Outsourcing in contests

We study ex post outsourcing of production in an imperfectly discriminating contest, interpreted here as a research tournament or a procurement contest for being awarded some production contract. We find that the possibility of outsourcing increases competition between the contestants, leading to higher total contest effort, if the contest winner is expected to obtain a sufficiently large share of ex post outsourcing rents. Under reasonable assumptions, outsourcing tends also to increase the number of active contestants, strengthening the case for outsourcing to increase total contest effort. If such effort is socially wasteful, outsourcing creates a welfare trade-off between ex ante and ex post efficiency.     

Diffusion of treatment interventions: exploration of ‘secondary’ treatment diffusion

Abstract

The present report presents outcome results from a randomized controlled effect study on extended Aggression Replacement Training (ART). In a pre–post design, a 30-hour ART intervention was found to significantly reduce behavioral problems and increase social skills. The control group did not demonstrate comparable changes, but still indicated improvement. Such control-group improvement may be caused by improper treatment and control group implementation (diffusion of treatment) and/or ‘secondary’ diffusion caused by participants in the treatment group affecting control group subjects by demonstrating changed behavior. Both mechanisms were explored, and it is concluded that the improvement observed in the control group was due to such ‘secondary diffusion’. Implications of these findings are discussed.     

Unions and Market Integration in Contests

In this paper, we study the effects of introducing endogenous costs in aTullock model of rent-seeking. We show that unions can be efficiencyimproving, and that the firms' levels of effort depend more critically uponthe number of firms participating in the contest when unions are present. Wethen study the effects of market integration in a two-country setup.Integrating two initially separate markets is shown to decrease union setwages, but is nevertheless beneficial to firms of both countries only if thereare sufficiently few contestants. However, unions and firms in one countrymight benefit from integration if their resident country is sufficiently largecompared to the post-integration market.     

Can tax evasion tame Leviathan governments?

This paper asks to what extent institutional features that facilitate tax evasion may keep Leviathan governments at bay. The specific feature we look at is banking secrecy abroad. The analysis draws on a 16-generation OLG model in which tax rates are determined in a repeated game between voters and a rent-seeking Leviathan government. Key insights are: (1) Effects on any generation alive when change takes place may differ substantially from steady-state effects that accrue for generations yet to be born. (2) There is considerable intergenerational diversity in these effects that is not monotonic as we move from young to old. Combined, these results suggest that the political economy of pertinent institutional change may be quite complex.