Koleman S. Strumpf

The Effect of File Sharing on Record Sales: An Empirical Analysis

For industries ranging from software to pharmaceuticals and entertainment, there is an intense debate about the appropriate level of protection for intellectual property. The Internet provides a natural crucible to assess the implications of reduced protection because it drastically lowers the cost of copying information. In this paper, we analyze whether file sharing has reduced the legal sales of music. While this question is receiving considerable attention in academia, industry, and Congress, we are the first to study the phenomenon employing data on actual downloads of music files. We match an extensive sample of downloads to U.S. sales data for a large number of albums. To establish causality, we instrument for downloads using data on international school holidays. Downloads have an effect on sales that is statistically indistinguishable from zero. Our estimates are inconsistent with claims that file sharing is the primary reason for the decline in music sales during our study period.

Assessing the Importance of Tiebout Sorting: Local Heterogeneity from 1850 to 1990

This paper argues that long-run trends in geographic segregation are inconsistent with models where residential choice depends solely on local public goods (the Tiebout hypothesis). We develop an extension of the Tiebout model that predicts as mobility costs fall, the heterogeneity across communities of individual public good preferences and of public good provision must (weakly) increase. Given the secular decline in mobility costs, these predictions can be evaluated using historical data. We find decreasing heterogeneity in policies and proxies for preferences across (i) a sample of U.S. municipalities (1870-1990); (ii) all Boston-area municipalities (1870-1990); and (iii) all U.S. counties (1850-1990).

Historical Presidential Betting Markets

This paper analyzes the large and often well-organized markets for betting on U.S. presidential elections that operated between 1868 and 1940. Four main points are addressed. First, we show that the market did a remarkable job forecasting elections in an era before scientific polling. Second, the market was fairly efficient, despite the limited information of participants and active attempts to manipulate the odds. Third, we argue political betting markets disappeared largely because of the rise of scientific polls and the increasing availability of other forms of gambling. Finally, we discuss lessons this experience provides for the present.

Does Government Decentralization Increase Policy Innovation

The conventional wisdom is that government decentralization promotes policy innovation because it allows for several simultaneous experiments by local governments. However, this ignores a learning externality: successful policy experiments provide useful information for all governments. Local governments will ignore this externality, but a central government should take it into account. This article uses a social learning model to compare policy innovation under centralization and decentralization. Centralization leads to more policy innovation if the local governments are relatively homogeneous or large in number. However, decentralization may induce more policy innovation if there are multiple experimental policies available. Copyright 2002 by Blackwell Publishing Inc.

Decentralisation and Government Provision of Public Goods: The Public Health Sector in Uganda

While many developing countries have devolved health care responsibilities to local governments in recent years, no study has examined whether decentralisation actually leads to greater health sector allocative efficiency. This paper approaches this question by modeling local government budgeting decisions under decentralisation. The model leads to conclusions not all favourable to decentralisation and produces several testable hypotheses concerning local government spending choices. For a brief empirical test of the model we look at data from Uganda. The data are of a type seldom available to researchers–actual local government budgets for the health sector in a developing country. The health budgets are disaggregated into specific types of activities based on a subjective characterisation of each activitys ‘publicness’. The empirical results provide preliminary evidence that local government health planners are allocating declining proportions of their budgets to public goods activities.

File Sharing and Copyright

The advent of file sharing has considerably weakened effective copyright protection. Today, more than 60% of Internet traffic consists of consumers sharing music, movies, books, and games. Yet, despite the popularity of the new technology, file sharing has not undermined the incentives of authors to produce new works. We argue that the effect of file sharing has been muted for three reasons. (1) The cannibalization of sales that is due to file sharing is more modest than many observers assume. Empirical work suggests that in music, no more than 20% of the recent decline in sales is due to sharing. (2) File sharing increases the demand for complements to protected works, raising, for instance, the demand for concerts and concert prices. The sale of more expensive complements has added to artists’ incomes. (3) In many creative industries, monetary incentives play a reduced role in motivating authors to remain creative. Data on the supply of new works are consistent with the argument that file sharing did not discourage authors and publishers. Since the advent of file sharing, the production of music, books, and movies has increased sharply.

Consumer Demand Under Price Uncertainty: Empirical Evidence from the Market for Cigarettes

We develop a demand model for goods that are subject to habit formation. We show that consumption plans of forward-looking individuals depend on preferences, current period prices, and individual beliefs about the evolution of future prices. Moreover, an increase in price uncertainty reduces consumption along the optimal path. With smoking as our application, we test the predictions of our model using a unique data set of prices for cigarettes and the restricted-use version of the National Education Longitudinal Study. Our estimation results suggest that teenagers who live in metropolitan areas with a large amount of cigarette price volatility have, on average, significantly lower levels of cigarette consumption.

Strategic Competition in Sequential Election Contests

This paper studies a sequential election contest, such as theAmerican presidential primary, in which several electionsoccur one at a time until a single winner emerges. Theconventional wisdom is such a system benefits a candidatefavored in the initial elections because of momentum. Thispaper uncovers a potentially opposing force if participationis costly and candidates exit when they have unfavorablefuture prospects. A candidate with friendly elections at theend of the contest will typically benefit from the resultinggame theoretic competition.Tension between this strategic effect and momentum helpsexplain several empirical regularities of presidentialprimaries.

Estimating Presidential Elections: The Importance of State Fixed Effects and the Role of National Versus Local Information

Explaining the outcome of presidential elections is central to any model of American government. Previous researchers have found that economic conditions explain a substantial portion of the variation in vote outcomes. We make two contributions to this literature. First, we show that state partisan predisposition is the most important explanatory variable for the period 1972-1992. Several states are simply out of reach for one of the parties, no matter how favorable is the information about their candidate. Second, we find that national economic indicators have an effect on votes that is an order of magnitude larger than state-level aggregates. Presidents who try to curry favor with certain states through pork barrel projects are unlikely to be rewarded with large vote margins. Our model does a reasonable job forecasting the state-level vote for the 1996 election when the actual economic conditions are used as regressors. None the less we are skeptical that these type of models can accurately forecast the Electoral College winner because of the wide confidence intervals on each states vote forecast and the potential error in predicted economic conditions. Copyright 1999 Blackwell Publishers Ltd..

Government credibility and policy choice: evidence from the Pennsylvania earned income tax

Abstract This paper considers the decision of Pennsylvania communities whether to levy a 1% wage tax. While a simple political economy model suggests this tax should be enacted when many residents are exempted from the tax, the opposite pattern seems to hold. One explanation is that residents may mistrust their government and fear that the new tax monies will be spent unwisely. Several implications of this credibility story are consistent with the data, and non-taxing communities tend to have low credibility (as measured by three proxies). In addition, after controlling for credibility the proportion of exempt residents is positively associated with the probability of enacting the wage tax just as the political economy model suggests.