competition increases the value of stronger entrepreneurial incentives and thus increases the maximum level of risk the entrepreneur is willing to take before switching from bank financing to vc financing this is a robust result that is shown to hold in various models of competition including the hotelling salop dixit stiglitz and cournot to bertrand switch this paper was accepted by lee fleming entrepreneurship and innovation

early stage financing and firm growth in new industries this paper shows that active investors such as venture capitalists can affect the speed at which new ventures grow in the absence of product market competition new ventures financed by active investors grow faster initially though in the long run those financed by passive investors are able to catch up by contrast in a competitive product market new ventures financed by active investors may prey on rivals that are financed by passive investors by strategically overinvesting early on resulting in long run differences in investment profits and firm growth the value of active investors is greater in highly competitive industries as well as in industries with learning curves economies of scope and network effects as is typical for many new economy industries for such industries our model predicts that start ups with access to venture capital may dominate their industry peers in the long run

financing and advising optimal financial contracts with venture capitalists this paper analyses the joint provision of effort by an entrepreneur and by an advisor to improve the productivity of an investment project without moral hazard it is optimal that both exert effort with moral hazard if the entrepreneur s effort is more efficient less costly than the advisor s effort the latter is not hired if she does not provide funds outside financing arises endogenously this explains why investors like venture capitalists are value enhancing the level of outside financing determines whether common stocks or convertible bonds should be issued in response to incentives

capital market imperfections and countercyclical markups theory and evidence during recessions output prices seem to rise relative to wages and raw material prices one explanation is that imperfectly competitive firms compete less aggressively during recessions that is markups of price over marginal cost are countercyclical the authors present a model of countercyclical markups based on capital market imperfections during recessions liquidity constrained firms boost short run profits by raising prices to cut their investments in market share the authors provide evidence from the supermarket industry in support of this theory during regional and macroeconomic recessions more financially constrained supermarket chains raise their prices relative to less financially constrained chains copyright 1996 by american economic association

testing agency theory with entrepreneur effort and wealth we develop a principal agent model in an entrepreneurial setting and test the model s predictions using unique data on entrepreneurial effort and wealth in privately held firms accounting for unobserved firm heterogeneity using instrumental variables techniques we find that entrepreneurial ownership shares increase with outside wealth and decrease with firm risk effort increases with ownership and effort increases firm performance the magnitude of the effects in the cross section of firms suggests that agency costs may help explain why entrepreneurs concentrate large fractions of their wealth in firm equity

measuring market power and cost efficiency effects of industrial concentration in this paper i show how appelbaum s framework for testing price taking behavior in a single industry can be formally extended to consider concentration explicitly in so doing i separate the market power effect of concentration from its cost efficiency effect data from the us beef packing industry are used to illustrate an empirical application of the model the findings support oligopsonistic market power and slaughter cost efficiency in the industry however the cost efficiency effect outweighs the market power effect

income effects and physician labour supply evidence from the threshold system in ontario we examine a reform to the physician threshold system in ontario that provides a unique opportunity to assess the effect of fee changes on physician behaviour free from the biases that potentially affect simple time series or cross section inference we find that 1 the income effects of fee changes are small but significant 2 the income effect dominates the substitution effect only for a minority of services with relatively low prices and high volumes and 3 the cross effects of fee changes tend to be significant only for services with relatively high prices and low volumes une reforme du systeme des seuils de revenus au dela desquels les medecins sont penalises a fourni une occasion en or de mesurer l effet des changements de revenus sur le comportement du medecin en evitant les biais qui potentiellement vicient les resultats derives des series chronologiques ou des analyses transversales on decouvre que 1 les effets de revenus des changements de remuneration sont faibles mais significatifs 2 l effet de revenu domine l effet de substitution seulement pour un petit nombre de services a faible prix et fort volume et 3 les effets croises des changements de remuneration tendent aetre significatifs seulement pour les services dont le prix est relativement eleve et ou il y a faible volume

would rational voters acquire costly information abstract we analyze an election in which voters are uncertain about which of two alternatives is better for them voters can acquire some costly information about the alternatives in agreement with downs s rational ignorance hypothesis individual investment in political information declines to zero as the number of voters increases however if the marginal cost of information is near zero for nearly irrelevant information there is a sequence of equilibria such that the election outcome is likely to correspond to the interests of the majority for arbitrarily large numbers of voters thus rationally ignorant voters are consistent with a well informed electorate

optimal debt structure and the number of creditors within an optimal contracting framework we analyze the optimal number of creditors a company borrows from we also analyze the optimal allocation of security interests among creditors and intercreditor voting rules that govern renegotiation of debt contracts the key to our analysis is the idea that these aspects of the debt structure affect the outcome of debt renegotiation following a default debt structures that lead to inefficient renegotiation are beneficial in that they deter default but they are also costly if default is beyond a manager s control the optimal debt structure balances these effects we characterize how the optimal debt structure depends on firm characteristics such as its technology its credit rating and the market for its assets

product and process innovation as a response to increasing imports and foreign direct investment the paper analyses the hypotheses that imports and inward foreign direct investment fdi have positive effects on the innovative activity of domestic firms because competition on the domestic market is thereby increased and domestic firms have to perform more efficiently to maintain their market position chamberlain s random effects probit approach which may account for individual heterogeneity depending on exogenous variables is used to analyse a panel data set containing 1270 firms of the german manufacturing industry from 1984 to 1988 it turns out that both import share and fdi share have positive and significant effects on product and process innovations

using survey data of inflation expectations in the estimation of learning and rational expectations models do survey data on inflation expectations contain useful information for estimating macroeconomic models i address this question by using survey data in the new keynesian model by smets and wouters 2007 to estimate and compare its performance when solved under the assumptions of rational expectations and learning this information serves as an additional moment restriction and helps to determine the forecasting model for inflation that agents use under learning my results reveal that the predictive power of this model is improved when using both survey data and an admissible learning rule for the formation of inflation expectations

product market competition and boundaries of the firm this paper studies the effects of product market competition on firm boundaries in a duopoly setting each retailer is associated with a manufacturer who must decide how to allocate property rights over a retail asset delegating property rights over the retail asset to an indepedent retailer disintegration transfers incentives from the manufacturer to the retailer and has the benefit of increasing product quality and profits owing to the retailer s superior efficiency however it also forces the manufacturer to forfeit part of the profits competition increases the net benefit from delegation and leads to more efficient vertically disintegrated structures cet article etudie la concurrence sur le marche des produits et ses effets sur les limites de l entreprise dans un modele de duopole chaque producteur associea un distributeur choisit soit une structure verticale integree dans laquelle le distributeur est son employe soit une structure desintegree dans laquelle le distributeur est independant plus efficace en termes d incitations au distributeur la structure desintegree genere des profits joints plus importants elle oblige cependant le producteur a partager les profits avec le distributeur la concurrence augmente le benefice et reduit le cout de la desintegration favorisant ainsi des structures verticales desintegrees et efficaces

market structure internal capital markets and the boundaries of the firm we study how the creation of an internal capital market an icm can invite strategic responses in product markets that in turn shape firm boundaries icms provide ex post resource flexibility but come with ex ante commitment costs alternatively stand alones possess commitment ability but lack flexibility by creating flexibility integration can sometimes deter a rival s entry but commitment problems can also invite predatory capital raising these forces drive different organizational equilibria depending on the integrator s relation to the product market hybrid organizational forms like strategic alliances can sometimes dominate integration by offering some of its benefits with fewer strategic costs this paper develops a theory of the firm in which internal capital markets affect the ability to compete in product markets in our model a firm s decision to operate an internal capital market affects the fund raising behavior of its product market rivals an internal capital market can either scare away rival firms or else induce them to compete more aggressively raising more capital than they otherwise would in equilibrium these strategic interactions determine the boundaries of the firm

internal versus external capital markets this paper presents a framework for analyzing the costs and benefits of internal versus external capital allocation we focus pritnarily on comparing an internal capital market with bank lending while both represent centralized forms of financing in the former case the financing is owner provided while in the latter ceise it is not we argue that the ownership aspect of internal capital allocation has three important consequences 1 it leads to more monitoring than bank lending 2 it reduces managers entrepreneurial incentives and 3 it makes it easier to efficiently redeploy the assets of projects that are performing poorly under existing management

physician response to fee changes with multiple payers this paper develops a general model of physician behavior with demand inducement encompassing the two benchmark cases of profit maximization and target income behavior it is shown that when income effects are absent physicians maximize profits and when income effects are very strong physicians seek a target income the model is used to derive own and cross price expressions for the response of physicians to fee changes in the realistic context of more than one payer under the alternative behavior assumptions of profit maximization and target income behavior the implications for public and private fee policy and empirical research on physician response to fees are discussed

small and medium sized enterprises bank relationship strength and the use of venture capital we investigate the nexus between small and medium sized enterprises smes use of venture capital and bank financing relationships using a unique data set with detailed information on sme finance in italy germany and the uk the empirical regularities we uncover show that that entrepreneurial firms substitute venture capital for multiple banking relationships this substitution effect is primarily driven by expertise substitution and there is also some suggestive yet inconclusive indication in the data that smes turn to providers of venture capital to avoid rent extracting behavior by the firm s main bank our results do not support the view that firms obtain venture capital in instances when bank financing is difficult to obtain instead venture capital funds are used if bank funding is deemed not appropriate and firms do seem to be aware of which type of financing is more appropriate for them

do treatment decisions depend on physicians financial incentives we study whether and how physicians respond to nancial incentives making use of detailed register data on the health care services provided to patients by general practitioners gps in norway over a six year period 2006 11 to identify gps treatment responses we exploit that specialisation in general medicine entitles the gps to a higher consultation fee implying a change in total and relative fee payments to control for demand and supply factors related to becoming a specialist we estimate a gp fixed effect model focusing on a narrow time window around the date of specialist certi cation our results show a sharp response by the gps immediately after obtaining specialist certi fication and thus a higher consultation fee the number of visits increase while the treatment intensity prolonged consultations lab tests medical procedures decline these fi ndings are consistent with a theory model where partly profit motivated gps face excess demand and income effects are sufficiently small finally we find no evidence for adverse health effects measured by emergency care centre visits on patients due to the change in gps treatment behaviour after becoming a specialist

the swing voter s curse the authors analyze two candidate elections in which some voters are uncertain about the realization of a state variable that affects the utility of all voters they demonstrate the existence of a swing voter s curse less informed indifferent voters strictly prefer to abstain rather than vote for either candidate even when voting is costless the swing voter s curse leads to the equilibrium result that a substantial fraction of the electorate will abstain even though all abstainers strictly prefer voting for one candidate over voting for another copyright 1996 by american economic association

default and renegotiation a dynamic model of debt we analyze the role of debt in persuading an entrepreneur to pay out cash e ows rather than to divertthem in the e rstpartof the paper we study the optimal debt contract specie cally the trade off between the size of the loan and the repayment under the assumption that some debt contract is optimal in the second part we consider a more general class of nondebt contracts and derive sufficient conditions for debt to be optimal among these

sources of geographic variation in health care evidence from patient migration we study the drivers of geographic variation in us health care utilization using an empirical strategy that exploits migration of medicare patients to separate the role of demand and supply factors our approach allows us to account for demand differences driven by both observable and unobservable patient characteristics within our sample of over 65 medicare beneficiaries we find that 40 50 percent of geographic variation in utilization is attributable to demand side factors including health and preferences with the remainder due to place specific supply factors jel h51 i1 i11