What's in a Name? the Effect of Changing Definitions of “employee” on Worker Outcomes

Elliott Ash (ETH Zürich)
Daniel M. Deibler (Columbia University)

Abstract : This paper provides causal evidence on how the definition of employment – whether a worker can legally be designated as an employee or an independent contractor – affects labor market outcomes. We exploit the random assignment of U.S. Circuit Court Judges to specific cases to obtain exogenous variation in employment definitions over time, across states, and across occupations. More “employee” definitions (relative to "contractor" definitions) increase wages for workers in non-manual jobs by 10%, with no effect for workers in manual jobs. We also find evidence that wages increase more for workers in states without right-to-work laws, suggesting there is variation in effect by preexisting legal rules. We also find that more “employee” definitions increases unionization rates by 2 percentage points, again with larger effects in states without right-to-work laws. There is no effect on either aggregate employment or contracting rates, suggesting that the wage gains are not driven by compositional changes in the workforce. These results highlight the importance of legal definitions of employment in the operation of the labor market.

Judged in Hindsight: Regulatory Incentives in Approving Innovations

Suraj Malladi (Stanford Graduate School of Business)

Abstract : I study how limited information and ex-post evaluation by third parties with the benefit of hindsight affect how regulators approve innovations. In the face of ambiguity over innovation characteristics, such a regulator limits or delays product approval, even when she is not waiting for new information to arrive. When evidence is costly for firms to generate but can be selectively reported, the regulator delegates information acquisition to the firm with the objective of minimizing max-regret. This model can explain observed patterns of correlation between firm costs and benefits of approval, why regulators drag their feet on approval decisions even in the face of strong favorable evidence, and support for regulatory sandboxes even when they do not hasten learning.

Government Technology Policy, Social Value, and National Competitiveness

Frank Nagle (Harvard University)

Abstract : This study seeks to better understand the impact that government technology procurement regulations have on social value and national competitiveness. To do this, it examines the impact of a change in France’s technology procurement policy that required government agencies to favor open source software (OSS) over proprietary software in an attempt to reduce costs creating an unexpected demand shock for OSS. Analysis using the rest of the EU as controls via difference-in-differences and synthetic control frameworks shows that this policy change led to an increase of nearly 600,000 OSS contributions per year from France, creating social value by increasing the availability and quality of free and open source software. Estimates indicate this would have cost paid software developers roughly $20 million per year to replicate. However, the open nature of such goods means that any country can reap the benefits of these efforts. Therefore, additional economic outcomes that enhance France’s competitiveness are also considered. The results show that within France, the regulation led to a 0.6% - 5.4% yearly increase in companies that use OSS, a 9% - 18% yearly increase in the number of IT-related startups, a 6.6% - 14% yearly increase in the number of individuals employed in IT related jobs, and a 5% - 16% yearly decrease in software related patents. All of these outcomes help to increase productivity and competitiveness at the national level. In aggregate, these results show that changes in government technology policy that favor OSS can have a positive impact on both global social value and domestic national competitiveness.