Electromyographic Activity of Hand Muscles in a Motor Coordination Game: Effect of Incentive Scheme and Its Relation with Social Capital

Background. A vast body of social and cognitive psychology studies in humans reports evidence that external rewards, typically monetary ones, undermine intrinsic motivation. These findings challenge the standard selfish-rationality assumption at the core of economic reasoning. In the present work we aimed at investigating whether the different modulation of a given monetary reward automatically and unconsciously affects effort and performance of participants involved in a game devoid of visual and verbal interaction and without any perspective-taking activity. Methodology/Principal Findings Twelve pairs of participants were submitted to a simple motor coordination game while recording the electromyographic activity of First Dorsal Interosseus (FDI), the muscle mainly involved in the task. EMG data show a clear effect of alternative rewards strategies on subjects' motor behavior. Moreover, participants' stock of relevant past social experiences, measured by a specifically designed questionnaire, was significantly correlated with EMG activity, showing that only low social capital subjects responded to monetary incentives consistently with a standard rationality prediction. Conclusions/Significance Our findings show that the effect of extrinsic motivations on performance may arise outside social contexts involving complex cognitive processes due to conscious perspective-taking activity. More importantly, the peculiar performance of low social capital individuals, in agreement with standard economic reasoning, adds to the knowledge of the circumstances that makes the crowding out/in of intrinsic motivation likely to occur. This may help in improving the prediction and accuracy of economic models and reconcile this puzzling effect of external incentives with economic theory

Fiscal Policy Under Imperfect Competition: A Survey

This paper surveys the link between imperfect competition and the effects of fiscal policy on output, employment and welfare. We examine static and dynamic models, with and without entry under a variety of assumptions using a common analytical framework. We find that in general there is a robust relationship between the fiscal multiplier and welfare, the tantalizing possibility of Pareto improving fiscal policy is much more elusive. In general, the mechanisms are supply side, and so welfare improving policy, whilst possible, is not a general result

Taste for Variety, Taste for Novelty and Price Behaviour

In this paper we propose a formulation of preferences that exhibit both love for variety and love for novelty. This enables us to investigate the effects of ageing on imperfect substitutes, as they became progressively old-fashioned, due to the obsolescence of their aesthetic features. First, we assume that the industry is divided into several submarkets, each dominated by a monopolist producing a variety of a given vintage. We show that prices decrease, and the evolution of demand determines the equilibrium number of varieties at the point where the oldest vintage firm earns zero profits. Second, under a free entry condition assumption, the lifetime horizon of each variety will be characterized by decreasing prices accompanied by increasing demand levels

Composition of Public Expenditure and Short Run Fiscal Multiplier

Existing studies on the fiscal multiplier under imperfect competition assume a symmetric market structure with identical firms. This paper examines the fiscal policy implications of introducing a multisectoral economy where a composite commodity is o¤ered in many varieties within a market of monopolistic competition while a homogeneous good is produced in a perfectly competitive enviroment. Within the context of this mixed industrial structure we show that the sign and the size of the short run multiplier crucially depends on the composition of public expenditure chosen by the government

Non Monotoninc Catching up in a Solow Model with Public Capital

In this paper we propose a standard Solow model augmented with public capital in the production function. The model solution displays two steady states, an unstable one and an efficient stable equilibrium. As a result the model predicts both divergence and non monotonic convergence; that is a transition path characterized by increasing growth rates up to the point where the traditional convergence behavior describes the successive evolution towards the stationary equilibrium. Using traditional cross section techniques the hypothesis of non monotonic catching-up is tested against a large sample of countries, obtaining favorable evidence

Fiscal policy in an R&D growth model: the role of public consumption composition

This paper analyzes the role of the composition of public consumption in a non-scale R&D based growth model by drawing a distinction between two broad categories of current government spending: final good purchases and public employee compensations. The composition of government expenditure plays a crucial role because changes in the goods and the employment components have different effects on an economy's long run performance. Unlike an increase in government spending in final goods, an increase in public employment reallocates labor away from the private sector with a negative effect on per capita output, research effort and innovation. In addition, for given level of public expenditure a change in its composition affects the steady-state allocation of resources and influences the economy's transitional dynamics by varying the speed of convergence towards the steady state

Public Consumption Composition in a Growing Economy

This paper explores the role of the composition of public consumption within a three sector R&D growth model. A competitive industry supplies a homogeneous good and a monopolistic sector manufactures a composite commodity differentiated in many varieties, whose size can be increased through investment in R&D. We investigate the effects of changes in the level and in the composition of public consumption on the steady state and on the economy's transitional dynamics. By varying the aggregate composition of demand, the government can effectively move resources away from traditional industry to foster innovation. Welfare effects are also evaluated. We show that the composition of government consumption affects the entire time path of utility

Public Consumption Composition in a Growing Economy

This paper explores the role of the composition of public consumption within a three sector R&D growth model. A competitive industry supplies a homogeneous good and a monopolistic sector manufactures a composite commodity di¤erentiated in many varieties, whose size can be increased through investment in R&D. We investigate the e¤ects of changes in the level and in the composition of public consumption on the steady state and on the economy’s transitional dynamics. By varying the aggregate composition of demand, the government can e¤ectively move resources away from traditional industry to foster innovation. Welfare e¤ects are also evaluated. We show that the composition of government consumption a¤ects the entire time path of utility

The role of government consumption composition in an R&D based growth model

This paper analyses the role of the composition of government consumption in a non-scale R&D based model of growth by drawing a distinction between two broad categories of government spending: final goods purchases and public employee compensation. The composition of public expenditure plays a crucial role because changes in the goods and the employment components have different effects on the long run equilibrium of the economy. Unlike an increase in government spending in final goods, an increase in public employment reallocates labour away from the private sector with a negative effect on per capita output, research effort and innovation. In addition, for given level of public expenditure a change in the composition affects the steady-state allocation of resources and influences the economy transitional dynamics by varying the speed of convergence toward the steady state