Aging, Retirement, and High-skill Work Performance: the Case of State Supreme Court Judges

Elliott Ash (Princeton University)
W. Bentley MacLeod (Columbia University)

Abstract : This paper provides evidence on how high-skill work performance changes in response to biological aging, and in response to mandatory retirement policies. Our data set is constructed from the work product of all state supreme court judges for the years 1947 through 1994. Older judges have the same work output as younger judges but write lower-quality opinions. Older judges use a different writing style, with shorter words but longer sentences. Conditional on current age, judges who retire later in life write write higher-quality opinions than judges who retire earlier in life. Mandatory retirement policies have a demotivating effect on judge work output, but not on work quality.

Morningness-evenigness Pay Gap in Creative R&d Jobs

Aaro Hazak (Tallinn University of Technology)
Kadri Männasoo (Tallinn University of Technology)
Markku Partinen (Helsinki Sleep Clinic, University of Helsinki)

Abstract : People differ from one another in their daily sleep and wake regimes. Various social norms, regulations and other institutional factors imply on the behaviour and equality of treatment of individuals with different morningness-eveningness patterns. We provide some insight on the existence of morningness-eveningness pay gap. We present fully observed recursive structural equation estimates as well as ordered probit regression estimates of the drivers of salary levels, based on data from our original repeated survey of Estonian creative R&D employees on a sample of 149 individuals from eleven entities. Employees of evening type appear to have a lower probability of getting higher levels of salary, compared to employees with no distinct morningness-eveningness profile. Simultaneously, we find support to a strong gender pay gap, with female employees having an average 13-15% lower probability of earning the higher levels of salary. Age is another strong determinant of the salary level.

Conflict and the Design of Optimal Conflict

Bentley W. MacLeod (Columbia University)
Victoria Valle Lara (University of Lausanne)
Christian Zehnder (University of Lausanne)

Abstract : One prevalent theme that runs through the management literature on compensation is the problem of reducing organizational conflict. However, theoretical research in economics emphasizes that while it is desirable to reduce destructive conflicts, there are situations in which functional conflicts are needed to ensure efficiency. MacLeod (2003) proposes a version of the principal-agent model in which output is not perfectly observable and the principal and agent receive noisy and private performance signals which are imperfectly correlated and can lead to disagreements. In this model, high effort equilibria require conflicts on the equilibrium path. Bonus payments can only be based on the principal’s private signal. Since the signals are only imperfectly correlated, there will be situations in which the agent does not get a bonus although he observes a good signal. In those cases, it is crucial that the agent initiates conflict which is costly for the principal to ensure that the principal is motivated to pay the bonus when she observes a good signal. To study the role of functional conflicts we implement MacLeod’s environment in an experiment. In one treatment we allow for conflicts while in another treatment we rule out conflicts. We observe that subjects fail to coordinate on the predicted high-effort equilibrium under conflict. Agents initiate too many conflicts which are not functional. These conflict patterns distort the incentives of the principal to pay the bonus as a function of his private signal. Thus, agents are not incentivized to choose high effort. Our results indicate that efficiency enhancing equilibria based on strategically initiated conflicts are hard to obtain. We plan to design instruments to institutionalise conflict. In particular, we intend to study a formal reporting system in which agents can file official complaints. We hope that behavioural forces such as lying aversion will help to better align behaviour by making conflict formal.

Relative Evaluation Scheme for Teams and Multi-tasks

Satoshi Matsuzawa (Yale University)

Abstract : One of the solutions to the moral hazard in team production is to divide the firm into more than two teams and make them compete. We extend this relative evaluation scheme for teams so that we can pin down the optimal incentive power explicitly. We find that the firm should provide a higher-powered incentive when the firm's size grows and the degree of complementarity of each team's output increases, and this explains why large companies tend to have a more skewed remuneration menu. We further extend the model to the cases where workers have to deal with two kinds of multi-tasks: the first is to help their coworkers and the second is they face a general and team-specific jobs. We find that, in the former case, given a higher-powered incentive, a worker tends to put more effort into help, and in the latter case, he/she tends to put more effort into the team-specific job and less into the general job. This result implies that the firm sometimes would be better off by providing a lower-powered incentive.

Endogenous Corruption in Europe: Destructive or Constructive? an Econometric Analysis of Corruption’s Effects on Output and Income Inequalities

Georgios Melios (Swansea University)

Abstract : What are the origins and characteristics of corruption in European countries and how does it affect per capita GDP and income distribution? This research attempts to answer these questions using a panel of 28 European countries between 1995-2015 and a system of 3 simultaneous equations. Results imply that in the sample as a whole, corruption depresses economic output and increases income inequalities. We split the sample into groups according to their GDP level and we find that for poor countries corruption appears to have an efficiency enhancing mechanism, suggesting that corruption might be a stage in the development process through which all countries pass. Additionally, we explore the sub-sample of former communist countries to assess whether their corruption is distinctive.

Nanotechnology Risk – Next Challenge for the Insurance Sector

Adam Sliwinski (Warsaw School of Economics)
Marietta Janowicz-Lomott (Warsaw School of Economics)

Abstract : The discovery of nanoparticles has already revolutionized progress of civilization by impacting many aspects of human life. Nanotechnology, or controlled production and creation of atomic and molecular structures in nanoscopic scale, creates unimaginable opportunities in many disciplines including medicine, defense systems or as well as clothing and food industries. Aside from the many benefits that growth of nanotechnology exposes our civilization to an increasing number of new risks, creating hazards that are currently difficult to foresee. Existence of threats opens up space for the functioning of insurance. However, this leads to questions whether nanotechnology-related risk is an insurable risk and whether it is technically feasible at this time to draft such an insurance offer. The present publication attempts to answer these questions. The publication consists of four parts. Part one describes nanotechnology as a branch of science. Part two presents options of implementing nanotechnology-based methods in the industry. Part three discusses the hazards that nanotechnology poses for human health and the environment, and evaluates the insurability of risks connected to this production methods. In part four, authors advocate for applying mutual insurance specifics to risk management in conditions calling for nanotechnological use. The essence of mutual insurance creates opportunities for dealing with nanotechnology risk even in situations when no verified actuarial models enabling credible insurance contribution calculations exist. The publication is based on authors’ own research and analyses of literature pertaining to nanotechnology risk management, including studies of reinsurers and insurance companies as well as the study: The Insurability of Nanomaterial Production Risk, Nature Nanotechnology 8, p.222–224 (2013), whose authors discuss the possibilities of and auxiliary conditions for transfer nanotechnology risk to the insurance sector.

Gulag-mart: Gray and Black Markets Within Modern Russian Penal System

Anton V. Tabakh (Higher School of Economics, Mosow)
Polina V. Kryuchkova (Higher School of Economics, Moscow)

Abstract : Russia’s FSIN (Federal Correctional Service) - direct successor of notorious GULAG - is one of the biggest prison systems in the world, with about 1000 penal institutions. While exchange of goods between inmates is prohibited, there is a flourishing market for goods and services with counterparties inside and outside penitentiaries. We tested hypothesis that (1) prices of goods and services can significantly deviate within closed system than at outside market, in both legal and semi-legal trading (2) lack of formal property rights significantly distorts behavior of economic agents and (3) opportunistic behavior of prison stuff shapes market structure and outcomes. All three were confirmed. Market for mobile phones was the most interesting. While mobile telephones are banned within prisons and their ownership is punished by stricter regime and withdrawal of privileges, they are highly valued. Unlike free world, model of the telephone does not impact price, which is 5-10 times higher than outside. Size (easiness to hide) and quality of cameras were material factors. Interestingly common ownership of telephones is rare – as it is both status symbol and due to lack of property rights. Payments within prisons are still done in cigarettes or loose tea, and price scale exists for most goods and services. However, mobile payments became common these days for deals with outsiders. Agents serve as intermediaries with relatively high fees that cover semi-legal nature of transactions.

Segregation and Mobility in Economic Activity: Deriving Features and Drivers from Income and Spending Patterns

Milan van den Heuvel (Ghent University)
Tarik Roukny (MIT)
Ken Bastiaensen (Ghent University)
Benjamin Vandermarliere (Ghent University)
Koen Schoors (Ghent University)
Jan Ryckebusch (Ghent University)

Abstract : In this paper, we study the dynamics of income and spending behaviors using panel data spreading 10 years (2006-2016) and containing 3,5 million clients from the belgian market of a large european bank. For this representative sample of the belgian population, we collect every transactions statement at the individual level, as well as a wide range of individual characteristics (e.g. loan debt, age, postal code, marital status, etc.). First, we identify distinct clusters based on income and spending behavior using a selected set of individual characteristics data. We then study the evolution of each cluster over time. Furthermore, we characterise transfer flows of individuals from one cluster to another. When an individual moves from one cluster to another, we study other changes that subsequently take place in aspects of the economic behavior of the individual that is not part of the clustering method. Doing so, we are able to study economic and social mobility at a large and representative scale of the country population showing clear cases of intra-generational mobility upwards and downwards as well as the effects of mobility on other dimensions of individual’s economic life. This work offers a map of a country’s population relative economic dynamics, which factors come into play, and what second order effects may in turn occur. The results are relevant to discussions of government policy intended to identify and promote upwards trends for the welfare of its population.