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Showing 4 of 13 Publications by Jonathan Klick
Scholarship Abstract Economists generally agree that free trade leads to economic growth. This proposition is supported both by theoretical models and empirical data. Further, while the . . .
Economists generally agree that free trade leads to economic growth. This proposition is supported both by theoretical models and empirical data. Further, while the empirical evidence is more limited on this question, the general consensus among economists holds that trade restrictions are likely to hurt the poor. Even if the latter consensus turns out to be wrong, if free trade leads to superior growth, governments would have more resources to redistribute to the poor. It is surprising then that philosophers and human rights scholars do not advocate liberalizing trade as a way to improve the welfare of the poor as a class. While many scholars in these fields are silent with respect to the effect of free trade on the poor, some actually argue that liberalized trade is harmful for the poor, contrary to the claims of economists. In this article, we argue that any serious scholar concerned with the plight of the poor needs to address the theory and evidence regarding the effects of trade liberalization on economic growth, suggesting that the standard policy prescriptions of the philosophers and human rights scholars are, at best, of second order concern and, at worst, likely to be counterproductive in terms of improving the welfare of the poor.
Scholarship Abstract In the face of rising rates of diabetes, many states have passed laws requiring health insurance plans to cover medical treatments for the disease. . . .
In the face of rising rates of diabetes, many states have passed laws requiring health insurance plans to cover medical treatments for the disease. Although supporters of the mandates expect them to improve the health of diabetics, the mandates have the potential to generate a moral hazard to the extent that medical treatments might displace individual behavioral improvements. Another possibility is that the mandates do little to improve insurance coverage for most individuals, as previous research on benefit mandates has suggested that mandates often duplicate what plans already cover. To examine the effects of these mandates, we employ a triple?differences methodology comparing the change in the gap in body mass index (BMI) between diabetics and nondiabetics in mandate and nonmandate states. We find that mandates do generate a moral hazard problem, with diabetics exhibiting higher BMIs after the adoption of these mandates.
Scholarship Abstract Economic theorists argue that broad termination rights allow franchisors to police opportunism on the part of franchisees which have an incentive to free ride . . .
Economic theorists argue that broad termination rights allow franchisors to police opportunism on the part of franchisees which have an incentive to free ride on the franchised trademark. However, in principle, these termination rights could generate another form of opportunism as franchisors then have an incentive to skim establishments that prove to be particularly profitable. We use the adoption of state franchise termination laws to determine which form of opportunism is more important on the margin. Using panel data on fast food establishments, we find that laws restricting franchisor termination rights lead to a reduction in franchising, and this reduction is not offset by the concomitant increase in franchisor-operated establishments. We also examine state employment rates in industries characterized by high rates of franchising relative to other industries where franchising is rare, finding that employment in franchise industries drops, as a proportion of total employment, by about 7 percent when states enact restrictions on franchisor termination rights. Both sets of results imply that the potential for franchisee opportunism is stronger, and restrictions on termination rights are likely to reduce joint surplus among franchisors and franchisees.
Scholarship Abstract Behavioral law and economics scholars who advance paternalistic policy proposals typically employ static models of decision-making behavior, despite the dynamic effects of paternalistic policies. . . .
Behavioral law and economics scholars who advance paternalistic policy proposals typically employ static models of decision-making behavior, despite the dynamic effects of paternalistic policies. In this article, we consider how paternalistic policies fare under a dynamic account of decision-making that incorporates learning and motivation effects. This approach brings out two important limitations on the efficiency effects of paternalistic regulations. First, if preferences and biases are endogenous to institutional forces, paternalistic government regulations may perpetuate and even magnify a given bias and cause other adverse psychological effects. Second, for some biases, it will be more efficient to invest resources in debiasing than to change legal rights and remedies or, in some cases, to do nothing in light of the natural variation in irrational propensities. We propose dynamic models for determining ex ante and ex post when accommodation of bias will be second-best efficient. These models direct decision-makers to consider (1) the efficiency cost of the bias; (2) the extent to which accommodation worsens the bias or, alternatively, the extent to which non-accommodation improves the bias or has other benefits; and (3) the potential for education or other mechanisms to debias an individual. We argue that the concept of “cognitive hazard” – the potential for the costs of a bias to increase as individuals are insulated from the adverse effects of the bias – should be added to the concept of moral hazard as important qualifications to paternalistic proposals.
