Do European car manufacturers make exclusive dealing contracts with their retailers to keep out new, smaller suppliers (mainly from Asia) and in turn, hurt competition? The manufacturing industry could collectively maintain an exclusive dealing system through a block exemption regulation, which would require exclusive dealing through manufacturers’ retailers. Our research shows that if these exclusive contracts were banned, consumers would benefit from allowing dealerships to have more than one supplier and consequently, more brands of cars in stock. However, consumers would not benefit much through increased price competition, in contrast to what is commonly believed.
The increase in spatial sorting of college and non-college workers into very different cities calls into question whether the large increases in wage inequality over the past three decades truly represents a similar increase in inequality in economic well-being. Since college graduates are paying much higher housing costs than lower skill workers, it is possible […]
Can financial incentives encourage disability program participants to work? Due to a lack of randomized experiments with well-defined treatment and control groups, there is little evidence on this question. This paper helps to fill the void by exploiting a policy change in the Norwegian disability system that approximates a well-controlled policy experiment. The results show that financial incentives induce many disability recipients to work, enough so that overall program costs fall in spite of the added financial incentives. The analysis points to the possibility that incorporating financial incentives into the U.S. disability system could achieve similar results.
The introduction of new production processes can have dramatic effects on aggregate productivity within an industry. This research explores the impact of the major technological innovation of the minimill on the US steel industry, analyzing detailed producer-level data on prices and production over a 40-year period. The study illustrates how technology can drive reallocation: the market share of plants using minimills rose significantly, but the older technology of vertically integrated production was not entirely displaced. Instead, less productive vertically integrated plants were driven out of the industry and output was reallocated to more efficient producers.
Tax collectors in developing countries collect far less tax revenue as a share of gross domestic product than tax collectors in higher income countries. In many of these developing countries, tax officials have discretion in assessing, enforcing, and auditing taxes. In addition, they earn relatively low wages with fewer rewards for good performance, allowing for the possibility of collusion with taxpayers. In the case of property taxes, officials may accept payments in exchange for leaving properties off the tax rolls, granting inappropriate exemptions, or assessing properties at a lower rate, all of which lead to lower revenues for the state.
Adults who participated in the Food Stamp Program, renamed the Supplemental Nutrition Assistance Program (SNAP) in 2008, as children are healthier and better off financially than poverty-stricken families who did not have access to the program, according to findings in joint work with Douglas Almond and Diane Schanzenbach (this paper and a companion paper Almond, et al. 2011).
When new technologies enter the market, older products are often removed from store shelves. This article asks whether such product elimination is socially efficient. It studies this question in the context of the American Home PC market between 2001 and 2004. Empirically, the paper documents consumer heterogeneity and then studies how the major innovation of the time—Intel’s Pentium M™ processor—contributed to social welfare.
Urban land development in China is occurring on a massive scale and corruption is prevalent in the real estate sector through side deals between buyers and city officials. A recent study by Cai, Henderson, and Zhang (2013, RAND Journal of Economics) provides indirect evidence of this corruption through the use of two different types of auctions. The authors argue that the practices of city officials overseeing land sales amount to losses in city revenue in the hundreds of billions of dollars.
Developing economies are typically characterized by low tax revenue and widespread tax evasion. This research shows that in such environments, it can be better to tax firms based on turnover rather than profits: while turnover taxes are known to distort production decisions, they are more difficult to evade than profit taxes. Analyzing administrative tax records from Pakistan, the study shows that the use of production-inefficient turnover taxes sharply reduces tax evasion and increases tax revenue.
The landmark US welfare reform of 1996 provided strong incentives for poor women to work while receiving assistance – but it also provided incentives for some women to reduce their earnings to qualify for benefits. This research develops a new approach to detecting this ‘welfare opt-in’ effect and uses it to analyze data from a large randomized evaluation of welfare reform in Connecticut: the “Jobs First” program.