A stated objective of the Australian Plain Packaging Act 2011 is to reduce smoking prevalence. We use the Roy Morgan Single Source (Australia) data set over the time period January 2001 to December 2013 to analyze whether this goal has been achieved in the first year since the implementation. In particular, we carry out a statistical trend analysis to study the (possible) effect of plain packaging on smoking prevalence. Two informative analyses help to draw conclusions on the (actual) effect of plain packaging on smoking prevalence in Australia. First, we look at the year of data before plain packaging was introduced, which happened in December 2012. Second, we compute confidence intervals around the estimated treatment effects. Our main results can be summarized as follows. First, if a statistical significance level of 5% is required, then there is no evidence at all for a plain packaging effect on smoking prevalence. Second, if one is willing to accept a relatively low level of statistical significance (that is, 10%), then there is evidence for a very short-lived plain packaging effect on smoking prevalence, namely in December 2012 only (after which smoking prevalence is statistically indistinguishable from its pre-existing trend). A formal power analysis demonstrates that the power of our inference methods is remarkably high.
We model capital flows among Chinese provinces using a theory-based variance decomposition that allows us to gauge the importance of various channels of external adjustments at the regional level: variation in intertemporal prices - domestic and international interest rates and the real exchange rate - and intertemporal variation in quantities (cash flows of output, investment and government spending). We find that our simple framework can account for around 85 percent of the variation in regional capital flows over the 1985-2010 period. Our results suggest that the relative importance of private and state-owned enterprises, a province's level of integration into the world economy and its sectoral composition play an important role for external adjustment vis-à-vis the rest of China and the world. Specifically, we find strong empirical support for the view that differential access of private and state-owned enterprises to finance is a key driver of China's surpluses. We discuss implications of our results for global imbalances in capital flows.
While China has been pivotal in discussions and academic research on global imbalances, little is known about macroeconomic external imbalances among Chinese regions and the factors driving them. We use aggregate regional data and estimate provincial total factor productivity growth over 1984-2010. We observe that provinces that caught up relatively to national TFP had capital outflows while those that fell behind had capital inflows: there seems to be a capital allocation puzzle at the regional level inside China. We follow up by identifying the drivers of this pattern using the methodology developed in Gourinchas and Jeanne (2013) to compute regional investment and saving wedges. By relating those frictions with TFP catch-up parameters, we find an investment and a saving puzzle: regions that caught up relative to the rest of China seem to have lower investment rate (higher investment tax) and higher saving (lower saving tax) relative to the prediction of the neoclassical model. We exploit Chinese cross-regional variation in key characteristics suggested by the literature and find robust explanatory variables of the wedges: factors related to the ownership type, the level of integration into the world economy and the economic structure are highly correlated with the identified frictions.
This paper studies whether people can avoid punishment by remaining willfully ignorant about possible negative consequences of their actions for others. We employ a laboratory experiment, using modified dictator games in which a dictator can remain willfully ignorant about the payoff consequences of his decision for a receiver. A third party can punish the dictator after observing the dictator’s decision and the resulting payoffs. On the one hand, willfully ignorant dictators are punished less if their actions lead to unfair outcomes than dictators who reveal the consequences before implementing the same outcome. On the other hand, willfully ignorant dictators are punished more than revealing dictators if their actions do not lead to unfair outcomes. We conclude that willful ignorance can circumvent blame when unfair outcomes result, but that the act of remaining willfully ignorant is itself punished, regardless of the outcome
In historical accounts of the world economic crisis of the 1930s, Switzerland is known for its staunch defense of the gold standard and the rise of corporatist policies. Yet, so far, the literature has not discussed the implications of these two features. This paper tries to show how the combination of hard-currency policy and nominal rigidities introduced by corporatist policies proved to be fatal for growth. Estimating a New Keynesian small open economy model for the period 1926-1938, we show that the decision to participate in the Gold Bloc after 1933 at an overvalued currency can be identified as the main reason for the unusual long lasting recession and that price rigidities from 1931 to 1936 significantly slowed down the adjustment process.
Understanding differences in business cycle phenomena between Emerging Market Economies (EMEs) and industrialized countries has been at the center of recent research on macroeconomic fluctuations. The purpose of this paper is to investigate the importance of certain credit market imperfections in different EMEs. To this end, we develop a small open economy Dynamic Stochastic General Equilibrium (DSGE) framework featuring both permanent and transitory productivity shocks, differentiated home and foreign goods, and endogenous exchange rate movements. Furthermore, our model incorporates liability dollarization as a particular form of financial frictions in EMEs. In this vein, we account for the fact that emerging markets traditionally have had difficulties in borrowing in domestic currency on international capital markets and thus allow for valuation effects in our analysis. We estimate our model using Bayesian techniques for a number of EMEs and thereby control for potential heterogeneity across countries. Contrary to previous studies in this strand of the literature, we include a (vector-)autoregressive measurement error component to capture off-model dynamics. Regarding business cycles in emerging markets, our main findings are that (i) even though we incorporate financial frictions in the framework, trend shocks are the main determinant of macroeconomic fluctuations, (ii) accounting for liability dollarization ameliorates the model fit, and (iii) valuation effects on average stabilize changes in the net foreign asset position.
SBTC is a powerful mechanism in explaining the increasing gap between educated and uneducated wages. However, SBTC cannot mimic the US within-group wage inequality. This paper provides an explanation for the observed intra-college group inequality by showing that the top decile earners' significant wage growth is underpinned by the link between ex ante ability, math-heavy college majors and highly quantitative occupations. We develop a general equilibrium model with multiple education outcomes, where wages are driven by individuals' ex ante abilities and acquired math skills. A large portion of within-group and general wage inequality is explained by math-biased technical change (MBTC).
We design a laboratory experiment to identify causal performance effects of top-down communication between managers and their subordinates. Our focus lies on communication that resolves uncertainty about the work environment but does not provide task-specific knowledge. Recent articles in the business press report a lack of such communication in real-world organizations and associate it with reduced organizational performance. Our results confirm this observation. We find that top-down communication is a profitable way for managers to increase employee performance in the presence of uncertainty. Specifically, we show that non-communication is the worst option for managers. However, 50 percent of our experimental managers use top-down communication too restrictively. Overall, managers forego 30 percent of their potential profits through non-communication. We show that organizations can overcome this problem by adopting automated information procedures, which are equally effective.
Can infrastructure investment win "hearts and minds"? We analyze a famous case in the early stages of dictatorship - the building of the motorway network in Nazi Germany. The Autobahn was one of the most important projects of the Hitler government. It was intended to reduce unemployment, and was widely used for propaganda purposes. We examine its role in increasing support for the NS regime by analyzing new data on motorway construction and the 1934 plebiscite, which gave Hitler great powers as head of state. Our results suggest that road building was highly effective, reducing opposition to the nascent Nazi regime.
