Discussion Papers

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Discussion Paper No. 340
September 30, 2022

Filling the Gap: The Consequences of Collaborator Loss in Corporate R&D

Authors:
Poege, Felix (Boston University and IZA)
Gaessler, Fabian (Universitat Pompeu Fabra and MPI)
Hoisl, Karin (MPI, University of Mannheim and Copenhagen Business School)
Harhoff, Dietmar (MPI, LMU Munich and CEPR)
Dorner, Matthias (Institute for Employment Research, Nuremberg)
Abstract:
We examine how collaborator loss affects knowledge workers in corporate R&D. We argue that such a loss affects the remaining collaborators not only by reducing their team-specific capital (as argued in the prior literature) but also by increasing their bargaining power over the employer, who is in need of filling the gap left by the lost collaborator to ensure the continuation of R&D projects. This shift in bargaining power may, in turn, lead to benefits, such as additional resources or more attractive working conditions. These benefits can partially compensate for the negative effect of reduced team-specific capital on productivity and influence the career trajectories of the remaining collaborators. We empirically investigate the consequences of collaborator loss by exploiting 845 unexpected deaths of active inventors. We find that inventor death has a moderate negative effect on the productivity of the remaining collaborators. This negative effect disappears when we focus on the remaining collaborators who work for the same employer as the deceased inventor. Moreover, this group is more likely to be promoted and less likely to leave their current employer.
Keywords:
collaboration; mobility; innovation; inventors; patents; teams
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Discussion Paper No. 339
September 29, 2022

The Empirics of Economic Growth Over Time and Across Nations: A Unified Growth Perspective

Authors:
Cervellati, Matteo (University of Bologna)
Meyerheim, Gerrit (LMU Munich)
Sunde, Uwe (LMU Munich)
Abstract:
This research develops an expanded unified growth theory that incorporates the endogenous accumulation of physical capital, population, human capital, and technology. The model incorporates a complementarity between physical capital and human capital and can be extended to a multi-country setting with international technology diffusion. The analytical characterization of the mechanisms behind the observed patterns of long-run growth and comparative development delivers a consistent explanation for a large set of seemingly unrelated empirical facts. A quantitative multi-country version of the model matches various empirical regularities of long-run growth dynamics and comparative development patterns that have previously been studied in isolation. The findings also shed new light on the role of the demographic transition for convergence patterns, the specification of cross-country growth regressions, technology spillovers, and the secular stagnation debate.
Keywords:
unified growth; long-run development; demographic transition; secular stagnation
JEL-Classification:
O47; O11; O15; E24
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Discussion Paper No. 338
September 13, 2022

Does Demography Determine Democratic Attitudes?

Authors:
Kotschy, Rainer (Harvard University)
Sunde, Uwe (LMU Munich)
Abstract:
This paper presents new evidence on how demography affects democratic attitudes in Western democracies. Using individual survey responses, the empirical analysis disentangles age from cohort patterns and other contemporaneous economic and political influences that shape democratic attitudes. The results reveal that support for democracy increases with age and is lower for more recent birth cohorts. These patterns are more pronounced in Western democracies than in the former Eastern bloc and in other countries around the world. Additional findings document that demography's effect partly captures heterogeneity in experiences with democracy, and that socioeconomic factors impact democratic attitudes.
Keywords:
support for democracy; age-periods-cohort models; population aging; demographic composition; stability of democracy; modernization hypothesis
JEL-Classification:
D72; O17; O43; P48
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Discussion Paper No. 337
September 9, 2022

Non-Additivity of Subjective Expectations over Different Time Intervals

Authors:
Haan, Peter (FU Berlin and DIW Berlin)
Sun, Chen (HU Berlin)
Sunde, Uwe (LMU Munich)
Weizsäcker, Georg (HU Berlin)
Abstract:
We examine the additivity of stock-market expectations over different time intervals. When asked about a ten-year interval, survey respondents expect a stock-price change that is not equal to, but closer to zero than, the sum of their expectations over two shorter time intervals that cover the same ten years. Such sub-additivity is irrational in that it cannot stem from aggregating short-term expectations. Model estimates show that the pattern is consistent with a time perception where shorter time intervals have a proportionally larger weight. We also find that the respondents' degree of additivity is correlated with making larger financial investments.
Keywords:
expectation formation; time perception; sub-additivity; super-additivity
JEL-Classification:
D01; D14; D84; D9
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Discussion Paper No. 336
September 9, 2022

Attracting Profit Shifting or Fostering Innovation? On Patent Boxes and R&D Subsidies

Authors:
Haufler, Andreas (LMU Munich and CESifo)
Schindler, Dirk (Erasmus University Rotterdam)
Abstract:
Many countries have introduced patent box regimes in recent years, offering a reduced tax rate to businesses for their IP-related income. In this paper, we analyze the effects of patent box regimes when countries can simultaneously use patent boxes and R&D subsidies to promote innovation. We show that when countries set their tax policies non-cooperatively, innovation is fostered, at the margin, only by the R&D subsidy, whereas the patent box tax rate is targeted at attracting international profit shifting. In equilibrium, patent box regimes emerge endogenously under policy competition, but never under policy coordination. We also compare the competition for mobile patents with the competition for mobile R&D units and show that enforcing a nexus principle is likely to reduce the aggressiveness of patent box regimes.
Keywords:
corporate taxation; profit shifting; patent boxes; R&D tax credits; tax competition
JEL-Classification:
H25; H87; F23
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Discussion Paper No. 335
September 9, 2022

Incentives, Globalization, and Redistribution

Authors:
Ferey, Antoine (LMU Munich and CESifo)
Haufler, Andreas (LMU Munich and CESifo)
Perroni, Carlo (University of Warwick and CESifo)
Abstract:
We offer a new explanation for why taxes have become less redistributive in many countries in parallel with an increase in income concentration. When performance-based contracts are needed to incentivize effort, redistribution through progressive income taxes becomes less precisely targeted. Taxation reduces after-tax income inequality but undermines performance-based contracts, lowering effort and raising pre-tax income differentials. Product market integration can widen the spread of project returns and make contract choices more responsive to changes in the level of taxation, resulting in a lower optimal income tax rate even when individuals are not inter-jurisdictionally mobile.
Keywords:
performance contracts; market integration; redistributive taxation
JEL-Classification:
D63; F15; H21
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Discussion Paper No. 334
September 9, 2022

Aversion to Hiring Algorithms: Transparency, Gender Profiling, and Self-Confidence

Authors:
Dargnies, Marie-Pierre (University of Paris Dauphine, PSL)
Hakimov, Rustamdjan (University of Lausanne and WZB Berlin)
Kübler, Dorothea (WZB Berlin and TU Berlin)
Abstract:
We run an online experiment to study the origins of algorithm aversion. Participants are either in the role of workers or of managers. Workers perform three real-effort tasks: task 1, task 2, and the job task which is a combination of tasks 1 and 2. They choose whether the hiring decision between themselves and another worker is made either by a participant in the role of a manager or by an algorithm. In a second set of experiments, managers choose whether they want to delegate their hiring decisions to the algorithm. In the baseline treatments, we observe that workers choose the manager more often than the algorithm, and managers also prefer to make the hiring decisions themselves rather than delegate them to the algorithm. When the algorithm does not use workers' gender to predict their job task performance and workers know this, they choose the algorithm more often. Providing details on how the algorithm works does not increase the preference for the algorithm, neither for workers nor for managers. Providing feedback to managers about their performance in hiring the best workers increases their preference for the algorithm, as managers are, on average, overconfident.
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Discussion Paper No. 333
August 15, 2022

The Dynamics of Behavioral Responses During a Crisis

Authors:
Hartung, Corinna (LMU Munich)
Veramendi, Gregory F. (LMU Munich)
Winter, Joachim (LMU Munich)
Abstract:
This paper investigates the dynamics of behavioral changes during a crisis. We study this in the context of the first year of the Covid-19 pandemic, where behavioral responses were important in mitigating the costs of the pandemic. To identify behavioral responses to unanticipated and transient health risk shocks, we combine high-frequency cellphone mobility data with detailed incidence data in Germany. Using an event-study design on local outbreaks, we find that county-level mobility immediately and significantly decreased by about 2.5% in response to an outbreak independent of non-pharmaceutical interventions. We also find that the reproduction rate decreased by about 17% in response to a local outbreak. Both behavioral responses are quite persistent even after the relative health risk has dissipated. By the time of the second wave, the behavioral response to a second or third shock is small or negligible. Our results demonstrate the importance of (1) integrating behavioral persistence in models used to study behavior and policies that change behavior, (2) the effectiveness of policies that provide high-frequency localized information on health risks, and (3) the potential persistence of behavioral changes after the Covid-19 pandemic has passed.
Keywords:
dynamics; behavioral response; crisis; covid-19
JEL-Classification:
D90; H12; I12; I18
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Discussion Paper No. 332
July 21, 2022

Cooperation, Competition, and Welfare in a Matching Market

Authors:
Bester, Helmut (FU Berlin and HU Berlin)
Sákovics, József (University of the Balearic Islands and University of Edinburgh)
Abstract:
We investigate the welfare effect of increasing competition in an anonymous two-sided matching market, where matched pairs play an infinitely repeated Pris- oner’s Dilemma. Higher matching efficiency is usually considered detrimental as it creates stronger incentives for defection. We point out, however, that a reduction in matching frictions also increases welfare because more agents find themselves in a cooperative relationship. We characterize the conditions for which increasing competition increases overall welfare. In particular, this is always the case when the incentives for defection are high.
Keywords:
cooperation; prisoner's dilemma; competition; welfare; matching; trust building
JEL-Classification:
C72; C73; C78; D6
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Discussion Paper No. 331
July 7, 2022

Charitable Giving by the Poor
A Field Experiment in Kyrgyzstan

Authors:
Adena, Maja (WZB Berlin)
Hakimov, Rustamdjan (University of Lausanne and WZB Berlin)
Huck, Steffen (WZB Berlin and UCL)
Abstract:
In a large-scale natural field experiment, we partnered with a micro-lending company in Kyrgyzstan that asked over 180,000 of its clients for donations to social projects as a form of corporate philanthropy. In a 2×2 design, we explored two main (pre-registered) hypotheses about giving by the poor. First, based on a conjecture that poor are more price sensitive than the rich and in contrast to previous studies, we hypothesize that matching incentives induce crowding in of out-of-pocket donations. Second, we hypothesize that our population cares about their proximity to the charitable project. We find evidence in favor of the former hypothesis but not the latter. Previous studies of charitable giving focus on middle- or high-income earners in Western countries, neglecting the poor, although the lowest income groups are often shown to contribute substantial shares of their income to charitable causes. Our results challenge the evidence in the extant literature but are in line with our theoretical model. The implications for fundraising managers are that the optimal design of fundraising campaigns crucially depends on the targeted groups, and that donation matching is successful in stimulating participation in poorer populations.
Keywords:
charitable giving; field experiments; matching donations
JEL-Classification:
C93; D64; D12
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