In 1993 Joel Waldfogel published a paper “The Deadweight Loss of Christmas” in which he declared that the tradition of gift-giving causes economic losses for society because recipients generally value the items they receive as gifts less than the price that was paid by the givers. The source of this inefficiency is caused by the fact that the buyer is not the final consumer of a good and thus there may be a mismatch between the giver’s and the receiver’s preferences. Waldfogel’s study showed that gifts from friends and other people very close to the reci...
ISET Economist Blog
A blog about economics in the South Caucasus.
Jan
23
Jan
18
Is inequality bad for economic development? There has been a lively debate on this issue. Some economists argue that inequality is necessary for economic growth, while others are against it. Relatively recent empirical studies have found that in countries with relatively low per capita income inequality hampers growth. One of the main ways in which high inequality negatively affects economic growth is social turmoil. Social discontent is translated into socio-political instability, raising political and economic uncertainty in a country, which in turn im...
Jan
17
Wages and productivity levels differ across countries. For instance, in 2011 the average yearly income in the US was about $53 000, whilst the same indicator was $250 in Madagascar. Clearly then, Madagascar has a competitive advantage in labor cost over the US. But the issue is not so simple because workers in the US operate in a completely different environment (with better capital facilities, more educated colleagues, higher level of technologies, etc.) that determine a much higher productivity level. Higher wages can positively affect productivi...
Jan
11
How can a society become more prosperous? This question has been on the minds of economists and policymakers for centuries. More than two hundred years ago, Adam Smith wrote that “little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism but peace, easy taxes, and a tolerable administration of justice, all the rest being brought about by the natural course of things.” Yet, still today, many societies around the world are characterized not by peace, easy taxes, and a tolerable administration of justice, but by c...
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