Monday, March 02, 2009

The theory predicts

The new (Feb. 2009) American Economic Journal: Microeconomics includes an interesting investigation by Ginger Zhe Jin and Phillip Leslie on "Reputational Incentives for Restaurant Hygiene". LA County food inspectors have been placing letter grades (A or B or C) in restaurant windows since 1998. I see mainly As, a few Bs and never any Cs. Given the high frequency of As and Bs, I would never enter a C-rated establishment. In light of all this, the authors test for pre-1998 reputational effects. They find that "... chain restaurants tend to have significantly better hygiene than independent restaurants because of the reputational effects from chain affiliation."

Economists expect this, but (the authors note) there have been few serious tests. This paper should, therefore, find its way into various collections of papers.