Kenneth S. Chan

Heterogeneity and the Voluntary Provision of Public Goods

We investigate the effects of heterogeneity and incomplete information on aggregate contributions to a public good using the voluntary contribution mechanism. The non-linear laboratory environment has three-person groups as partners under varying conditions of information and communication. Bergstrom, Blum and Varian predict that increasing heterogeneity will have no effect on aggregate contributions in a no-communication environment. Ledyard conjectures a positive effect of incomplete information, a negative effect of heterogeneity, and a positive interaction of heterogeneity and incomplete information. We find that incomplete information has a small but significant negative effect. Heterogeneity has a positive effect on aggregate contributions, but its effects interact unexpectedly with communication. In a no-communication environment, heterogeneity in two dimensions (endowment and preferences) increases contributions substantially while heterogeneity in a single dimension (endowment or preferences) has little effect. In the communication environment we find the reverse. We also find a positive interaction between heterogeneity and incomplete information. Thus we reject the Bergstrom, Blume and Varian invariance result and provide mixed evidence on Ledyards conjectures.

The Voluntary Provision of Public Goods under Varying Income Distributions

The T. C. Bergstrom, L. E. Blume, and H. R. Varian (1986) model of voluntary contributions to public goods predicts increases in public good provision as the distribution of income becomes more unequal. This model is tested in the laboratory. Group behavior conforms to the model but individual behavior does not. Individuals with low incomes overcontribute to the public good; individuals with high incomes undercontribute. Coauthors are Stuart Mestelman, Rob Moir, and R. Andrew Muller.

A cross-country input-output analysis of intersectoral relationships between manufacturing and services and their employment implications

Abstract The paper examines the nature and the evolution of intersectoral relationships between manufacturing and services at different stages of industrialization, as revealed by a cross-country comparative analysis of input-output tables of 26 countries at different income levels. This paper suggests, among many other findings, that the intersectoral relationships between manufacturing and services generally characterize asymmetrical dependence. Namely, service activities tend to depend on the manufacturing sector as a source of inputs to a far greater extent than vice versa. Moreover, the employment absorptive capacity of the manufacturing sector is seriously underestimated, when one only measures the direct employment effect of the manufacturing sector and ignores the intersectoral demand of the manufacturing sector for service inputs and its income induced demand for various types of services. In effect, the capability of the service sector to generate and sustain a high level of employment critically hinges upon its vital linkages with the manufacturing sector.

Crowding-out voluntary contributions to public goods

We test the null hypothesis that involuntary transfers for the provision of a public good will completely crowd out voluntary transfers against the warm-glow hypothesis that crowding-out will be incomplete because individuals care about giving. Our design differs from the related design used by Andreoni in considering two levels of the involuntary transfer and a wider range of contribution possibilities, and in mixing groups every period instead of every four periods. We analyse the data with careful attention to boundary effects. We retain the null hypothesis of complete crowding-out in two of three pairwise comparisions, but reject it in favour of incomplete crowding-out in the comparison most closely akin to Andreoni’s design. Thus we confirm the existence of incomplete crowding-out in some environments, but suggest that the warm-glow hypothesis is inadequate in explaining it.

Equity theory and the voluntary provision of public goods

Abstract A model incorporating aspects of a psychological theory of equity is presented as an alternative to the conventional economics model. Equity theory suggests that people may feel distress if they contribute either larger or smaller shares of their incomes to the public good than the average contribution of others, and that people will behave in a way to avoid this distress. The Nash equilibrium prediction for this model is for high-income individuals to undercontribute and for low-income individuals to overcontribute relative to the prediction of the conventional model. The data support the alternative model over the conventional model.

Trade negotiations in a Nash bargaining model

Abstract This paper examines the impact on trade negotiation outcomes due to different feasible utility-payoff sets. When a countrys tastes or endowment patterns are biased towards a single commodity, or rely heavily on international exchange, to improve utility, the negotiated outcome, in a two-country Nash-Shapley bargaining framework, generally benefits its opponent.

Institutions, efficiency and the strategic behaviour of sponsors and bureaus

Abstract The over-production associated with bureaucratic production is examined in a general equilibrium environment in which the bureau and its sponsor behave strategically. Seemingly minor modifications in institutional settings give major differences in Nash equilibrium outcomes. The non-equivalence of institutional settings suggests that over-production or under-production by bureaus can be a result of the institutions governing the decision process as well as the preferences of the bureau for the size of the bureau.

Value Orientations, Income and Displacement Effects, and Voluntary Contributions

Identifying the value orientations of subjects participating in market or non-market decisions by having them participate in a ring game may be helpful in understanding the behaviour of these subjects. This experiment presents the results of changes in the centre and the radius of a value orientations ring in an attempt to discover if the measured value orientations exhibit income or displacement effects. Neither significant income effects nor displacement effects are identified. An external validity check with a voluntary contribution game provides evidence that value orientations from rings centred around the origin of the decision-space explain significant portions of voluntary contributions while value orientations from displaced rings do not.

The Role of (Non)Transparency in a Currency Crisis Model

This paper extends the work by Morris and Shin (1998) where multiple equilibria in the self-fulfilling currency attack models can be reduced to a unique equilibrium when agents observe fundamentals privately with small errors. We find that under a more general specification with realistic parameters, noisy private observations are generally insufficient to prevent the multiplicity of equilibria. The pivotal role played by the transparency of fundamentals/policies in currency crisis is also examined. Surprisingly, transparency may trigger rather than eliminate currency crises when fundamentals are relatively healthy. Our results may be relevant to research in other coordination problems.

Trade similarities and contagion among the Asian crisis economies

Abstract This paper estimates trade similarities among the recent currency crisis economies in Asia. Direct measures of trade similarities, by the elasticities of substitution of national exports, are computed. Our finding supports the hypothesis that the Asian currency crisis (or the mechanism of competitive devaluations) spreads among economies with similar and close trade ties.