Friday, February 26th, 2016

Carl Lin – Lin, Carl. “How Do Immigrants from Taiwan Fare in the U.S. Labor Market?” The Singapore Economic Review (2015).

Carl Lin, Assistant Professor of Economics

This paper presents evidence that since 1980, relative to native-born Americans and other immigrants, the earnings of Taiwanese immigrants have grown rapidly as they assimilate into the U.S. economy. Consistent with the existing U.S. evidence, I show that most of the immigrant–native earnings gaps can be explained by endowments, and the importance of endowments continues to increase. The estimates indicate that the improved endowments from education and U.S. experience, along with rising returns to both factors, largely explain Taiwanese immigrants’ economic assimilation experience. I show that more recently arrival cohorts of Taiwanese immigrants have earned more than the older ones since 1980.

Lin, Carl. “How Do Immigrants from Taiwan Fare in the U.S. Labor Market?” The Singapore Economic Review (2015).

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Friday, February 26th, 2016

Winston H. Griffith – Griffith, Winston H. “Devaluation as a Policy Instrument for Caricom Countries.” Journal of Economic Issues 49, no. 3 (2015) : 711-729.

Winston H. Griffith, Professor of Economics

Caribbean Community (Caricom) governments are being urged to devalue their currencies in order to correct their balance of trade deficits and stimulate the industrial sector. This advice rests on the assumptions that the sum of the elasticities of demand and supply in Caricom countries is greater than one, that free trade prevails, and that the pass-through effects following the devaluation are complete. However, useful as the theory of devaluation may be for the industrial countries where it was developed, it is not necessarily an effective policy instrument within the context of most less developed countries because, in addition to other things, it ignores their colonial social and economic structures. I hypothesize that the colonial social and economic structures, which have persisted into the period of their political independence, help to render devaluation an ineffective policy instrument for Caricom countries.

Griffith, Winston H. “Devaluation as a Policy Instrument for Caricom Countries.” Journal of Economic Issues 49, no. 3 (2015) : 711-729.

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Friday, February 26th, 2016

Joaquin Gomez-Minambres – Gomez-Minambres, Joaquin. “Temptation, Horizontal Differentiation and Monopoly Pricing.”Theory and Decision 78, no. 4 (2015) : 549-573.

Joaquin Gomez-Minambres, Assistant Professor of Economics

We study the implications for monopoly pricing strategies and product diversity of consumers’ temptation when the differentiation of the product is horizontal. Consumers have an ex-ante ideal product (“commitment preferences”), but they and the monopolist are aware that consumers may fall prey to “temptation preferences” ex-post with some probability. Our results indicate that when consumers are aware of their dynamic change in preferences, the firm cannot take advantage of consumers’ temptation but instead, in order to attract them into the store, the firm must compensate ex-ante consumers for the possibility of yielding to temptation once inside the store. As a result, this paper shows that the firm narrows the variety of products, not offering those products close to temptation preferences. Moreover, it is shown that product prices and firm’s profits decrease with the probability of temptation and with the consumers’ awareness of their dynamic inconsistency.

Gomez-Minambres, Joaquin. “Temptation, Horizontal Differentiation and Monopoly Pricing.”Theory and Decision 78, no. 4 (2015) : 549-573.

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Friday, February 26th, 2016

Joaquin Gomez-Minambres – Corgnet, Brice; Gomez-Minambres, Joaquin; and Hernan-Gonzalez, Roberto. “Goal Setting and Monetary Incentives: When Large Stakes Are Not Enough.” Management Science 61, no. 12 (2015) : 2926-2944.

Joaquin Gomez-Minambres, Assistant Professor of Economics

The aim of this paper is to test the effectiveness of wage-irrelevant goal-setting policies in a laboratory environment. In our design, managers can assign a goal to their workers by setting a certain level of performance on the work task. We establish our theoretical conjectures by developing a model in which assigned goals act as reference points to workers’ intrinsic motivation. Consistent with our model, we find that managers set goals that are challenging but attainable for a worker of average ability. Workers respond to these goals by increasing effort and performance and by decreasing on-the-job leisure activities with respect to the no-goal-setting baseline. Finally, we study the interaction between goal setting and monetary rewards and find, in line with our theoretical model, that goal setting is most effective when monetary incentives are strong. These results suggest that goal setting may produce intrinsic motivation and increase workers’ performance beyond what is achieved by using solely monetary incentives.

Corgnet, Brice; Gomez-Minambres, Joaquin; and Hernan-Gonzalez, Roberto. “Goal Setting and Monetary Incentives: When Large Stakes Are Not Enough.” Management Science 61, no. 12 (2015) : 2926-2944.

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Friday, February 26th, 2016

Erdogan Bakir – Bakir, Erdogan and Campbell, Al. “Is Over-investment the Cause of the Post-2007 US Economic Crisis?.” Review of Radical Political Economics 47, no. 4 (2015) : 550-557.

Erdogan Bakir, Associate Professor of Economics

A significant number of left political economists hold that the U.S. Great Recession and subsequent lethargic performance are a crisis of over-capacity that resulted from over-investment. Kotz (2011, 2013) has recently attempted to provide empirical support for this position. Despite sharing an understanding of the crisis very similar to his, the authors find in this paper that a careful examination of his evidence does not support considering this to be a crisis of over-investment.

Bakir, Erdogan and Campbell, Al. “Is Over-investment the Cause of the Post-2007 US Economic Crisis?.” Review of Radical Political Economics 47, no. 4 (2015) : 550-557.

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Friday, February 26th, 2016

Erdogan Bakir – Bakir, Erdogan. “Capital Accumulation, Profitability, and Crisis: Neoliberalism in the United States.” Review of Radical Political Economics 47, no. 3 (2015) : 389-411.

Erdogan Bakir, Associate Professor of Economics

This paper uses the rate of profit to address the issue of structural changes in class relationships and the process of capital accumulation that occurred under neoliberalism. I take a long-term class perspective and show that changing class relationships along with the financialization of the economy beginning in early 1980s progressively set the stage for the crisis of 2007-2009.

Bakir, Erdogan. “Capital Accumulation, Profitability, and Crisis: Neoliberalism in the United States.” Review of Radical Political Economics 47, no. 3 (2015) : 389-411.

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Friday, February 26th, 2016

Carl Lin – Fang, Tony and Lin, Carl. “Minimum Wages and Employment in China.” IZA Journal of Labor Policy 4, no. 22 (2015).

Carl Lin, Assistant Professor of Economics

Since China promulgated new minimum wage regulations in 2004, the frequency and magnitude of changes in minimum wages have been substantial. This paper uses county-level minimum wage data combined with urban household survey micro-dataset from 16 representative provinces as a merged county-level panel to estimate the employment effects of minimum wage changes in China over the 2002–2009 period. In contrast to the mixed results reported by previous studies using provincial-level data, we present evidence that minimum wage changes led to significant adverse effects on employment in the Eastern and Central regions of China, and resulted in disemployment for females, young adults, and low-skilled workers.

Fang, Tony and Lin, Carl. “Minimum Wages and Employment in China.” IZA Journal of Labor Policy 4, no. 22 (2015).

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Friday, February 26th, 2016

Christopher S. Magee – Magee, Christopher S. and Doces, John A. “Reconsidering Regime Type and Growth: Lies, Dictatorships, and Statistics.” International Studies Quarterly 59, no. 2 (2015) : 223-237.

Christopher S. Magee, Professor of Economics

Some recent papers have concluded that authoritarian regimes have faster economic growth than democracies. These supposed growth benefits of autocracies are estimated using data sets in which growth rates rely heavily on data reported by each government. Governments have incentives to exaggerate their economic growth figures, however, and authoritarian regimes may have fewer limitations than democracies on their ability to do so. This paper argues that growth data submitted to international agencies are overstated by authoritarian regimes compared to democracies. If true, it calls into question the estimated relationship between government type and economic growth found in the literature. To measure the degree to which each government’s official growth statistics are overstated, the economic growth rates reported in the World Bank’s World Development Indicators are compared to a new measure of economic growth based on satellite imaging of nighttime lights. This comparison reveals whether or not dictators exaggerate their true growth rates and by how much. Annual GDP growth rates are estimated to be overstated by 0.5-1.5 percentage points in the statistics that dictatorships report to the World Bank.

Magee, Christopher S. and Doces, John A. “Reconsidering Regime Type and Growth: Lies, Dictatorships, and Statistics.” International Studies Quarterly 59, no. 2 (2015) : 223-237.

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Friday, February 26th, 2016

Christopher S. Magee – Doces, John A. and Magee, Christopher S. “Trade and Democracy: A Factor-Based Approach.” International Interactions 41, no. 2 (2015) : 407-425.

Christopher S. Magee, Professor of Economics

We study the relationship between trade openness and democracy using a data set with capital-labor ratios, trade flows, and regime type for 142 countries between 1960 and 2007. We are among the first to test a prediction that emerges from the model of Acemoglu and Robinson (2006): Relative factor endowments determine whether trade promotes democracy or not. The statistical results from two-stage least squares estimation indicate that trade is positively associated with democracy among labor-abundant countries but that trade has a negative effect on democracy in capital-abundant countries. The results are not robust, however, and thus we conclude that the evidence in support of their argument is relatively weak.

Doces, John A. and Magee, Christopher S. “Trade and Democracy: A Factor-Based Approach.” International Interactions 41, no. 2 (2015) : 407-425.

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Friday, February 26th, 2016

Matias Vernengo – Vernengo, Matias. “From Restrained Golden Age to Creeping Platinum Age: A Periodization of Latin American Development in the Robinsonian Tradition = Da Idade do Ouro a Era Platinum Rastejante: Uma Periodização do Desenvolvimento Latino Americano na Tradição Robinsoniana.” Revista de Economia Política 35, no. 4 (2015) : 683-707.

Matias Vernengo, Professor of Economics

ABSTRACT This paper analyzes Joan Robinson’s growth model, and then adapted in order to provide an exploratory taxonomy of Growth Eras. The Growth Eras or Ages were for Robinson a way to provide logical connections among output growth, capital accumulation, the degree of thriftiness, the real wage and illustrate a catalogue of growth possibilities. This modified taxonomy follows the spirit of Robinson’s work, but it takes different theoretical approaches, which imply that some of her classifications do not fit perfectly the ones here suggested. Latin America has moved from a Golden Age in the 1950s and 1960s, to a Leaden Age in the 1980s, having two traverse periods, one in which the process of growth and industrialization accelerated in the late 1960s and early 1970s, which is here referred to as a Galloping Platinum Age, and one in which a process of deindustrialization, and reprimarization and maquilization of the productive structure took place, starting in the 1990s, which could be referred to as a Creeping Platinum Age.

Abstract: RESUMOEste artigo analisa o modelo de crescimento de Joan Robinson, aqui adaptado a fim de fornecer uma taxonomia exploratória de Eras de Crescimento. Essas Eras ou Anos de Crescimento foram para Robinson uma maneira de fornecer conexões lógicas entre o crescimento da produção, a acumulação de capital, o grau de frugalidade, o salário real e ilustrar um catálogo de possibilidades de crescimento. Esta taxonomia modificada segue o espírito da obra de Robinson, mas é preciso diferentes abordagens teóricas, o que implica que algumas não se encaixam perfeitamente às aqui sugeridas. A América Latina passou de uma Idade de Ouro na década de 1950 e 1960, a uma Idade de Chumbo na década de 1980, com dois períodos de travessia, um em que o processo de crescimento e industrialização se acelerou na década de 1960 e início de 1970, que aqui se refere a uma Era Platinum Galopante, e aquela em que um processo de desindustrialização e reprimarização e maquilação da estrutura produtiva teve lugar, começando na década de 1990, que poderia ser referido como uma Era Platinum Rastejante.

Vernengo, Matias. “From Restrained Golden Age to Creeping Platinum Age: A Periodization of Latin American Development in the Robinsonian Tradition = Da Idade do Ouro a Era Platinum Rastejante: Uma Periodização do Desenvolvimento Latino Americano na Tradição Robinsoniana.” Revista de Economia Política 35, no. 4 (2015) : 683-707.

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Friday, February 26th, 2016

Matias Vernengo – Caldentey, Esteban Perez and Vernengo, Matias. “Towards an Understanding of Crisis Episodes in Latin America: a Post-Keynesian Approach.” Review of Keynesian Economics 3, no. 2 (2015) : 158-180.

Matias Vernengo, Professor of Economics

Conventional wisdom about the business cycle in Latin America assumes that monetary shocks cause deviations from the optimal path, and that the triggering factor in the cycle is excess credit and liquidity. Furthermore, in this view the origin of the contraction is ultimately related to the excesses during the expansion. For that reason it follows that avoiding the worst conditions during the bust entails applying restrictive economic policies during the expansion (that is, the boom) in the business cycle including reining in government expenditures and reducing liquidity to private agents. In this paper we develop an alternative approach that suggests that fiscal restraint may not have a significant impact in reducing the risks of a crisis, and that excessive fiscal conservatism might actually exacerbate problems. In the case of Central America, the efforts to reduce fiscal imbalances, in conjunction with the persistent current-account deficits, implied that financial inflows, with remittances being particularly important in some cases, allowed for an expansion of a private spending boom that proved unsustainable once the Great Recession led to a sharp fall in external funds. In the case of South America, the commodity boom created conditions for growth without hitting the external constraint. Fiscal restraint in the South American context has resulted, in some cases, in lower rates of growth than what otherwise would have been possible as a result of the absence of an external constraint. Yet the lower reliance on external funds has made South American countries less vulnerable to the external shock waves of the Great Recession than Central American economies.

Caldentey, Esteban Perez and Vernengo, Matias. “Towards an Understanding of Crisis Episodes in Latin America: a Post-Keynesian Approach.” Review of Keynesian Economics 3, no. 2 (2015) : 158-180.

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