en-us http://economics.ca/cje/en/ The journal of the Canadian Economics Association Copyright 2013, Canadian Economics Association green@econ.ubc.ca (David Green) werner@sauder.ubc.ca (Werner Antweiler) Journals 8640 Sun, 19 May 2013 17:00:01 -0700 http://www.onlinelibrary.wiley.com/doi/10.1111/caje.12000/abstract While intellectual property rights (IPRs) are the key drivers of economic performance in R&D based growth models, they have not been fully explored in empirical development studies. We introduce IPRs to this literature, using Two-Stage Least Squares Bayesian Model Averaging to address endogeneity and model uncertainty at the instrument and income stages. We show that IPRs exert effects similar to `Rule of Law' and therefore provide robust evidence that both physical and intellectual property rights are crucial development determinants. We document that unenforced IPRs exert no effect on development. Instead, it is the level of enforced IPRs that causes development. http://economics.ca/cgi/jab?journal=cje&article=v46n1p0004 http://www.onlinelibrary.wiley.com/doi/10.1111/caje.12001/abstract This paper examines the effects of FDI on indigenous new plants' survival, through intra- and inter-industry economic linkages. It includes all manufacturing plants born to indigenous firms from 1973 to 1997 in Canada. The study finds that indigenous plants tend to have shorter lives (more deaths) due to competition with FDI affiliates operating in the same industry, but they benefit from FDI affiliates operating both in downstream industries as customers and in upstream industries as suppliers. The positive inter-industry effects of FDI outweigh the negative intra-industry effects, resulting in a net positive impact of FDI on the durations of indigeneous plants. http://economics.ca/cgi/jab?journal=cje&article=v46n1p0046 http://www.onlinelibrary.wiley.com/doi/10.1111/caje.12002/abstract Why do borders still matter for economic activity? The reunification of Germany in 1990 provides a unique natural experiment for examining the effect of political borders on trade. With the fall of the Berlin Wall and the rapid formation of a political and economic union, strong and strictly enforced administrative barriers to trade between East Germany and West Germany were eliminated completely within a very short period of time. Remarkable persistence in intra-German trade patterns along the former East-West border suggests that border effects are neither statistical artefacts nor driven by administrative barriers to trade, but arise from economic fundamentals. http://economics.ca/cgi/jab?journal=cje&article=v46n1p0154 http://www.onlinelibrary.wiley.com/doi/10.1111/caje.12003/abstract We study the impact of a mixed capitation model (the Family Health Organization, FHO) on quality and quantity outcomes among primary care physicians in Ontario. Using a panel of administrative data covering one year before and two years after the FHO model was introduced, we find that physicians in the FHO model provide about 6% to 7% fewer services and visits per day, but are between 7% and 11% more likely to achieve preventive care quality targets. These results suggest that the mixed capitation model with contractible quality indicators may be welfare improving relative to the FFS model. http://economics.ca/cgi/jab?journal=cje&article=v46n1p0208 http://www.onlinelibrary.wiley.com/doi/10.1111/caje.12004/abstract This study evaluates the impacts of welfare transfers and the minimum wage on teen family formation by pooling provincial data from Canada between 1990 and 2005. OLS estimates suggest that welfare transfers have had limited impact on teen births. On the other hand, a 10% increase in the minimum wage is significantly correlated with a 3% -5% rise in teen birth rates. This finding is explained by further regressions, which reveal that an increase in the minimum wage is significantly associated with (1) higher earnings among male teens, (2) an increase in teen marriage rates, and (3) an increase in fertility among married teens but not among unmarried females. Finally, estimates based on the 2003 and 2005 waves of the Canadian Community Health Surveys demonstrate that married teens are more likely to engage in sex as well as unprotected intercourse in comparison with single teens. http://economics.ca/cgi/jab?journal=cje&article=v46n1p0338 http://www.onlinelibrary.wiley.com/doi/10.1111/caje.12005/abstract We study how unionization affects competitive selection between heterogeneous firms when wage negotiations can occur at the firm or at the profit-centre level. With productivity specific wages, an increase in union power has: (i) a selection-softening; (ii) a counter-competitive; (iii) a wage-inequality; and (iv) a variety effect. In a two-country asymmetric setting, stronger unions soften competition for domestic firms and toughen it for exporters. With profit-centre bargaining, we show how trade liberalization can affect wage inequality among identical workers both across firms (via its effects on competitive selection) and within firms (via wage discrimination across destination markets). http://economics.ca/cgi/jab?journal=cje&article=v46n1p0023 http://www.onlinelibrary.wiley.com/doi/10.1111/caje.12006/abstract We use plant-level data to study the link between the local availability of services and the decision of manufacturing firms to source materials from abroad. We develop a model to generate predictions about how the intensity of international sourcing of materials depends on the availability of services and firm characteristics. These predictions are supported by the data. Greater availability of services across regions, industries, and time increases firms' foreign sourcing of materials relative to sales. The impact of services differs by firm type. National firms' sourcing responds to changes in regional service conditions, whereas multinationals tend to be less affected. http://economics.ca/cgi/jab?journal=cje&article=v46n1p0078 http://www.onlinelibrary.wiley.com/doi/10.1111/caje.12007/abstract This paper presents an empirical analysis of outsourcing behaviour by French manufacturing industries. It focuses on the effects of market thickness, sunk costs, and the productivity of firms on the outsourcing decision. I estimate a dynamic probit model where outsourcing decision is linked to past outsourcing behaviour. The results show that outsourcing is a persistent strategy adopted by large firms and suggest the presence of significant sunk costs associated with outsourcing. The results also show that market thickness reduces search costs and enhances the establishment of outsourcing relationships. http://economics.ca/cgi/jab?journal=cje&article=v46n1p0103 http://www.onlinelibrary.wiley.com/doi/10.1111/caje.12008/abstract The fact that crossing a political border dramatically reduces trade flows has been widely documented in the literature. The increasing number of borders has surprisingly attracted much less attention. The number of independent countries has indeed risen from 72 in 1948 to 192 today. This paper estimates the effect of political disintegration since World War II on the measured growth in world trade. We first show that trade statistics should be considered carefully when assessing globalization over time, since the definition of trade partners varies over time. We document a sizeable resulting accounting artefact, which accounts for 17% of world trade in 2007. Second, based on a structural gravity equation, we estimate that since World War II political disintegration alone has raised measured international trade flows by 7% but decreased actual trade flows (including inter-regional trade) by 2%. http://economics.ca/cgi/jab?journal=cje&article=v46n1p0135 http://www.onlinelibrary.wiley.com/doi/10.1111/caje.12009/abstract This paper re-examines how differences in systems for financing education influence GDP by highlighting a neglected function of education policy: it affects the magnitude of gains from job assignment. When more productive jobs demand more skill, privately financed education can increase productivity gains from matching between jobs and skill by increasing the availability of highly educated people. This differs from the standard argument that publicly financed education increases the total amount of human capital by equalizing educational opportunities. It is shown that if job opportunities have large variations in productivity, education policy may face a serious efficiency-equity trade-off. http://economics.ca/cgi/jab?journal=cje&article=v46n1p0180 http://www.onlinelibrary.wiley.com/doi/10.1111/caje.12010/abstract Both the Theory of Storage and the Hotelling model play a prominent role in the study of non-renewable resource prices. This paper combines these approaches by modifying the Hotelling model to allow firms to hold inventory in addition to in-ground reserves, contributing three new results. First, inventory is more likely to be held if future demand and/or the marginal cost of extraction are uncertain. Second, the market price of the commodity is based on the Theory of Storage when inventory is held. Third, the optimal extraction of the resource is based on the Hotelling model. http://economics.ca/cgi/jab?journal=cje&article=v46n1p0239 http://www.onlinelibrary.wiley.com/doi/10.1111/caje.12011/abstract In order to analyze the welfare effects of price changes in input markets - following for example a price-fixing conspiracy - economists have studied the relationship between the surplus measured in the input markets and the surplus in the output markets. The latest results hinge on simplifying assumptions, which are relaxed here by linking the input markets surplus question to another stream of literature, which characterizes functions that oligopolists collectively, yet unintentionally, maximize. It is shown that the area under the input demands is equal to the change in a function for which critical points coincide with the equilibria of the downstream game. A particular case of these functions is the exact potential function. http://economics.ca/cgi/jab?journal=cje&article=v46n1p0266 http://www.onlinelibrary.wiley.com/doi/10.1111/caje.12012/abstract We investigate the impact of alternative certifying institutions on firms' incentives to engage in costly Corporate Social Responsibility (CSR) activities as well as their relative market and societal implications. We find that the CSR certification standard is the lowest under for-profit private certifiers and the highest under a Non Governmental Organization (NGO), with the standard of a welfare-maximizing public certifier lying in between. Yet, regarding industry output, this ranking is reversed. Certification of CSR activities is welfare enhancing for consumers and firms and should be encouraged. Finally, the market and societal outcomes of CSR certification depend crucially on whether certification takes place before or after firms' CSR activities. http://economics.ca/cgi/jab?journal=cje&article=v46n1p0282 http://www.onlinelibrary.wiley.com/doi/10.1111/caje.12013/abstract This paper shows that imperfect financial integration and informational asymmetries are not competing theories but rather complementary ideas to a single explanation of the home bias puzzle. We develop a rational expectations model of asset prices with investors that face informational constraints and find that informational advantages arise endogenously as a response to small financial frictions. We also present empirical evidence that (i) international financial frictions are correlated to observed patterns of US investors' attention and that (ii) the attention US investors allocate to foreign stocks helps explain home bias towards those countries, even after controlling for financial integration levels. http://economics.ca/cgi/jab?journal=cje&article=v46n1p0310 http://www.onlinelibrary.wiley.com/doi/10.1111/caje.12014/abstract http://economics.ca/cgi/jab?journal=cje&article=v46n1p0001