Ronald Coase Institute



2015 Tel Aviv Workshop: Abstracts



WORKSHOP ON INSTITUTIONAL ANALYSIS
DECEMBER 13-19, 2015
TEL AVIV, ISRAEL

ABSTRACTS

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Explaining Low Level of Trust in Court System
in the Transition Countries in Europe
Kamil Jonski, Jaroslaw BELDOWSKI, Daniel Mankowski
Warsaw School of Economics


Confidence in a judicial system – understood as support that is not contingent upon approval of a specific court decision – is essential to its proper functioning. In particular, such confidence is crucial when judgments go against the conventional wisdom or preferences of the majority. This paper attempts to explain a long-standing phenomenon of exceptionally low level of public confidence in the European judiciaries of countries that have experienced the third wave of so called democratic transition. Building upon an Institutional Performance Model linking confidence in public institutions with assessment of their actual performance, it attempts to tailor this model to transition countries in Europe. It then applies different metrics of confidence, derived from the World Value Survey as well as a variety of “rule of law” indexes in order to verify it empirically. Obtained results suggest that with respect to transition countries, further institutional fine-tuning and public education is necessary to meet growing expectations of their citizens.



The Effect of Council Size on Sub-National Levels of Government:
Empirical Evidence from Costa Rica
Cesar CASTELLON
Clemson University

The notion that a larger legislature is prone to higher levels of spending and targeted redistribution, often referred to as the law of 1/n, is perceived by some scholars as a well-established result. However, recent empirical literature looking at the effect of council-size at sub-national levels of government has found a negative relation between council-size and municipal spending (see Petterson-Lidbom, 2012; and Garmann, 2015).  These studies have used data from European countries and have exploited the fact that council size in such countries is determined using a discontinuous function of population; which allows for the use of a regression discontinuity design (RD) on observations around the population thresholds.

This paper follows this literature and uses data from sub-national governments in Costa Rica to empirically test theeffect of council size on the different categories of spending. Its contributions are threefold: 1) it estimates the causal effect of council size by exploiting an exogenous change in the population formula used to allocate council seats (and thus circumvents problems associated with RD designs on population thresholds), 2) it looks at the effect of council size on expenditures for geographically targeted programs (an improvement as previous studies only look at total expenditures or sub-categories of expenditures), and 3) it looks at smaller council governments than those in recent empirical studies; this might be relevant for reconciling current results as Primo and Snyder (2008) show that a sufficiently large legislature might lead to a reverse  law of 1/n.

In order to look at the exogenous change in the population formula allocating council seats it is necessary to go back as far as 1998; so far data has been collected for the period 2006-2014 and the information for the remaining years is expected to be collected in two months.  Meanwhile, preliminary results indicate a negative council effect of at least 23 percentage points fewer per capita total expenditures between municipal councils with seven and those with five seats. The effect is stronger for spending on services than on fixed assets, consistent with the notion that larger councils might help monitor the government.



Bank Resolution and Organizational Forms
Enmanuel CEDENO-BREA
European Doctorate in Law and Economics


In the ongoing debates on bank structural reform it has been argued that the functional separation of banking activities could enhance or facilitate resolvability avoiding wider disruptions to the overall economy. This paper raises questions on whether a better understanding of bank legal forms could also provide some insights for avoiding taxpayer backed bank bailouts. Does bank organizational form have any incidence on how commercial banks fare during events of financial instability? Put differently, could the legal structure of commercial banks have an incidence on their resolvability in the event of failure or increase the likelihood of their operations as a going concern?

This article asks if and how the inherent incentive structures that bank organizational forms exhibit can promote the safety and soundness of the financial system by helping minimize the likelihood or the adverse effects of bank failures. In particular, it seeks to explain the linkage between the incentive structures created by bank organizational form and some crisis management measures and policies, including: bank resolution regimes, bail-in rules, liquidity provision and lender of last resort and deposit protection insurance schemes. The chapter argues that beyond ring-fencing and other types of existing structural reform proposal, a better understanding of legal forms could improve bank resolvability, while promoting the operational continuity of critical services for depositors during episodes of financial distress.



Governance Mechanism in the Dairy Supply Chains in Mongolia
Tuvshinjargal DAGIIMAA
Institute of Finance and Economics, Mongolia


The agri-food supply chains of former central planned countries during the transition collapsed, so that caused the breakdown of relationship of local farmers with input suppliers and output markets. These outcome were worsened by the absent of appropriate public institutions such as for enforcing property right and contractual agreements and consequently hold-up problems are widespread. However, as a good experience in CEECs, the restructuring agri-food chains typically from foreign-owned agribusiness companies has initiated private institutional innovations. Specifically, due to the innovations the processor offers the supplier assistance programs including credit, extension services and inputs to the farmers delivering to them in return for guaranteed and quality supplies as like hybrid governance form, in particular, reciprocal trading arrangements defined by Oliver Williamson (1985).  

For Mongolian dairy processing industry which this paper considered its governance arrangements on supply chains, it also felt due to the transition but from the late of 2000s has been increasing rapidly apart from in following domestic investment, the preferential credit of the government of Mongolia. Along the dairy chain all processing companies interviewed not only take supply from farms by the contractual arrangement, but this also is a change in governance mechanism that responding to increased competition and the capacity of production it is shifting from spot market to contractual arrangements with supplier assistance programs through extension services and access to inputs. But the provisions of inputs and credit programs are infrequently offered to the farmers. Instead, few farmers could have received the preferential loans of government and consequently only their production increased, but most of local farmers still have been credit rations and face to financial constraints on investment. In other word, even though dairy processing capacity has been increasing by government’s support, the former farmers could not have experienced beneficial effects on output and productivity as participating on the restructuring dairy chain. Looking forward, Mongolia faces the equity challenge that these farmers be excluded from the chain as increasing market competition and quality requirements. 



E-commerce Expands the Bandwidth of Entrepreneurship:
Evidence from China
Ruochen DAI, Xiaobo Zhang
Peking University


As a new born virtual market in the information age, e-commerce platform such as Taobao.com grows super rapidly over the world, especially in China. However, there is little studies on how it affects the real economy due to the lack of data. Based on a unique primary collected data in Baigou, one of the most famous “E-commerce Towns”, we find and describe rigorously that e-commerce can significantly lower the transaction cost both in upstream and downstream, which contributes to a largely expanding of the entrepreneurship’s bandwidth. Particularly, we find that this effect is much more significant for outsiders with little network benefit to enter the industry. With the help of e-commerce, outsiders can run the business as well as insiders do in online business, which is totally reverse from traditional wholesale business.

Except the intensive growth, we also test the extensive growth of investment from outsiders thanks to the emerging of e-commerce using a distinctive database of e-commerce merchant index from Alibaba Inc. combined with another extraordinary firm-level database which can be aggregated to get the amount of new investment from outsiders and insiders each county each year from State Administration of Industry and Commerce (SAIC). We find that the extensive effect is significant positive for only private firms since e-commerce booms, but not significant for State Owned Enterprises (SOE) and foreign firms. Moreover, we find that there is positive correlation only between the private firms invested by outsiders with e-commerce index, but not significant between the private firms invested by insiders and e-commerce index. We believe that the three-dimensional placebo test can infer a causal relationship.



Turnover Costs in the Postbellum South
Guilherme DE OLIVEIRA
University of Amsterdam

This paper analyzes the role of turnover costs in agriculture in the distribution of sharecroppers in the US South after the American Civil War/Reconstruction period (1861-1877). I follow Hanes (1996) and define turnover costs as “an employer's costs of searching for a new worker, going without labor in the meantime, and providing a new hire with firm-specific skills”.

Economics literature and historiography repeatedly underline the importance of turnover in Postbellum South. More specifically, sharecropping aimed to minimize turnover costs, since slavery, the previous solution, was abolished in 1865.
However, to my knowledge, no econometric analysis has verified such claims. Moreover, the literature worries about labor availability without attending to technological heterogeneity across agriculture crops, failing to explain the wide spatial variations in sharecropping. For instance, some crops have narrower harvesting periods.

Therefore, uncovering these details contributes to the literature on the economic origins of labor institutions. It also sheds new light on the use and persistence of sharecropping contracts in farming.

The empirical strategy runs on panel-data referring to the period 1880-1950 but with different geographical units. In order to study the origins of sharecropping, I run county-level regressions explaining the number of sharecroppers. Variables range from demographic data to historical climate data, from census to archival data.
On the one hand, I find evidence supporting the turnover cost theory in crops’ technology. On the other hand, I find no support for it in the availability of labor force. These results support the idea that one must distinguish technology and labor in the turnover cost theory. In addition, the empirical analysis points to sharecropping as mostly a result of the lack of alternatives for the labor force, not of difficulties from the landlords.



Institutions and Political Conflict: Evidence from Restoration England
Kara DIMITRUK
University of California - Irvine

Why does a special interest legislation fail or succeed in the legislative process? English Parliaments in the Restoration Era, sitting from 1660-1681, saw a highly variable success rate of a special interest bill, property rights legislation. This paper examines the factors influencing the success or failure of property rights bills in the parliamentary process. This legislation provided security for property rights in land and removed legal restrictions so that land could be used for productive purposes. The era also saw cooperation and conflict over government revenue, religion, and legal jurisdiction between the Crown and Parliament and between both Houses of Parliament.

Using a comprehensive dataset on legislation, I document and compare data on property rights bill history in three illustrative parliamentary sessions to debates on government revenue, religious bills, or legal cases. The data indicate the time Parliament allocated to legislate on the special interest legislation was affected by the three political factors. I then create proxies for the political variables to examine if bills are more likely to succeed in certain sessions for the entire era.  Findings show, on average, bills were more likely to succeed in sessions when Parliament and the Crown cooperated to grant revenue. More generally, the analysis provides insight to political economy of the era and to how political conflict and instability affects a legislature’s ability to pass economic reforms.



“Esau Hates Jacob”: The Politics of Religious Elite Communication in Israel
Michael FREEDMAN
Massachusetts Institute of Technology

In Israel, religious elites greatly influence government decisions, political attitudes, and vote choice. Yet, religious views in Israel are far from uniform, and religious elites hold diverse views on important political, national, and social issues. However, work that examines how religious elites formulate and express their nationalist and political ideologies remains limited. My dissertation project will explore two related questions. First, how do religious elites respond to political and military conflict? Second, to what extent are religious elites able to influence individual political behavior? The dissertation project argues that religious elites take advantage of the changing political opportunity structure provided by conflict to advance ideologically extreme positions that would ordinarily be rejected during times of non-conflict. Moreover, these communications during conflict are highly influential on people’s political behavior, whose effects remain even after conflict has abated.

To examine these arguments, I propose a combination of quantitative and qualitative methods including statistical text analysis methods that compare religious elite discourse in weekly Sabbath leaflets (Alonei Shabbat) before and after different periods of conflict, qualitative interviews with religious elites, and by conducting experimental surveys with the religious public in Israel. My preliminary results suggest that there is a significant increase in nationalist rhetoric during times of military conflict, and that during conflict nationalist rhetoric shifts from an emphasis on connection to the land to nationalist incitement towards the enemy. Overall, this dissertation project will contribute to better understanding the content and politics of religious communication in Israel and uncover an important micro-mechanism that embeds nationalist attitudes and conflict in religiously divided societies.



Marriage Regulation in Israel and Turkey:
The Interplay Between Institutional Dynamics and Public Preferences
Niva GOLAN-NADIR
University of Haifa


This doctoral research investigates: "Why do legal-institutional arrangements which are not responsive to public preferences remain largely unchallenged in Western Democracies?" while comparing long standing gaps between marriage regulation and public will in Israel and Turkey.

This realm of investigation is interesting theoretically and empirically, as the two countries represents very different policies, yet share similar institutional dynamics. More specifically, in Israel religious marriage is the only statutory option, despite a clear preference by a significant segment of the society to establish a civil marriage option, whereas in Turkey only civil marriage is statutory accepted, despite the fact that most Turks conducts complementary religious ceremonies. Theoretically, these two very different policies highlight a similar institutional dynamic, according to which legal-institutional arrangements which are not responsive to public preferences remain largely unchallenged by the population and therefore do not face pressures to modify. According to mainstream democratic theory, this represents an instance of democratic malfunctioning.

This research suggests that such a long time disparity between public will and institutional design is rooted in the ability of institutions in the two countries to employ micro-level tactics in order to provide cheap alternatives to direct societal protest, and avoid public pressure to modify their policies.

The theoretical framework offered here can be used in investigating other state policies, and extend beyond the cases of Turkey and Israel; Such approach shifts attention from internal processes within state institutions and traditional macro intra-institutional theories, towards evaluating the impact that state institutions exert on their surrounding environment in the micro level, in order to avoid pressures directed from society, and maintain their design and policies.



Electoral Rules and Quality of Politicians: An Empirical Investigation
Jaroslaw KANTOROWICZ
Erasmus University Rotterdam

A landmark publication by Persson and Tabellini (2003) on the effects of electoral systems triggered an avalanche of empirical work investigating the causal link between electoral regimes and various economic and political outcomes. A consensus seems to emerge that majoritarian systems lead to more targeted public spending (such as on road infrastructure), less rent-seeking activity and reduced turnout rate as compared to proportional systems (Persson and Tabellini 2003, Kunicova and Rose-Ackerman 2005, Eger 2014). Little attention in the literature is given, however, to the question whether electoral systems determine political selection or more precisely quality of representatives. It is an unfortunate omission given that leaders' educational attainment is important for economic growth (Besley et al. 2011).

Two recent working papers, Beath et al. (2014) as well as Galasso and Nannicini (2015), attempt to tackle this question. To some extent, however, they offer contradicting theories and predictions. On one hand, Galasso and Nannicini (2015) argue that majoritarian systems with sufficiently large share of competitive districts dominate proportional systems in selecting high quality candidates. On the other hand, Beath et al. (2014) demonstrate that in district elections voters prefer candidates with more extreme policy preferences over more competent candidates as they are better positioned to bargain with candidates elected from other districts. Conversely, as strategic intra-district considerations are less pronounced in at-large elections, voters in these systems are more willing to elect competent candidates.

I offer to test empirically these two theories by employing a very compelling dataset from Poland. In years 1998-2014, at the municipal level in Poland two electoral regimes were applied depending on the size of the municipalities. Namely, the municipalities with the population size up to 20,000 inhabitants were subject to majoritarian elections (small districts and plurality vote), and reversely municipalities with the population above 20,000 inhabitants were imposed proportional regimes (at-large elections and proportional formula). This setting constitutes a unique natural experiment to test which types of representatives (competent or loyal) are favoured by these two distinct electoral regimes. A sharp regression discontinuity design is a common tool for inferring the causality in this type of settings.



Opening the Doors to Open Data
Yosef KEREN-ABRAHAM
Ben-Gurion University of the Negev


What mechanisms should be in place to allow the public to access government data?  How can the free flow of government data be ensured? And what can be done to increase the scope of the data available and maximize information flow?  These questions are at the heart of the discourse concerning government transparency reform.

The following analysis explores how government transparency may be maximized, specifically with regards to the sharing of open data (OD) – that is, data produced with public funds and made freely available to the public.
Current OD policy relies on three assumptions: the first, that politicians will agree to relinquish control over some information; the second, that government agencies will collect, process and ultimately release public data; and the third, that citizens and other entities will access and use this data. 

Critics of this policy proclaim that the evidence does not support these assumptions, and that they should be amended if government data is to flow more freely. According to this argument, decisions made by government agencies regarding what and when information is shared, as well its scope and format, influences the costs of using the information, and, in extreme but common cases, may prevent citizens, corporations, and other private and public entities from using it at all.

Some critics have proposed the establishment of a "Public Sector Information Exchange" – a mechanism which facilitates the distribution and dissemination of government information by incentivizing government agencies to release data. Such a proposal entails various changes to the institutional framework underlying government transparency policy generally, and OD policy specifically.  For instance, it would lead to the formation of property rights over government data, as well as change the transaction costs affiliated with the use of OD. Moreover, it may have far-reaching implications for the political transactions between politicians, bureaucrats, and interest groups.

Relying on property right and the transaction cost theory, and adopting Weingasts (2005) approach of deriving analytical principles from both historical and rational choice institutionalism, this work explores the various proposals for change to current OD policy by analyzing their implications for the US OD initiative.



De Iure and De Facto Labor Market Rules
Jacek LEWKOWICZ
University of Warsaw

This project is dedicated to labor market rules analysis using economic apparatus. The main research question is how formal (de iure) rules present on labor market interact with informal rules (de facto). Are these rules complementary or is there a crowding-out effect between de iure and de facto institutions? It is closely linked with the issue of making legal rules effective, as long as institutions influence strongly both employers and employees.

Informal institutions present on labor market express stable patterns of behavior that evolved over years and existing literature confirms their impact on relationships between employees, employers and the government. These rules may be brought about in many ways (market-driven institutions). De iure rules are imposed usually in order to guarantee the most important laws (their quality and repeatability) and to execute some ministerial policy. The question is if formal rules are really essential for informal rules enforcement. Another thing is if de iure rules (formal standards organization) are in line with de facto institutions and do they exert an influence on labor market condition.

The theoretical part of the project is inspired by regulatory economics and the theory on the production of norms. Theoretical underpinnings will also contain institutional economics and game theory tools. The empirical study will be conducted in order to verify research hypotheses, using panel data on Polish labor market after 1989. It will apply simultaneous systems estimations technique.

The results obtained within the project could deliver valuable outcome both in theoretical and practical context, aiming in particular at providing conclusions about mutual relationships between de iure and de facto labor market rules at the national level for Poland. This original scientific research serves to acquire new knowledge and it will contribute to development of institutional approaches within economics and law. Additionally, the results of the research may serve as the basis for formulation labor market policy.



Judicial Reform as Political Stabilizer:
Evidence from China’s Quasi-Natural Experiment
Zeren LI
Hong Kong University of Science and Technology


Why do authoritarian leaders launch partial judicial reform? In this article, I provide a political stabilizer explanation, in that limited judicial reform allows the malcontent citizens to voice their concerns through the legalized channel, thereby reducing their proclivities to take their disgruntlements to the streets. My argument is based on the result of a triple difference analysis (DDD) applied over the rotation of chief judges that occurred in only 14 out of 31 provinces in China in 2007. In the treated provinces, the number of administrative lawsuits decided by the court—a proxy for legitimatized resistance, was nearly 20% more than that in the control group. Additionally, approval of the administrative lawsuits are 95% higher in those treated provinces where the new chief judge had previously served in the supreme people’s court, than in those where the chief judge is merely rotated from other provincial judicial institutions. Regardless, since the launching of the job-rotation reform, social protests have been reduced by more than 80 cases per year. The Sobel-Goodman mediation test further indicates that the effect of the legitimatized resistance approach accounts for about 63% of the judicial reform’s total effect on social protests. Together, these results suggest, perhaps ironically, that the court plays an unexpectedly important role in the survival of an authoritarian regime.


Entrepreneurship or Necessity?
Self-Employment and Economic Development in Developing Countries
Lulu LIU
University of Pittsburgh


One of the most commonly used measures of entrepreneurship is the self-employment rate. Most programs striving to enhance entrepreneurship are aimed at raising the share of the workforce owning their own businesses. A self-employed worker can be an entrepreneur exploiting new opportunities and improving products. However, self-employment can also be a last resort for those who grasp for survival when regular jobs become scarce or pay poorly.

In this paper, I answer two questions: What is the nature of self-employment, a sign of entrepreneurship or necessity? What is the relationship between self-employment and economic conditions? I use China as a laboratory, and separate self-employment into two types based on whether they have paid employees – self-employed own-account workers and self-employed owner-managers. I found that own-account workers are more likely to choose self-employment as a last resort, while owner-managers are more likely to be true entrepreneurs. I compare individuals who transit from wage earners to self-employers with those who remain in the wage sector. I document that new own-account workers were unsuccessful wage earners, and their earnings decrease after the transition into self-employment. For new owner-managers, their original salary is comparable to the remaining wage earners, and their income as entrepreneurs is much higher.

I further show that the propensities to become different types of self-employers are affected differently by institutions. The job perspectives in the wage sector and the coverage of social safety net greatly influence the decision to become own-account workers. The access to finance and legal support have more impact on owner-managers.

Finally, I examine the effect of these two different kinds of self-employment on economic growth by running growth regressions. My preliminary empirical results suggest that, in urban China, both types of self-employed individuals are positively related to growth, though the effect of own-account workers is much smaller than that of owner-managers.



Health Penalty of Urbanization in China
Jia MIAO
Hong Kong University of Science and Technology

This study investigates the impacts of urbanization, one of the most important socioeconomic changes in China, on health of Chinese adults. Using nine waves of the China Health and Nutrition Survey spanning 22 years (1989-2011), the study examines the confounding effects of rapid urbanization on non-communicable disease incidence and tests the mechanisms. Results from hierarchical generalized linear models show that, there is health penalty of urbanization in China, and people with high income are at higher risk of health decline; lifestyle is the pathway through which urbanization affects health, and a high-fat diet and decreased physical activity increase health risks in more urbanized areas. Urbanization in China is characterized by strong party-state intervention. It is driven by the government for tax revenue in many circumstances. The study illustrates that it is important to consider the role of institutional factors in shaping population health.



Impact of Community Institutions on Migration and Private Transfers
Atul NEPAL
University of Illinois – Urbana Champaign


Poverty alleviation fund (PAF) is community driven development program, established to empower poor and marginalized communities in rural Nepal.  One of the aims of this program is to promote the welfare of individuals in rural and marginalized communities, which have been excluded from public service due to gender, caste, ethnicity, and location. PAF sets up social institutions (community organizations) consisting of 20 to 30 households to create social cohesion and cooperation for economic wellbeing in such communities. The program is placed in communities, which have weak social environment with poor track record of public service delivery. PAF utilizes the actors in community to identify livelihood and income generating activities with faster delivery of results to individuals. PAF also facilitates the formation of community organizations within a village with the help of local non-governmental organizations. The community organizations submit proposal for feasible income generating activities to be implemented by the community members. Community organizations have the right to self-govern the repayment and reinvestments of loans within the organization.

This paper investigates the causal impact of community institution with focus on income-generating activities on remittances and migration using panel data from the poverty alleviation fund program in Nepal. The unique dataset from a randomized design provides an ideal setting to understand the causal effects of rural social institutional development program on remittances and migration, which is on increasing trend. Findings from this paper can help to understand the role of community-driven development programs on issues of migration and remittances, which are distinct from the primary goals of the program: alleviating poverty and improving food security in marginalized and poor communities. Unlike previous research which has used conditional cash transfer programs (CCTs), I employ the data from the community driven development program to understand the effect on migration and private transfers. The preliminary results show a decrease of approximately Rs.6000 in remittances received. The paper shows an increase in domestic migration, but no change in international migration due to the implementation of PAF program.



(Anti) Competitive Effects of Vertical Mergers in the Light of TCE:
Comparative Study of the European and US Approaches:
TomTom/TeleAtlas  and  News Corp./DirectTV
Ana ODOROVIC
University of Belgrade

Transaction costs economics, with the early work of Coase (1937) and Williamson (1971, 1975 and 1979) has significantly broadened our comprehension of boundaries between firms, emphasizing that vertical integration is more likely to occur as the complexity and uncertainty of transaction and asset specificity increase. Since vertical merger eliminates the costs of market exchanges, greater social welfare may arise as a consequence. Even though institutional economics has offered an efficiency-enhancing explanation of vertical mergers, neoclassical approach still remains predominant analytical tool of competition authorities in many countries when they derive conclusions on whether a firm’s behavior is to be deemed anticompetitive, i.e. whether a vertical merger leads to downstream or upstream market foreclosure, raises rival costs or facilitates collusion.

The aim of this paper is to discuss the application of the TCE reasoning by competition authorities in assessing (anti)competitive effects of vertical mergers. In this regard, the relationship between transaction costs theory and alternative theories of vertical integration is considered, with a special emphasis on the ability to raise defense of vertical integration based on economizing of transaction costs, when anticompetitive purpose or effects of a merger have been previously established. Moreover, transaction costs theory may be used as a methodological framework for the analysis of other efficiencies that serve as a defense of vertical integration, for every sort of efficiency that emerges as a result of vertical integration may be analyzed in the light of inefficient contracting.

The issue in question is explored on the basis of comparative study of two competition cases dealt with by the European Commission and the U.S. Federal Communications Commission: TomTom/TeleAtlas (Case No COMP/M.4854) and News Corp./DirectTV (FCC 03- 330).



Partisanship and Personalization in Multi-Party Polities with Strong Leaders
Sergey SANOVICH
New York University


In many countries citizens are assumed to be incapable or unwilling to track party platforms, politician’s ideology or position on issues. Instead, they form their preferences exclusively based on the personality of political leaders, which in that particular case is usually called “charisma”. However, as Fish (2005, 230) notes with respect to Russia – the very model of such country – “... no one has demonstrated the veracity of this claim in comparative perspective. None has ever shown that Russians care more about faces and less about principles than do American or French or Indonesian voters”. In my dissertation I intend to use innovative cueing survey experiments, developed by Brader and Tucker (2012), to rigorously evaluate the personalization of politics hypothesis.

My motivation comes from a puzzling result of Brader and Tucker (2009), who were able to find substantial cueing capacity of Russian political parties on various policy issues despite scholarly consensus that political parties in Russia were never strong and under Putin their influence has further declined. My hypothesis is that leaders associated with these parties are the driving force behind the measured cueing effects. In order to distinguish between effects of leadership attachments and partisan identification, in my baseline experiments I simply modify Tucker and Brader’s experiments to include an additional treatment group, which receives the same policy cue from leaders rather than parties. The results of this experiment could provide an updated and reliable estimation of the level of partisanship, as well as clarify the policy implications of sky-high approval rating of current political leadership in Russia.

In the second and third experiments I further modify the experiments to take into account some specific characteristics of Russian political regime. In the second experiment I aim to determine whether the cueing capacity of Russian top political leaders comes from their association with ruling political party or from their executive government position. In the third experiment I aim to investigate the strategic interaction between the country political leadership and the ruling party, specifically efforts to control agenda by sending conflicting cues to the voters.

To make my empirical analysis more rigorous I intend to go beyond simple difference- in-means and employ the explicit spatial model of ideal point estimation for endorsement experiments, recently developed by Kosuke Imai and co-authors (Bullock, Imai, and Shapiro 2011). I also intend to broaden focus of my research to established democracies, where mediatization of electoral campaigns, prezidentialization of decision-making and party decline (Dalton and Wattenberg 2002) also lead to elections and politics increasingly organized around leaders rather than parties they are supposed to represent.



Plural Forms: A Variety of Organizational Arrangements
Paula Sarita Bigio SCHNAIDER
University of São Paulo


In recent years, a lot of effort has been put into understanding the motivations pushing towards the consideration and examination of plural forms in a wide range of transactions within organizations (Parmigiani, 2007; Krzeminska, 2008, 2013; Menard, 2013, 2014). Very little, however, has been specifically said about the composition and the diversity (the variety of combinations of organizational arrangements) of plural forms. Therefore, in this theoretical paper, we intend to shed some light on this variety and determine what explains it. In order to keep our argumentation tractable, we group the variety of organizational arrangements into three subsets, i.e., those involving different classes of organizational arrangements (make-and-buy, make-and-ally, buy-and-ally, make-buy-and-ally), those addressing multiple categories of hybrid arrangements (ally-and-ally), and finally, those dealing with a combination of the two groups mentioned above (make-ally-and-ally, buy-ally-and-ally, make-buy, ally-and-ally).

In order to explain the existence of these diversified combinations, we first take a step back and build a theoretical model to predict when plural forms should or should not be observed. In doing so, we follow Parmigiani (2007), Krzeminska (2008) and Menard (2013, 2014) to propose an integrative model of asset specificity and uncertainty to predict plural forms and their variety. This is an interesting perspective because it pushes Williamson’s (1991) framework further by digging deeper into the interactions between these two variables. This allows for predictions for both plural and non-plural forms. Next, given the predictions shown in our model, we build some theoretical hypotheses to clarify the variety of plural forms. In particular, we associate multiple types of uncertainties (namely, market, technological and performance assessment) to the three sets of plural forms previously defined, keeping constant the degree of asset specificity. Our hypotheses predict the circumstances under which each type of plural forms should emerge and be efficient; and therefore, they might assist decision-makers in deciding what combination of organizational arrangements better suits the conditions under which they operate. Because the paper remains strictly theoretical, we conclude it with said hypotheses.



The Case for Managerial Signaling in Adjudicating Hostile Takeovers
Nitzan SHILON
Peking University


In this paper, I put forward a new regime to strengthen efficiency, fairness and clarity in adjudicating hostile takeovers in Delaware. Under my proposed reform, target companies who want to fend off unsolicited takeover bids by articulating a cognizable “substantive coercion” threat to corporate effectiveness and policy, will have to credibly signal their beliefs against the bid. In particular, they will be encouraged to commit that if the bid fails they will purchase, and hold for a specified time, a certain amount of at-the-bidprice target’s stock. Once incumbents communicate their credible signal against the bid, courts will allow them to use proportionate defensive tactics, including a “poison pill”, to fend off the unsolicited bidder.

From an institutional standpoint, my proposal differs greatly from a proposal made by Harvard Professor Lucian Bebchuk. Bebchuk proposal encourages managers to signal their beliefs to their shareholders, and allocates the power to decide takeovers solely with the shareholders. My proposal does not aim to assist shareholders to decide whether to accept an unsolicited bid. Instead, it lets courts decide on the matter and aims to assist them in adjudicating “substantive coercion”. I prefer such institutional approach for several reasons. First, even if it is possible to develop a formula for credible signaling, some one or some body needs to enter the values for the variables so the formula can establish a credible signal in specific cases. Given the inherent conflict of interest between managers and shareholders and given shareholders’ lack of information and expertise, only courts can play this role. Second, even if shareholders had enough information or expertise to decide whether managerial signal was credible, arbitrageurs, who seek quick short-term profits, could dominate the target’s shareholders and distort their choice. Finally, should courts not allow incumbents to fend off the bidder under my proposed scheme, management willingness to signal at a certain level or lack thereof would aid shareholders to decide whether to accept the bid.



Yardstick Competition and Performance:
An Empirical Analysis of Electricity Networks in Norway and Sweden

Jonas Teusch
Université de Liège & Université Catholique de Louvain

Does yardstick comp etition increase the performance of electricity network operators? Even though there is no direct competition among electricity network operators—as networks operation is a natural monopoly—firms are nevertheless in indirect (yardstick) competition with one another. This is most obvious when a regulatory authority makes a firm's revenue the function of similar firms' costs (Shleifer, 1985). But even in the absence of such formalized comparisons, firms may face competitive pressures if consumers or regulators can observe other firms that provide a comparable service under similar conditions (Wallsten and Kosec, 2006).

As the quality and cost of electricity supply is critical for virtually every activity in the modern economy, understanding whether yardstick competition yields tangible benefits is an important research question. Nevertheless, although theoretical literature does exist on the topic (Auriol and Laffont, 1992; Tangeras, 2002), there is little empirical work analyzing the impact of yardstick competition on the performance of electricity network operators. In particular, the relative importance of formal versus informal channels of competition has not yet been subject to rigorous empirical scrutiny.

Two ten-year panel datasets from Norway and Sweden allow me to estimate high-quality performance measures for electricity distribution companies. Based on this data, I can test the impact of yardstick competition on performance; controlling for ownership, urbanization, operator size and the composition of the electricity mix, among other aspects. Changing regulatory regimes and a large number of mergers ensure significant variation in the degree of yardstick competition across time and space. I hypothesize that greater yardstick competition is associated with better performance. In addition, I test whether yardstick competition is more effective when based on formalized comparisons using state-of-the-art benchmarking techniques—as opposed to informal comparisons made by consumers and/or regulators.


Negative Revenue Shocks, Diversification, and Economic Development
Delgerjargal UVSH
University of Wisconsin - Madison


What is the effect of natural resources on economic development? Although the relationship between resource endowment and development has been studied extensively, the current political science literature focuses primarily on one aspect of resource dependence -- what happens when countries get a positive revenue shock in form of natural resource windfall income. By comparison, we know little about how political and economic actors deal with negative revenue shocks, which are an integral part of resource dependence given the volatile nature of commodity prices. This dissertation aims to shed light on this gap. It focuses on the strategies adopted by governments to respond to these negative shocks and asks why and under what conditions some governments take these crises as an opportunity to diversify their revenue basis, while others do not.

I answer this question through two broad sets of analyses. First, I conduct cross-national analysis based on a theoretical framework that draws on the theory of commodity volatility, the political and institutional theory of resource dependence, and the literature on economic reforms. I test the validity of the hypotheses generated under this framework using a newly available panel dataset on the composition of government revenues between 1970 and 2010. Second, I focus on Russia as an illustrative case. I examine whether and how Russia's tax reform in 2002 incentivized its resource-dependent regions to promote diversification and improve the business environment, as this reform shifted resource revenue collection and allocation from regional governments to the federal government. My quantitative analysis of firm and subnational level data will be supplemented by case studies of four Russian regions with varying degrees of resource reliance.



Becoming Local:
The Determinants of Demand for Local-Urban Status in Beijing

Sam A. VORTHERMS
University of Wisconsin - Madison


The Chinese household registration system, hukou, is the structure through which individuals receive government-provided welfare goods and services. The type of services one is entitled to and the location of service provision are dependent on one's hukou status, which leaves internal migrant and rural populations outside of urban welfare systems. While a necessary institution during the planned economy, the hukou system has outlasted its utility and is currently an area of reform pushed by the central government. In an attempt to alleviate the unequal access to government services created by the system, the central government called for reform to the system, encouraging the removal of the distinction between urban and rural status in service provision and encouraging the integration of rural and non-local populations into the local welfare services system. The success of these reform strategies depends in part on the demand for reform from those currently left out of the welfare system. In recent years a few scholars and the media provided anecdotal evidence of both high demand for reform with millions integrating into the urban areas as well as many resisting reform, creating a complicated picture of demand.

This research seeks to understand what drives demand for reform to the hukou system of migrant and rural populations by examining the determinants of willingness to pay (WTP) for local urban hukou status, which is driven in part by the value of local urban status and the value of the status individuals must give up to obtain it. This research seeks to understand individuals' WTP for local urban status through a contingent valuation of a hypothetical market situation for hukou with an experiment to evaluate the impact of land rights on WTP as well as the trade-off between wages and status transfer in a choice experiment. Data presented in this analysis are from an original pilot survey implemented in December 2014 - January 2015.



Accountability of Primary Education in China and India:
A Probe into Stakeholder Incentives
Bria Yifei Yan
National University of Singapore

What are the impacts of accountability mechanisms, from school-based management to teacher management, on primary education outcomes at sub-state level in China and India?

While more comparative works is being done to better understand economic performance of the two emerging powers, their social development remains under-compared. Most comparison presents a gross national picture that under-presents local nuance. The primary education sector is especially interesting. While the two countries share several similarities from chronic state under-investment to great regional diversity, discrepancy in student performance even between India’s advanced states and China’s advanced provinces deserves further investigation. Compared to input-side explanations, governance of education, i.e. how fiscal, physical and human resources are managed, seems to play a greater role. It is thus both interesting and urgent to scrutinize not only what works, but also why.

In this research, education outcomes are measured by intermediate variables. I hypothesize that schools with more established accountability mechanisms will, among others, have higher teacher satisfaction rates, transition rates and lower drop-out rates. To test the hypotheses, various aspects of accountability mechanisms will be asked through school and teacher surveys in districts of Beijing and Delhi. Principal Component Analysis will be done to condense the information received. After a baseline regression to see which accountability mechanisms matter most for intermediate outcomes, a number of schools will be zoomed in to conduct process tracing to establish the causal chain, if any, between accountability mechanisms and educational outcomes through stakeholder incentives.



Education and Employment Outcomes of Roma Children and Youth
Tomas Zelinsky
Technical University of Kosice


Are there differences in education and employment outcomes among Roma children/youth living in different environments?

It is estimated that 8% of the Slovak population are Roma, which makes them one of the largest ethnic minorities in Slovakia. Around 40% of them are marginalized, and most of them face high rates of poverty and material deprivation, low level of education, high level of long-term unemployment, and other disadvantages.

Anecdotal evidence suggests that different social environments are associated with different education and employment outcomes of poor Roma people. So far no study aimed at investigating that assumption has been performed in Slovakia, and no conclusions can be accepted.

The first stage of this study is aimed at comparing education outcomes of children/youth from different environments. Survey data from the following samples will be used: Roma children and youth living in segregated settlements, Roma children and youth integrated with majority, Roma children and youth living in orphanages, non-Roma children and youth living in “poorer” and “richer” regions, and non-Roma children and youth living in orphanages.

We expect that social environment is one of the significant factors of human development and can to a great extent influence people’s education and employment outcomes. Such a finding would serve as one of the indications that segregation negatively affects people’s lives, and thus to break the negative stereotype of Roma people.



Does Financial Regulation Matter?
The Case of the US 1933/1934 Securities and Exchange Acts
Zengyuan Sun and Bo Zhao
University of Hong Kong


The Securities and Exchange Acts of 1933/1934 are the first nationwide public laws of financial regulation in the world. These laws are implemented with the aims of making information disclosure mandatory and market manipulation illegal. Subsequent financial regulations all over the world follow the principles embedded in these two laws. However, 80 years later, the effects of these laws on financial markets are still under debate and continue to have deep implications on law and financial development at a global scale. Stigler (1964), Benston (1973), Simon (1989) find that the laws are at best ineffective in the aspects of increasing stock returns. Daines and Jones (2005), Mahoney and Mei (2006) discover minimal evidence proving that the laws improve the market by reducing information asymmetry. Greenstone et al. (2006) find that mandatory disclosure requirements in the 1964 Securities Acts Amendments improve OTC firms' returns, but their positive effects on exchange listed firms have yet to be directly proven.

In this study we examine the impact of the 1934 Act in reducing stock idiosyncratic volatility. Monthly firm-level idiosyncratic volatility series for NYSE/AMEX listed firms in the period of 1926 - 1970 are constructed from daily CRSP stock data; voluntary disclosed accounting data from Moody's Manual of Investments 1934 are manually collected as a proxy of firms' disclosure quality before the law. The comparison of the firm-level idiosyncratic volatilities before and after the enactment of the Acts show systematic evidence indicating that the Acts significantly reduce idiosyncratic volatility. Moreover, the firms that disclose much less the key accounting information before the implementation of the Acts, have experienced more reductions in volatility and are thus more deeply affected by the Acts than others. In addition, these firms are associated with further reductions in bid-ask spreads and additional improvements in liquidity after the enactment of the Acts. Our findings suggest that one of the mechanisms, through which the Acts affect the market, have been identified.

Note: This paper is a part of the TRS project led by Chenggang Xu. Sheng Li has made substantial comments and suggestions in every major step of the research project. Financial support from RGC TRS Project (T31-717 112-R) is acknowledged.


 
Abstracts
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|2004 Tucson |2005 Barcelona |2006 Boulder |2007 Reykjavik |2008 Singapore|
|2008 Philippines |2008 Beijing |2009 Bratislava |2009 Xiamen |2010 Moscow|
|2010 Shanghai |2011 Chicago |2012 Beijing |2012 Santiago |2013 Xiamen|
|2014 Manila |2015 Hong Kong |2015 Tel Aviv |2016 Tallinn |2017 Xiamen|




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