Tuesday, August 02, 2011

Picked from The Latest NBER Research (2011-07-25)

1. Network Stability, Network Externalities and Technology Adoption
by Catherine Tucker  -  #17246 (PR) http://papers.nber.org/papers/W17246

This paper investigates how the destabilizing of a social network may increase the scope of network externalities, using data on sales of a video-calling system made to an investment bank's employees and subsequent usage by these customers.  The terrorist attacks of 2001 led potential customers in New York to start communicating with a new and less predictable set of people when their work teams were reorganized as a result of the physical displacement that resulted from the attacks.  This did not happen in other comparable cities. These destabilized communication patterns were associated with potential adopters in New York being more likely to take into account a wider spectrum of the user base when deciding whether to adopt relative to those in other cities.  Empirical analysis suggests that the aggregate effect of network externalities on adoption was doubled by this instability.

2. The Value of Honesty: Empirical Estimates from the Case of the Missing Children
by Sara LaLumia, James M. Sallee  -  #17247 (PE) http://papers.nber.org/papers/W17247

How much are people willing to forego to be honest, to follow the rules? When people do break the rules, what can standard data sources tell us about their behavior? Standard economic models of crime typically assume that individuals are indifferent to dishonesty, so that they will cheat or lie as long as the expected pecuniary benefits exceed the expected costs of being caught and punished.  We
investigate this presumption by studying the response to a change in tax reporting rules that made it much more difficult for taxpayers to evade taxes by inappropriately claiming additional dependents.  The policy reform induced a substantial reduction in the number of
dependents claimed, which indicates that many filers had been cheating before the reform.  Yet, the number of filers who availed themselves of this evasion opportunity is dwarfed by the number of filers who passed up substantial tax savings by not claiming extra
dependents.  By declining the opportunity to cheat, these taxpayers reveal information about their willingness to pay to be honest.  We
present a novel method for inferring the characteristics of taxpayers in the absence of audit data.  Our analysis suggests both that this willingness to pay to be honest is large on average and that it varies significantly across the population of taxpayers.

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