In this paper we discuss an incumbent postal operator's incentives to invest in an innovation in the face of upcoming liberalization and deregulation of the letter market. Our contribution is a short description of recent innovations in the Swiss mail market and their interpretation in light of an illuminative yet tractable model. Following the literature, we distinguish between product and process innovation. We characterize
competitive pressure by a reduction in the incumbent's market share and an increase of his/her perceived price elasticity of demand due to consumers' switching to competitors. This may result in adverse incentives to invest in an innovation. Likewise, deregulation leads to increased entrepreneurial freedom on the operator's side and possibly a lower burden of USO (universal service obligations), reflected in lower cost. This sustains incentives to invest in both product and process innovation.
This paper deals with the optimality of teacher incentive contracts in the presence of costly or limited government resources. It considers educational production under asymmetric information as a function of teacher effort and class size. In the presence of costly government resources and convex effort costs, teacher monitoring - which is wasteful in principle - may be superior to merit pay in order to induce second-best teacher effort; optimum class size is not affected by informational deficiencies. If the government budget is exogenously fixed, optimum teacher effort may not be affordable, which is shown to make the case for monitoring activity instead of incentive pay even stronger.
This paper relates to the current discussion about how to measure the net cost and the unfair burden of universal service provision in network industries. The established profitability cost approach compares the profit of a universal service provider (USP) with and without a universal service obligation (USO). This paper argues that the net cost of universal service provision critically depends on the regulatory counterfactual and hence the USP's strategy space without USO. On the one hand, a strong USO limits the USP's means to position itself in the market, which offers cream-skimming opportunities and invites competition. On the other hand, a simple game-theoretic entry analysis shows that the USO may effectively serve as a valuable strategic commitment device to deter entry. Hence, the USO may be valuable to the USP despite causing inefficient operations. From a policy perspective, this constitutes a counter-intuitive result for the definition of the USO: the stricter it is regulated, the more detrimental it may be to competition and, therefore, the smaller is its burden on the USP
This paper deals with two issues concerning the effects of population
aging on education decisions in the presence of a PAYG pension
system: We first analyze the effects of an aging population per se on
individual skill choices and continuous education and the production
structure. Second, we study the implications of postponed retirement, which is often proposed as a measure to cope with the economic challenges of increased longevity. Our study uses a dynamic general equilibrium framework with overlapping generations and probabilistic aging. The model allows for capital-skill complementarity in the production of final output. As a response to population aging, in a small open economy with a fixed interest rate, our first simulation shows that GDP is depressed due to an adverse effect on skill choice and labor supply. We then introduce postponed retirement as a potentially dampening policy measure due to its encouragement of human capital formation. However, since there is less private saving in this scenario, the overall effect on GDP is even worse than in the pure aging scenario
Using a comprehensive simulation study based on empirical data, this paper investigates the finite sample properties of different classes of parametric and semi-parametric estimators of (natural or pure) direct and indirect causal effects used in mediation analysis under sequential conditional independence assumptions. The estimators are based on regression, inverse probability weighting, and combinations thereof. Our simulation design uses a large population of Swiss jobseekers and considers variations of several features of the data generating process and the implementation of the estimators that are of practical relevance. We find that no estimator performs uniformly best (in terms of root mean squared error) in all simulations. Overall, so-called 'g-computation' dominates. However, differences between estimators are often (but not always) minor in the various setups and the relative performance of the methods often (but not always) varies with the features of the data generating process.
Peering points between different Internet service providers (ISPs) are among the bottlenecks of the Internet. Multihoming (MH) and content delivery networks (CDNs) are two technical solutions to bypass peering points and to improve the quality of data delivery. So far, however, there is no research that analyzes the economic effects of MH and CDNs on the market for Internet connectivity. This paper develops a static market model with locked-in end users and paid content. It shows that MH and CDNs create the possibility for terminating ISPs to engage in monopolistic pricing towards content providers, leading to a shift of rents from end users and content providers to ISPs. Implications for future innovations are discussed
Does official aid pave the road for private foreign investment or does it suffocate private initiative by diverting resources towards unproductive activities? We explore this question using panel data covering a large number of developing and emerging economies during the 1990s. Controlling for countries' institutional environment, we find that, evaluated at the mean, the marginal effect of aid on private foreign investment is close to zero. Surprisingly, however, the effect is strictly positive for countries in which private agents face a substantial regulatory burden. This result is robust across a wide range of specifications, samples and estimation methods.
