Perverse Impact Research Articles

Revisiting the economic theory of crime A state-level analysis in India

The economic theory of crime tends to suggest that deterrence variables have a significant impact on crime rates in a society. From an economic perspective, criminals are rational economic agents who weigh the likelihood of being arrested and apprehended before committing a crime. An increase in the likelihood of arrest and apprehension should deter criminals as it increases the expected costs of committing crimes. This paper revisits the behavioral links between deterrence variables and crime rates in the Indian context. Empirically, we draw on state level data for India in 2001–2014 and employ the system GMM estimator technique to support our claims. The study reports that deterrence factors (probability of arrest and apprehension) have a perverse impact on India’s crime rates. The paper reveals that an increase in the probability of deterrence variables does not lead to a reduction in crime rates, indicating a fundamental flaw in India’s corrective mechanisms. The research recommends penal system reform in order to accurately reconfigure the behavioral links between deterrence variables and crime rates.

The perverse impact of performance measures on policing: lessons from the rise and fall of out of court disposals

ABSTRACT This paper questions the assumption that performance measures inevitably lead to gaming behaviours. Using (and extending) Patrick’s Perverse Policing Model, the rise and fall of out of court disposals (OOCDs) from 2000–2020 – especially penalty notices for disorder – is assessed in light of the introduction and removal of the offences brought to justice target (in place from 2002–2008) and the Best Use of Stop and Search Scheme (BUSSS, in place from 2014). All four forms of gaming set out in the Perverse Policing Model were found with regard to the offences brought to justice target and a fifth form, materialising, was added to the model. However, gaming was not apparent in the use of OOCDs post-BUSSS. Reasons for this difference are considered. Namely, distinction is drawn between performance targets and performance measures. It is argued that all performance measures begin life as presentational rules. They either remain as such or become enabling (encouraging gaming) or inhibitory (encouraging compliance) depending on which response attracts the least ‘within the job’ trouble. This paper draws on national statistics on OOCD use from 2000–2020, a case study on one force’s use of PNDs from 2010–2011 and exploratory data on positive outcomes following stop and search from July 2015–December 2020. These varied datasets allow for a detailed consideration of how these powers have been used in practice, the various opportunities afforded for gaming by OOCDs and an exploration of why those opportunities are, and are not, realised.

Corruption and Income Inequality in China

ABSTRACT We investigate the intricate relation between corruption and income inequality in China based on provincial panel data of 1996–2014. Our analysis shows that lower corruption is associated with higher income inequality. This seemingly counter-intuitive result, however, is consistent with findings from countries with a large informal sector, particularly those in Latin America. Institutional reform reduces corruption but also imposes additional costs on the participants in the informal sector. The latter effect, at least initially, exacerbates inequality, giving rise to the negative correlation. After the informal sector in China is considered, that negative relation vanishes. Moreover, when reform is accompanied by measures protecting the poor (such as those taken in the agricultural reform occurring in early 2000s), its perverse impact on inequality is significantly reduced. Lastly, public investment is positively associated with income inequality as the former, generally financed by taxation, may transfer income from the taxpayers to the business elites.

The Invention of the Future. Does Platformisationn Redefine the Notion of the Firm?

New forms of labour intermediation through digital platforms such as Uber, Deliveroo or Amazon Mechanical Turk can be conceptualised as the latest stage of a long-lasting process of disaggregation of the firm and “disorganisation of labour law.” In particular, the rise of platform-mediated work can be seen as an instantiation of deliberate business strategies aimed at outsourcing labour while retaining intense and pervasive managerial prerogative. The phenomenon is exacerbating several unresolved tensions inherent in the contemporary world of work, let alone the perverse impact that “platformisation” is having on precariousness and social inequalities. In short, new technologies allow platforms to abandon traditional methods of workplace governance and adopt a stronger version of the “command and control” logic. Direct interaction is replaced by a significant reliance on information communications technology: workers are monitored more closely and intimately than they ever used to be by means of tech tools, including algorithms, artificial intelligence and customers’ reviews. This leads to the question whether the existing concept of “firm” is appropriate to face this transformational new reality, whether minor or major adaptations may be necessary or whether we need a total re-invention of the underlying assumptions of the employment relationship. After describing the theoretical antecedents of hierarchical outsourcing, the article explores the literature on the nature of “non-standard forms of firm” by applying transaction-cost economics. In an attempt to update the incomplete trichotomy among “hierarchies,” “markets” and “networks,” I present a complementary model combining pre-existing schemes. By building on theories unfolding the disarticulation of the formal employing entity and the pulverisation of work-related responsibilities, this paper demystifies the prototypical business model of rampant socio-economic actors.

Why Exchange Values are Not Environmental Values: Explaining the Problem with Neoliberal Conservation

In recent years, scholars have critiqued neoliberal conservation, asserting that neoliberal conservation policies tend to have ineffective outcomes and reinforce existing power relations. I build on this research by using a combination of quantitative and qualitative data from research in the Bellbird Biological Corridor, Costa Rica. I demonstrate that only a small subset of values for sustainable land uses align with monetary exchange values for ecosystem services, and I suggest that this may result in neoliberal conservation policy in the region having a perverse impact on long-term sustainability. Mixed methods data show that across the study area landowners engage differently with neoliberal conservation mechanisms, and market fluency is one of the factors shaping this interaction. Results further show how policy that emphasises an exchange value view of environmental benefits reflects an over-simplification of values that can undermine ecological sustainability by promoting short-term values of “competitive land uses.” This research highlights that integrating ecosystem services into marketable goods renders neoliberal conservation policies inadequate, and subject to volatile market fluctuations. I suggest that conservation policy should reinforce multifaceted social values toward sustainable landscapes, rather than promote economic incentives that reduce environmental benefits to exchange value.

Immigration Restrictions as Active Labor Market Policy: Evidence from the Mexican Bracero Exclusion.

An important class of active labor market policy has received little impact evaluation: immigration barriers intended to raise wages and employment by shrinking labor supply. Theories of endogenous technical advance raise the possibility of limited or even perverse impact. We study a natural policy experiment: the exclusion of almost half a million Mexican 'bracero' farm workers from the United States to improve farm labor market conditions. With novel archival data we measure state-level exposure to exclusion, and model the labor-market effect in the absence of technical change. We reject such an effect and fail to reject a null effect.

The perverse impact of external reference pricing (ERP): a comparison of orphan drugs affordability in 12 European countries. A call for policy change

ABSTRACTObjective: The study compared the relative cost differences of similar orphan drugs among high and low GDP countries in Europe: Bulgaria, France, Germany, Greece, Hungary, Italy, Norway, Poland, Romania, Spain, Sweden, UK.Methods: Annual treatment costs per patient were calculated. Relative costs were computed by dividing the costs by each economic parameter: nominal GDP per capita, GDP in PPP per capita, % GDP contributed by the government, government budget per inhabitant, % GDP spent on healthcare, % GDP spent on pharmaceuticals, and average annual salary. An international comparison of the relative costs was done using UK as the reference country and results were analysed descriptively.Results: 120 orphan drugs were included. The median annual costs of orphan drugs in all countries varied minimally (cost ratios: 0.87 to 1.08). When the costs were adjusted using GDP per capita, the EU-5 and Nordic countries maintained minimal difference in median cost. However, the lower GDP countries showed three to six times higher relative costs. The same pattern was evident when costs were adjusted using the other economic parameters.Conclusion: When the country’s ability to pay is taken into consideration, lower GDP countries pay relatively higher costs for similarly available orphan drugs in Europe.

Inequality: How Much Is There and Is It All Bad?

This article is an attempt at providing a better perspective on the debate over inequality. First, it claims that inequality is increasing, but not as much as many claim. In fact, the increase is modest and badly measured. Moreover, inequality is well below the levels observed prior to the 20th century. Secondly, it claims that inequalities must be decomposed between "good", "neutral" and "bad" inequalities. "Good inequalities" result from individual preferences and have no perverse impact on economic growth. "Neutral" inequalities relate to changes in family size, demography and marriage patterns and they have no moral implication whatsoever, as they merely exhibit changes in economic structures. "Good" and "Neutral" inequalities create no "social malaise". The "bad" inequalities are those that are socially noxious because they result from impairments in the capacity of individuals to make choices. Thirdly, this paper argues that a large share of the "bad" inequalities stem from government policies that push down the left-tail of the income distribution while pulling up the right tail. Although there are inequalities from birth, these are much costlier to combat than inequalities resulting from government intervention.

To educate or not to educate: Impact of public policies in developing countries

It is well-known in the empirical literature that present-oriented individuals are less likely to go to college as compared to forward looking individuals. There is compelling evidence of a high percentage of dropouts from high schools in poor countries. The endogenous sorting of homogeneous workers into skilled and unskilled types might be the outcome of exposure to income risk and an individual's aversion to risk. We obtain the critical risk aversion associated with income levels above which no individual chooses education. Broad-based economic policies may have perverse impact on educational attainments of individuals. We argue that such an analysis has been largely neglected in related studies. This outcome may also be undesirable from the perspective of a social planner. To address this, we suggest a sector-specific tax-subsidy scheme as a corrective instrument of public policy.

Information Acquisition, Dynamic Pricing of Electricity, and Conservation Requests: Evidence from a Field Experiment

This article uses panel data on how frequently households use in-home displays (IHD) in a randomized field experiment to investigate how acquiring information from IHDs affects electricity usage of households facing either dynamic pricing of electricity or conservation requests. Providing IHDs, which enables households to see a graph of their half-hourly electricity consumption in real time, is a promising policy intervention that corrects for biases associated with inattention and limited information-processing capacity by promoting salience and learning. Contrary to the energy-conservation literature, I find that IHD usage consistently raised electricity consumption of households. This perverse impact of IHD usage on energy conservation increased through learning over time as the experiment proceeds. However, an interactive effect of IHD provision and dynamic pricing implies that providing an IHD together with pecuniary incentive schemes could be effective in energy conservation.

The Impact of Investor Sentiment on Stock Returns in Emerging Markets: The Case of Central European Markets

This article studies the effect of investor sentiment on stock returns in three Central European markets: the Czech Republic, Hungary, and Poland. The results show that sentiment is a key variable in the prices of stocks traded on these markets, and has a stronger impact here than in more developed European markets. This effect is linked to stock characteristics, particularly those considered to make stocks more prone to the influence of investor sentiment. The evidence shows that the effect is not uniform across countries, since higher levels are found for Poland and the Czech Republic, thus confirming the role of country-specific factors in the impact of investor sentiment on stock prices. The results also confirm that sentiment is a twofold (global and local) phenomenon, in which the global dimension has much greater impact than the local dimension, at least in the markets considered. Finally, the article shows that sentiment does not spread, at least to any significant degree, through the movement of capital between markets. This strengthens the argument that sentiment is transmitted through a behavioral mechanism. If this argument proves correct, there is little likelihood of local regulatory action being very effective in limiting the perverse impact of asset bubbles.

The perverse impact of calling for energy conservation

In periods of high energy demand, utilities frequently issue “emergency” appeals for conservation over peak hours to reduce brownout risk. We estimate the impact of such appeals using high-frequency data on actual and forecasted electricity generation, pollutant emission measures, and real-time prices. Our results suggest a perverse impact; while there is no significant reduction in grid stress over superpeak hours, such calls lead to increased off-peak generation, CO2 emissions, and price volatility. We postulate that consumer attempts at load shifting lead to this result.

Means-Tested Age-Pension and Saving

We investigate whether households adjust retirement savings decisions in re-sponse to changes in the means-tested public pension plans. The policy in question lowered the taper rate of the assets test on the age pension in Australia in 2007. We use HILDA, a detailed micro panel data-set for Australian households and focus on the age group between 50 and 64 in 2006, prior to the reform. We compare savings behaviours of those who were constrained to increase financial wealth because of the assets test prior to the reform with those who were not constrained, and find that assets tests do have a perverse impact on saving.

Means-tested Age-Pension and Saving

We investigate whether households adjust retirement savings decisions in response to changes in the means-tested public pension plans. The policy in question lowered the taper rate of the assets test on the age pension in Australia in 2007. We use HILDA, a detailed micro panel data-set for Australian households and focus on the age group between 50 and 64 in 2006, prior to the reform. We compare savings behaviours of those who were constrained to increase nancial wealth because of the assets test prior to the reform with those who were not constrained, and nd that assets tests do have a perverse impact on saving.

WILLFUL BLINDNESS: THE INEFFICIENT REWARD STRUCTURE IN ACADEMIC RESEARCH

This article examines how economics departments judge research articles and assign credit to authors. It begins with a demonstration that only strictly prorated author credit induces researchers to choose efficient sized teams. Nevertheless, survey evidence reveals that most economics departments only partially prorate authorship credit, implying excessive coauthorship. Indeed, a half‐century increase in coauthorship may be better explained by incomplete proration than by any increased specialization among authors. A possible explanation for the reliance on incomplete proration is the self‐interest of economists who are more likely to engage coauthorship—full professors. The self‐interest of senior faculty may also explain the relatively small role given to citations in senior promotions. A rational response by economists to the under‐proration of author credit is to engage in false authorship.Although false authorship is of dubious ethical status, it may have the perverse impact of improving the efficiency of team production. Grossly excessive coauthorship, where little attention is paid to most authors listed on a paper, as found in some other academic disciplines, may be the path down which economics is headed if the reward structure is not altered. (JEL A14, O30, I23)

Willful Blindness: The Inefficient Reward Structure in Academic Research

This paper examines how economics departments judge research articles and assign credit to authors. It begins with a demonstration that only strictly prorated author credit induces researchers to choose efficient sized teams. Nevertheless, survey evidence reveals that most economics departments only partially prorate authorship credit, implying excessive coauthorship. Indeed, a half-century increase in coauthorship may be better explained by incomplete proration than by any increased specialization among authors. A possible explanation for the reliance on incomplete proration is the self-interest of economists who are more likely to engage coauthorship — full professors. The self-interest of senior faculty may also explain the relatively small role given to citations in senior promotions. A rational response by economists to the under-proration of author credit is to engage in false authorship. Although false authorship is of dubious ethical status, it may have the perverse impact of improving the efficiency of team production. Grossly excessive coauthorship, where little attention is paid to most authors listed on a paper, as found in some other academic disciplines, may be the path down which economics is headed if the reward structure is not altered.

The Carbon Farming Initiative: removing the obstacles to its success

In December 2011, the Australian Government introduced the Carbon Farming Initiative (CFI), a project-based, baseline-and-credit offset scheme for emissions and removals from the land use, land use change and forestry, agriculture and waste sectors. The scheme is one of the most robust of its kind, having several innovative design features developed to deal with integrity and perverse impact risks, and promote co-benefits. Despite this, there are a number of issues undermining the capacity of the CFI to realize cheap abatement opportunities and improve environmental outcomes. This paper provides an overview of the CFI and an analysis of the obstacles to its success. Suggestions for improvements are made, including substituting a flexible permanence period–permanence deduction mechanism for the existing 100-year rule and modifying the risk of reversal buffer and leakage deduction processes to improve returns to project proponents.

Globalization and the (Mis)Governance of Nations

We analyze whether or not the globalization of capital, `disciplines' governments and improves gov- ernance. We demonstrate that globalization a ects governance, by increasing a country's vulnerability to sudden capital ight. This increased threat of capital ight can discipline governments and improve governance and welfare by placing countries in a `golden straitjacket'. However, globalization may also overdiscipline' governments { resulting in a perverse impact on governmental incentives that catalyzes mis)governance. Accordingly, the paper suggests a novel (and quali ed) role for capital controls. Finally, we provide some suggestive evidence consistent with the predictions from our theoretical framework.

Market access agreements for pharmaceuticals in Europe: diversity of approaches and underlying concepts

BackgroundMarket Access Agreements (MAA) between pharmaceutical industry and health care payers have been proliferating in Europe in the last years. MAA can be simple discounts from the list price or very sophisticated schemes with inarguably high administrative burden.DiscussionWe distinguished and defined from the health care payer perspective three kinds of MAA: Commercial Agreements (CA), Payment for Performance Agreements (P4P) and Coverage with Evidence Development (CED). Apart from CA, the agreements assumed collection and analysis of real-life health outcomes data, either from a cohort of patients (CED) or on per patient basis (P4P). We argue that while P4P aim at reducing drug cost to payers without a systematic approach to addressing uncertainty about drugs' value, CED were implemented provisionally to reduce payer's uncertainty about value of a medicine within a defined time period.SummaryWe are of opinion that while CA and P4P have a potential to reduce payers' expenditure on costly drugs while maintaining a high list price, CED address initial uncertainty related to assessing the real-life value of new drugs and enable a final HTA recommendation or reimbursement and pricing decisions. Further, we suggest that real cost to health care payers of drugs in CA and P4P should be made publicly available in a systematic manner, to avoid a perverse impact of these MAA types on the international reference pricing system.

Design of Patient Access Schemes in the UK

Patient Access Schemes (PAS) are alternative market access agreements between the UK Department of Health and drug manufacturers. They are implemented to enable the UK National Institute for Health and Clinical Excellence (NICE) to recommend expensive medicines for use in the UK NHS. We aimed to analyse the extent to which NICE drug appraisals influence the construction of PAS and what rationale underlies the variety of approaches to their design. We analysed publicly available documentation on PAS developed as a part of the NICE Health Technology Assessment process. We demonstrate how the design of PAS is determined by the kind of evidence that is available to model cost effectiveness of a drug and by the incremental cost-effectiveness ratio that is deemed acceptable in a given patient population. PAS aimed to reduce drug cost to the NHS by means of various discounts or rebates on a per-patient basis rather than by lowering the list price of drugs. While almost all schemes were proposed by the industry in reply to negative draft recommendations by NICE, motivations of the stakeholders to implement PAS are not disclosed in the publicly available documentation. A more transparent process might be necessary to protect against a perverse impact of PAS on international reference pricing that uses list prices rather than the real cost of purchasing medicines that the NHS incurs.