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Publications (110)
By combining approaches from the economic theory of crime and of industrial organization, this paper analyzes optimal enforcement for three different forms of corporate misconduct that harm competition. The analysis shows why corporate crime is more harmful in large markets, why governments have a disinclination to sanction firms whose crime materi...
The paper proposes an empirical analysis of the determinants of the adoption of Intellectual Property Rights (IPR) and their impact on innovation in manufacturing. The analysis is conducted with panel data covering 112 countries. First we show that IPR protection is U-shaped with respect to a country’s market size and inverse-U-shaped with respect...
Significance
In economics, as in many high-skilled professions, women are underrepresented. Web-scraped data provide information on the situation of women in economics around the globe. We document the underrepresentation of women for a large set of countries using the same objective method. We find differences between countries and regions, which...
Regulated services represent between 14% and 26% of households’ expenditures in all economies and are costly to operate and maintain. They demand heavy investments for extensive periods of time. Funding them is a challenge: investment needs in infrastructure average 1– 2% of GDP, and 4– 8% of GDP in developing economies. The technological character...
Finance theory and practice drive the translation of the theoretical approaches to regulation into operational guidelines. The guidelines define a financial model to assess the net present value of all allowed costs and demand-related variables and the resulting allowed rate of return. The cost component accounts for the expenditures needed to meet...
The optimal form of regulation of the average price depends on the relative importance of the various sources of information asymmetry influencing the cost levels. Theory provides two main insights that hold, irrespective of the main source of distortion. The first is that the average regulated price needs to include a temporary payment to cover th...
The average price is essentially set to ensure a fair rate of return to the regulated firm, but it is also the weighted average of the various prices faced by the various types of users. Which specific prices and which specific weight the average price reflects depends on the forms of price discrimination and price differentiation adopted by the fi...
Regulated industries increasingly look like multi-product monopolies or oligopolies, which necessitates adaptations in the design of regulation. An oligopolistic market structure will be preferred if it allows information rents to be cut and shared and if these gains offset lost scale economies. Rent cuts come from sampling effects, yardstick compe...
The common economist’s benchmark to assess the efficiency impact of a regulatory decision is to compare the output and price outcomes of this decision to those that would be achieved under marginal cost pricing. The chapter explains that the efficiency payoff of marginal cost pricing in public service industries has to be balanced against the finan...
Underinvestment, overinvestment or mistargeted investment are common across sectors at all development stages. They penalize the poorest when it slows down increase in access rates, all users when it leads to congestion, environmental impacts or low quality, and taxpayers as their costs are passed on to final prices or subsidies. These failures are...
Institutional weaknesses can be attributed to limited human and/or financial capacity, limited accountability, limited commitment and limited fiscal capacity. Ignoring institutional limitations increases the odds of inefficient regulation, undesirable social side effects and excessive fiscal burdens. To address some of the limitations, most countri...
Because quality is multidimensional with costs sometimes hard to measure and because many attributes can be quite difficult to verify, both ex ante and ex post, there is a role for a specific intervention on quality of service in regulated industries. The main role of regulation is to minimize the risks of unreliability of services and overinvestme...
Regulation is one of the tools used by governments to control monopolistic behaviour in the provision of public services such as electricity, transport or water. Technological and financial innovations have changed these public services markets since the 1990s, bringing new regulatory challenges, including technological and financial ones. This boo...
The ability to appreciate and account for the magnitude and complexity of the interactions of efficiency and viability, on the one hand, and social concerns (including equity), on the other, continues to be a major regulatory challenges. One of the keys to effective targeting is to distinguish between lack of access and lack of affordability. For b...
Regulation is not adjusting fast enough to changes in market structure due to unanticipated changes in technology and preferences. Regulators need to conduct diagnostics to assess the impact of abuse of market power, both ex ante (e.g. in the context of mergers) and ex post (e.g. in gauging profit margins). Both the empirical and the more conceptua...
In practice, the regulator generally has access to less information than the regulated firm on costs. In Baron– Myerson (1982) the regulated firm has private information on cost characteristics it cannot modify. In Laffont– Tirole (1986) the firm has private information on its endogenous effort to decrease cost. Regulators must pay information rent...
Modern regulation theory is anchored into two canonical models of regulation under the benchmark case of full information. Baron– Myerson (1982) is useful to analyse the optimal regulation of efficiently run private monopolies for which maximization of profit, and therefore cost control, is paramount, while Laffont– Tirole (1986) is useful to desig...
The environmental concern and its social side effects will be at the core of regulatory authorities’ agenda on top of short-term efficiency objectives in the foreseeable future. The steady growth of ‘big data’, of digitalization and of the new data-processing technologies will change the way firms and governments use and share information in the de...
Understanding the details of the way public service providers get their market power and use is essential to the design of regulatory supervision. The Lerner index is one of the most basic indicators available to assess the risks of abuses from market power. It measures the percentage of extra profit the firm can earn per unit sold on top of the ma...
This paper elucidates the willingness of an autocrat to push through institutional reforms in a context where traditional authorities represented by religious clerics are averse to them and where the military control the means of repression and can potentially stage a coup. We show that although the autocrat always wants to co-opt the military, thi...
Regulation is one of the tools used by governments to control monopolistic behaviour in the provision of public services such as electricity, transport or water. Technological and financial innovations have changed these public services markets since the 1990s, bringing new regulatory challenges, including technological and financial ones. This boo...
We conducted an experimental study in Haiti testing for the relationship between religious belief and individual risk taking behavior. 774 subjects played lotteries in a standard neutral protocol and subsequently with reduced endowments but in the presence of religious images of Catholic, Protestant and Voodoo tradition. Subjects chose between payi...
This article provides experimental support for the hypothesis that insurance can be a motive for religious donations. We randomize enrollment of members of a Pentecostal church in Ghana into a commercial funeral insurance policy. Then church members allocate money between themselves and a set of religious goods in a series of dictator games with si...
Are religious believers more prosocial than other people? In a trust game field experiment with 774 subjects in Haiti, we elicit willingness to pay to play in the presence of religious images, and argue that this can be interpreted as a measure of the strength of religiosity. More religious individuals trust others more and reciprocate more than ot...
In the absence of a public safety net, wealthy Africans have the social obligation to share their resources with their needy relatives in the form of cash transfers and inefficient family hiring. We develop a model of entrepreneurial choice that accounts for this social redistributive constraint. We derive predictions regarding employment choices,...
We present a model with multiple donors-principals that provide funds to a unique recipient-agent. Each donor decides how to allocate his aid funds between a pooled and an unilateral project. Both the principals and the agent value the output produced with the pooled funds and the unilateral projects. However donors have a bias in favor of their ow...
Developing countries’ incentives to protect intellectual property rights (IPR) are studied in a model of vertical innovation. Enforcing IPR boosts export opportunities to advanced economies but slows down technological transfers and incentives to invest in R&D. Asymmetric protection of IPR, strict in the North and lax in the South, leads in many ca...
We study the impact of institutional characteristics of national and supranational regulation on the effectiveness of both types of regulation. We focus on four institutional dimensions: regulatory capacity, accountability, commitment and fiscal capacity. We show how supranational regulation may reduce or worsen the challenges imposed by national i...
As a result of widespread mistreatment and overt discrimination in all dimensions of their lives, women lack significant autonomy. The central preoccupation of this book is to explore key sources of female empowerment and discuss the current challenges and opportunities for the future. Schematically, three main domains are distinguished. The first...
Two types of intrinsically motivated workers are considered: good workers care about the mission of an organization, whereas bad workers derive pleasure from destructive behavior. Compared to the case with only good workers, the mission-oriented sector has to resort to higher monitoring to deal with the threat of sabotage. When standard monitoring...
The relationship between religion and politics is explored from a theoretical standpoint. Religious clerics can be seduced by an autocrat and political stability is at stake. The autocrat's decisions consist of two measures both capable of antagonizing religious clerics: adopting secular reforms and unduly appropriating part of the national wealth,...
With a view to reducing the consequences of corruption in public procurement, many governments have introduced debarment of suppliers found guilty of corruption and some other forms of crime. This paper explores the market effects of debarment on public procurement. Debarment is found to make little difference in markets with high competition, whil...
This article addresses how the rules intended to protect consumers and taxpayers from economic crime, namely leniency and cartel settlements in competition law, criminal sanctions and debarment of suppliers from participation in public tenders for bribery, work together. While the economic reasoning behind these rules makes sense when considering e...
The relationship between religion and politics is explored from a theoretical standpoint, assuming that religious clerics can be co-opted by the ruler acting as an autocrat. The comparative effects of decentralized versus centralized religions on the optimal level of cooperation between the autocrat and the religious clerics, which itself impinges...
We suggest a parsimonious dynamic agency model in which workers have status concerns. A firm is a promotion hierarchy in which a worker's status depends on past performance. We investigate the optimality of two types of promotion hierarchies: (i) standard promotion practices, where agents have a job guarantee, and (ii) "up-or-out", in which agents...
With a view to reducing the consequences of corruption in public procurement, many governments have introduced debarment of suppliers found guilty of corruption and some other forms of crime. This paper explores the market effects of debarment on public procurement. Debarment is found to make little difference in markets with high competition, whil...
This paper studies how signaling the credence attributes of consumer goods distorts their market equilibrium in developing countries. Costs of certification, sunk in order to achieve credibility, play a key role in producing an oligopolistic market, leading to high prices that form a barrier for consumers in the South. To lower the cost, certificat...
With a view to reducing the consequences of corruption in public procurement, many governments have introduced debarment of suppliers found guilty of corrup- tion and some other forms of crime. This paper explores the market effects of debarment on public procurement. Debarment is found to make little difference in markets with high competition, wh...
Two types of intrinsically motivated workers are considered: "good" workers care about the mission of an organization, whereas "bad" workers derive pleasure from destructive behavior. While mission-oriented organizations take advantage of the intrinsic motivation of good workers, they are more vulnerable than profit-oriented organizations to anti-s...
This paper examines determinants of schooling in traditional hierarchical societies with an established history of outmigration. In the village, a ruling caste controls local political and religious institutions. For children who do not belong to the ruling caste, migration is a strategy to increase social mobility, a process that is enhanced by fo...
Power market integration is analyzed in a two-country model with nationally regulated firms and costly public funds. If the
generation costs between the two countries are too similar, negative business stealing outweighs efficiency gains so that,
subsequent to integration, welfare decreases in both regions. Integration is welfare enhancing when the...
We study how smugglers respond to different types of migration policies - legalisation through the sale of migration visas, or more traditional repressive policies through borders' enforcement, employers' sanctions or deportation - by changing the price they propose to illegal migrants. In this context a government that aims at eradicating smuggler...
We suggest a parsimonious dynamic agency model in which workers have status concerns. A firm is a promotion hierarchy in which a worker's status depends on past performance. We investigate the optimality of two types of promotion hierarchies: (i) internal labor markets, in which agents have a job guarantee, and (ii) "up-or-out", in which agents are...
In this paper, we discuss the choice for build-operate-and-transfer (BOT) concessions when governments and managers do not share the same information regarding the operation characteristics of a facility. We show that larger shadow costs of public funds and larger information asymmetries entice governments to choose BOT concessions. This result ste...
The paper aims at studying determinants of schooling in traditional hierarchical soci-eties confronted with an established history of outmigration. In the village, a ruling caste controls local political and religious institutions. For children who do not belong to the ruling caste, migration is a social mobility factor that is enhanced by formal s...
A model of entrepreneurial choices in an economy with a corrupt public procurement sector is built, providing predictions along two main dimensions. First, corruption is more frequent in sectors where public institutions are large buyers. Second, firms favoured with corrupt contracts enjoy extra returns, so that procurement related activities attra...
Informal sectors are larger in Africa than in rich countries. The paper argues that social arrangements prevailing in Africa partly explain this result. Local successful entrepreneurs have the social obligation to provide a job and to redistribute their wealth to the members of their extended family. Such firms are thus less productive than their f...
Intrinsic motivation of workers may arise from different individual motives. While some workers care about the mission of an organization and derive an intrinsic benefit from advancing this mission ("good" workers), others derive pleasure from some form of destructive or anti-social behavior ("bad" workers). We show that mission-oriented organizati...
The article studies the impact of the government budget constraint on the regulation of natural monopolies in adverse selection contexts. The government maximises total surplus but incurs some cost of public funds à laLaffont and Tirole (1993). Government outsourcing is proposed as an alternative to regulation in which firms freely enter the market...
The paper focuses on public utilities services located in poor countries with a special attention to capture and corruption issues. It confronts the optimal policy of Auriol and Picard [Privatization in Developing Countries and the Government Budget Constraint, Nota di Lavoro 75.2002. Fondazione Eni Enrico Mattei, Milan, Italy] regarding private se...
The development of the infrastructure has always represented a major priority at the level of all actors implied in the economic-social activity, from public authorities to private organizations and even civil population. The particularities of the investment projects in the infrastructure attract a more and wider private organizations category whi...
In this paper we propose estimates of the marginal cost of public funds (MCF) in 38 African countries. We develop a simple general equilibrium model that can handle taxes on five major tax classes, and can be calibrated with little more than national accounts data. Our base case estimate of the average MCF from marginal increases in all five tax in...
This paper studies the incentives that developing countries have to enforce intellectual properties rights (IPR). On the one hand, free-riding on rich countries technology reduces the investment cost in R&D. On the other hand, it yields apotential indirect cost: a firm that violates IPR cannot legally export in a country that enforces them. IPR act...
The paper studies the impact of market integration on investment incentives in non-competitive industries. It distinguishes between investment in transportation and production cost-reducing technologies. Each domestic firm is controlled by a national regulator in a common market made of two countries. When public funds are costly, and production co...
We consider the difficulties that nonprofit organizations in a broader sense face in the labor market when they are not able to condition wages on performance. Agents in our model may be intrinsically mo-tivated for certain tasks or missions, but their motives do not neces-sarily coincide with the goals of the firm. Wages are an insufficient screen...
Parker and Van Praag (2009) showed, based on theory, that the group status of the profession ‘entrepreneurship’ shapes people’s occupational preferences and thus their choice behavior. The current study focuses on the determinants and consequences of the group status of a profession, entrepreneurship in particular. If the group status of entreprene...
In this paper we propose estimates of the marginal cost of public funds (MCF) in 38 African countries. We develop a simple general equilibrium mode inspired by the 1-2-3 model of Devarajan et al. (1994) that can handle taxes on the five major tax classes, takes account of the informal sector, and can be calibrated with little more than national acc...
We study a class of representation mechanisms, based on reports made by a random subset of agents, called representatives, in a collective choice problem with quasi-linear utilities. We do not assume the existence of a common prior probability describing the distribution of preference types. In addition, there is no benevolent planner. Decisions wi...
The paper studies capture and extortion in public purchase. It shows that capture yields a dead-weight loss while extortion does not. Based on the calibration of the model, the total cost of capture is between 1.2 and 2.88 times the amount of the bribes. The theoretical analysis focuses on capture fight. The legal framework that emerges from the no...
The paper analyzes governments' tradeoff between fiscal benefits and consumer surplus in privatization reforms of noncompetitive industries in developing countries. Under privatization, the control rights are transferred to private interests so that public subsidies decline. This benefit for tax-payers comes at the cost of price increases for consu...
exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They d...
Informal sectors are larger in developing countries than in rich countries. This is a result of higher fixed costs of entry into the formal economy in developing countries. We show that raising barriers to entry is consistent with a deliberate government policy for raising tax revenue. By generating market power, and hence rents, for the permitted...
This paper studies the effect of soft-budget constraints in a pure adverse selection model of monopoly regulation. We consider a government maximizing total surplus but incurring some cost of pub-lic funds à la Laffont Tirole (1993). We propose a regulatory set-up in which firms are free to enter natural monopoly markets and to choose their price a...
The paper studies how to fight corruption in public purchase. It shows that for large markets public purchasers should implement competitive bidding, while for small ones they should purchase freely. For a market of medium range, they should retain discretion over the attribution rule. This creates room for corruption. The paper shows that extortio...
This paper studies the effect of soft-budget constraints in a pure adverse selection model of monopoly regulation. We consider a government maximizing total surplus but incurring some cost of public funds A la Laffont Tirole (1993). We propose a regulatory set-up in which firms are free to enter natural monopoly markets and to choose their price an...
We examine the problem of signaling the quality of goods and services when quality is never observable to consumers. The solution to this problem is certication, which acts to transform unobservable credence attributes into observable search attributes. We study the impact of cer- tication systems on market structure and performance. It turns out t...
This paper can be downloaded without charge at: The Fondazione Eni Enrico Mattei Note di Lavoro Series Index: http://www. feem. it/web/activ/ activ.html Social Science Research Network Electronic Paper Collection: http://papers. ssm.com/abstract id=XXXXXX The opinions expressed in this paper do not necessarily reflect the position of Privatizations...
We investigate how changes in the commitment power of a principal affect cooperation among agents who work in a team. When the principal and her agents are symmetrically uncertain about the agents' innate abilities, workers have career concerns. Then, unless the principal can commit herself to long-term wage contracts, an implicit sabotage incentiv...
Auriol and Benaim (2000) studied in a model inspired by evolutionary game theory, how standards and norms emerge in decentralized economies when there are two standards. They showed that the decentralized adoption process always converges toward a stable equilibrium (possibly an incompatibility one). This paper explores the robustness of Auriol and...
Cet article propose une analyse de la concurrence comparative qui tienne compte de l'hétérogénéité des entreprises. Lorsqu'il existe une série de monopoles locaux, on montre qu'il est possible, même s'ils ne sont pas identiques, de mettre en œuvre une concurrence indirecte entre eux. En ayant recours à l'ensemble de l'information générée par ces en...
This paper presents a dynamic model, inspired by evolutionary game theory, of how standards and norms emerge in decentralized economies. It shows that standardization outcomes depend on adopters' attitudes to problems caused by incompatibility. If individuals display aversion to incompatibility, standardization never fails to happen eventually, but...
We introduce, in a multiple agents moral hazard setting, a status variable which reflects an agent's claim to social recognition in her work. Status is a scarce resource so that increasing an agent's status requires that another agent's status is decreased. High status agents are more willing to exert effort in exchange for monetary compensations w...
[fre] Cet article propose une analyse de la concurrence comparative qui tienne compte de l'hétérogénéité des entreprises. Lorsqu'il existe une série de monopoles locaux, on montre qu'il est possible, même s'ils ne sont pas identiques, de mettre en œuvre une concurrence indirecte entre eux. En ayant recours à l'ensemble de l'information générée par...
This paper analyzes the problem raised by quality provision in globalizing economies. When quality is a credence attribute, there is a signaling problem and quality drops to its minimum level. A way out of this under-provision equilibrium consists to rely on certification. However certification of goods involves costs, most of which are fixed, beca...
We introduce, in a multiple agents moral hazard setting, a status variable which reflects an agent's claim to social recognition in her work. Status is a scarce resource so that increasing an agent's status requires that another agent's status is decreased. High status agents are more willing to exert effort in exchange for monetary compensations w...
The paper derives optimal industrial policy for natural monopoly. It compares the benefit and cost of privatization and regulation taking into account the problems of asymmetric information and of soft budget constraint for regulated firms. It helps to disantangle the notion of 'privatization' and the notion of 'deregulation'. It shows that unless...
This paper examines the impact of an increase in the school leaving age on high school teachers’ absence behaviour. We estimate differ- ence in difference models of absenteeism using count data approaches. Employing data from the Spanish Labour Force Survey, our findings suggest that high school teachers reduced their effort due to the re- form tha...
We study a model of public decision-making in simple public goods economies with moral hazards and adverse selection. Economic agents must invest resources (or provide effort) to discover their own preferences. We consider direct revelation mechanisms based on sampling. A sample of agents is drawn in the population, and each member of the sample re...
This paper analyses, within a static model, the effect of quality concern on optimal market structure. It focuses on cases where industry quality has public-good like features and is not contractible. It is shown that the introduction of competition raises a free-rider problem which depresses quality (the smaller producer free-rides on its competit...
The paper studies the impact of corruption threat in procurement an dpublic purchases. It explores the consequences of the unobservability of people integrity and considers the problem of both capture and extortion. It shows that extortion is not fight against because it is not harmful to the principal, contrary to capture which is costly. This dis...
This paper presents a dynamic model, inspired by evolutionary game theory, of how standards and norms emerge in decentralized economies. It shows that standardization outcomes depend on adopters' attitudes to problems caused by incompatibility. If individuals display aversion to incompatibility, standardization never fails to happen eventually, but...
