The Economic Impact of China's Anti-Corruption Campaign. Nan Chen and Zemin (Zachary) Zhong. University of California Working Paper, June 2017, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2996009
Abstract: Political corruption is a major problem in governance and is pervasive especially in developing countries. Depending on pre-existing distortions, corruption may benefit economic growth by "greasing the wheel", or it may distort supply of public goods and create inefficiency. Empirically testing the effect of corruption on efficiency and distribution is difficult due to the evasive nature of corruption. We take an alternative approach by investigating the economic impacts of governments' anti-corruption efforts. Our analysis is performed in the context of China's recent anti-corruption campaign under the new president Xi Jinping, the largest of its kind in recent history. As an important initiative of this campaign, the CPC's Provincial Committee of Discipline Inspection (PCDI) send inspection teams to investigate county-level government for potential corruption. The variation in the timing of PCDI visit allows us to use a difference-in-difference design to identify the impact of anti-corruption on local economy. Using a unique administrative dataset of vehicle registration, we find that PCDI visits cause car sales to drop by 3.4% at county level. The effect is surprisingly uniformly distributed across different price tiers. Luxury brands exhibit a similar drop as domestic brands, suggesting corruption's impact permeates a wide income spectrum. Over time, the effect is strengthening: We observe a 2% drop in the first three months of PCDI visit, and a 10% drop one year afterwards. The especially large impact cannot be explained by decline in government officials' consumption behavior, suggesting anti-corruption efforts also affect the private sector.
We validate our empirical strategy by showing that:
(1) the timing of PCDI visits cannot be predicted by observable county characteristics and,
(2) car registrations exhibit parallel pre-treatment trends.
The results are robust to placebo tests and alternative specifications. We find that the effect of PCDI visit on car sales cannot be explained by local economic indicators or monitoring cost as measured by distances to provincial/prefectural governments.
Keywords: Corruption, Political Economy, China
JEL Classification: D73, P16, H70, L62
Tuesday, August 1, 2017
Painting too “Rosie” a picture: The impact of external threat on women’s economic welfare
Painting too “Rosie” a picture: The impact of external threat on women’s economic welfare. Jaroslav Tir and Maureen Bailey. Conflict Management and Peace Science, http://www.colorado.edu/polisci/2017/04/19/painting-too-rosie-picture-impact-external-threat-womens-economic-welfare
Abstract: Why is the economic status of women better in one country than another? We maintain that the answer lies in part in the extent of external threat to the homeland territory a country faces. To respond to the threat, states centralize their decision-making, invest more in the military and decrease citizens’ liberties. Associated restrictions and emphases on more “masculine” values create an environment where women’s welfare takes a back seat to the ostensible priority of defending the homeland. Utilizing measures of women’s unemployment from across the world, 1981-2001, we demonstrate that higher levels of territorial threat decrease women’s economic welfare.
Abstract: Why is the economic status of women better in one country than another? We maintain that the answer lies in part in the extent of external threat to the homeland territory a country faces. To respond to the threat, states centralize their decision-making, invest more in the military and decrease citizens’ liberties. Associated restrictions and emphases on more “masculine” values create an environment where women’s welfare takes a back seat to the ostensible priority of defending the homeland. Utilizing measures of women’s unemployment from across the world, 1981-2001, we demonstrate that higher levels of territorial threat decrease women’s economic welfare.
China's Lost Generation: Changes in Beliefs and their Intergenerational Transmission
China's Lost Generation: Changes in Beliefs and their Intergenerational Transmission. Gerard Roland and David Yang. NBER Working Paper, May 2017, http://www.nber.org/papers/w23441
Abstract: Beliefs about whether effort pays off govern some of the most fundamental choices individuals make. This paper uses China’s Cultural Revolution to understand how these beliefs can be affected, how they impact behavior, and how they are transmitted across generations. During the Cultural Revolution, China’s college admission system based on entrance exams was suspended for a decade until 1976, effectively depriving an entire generation of young people of the opportunity to access higher education (the “lost generation”). Using data from a nationally representative survey, we compare cohorts who graduated from high school just before and after the college entrance exam was resumed. We find that members of the “lost generation” who missed out on college because they were born just a year or two too early believe that effort pays off to a much lesser degree, even 40 years into their adulthood. However, they invested more in their children’s education, and transmitted less of their changed beliefs to the next generation, suggesting attempts to safeguard their children from sharing their misfortunes.
Abstract: Beliefs about whether effort pays off govern some of the most fundamental choices individuals make. This paper uses China’s Cultural Revolution to understand how these beliefs can be affected, how they impact behavior, and how they are transmitted across generations. During the Cultural Revolution, China’s college admission system based on entrance exams was suspended for a decade until 1976, effectively depriving an entire generation of young people of the opportunity to access higher education (the “lost generation”). Using data from a nationally representative survey, we compare cohorts who graduated from high school just before and after the college entrance exam was resumed. We find that members of the “lost generation” who missed out on college because they were born just a year or two too early believe that effort pays off to a much lesser degree, even 40 years into their adulthood. However, they invested more in their children’s education, and transmitted less of their changed beliefs to the next generation, suggesting attempts to safeguard their children from sharing their misfortunes.
People work less hard for others
People work less hard for others. Michael Inzlicht & Cendri A. Hutcherson. Nature Human Behaviour 1, Article number: 0148 (2017). doi:10.1038/s41562-017-0148
Effort is costly. People devalue personal rewards that require some measure of physical or even mental effort. Laboratory studies now suggest that physical effort is especially costly when engaged to benefit others. Even when people are willing, however, their efforts are often superficial, with people doing what is necessary but no more.
Effort is costly. People devalue personal rewards that require some measure of physical or even mental effort. Laboratory studies now suggest that physical effort is especially costly when engaged to benefit others. Even when people are willing, however, their efforts are often superficial, with people doing what is necessary but no more.
Corrupting cooperation and how anti-corruption strategies may backfire
Corrupting cooperation and how anti-corruption strategies may backfire. Michael Muthukrishna et al.
Nature Human Behaviour, July 2017, https://www.nature.com/articles/s41562-017-0138
Abstract: Understanding how humans sustain cooperation in large, anonymous societies remains a central question of both theoretical and practical importance. In the laboratory, experimental behavioural research using tools like public goods games suggests that cooperation can be sustained by institutional punishment - analogous to governments, police forces and other institutions that sanction free-riders on behalf of individuals in large societies. In the real world, however, corruption can undermine the effectiveness of these institutions. Levels of corruption correlate with institutional, economic and cultural factors, but the causal directions of these relationships are difficult to determine. Here, we experimentally model corruption by introducing the possibility of bribery. We investigate the effect of structural factors (a leader’s punitive power and economic potential), anti-corruption strategies (transparency and leader investment in the public good) and cultural background. The results reveal that (1) corruption possibilities cause a large (25%) decrease in public good provisioning, (2) empowering leaders decreases cooperative contributions (in direct opposition to typical institutional punishment results), (3) growing up in a more corrupt society predicts more acceptance of bribes and (4) anti-corruption strategies are effective under some conditions, but can further decrease public good provisioning when leaders are weak and the economic potential is poor. These results suggest that a more nuanced approach to corruption is needed and that proposed panaceas, such as transparency, may actually be harmful in some contexts.
Nature Human Behaviour, July 2017, https://www.nature.com/articles/s41562-017-0138
Abstract: Understanding how humans sustain cooperation in large, anonymous societies remains a central question of both theoretical and practical importance. In the laboratory, experimental behavioural research using tools like public goods games suggests that cooperation can be sustained by institutional punishment - analogous to governments, police forces and other institutions that sanction free-riders on behalf of individuals in large societies. In the real world, however, corruption can undermine the effectiveness of these institutions. Levels of corruption correlate with institutional, economic and cultural factors, but the causal directions of these relationships are difficult to determine. Here, we experimentally model corruption by introducing the possibility of bribery. We investigate the effect of structural factors (a leader’s punitive power and economic potential), anti-corruption strategies (transparency and leader investment in the public good) and cultural background. The results reveal that (1) corruption possibilities cause a large (25%) decrease in public good provisioning, (2) empowering leaders decreases cooperative contributions (in direct opposition to typical institutional punishment results), (3) growing up in a more corrupt society predicts more acceptance of bribes and (4) anti-corruption strategies are effective under some conditions, but can further decrease public good provisioning when leaders are weak and the economic potential is poor. These results suggest that a more nuanced approach to corruption is needed and that proposed panaceas, such as transparency, may actually be harmful in some contexts.
Sentimental Value and Gift Giving: Givers' Fears of Getting It Wrong Prevents Them from Getting It Right
Sentimental Value and Gift Giving: Givers' Fears of Getting It Wrong Prevents Them from Getting It Right. Julian Givi and Jeff Galak. Journal of Consumer Psychology, https://www.journals.elsevier.com/journal-of-consumer-psychology/forthcoming-articles/sentimental-value-and-gift-giving-givers
Abstract: Sentimental value is the value derived from an emotionally-laden item's associations with significant others, or special events or times in one's life. The present research demonstrates that when faced with the choice between sentimentally valuable gifts and gifts with superficial attributes that match the preferences of the recipient, givers give the latter much more often than recipients would prefer to receive such gifts. This asymmetry appears to be driven by givers feeling relatively certain that preference-matching gifts will be well-liked by recipients, but relatively uncertain that the same is true for sentimentally valuable gifts. Three studies demonstrate this gift-giving mismatch and validate the proposed mechanism across a variety of gift-giving occasions and giver-receiver relationship types. The contribution of these findings to the gift-giving literature, as well as directions for future research, are discussed.
Abstract: Sentimental value is the value derived from an emotionally-laden item's associations with significant others, or special events or times in one's life. The present research demonstrates that when faced with the choice between sentimentally valuable gifts and gifts with superficial attributes that match the preferences of the recipient, givers give the latter much more often than recipients would prefer to receive such gifts. This asymmetry appears to be driven by givers feeling relatively certain that preference-matching gifts will be well-liked by recipients, but relatively uncertain that the same is true for sentimentally valuable gifts. Three studies demonstrate this gift-giving mismatch and validate the proposed mechanism across a variety of gift-giving occasions and giver-receiver relationship types. The contribution of these findings to the gift-giving literature, as well as directions for future research, are discussed.
Illusory Increases in Font Size Improve Letter Recognition
Illusory Increases in Font Size Improve Letter Recognition. Martin Lages, Stephanie Boyle & Rob Jenkins. Psychological Science, https://www.ncbi.nlm.nih.gov/pubmed/28677992
Abstract: Visual performance of human observers depends not only on the optics of the eye and early sensory encoding but also on subsequent cortical processing and representations. In two experiments, we demonstrated that motion adaptation can enhance as well as impair visual acuity. Observers who experienced an expanding motion aftereffect exhibited improved letter recognition, whereas observers who experienced a contracting motion aftereffect showed impaired letter recognition. We conclude that illusory enlargement and shrinkage of a visual stimulus can modulate visual acuity.
Abstract: Visual performance of human observers depends not only on the optics of the eye and early sensory encoding but also on subsequent cortical processing and representations. In two experiments, we demonstrated that motion adaptation can enhance as well as impair visual acuity. Observers who experienced an expanding motion aftereffect exhibited improved letter recognition, whereas observers who experienced a contracting motion aftereffect showed impaired letter recognition. We conclude that illusory enlargement and shrinkage of a visual stimulus can modulate visual acuity.
Physical Proximity Increases Persuasive Effectiveness through Visual Imagery
Physical Proximity Increases Persuasive Effectiveness through Visual Imagery. Yanli Jia et al. Journal of Consumer Psychology, https://www.journals.elsevier.com/journal-of-consumer-psychology/forthcoming-articles/physical-proximity-increases-persuasive-effectiveness
Abstract: Six experiments converged on the conclusion that consumers' physical distance from the verbal description of an event or a product can influence their beliefs in its implications. For example, participants' proximity to information about the likelihood of surviving an airline crash can influence their expectations that there would be survivors of a real-life airplane accident, and being close to the description of a commercial product can influence beliefs that the product would be effective. These and other effects are mediated by the vividness of the mental image that participants form on the basis of the information. Consequently, the effects were attenuated when participants are under high cognitive load or when the verbal description lacks the detail necessary for forming a clear mental image. Alternative interpretations in terms of task involvement, perceptual fluency and construal levels are evaluated.
Abstract: Six experiments converged on the conclusion that consumers' physical distance from the verbal description of an event or a product can influence their beliefs in its implications. For example, participants' proximity to information about the likelihood of surviving an airline crash can influence their expectations that there would be survivors of a real-life airplane accident, and being close to the description of a commercial product can influence beliefs that the product would be effective. These and other effects are mediated by the vividness of the mental image that participants form on the basis of the information. Consequently, the effects were attenuated when participants are under high cognitive load or when the verbal description lacks the detail necessary for forming a clear mental image. Alternative interpretations in terms of task involvement, perceptual fluency and construal levels are evaluated.
Firm Performance in the Face of Fear: How CEO Moods Affect Firm Performance. Ali Akansu et al. Journal of Behavioral Finance, http://www.tandfonline.com/doi/abs/10.1080/15427560.2017.1338704?journalCode=hbhf20
Abstract: The authors use facial emotion recognition software to quantify CEO mood. Anger or disgust motivates a CEO to work harder to improve his or her situation; thus firm profitability improves in the subsequent quarter. Happy CEOs are less likely to work on hard or unpleasant tasks; thus profitability decreases in the subsequent quarter. In the short term, fear explains the firm's announcement period market performance. However, fear is transient and performance improvement is short term.
KEYWORDS: Corporate governance, CEO, Firm performance, Moods, Affect, Emotions, Nonverbal information, Facial recognition, Emotion recognition, Soft information
Abstract: The authors use facial emotion recognition software to quantify CEO mood. Anger or disgust motivates a CEO to work harder to improve his or her situation; thus firm profitability improves in the subsequent quarter. Happy CEOs are less likely to work on hard or unpleasant tasks; thus profitability decreases in the subsequent quarter. In the short term, fear explains the firm's announcement period market performance. However, fear is transient and performance improvement is short term.
KEYWORDS: Corporate governance, CEO, Firm performance, Moods, Affect, Emotions, Nonverbal information, Facial recognition, Emotion recognition, Soft information
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