The size of the underground economy in Germany: A correction of the record and new evidence from the Modified-Cash-deposit-Ratio approach

Based on the Ahumada et al. (2007, Review of Income and Wealth) critique we revise existing estimates of the size of the German underground economy. Among other things, it turns out that most of these estimates are untenable and that the tax pressure induced size of the German underground economy may be much lower than previously thought. To this extent, German policy and law makers have been misguided during the last three decades. Therefore, we introduce the Modified-Cash-Deposit-Ratio (MCDR) approach, which is not subject to the recent critique and apply it to Germany for the period 1960 to 2008. JEL: O17, Q41, C22, Keywords: underground economy, shadow economy, cash-depositratio, currency demand approach, MIMIC approach

Audit risk and rent extraction: Evidence from a randomized evaluation in Brazil

We report results from a randomized policy experiment designed to test whether increasedaudit risk deters rent extraction in local public procurement and service delivery in Brazil. Ourestimates suggest that temporarily increasing annual audit risk by about 20 percentage pointsreduced the proportion of irregular local procurement processes by about 17 percentage points.This reduction was driven entirely by irregularities involving mismanagement or corruption. Incontrast, we find no evidence that increased audit risk affected the quality of publicly providedpreventive and primary health care services -measured based on user satisfaction surveys- orcompliance with national regulations of the conditional cash transfer program "Bolsa Família".

Gender gaps in performance: Evidence from young lawyers

This paper documents and studies the gender gap in performance among associatelawyers in the United States. Unlike most high-skilled professions, the legal professionhas widely-used objective methods to measure and reward lawyers' productivity: thenumber of hours billed to clients and the amount of new-client revenue generated. Wefind clear evidence of a gender gap in annual performance with respect to bothmeasures. Male lawyers bill ten-percent more hours and bring in more than double thenew-client revenue. We show that the differential impact across genders in the presenceof young children and the differences in aspirations to become a law-firm partneraccount for a large part of the difference in performance. These performance gaps haveimportant consequences for gender gaps in earnings. While individual and firmcharacteristics explain up to 50 percent of earnings gap, the inclusion of performancemeasures explains most of the remainder.

Banks and development: Jewish communities in the Italian Renaissance and current economic performance

Are differences in local banking development long-lasting? Do they affect long-term economic performance?I answer these questions by relying on an historical development that occurred in Italian cities during the 15thcentury. A sudden change in the Catholic doctrine had driven the Jews toward money lending. Cities thatwere hosting Jewish communities developed complex banking institutions for two reasons: first, the Jews werethe only people in Italy who were allowed to lend for a profit and, second, the Franciscan reaction to Jewishusury led to the creation of charity lending institutions, the Monti di Pietà, that have survived until today andhave become the basis of the Italian banking system. Using Jewish demography in 1500 as an instrument, Iprovide evidence of (1) an extraordinary persistence in the level of banking development across Italian cities (2)large effects of current local banking development on per-capita income. Additional firm-level analyses suggestthat well-functioning local banks exert large effects on aggregate productivity by reallocating resources towardmore efficient firms. I exploit the expulsion of the Jews from the Spanish territories in Italy in 1541 to arguethat my results are not driven by omitted institutional, cultural and geographical characteristics. In particular,I show that, in Central Italy, the difference in current income between cities that hosted Jewish communitiesand cities that did not exists only in those regions that were not Spanish territories in the 16th century.

Optimal law enforcement and criminal organization

In this paper, we take an organizational view of organized crime. In particular, we study the organizational consequences of product illegality attending at the following characteristics: (i) contracts are not enforceable in court, (ii) all participants are subject to the risk of being punished, (iii) employees present a major threat to the entrepreneur having the most detailed knowledge concerning participation, (iv) separation between ownership and management is difficult because record-keeping and auditing augments criminal evidence.

Do Schools Discriminate Against Homosexual Parents? Evidence from an Internet Field Experiment

The recognition of homosexual rights is a controversial issue in many countries. Spain was the third country in the world (after Netherlands and Belgium) to introduce a law recognizing homosexual marriage and adoption of children. In this paper, we examine for the first time whether schools are more hesitant to give feedback to homosexual parents during children's pre-registration period in Spain. In order to do that, we designed an internet field experiment to be conducted in schools. We created three types of fictitious couples; one heterosexual, one male homosexual and one female homosexual, and send emails to schools making sexual orientation explicit. Our results show that men homosexual couples had a significant lower probability to receive and answer than heterosexual couples (22.5 percentage points less). No statistically significant differences in the response rate were found between female homosexual and heterosexual couples. This result suggests that male homosexual couples might be penalized because of the lack of a maternal figure. Keywords: Discrimination, field experiment, schools, homosexual rights. JEL codes: H41, I20, K36

Internal promotion versus external recruitment: evidence in industrial plants

An analysis is carried out in a sample of 738 industrial plants of the determining factors in the use of internal promotion of blue-collar workers to middle managers and skilled technicians as against their external recruitment. The use of internal promotion is positively correlated with variables indicative of the efforts made by plants to measure employees' skills, and to a lesser extent, with the level of specificity of investments in human capital made by blue-collar workers. Contrary to what was expected, variables related with the use and efficiency of other incentive systems have no significant influence on the increased or decreased use of internal promotion. These results are initial evidence that internal promotions are used to protect and favour specific investments, especially those made by firms in order to discover their workers' skills.

External sources of innovation and industry-university interaction:evidence from Spanish firms

This paper is about the firm innovation process and the cooperation of the innovative firms with other firms and public institutions. A special attention is paid to the cooperation with universities. We use the Technological Innovation Survey (TIS) from the Instituto Nacional de Estadística (Spain) in order to obtain data for 4,159 innovative firms. Our results show that firm's cooperation activities are closely linked to the characteristics of the industry and the firm as well as to the origin of public funds for R&D activities. Key words: Innovation, universities, Spanish economy. JEL code: O31, I20, L60

The Determinants of Entry are not Independent of Start-up Size: Some evidence from Spanish manufacturing

In this paper we explore the determinants of firm start-up size of Spanish manufacturing industries. The industries' barriers to entry affect the ability of potential entrants to enter the markets and the size range at which they decide to enter. In order to examine the relationships between barriers to entry and size we applied the quantile regression techniques. Our results indicate that the variables that characterize the structure of the market, the variables that are related to the behaviour of the incumbent firms and the rate of growth of the industries generate different barriers depending on the initial size of the entrants. Keywords: Entry, regression quantiles, start-up size. JEL classification: L110, L600

Evidence on the determinants of foreign direct investment: the case of three european regions

This study aims at analyzing the determinants of FDI (foreign direct investment) inflows for a group of European regions. The originality of this approach lies in the use of disaggregated regional data. First, we develop a qualitative description of our database and discuss the importance of the macroeconomic determinants in attracting FDI. Then, we provide an econometric exercise to identify the potential determinants of FDI. In spite of choosing regions presenting economic similarities, we show that regional FDI inflows rely on a combination of factors that differs from one region to another.

Collusion in growing and shrinking markets: empirical evidence from experimental duopolies

We study collusive behaviour in experimental duopolies that compete in prices under dynamic demand conditions. In one treatment the demand grows at a constant rate. In the other treatment the demand declines at another constant rate. The rates are chosen so that the evolution of the demand in one case is just the reverse in time than the one for the other case. We use a box-design demand function so that there are no issues of finding and co-ordinating on the collusive price. Contrary to game-theoretic reasoning, our results show that collusion is significantly larger when the demand shrinks than when it grows. We conjecture that the prospect of rapidly declining profit opportunities exerts a disciplining effect on firms that facilitates collusion and discourages deviation.

Experimental evidence on the multibidding mechanism

Pérez-Castrillo and Wettstein (2002) and Veszteg (2004) propose the use of a multibidding mechanism for situations where agents have to choose a common project. Examples are decisions involving public goods (or public "bads"). We report experimental results to test the practical tractability and effectiveness of the multibidding mechanisms in environments where agents hold private information concerning their valuation of the projects. The mechanism performed quite well in the laboratory: it provided the ex post efficient outcome in roughly three quarters of the cases across the treatments; moreover, the largest part of the subject pool formed their bids according to the theoretical bidding behavior.

Do market conditions affect gift exchange? Evidence from experimental markets with excess supply and excess demand

We study whether people's behavior in unbalanced gift exchange markets with repeated interaction are affected by whether they are on the excess supply side or the excess demand side of the market. Our analysis is based on the comparison of behavior between two types of experimental gift exchange markets, which vary only with respect to whether first or second movers are on the long side of the market. The direction of market imbalance could influence subjects' behavior, as second movers (workers) might react differently to favorable actions by first movers (firms) in the two cases. While our data show strong deviations from the standard game-theoretic prediction, we find mainly secondary treatment effects. Wage offers are not higher when there is an excess supply of firms, and workers do not respond more favorably to a given wage when there is an excess supply of labor. The state of competition does not appear to have strong effects in our data. We also present data from single-period sessions that show substantial gift exchange even without repeated interactions.

Fair procedures. Evidence from games involving lotteries

Procedural fairness plays a prominent role in the social discourse concerning the marketplace in particular, and social institutions in general. Random procedures are a simple case, and they have found application in several important social allocation decisions. We investigate random procedures in the laboratory. We find that an unbiased random procedure is an acceptable substitute for an unbiased allocation: similar patterns of acceptance and rejection result when either is inserted as a feasible proposal in a sequential battle-of-the-sexes. We also find that unbiasedness, known to be a crucial characteristic of allocation fairness, is important to procedural fairness: in the context of a random offer game, a biased outcome is more readily accepted when chosen by an unbiased random draw than by one that is biased. Procedural fairness is conceptually different than allocation fairness or attribution-based behavior, and none of the current models of fairness and reciprocity captures our results. Post hoc extension of one of these models (ERC) suggests that a deeper understanding of procedural fairness requires further investigation of competing fairness norms.

Spillover effects of public capital formation: evidence from the spanish regions

Maybe because of the inconclusive nature of the results on the impact of public capital on output at the regional level, the issue of the possible existence of the regional spillovers from public capital formation has received little attention. The objective of this paper is to provide evidence on the possible existence of such spillovers. We consider the case of Spain and its seventeen regions. Our methodological approach consists in estimating an aggregate VAR model for Spain as well as seventeen region-specific VAR models in which both capital installed in the region and capital installed outside the region are allowed to play a role in enhancing regional output. The estimation results can be summarized as follows. The aggregate effects of public capital formation in Spain are important. They cannot, however, be captured in their entirety by the direct effects in each region from public capital installed in the region itself. When for each region both the capital installed in the region and the capital installed outside the region are considered the total disaggregated effect from the seventeen regional models are very much in line with the aggregate results. Furthermore, the aggregate effect seems to be due in almost equal parts to the direct and spillover effects of public capital formation. Ultimately, this paper establishes the relevance of both capital installed in each region and spillover effects in the understanding of the regional decomposition of the aggregate effects of public capital formation. In doing so it opens the door to some tantalizing and potentially highly charged research issues in terms of the determination of the optimal location of public investment projects.