Frontiers of economic research

Ross Levine, Chen Lin, Lai Wei, 27 May 2016

Economic theory offers conflicting perspectives on the relationship between insider trading and innovation. To date, the empirical evidence is similarly inconclusive. This column exploits the staggered enforcement of inside trading laws across countries to explore the effect on patenting behaviour. The findings point to a robust positive effect of enforcement on various measures of patenting behaviour. Legal systems that protect outside investors from corporate insiders thus help to foster innovation. 

Samuel Bowles, 26 May 2016

Explicit economic incentives – for example, a subsidy to contribute to a public good – can sometimes ‘crowd out’ generous and ethical motives. But when properly designed, can incentives ‘crowd in’ these civic virtues? This column uses an example from ancient Athens to show how this might be done, providing a lesson for modern mechanism design and public policy. 

Ivan G. Lopez Cruz, Sebastian Galiani, Gustavo Torrens, 24 May 2016

A large empirical literature has revealed the effects of preventative and punitive measures on crime. This column examines the effects of police deployment strategies, comparing geographically concentrated protection with evenly dispersed protection across a city. The results suggests that when considering changes in the geographic distribution of police forces, we should take into account the effects on house prices and on reallocation of the population, as well as the overall effect on crime in the entire city. 

Guglielmo Barone, Sauro Mocetti, 17 May 2016

Societies characterised by a high transmission of socioeconomic status across generations are not only more likely to be perceived as ‘unfair’, they may also be less efficient as they waste the skills of those coming from disadvantaged backgrounds. Existing evidence suggests that the related earnings advantages disappear after several generations. This column challenges this view by comparing tax records for family dynasties (identified by surname) in Florence, Italy in 1427 and 2011. The top earners among the current taxpayers were found to have already been at the top of the socioeconomic ladder six centuries ago. This persistence is identified despite the huge political, demographic, and economic upheavals that occurred between the two dates. 

Paula Stephan, Jian Wang, Reinhilde Veugelers, 12 May 2016

There is growing concern that funding agencies supporting scientific research are increasingly risk-averse, favouring safe projects at the expense of novel projects exploring untested approaches. This column uses the citation trajectories for over 1 million research papers to examine the impact profile of novel research. Novel papers tend to suffer from delayed impact, but are more likely to become big hits in the long run and to generate follow-up research. The short time windows of the bibliometric indicators that are increasingly used by funding agencies in their decision-making may bias funding decisions against novelty.

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