“Post‐Truth,” “Alternative Facts” and “Fakenomics”

South African companies are accused of hoarding profits to accumulate large amounts of “idle” cash, as well as of being the perpetrators of massive illegal capital flight. This paper argues that much of the claimed corporate cash is either offshore or belongs to banks. It reminds that bank deposits increase when companies borrow, not when they retain profits. It shows, too, that measures of massive capital flight actually reflect data errors. Exaggerating, through faulty methodology the extent to which companies have cash or may be involved in illegal capital flight is unhelpful. It exacerbates already‐fraught government‐business relations, and complicates the search for solutions to South Africa's economic problems.     

Endogenous,Intra‐household Decision‐making and its Impact on the Labor Supply of Couples in Rural India*

Using data for rural India, this paper analyzes households' labor supply decision‐making, taking into consideration non‐participation, endogenous intrahousehold bargaining and nutritional status. Analyses of unitary and collective models suggest that bargaining between household members forms the basis of households' decisions, and these decisions alter households' internal power balance. Analysis of households' internal bargaining process suggests that women's bargaining power increases when their wages are higher and they are better educated. The results indicate that it is crucial to account for the mechanics of decision‐making within households when studying the effects of changing labor market conditions or designing development policies to improve individual well‐being or to empower women.     

The Influence of Affect on Managers' Capital‐Budgeting Decisions*

In this paper, we propose that affective reactions are integral to accounting decision contexts like capital budgeting, and that researchers must jointly consider affect and cognition to better understand accounting decision makers' behavior. We argue that interpersonal relationships are characteristic of many capital‐budgeting contexts, and that these relationships can lead to emotional affective reactions. For example, reactions such as frustration and anger may result if a manager is treated unfairly by another individual involved in a capital project. Drawing on relevant work in neurobiology and psychology, we then predict that these affective reactions can influence managers' capital‐budgeting decisions. We report on four experimental scenarios that demonstrate the impact of affective reactions on capital‐budgeting decisions. Consistent with our predictions, the results indicate that managers consider both financial data and affective reactions when evaluating the utility of an investment alternative. Our results suggest that researchers should consider both affect and cognition to more fully understand decision making in accounting contexts.     

Weathering the Storm: Measuring Household Willingness‐to‐Pay for Risk‐Reduction in Post‐Katrina New Orleans

The city of New Orleans suffered extensive damage as a result of Hurricane Katrina. Rebuilding involves decisions on investment in protective measures. An exhaustive list of protective measures has been studied in planning documents, with public comment solicited in town hall meetings. In this study we employ a different approach to examine public sentiment toward the selection and investment in protective measures. Our study uses a stated preference choice experiment with a stratified sample to investigate individuals' willingness‐to‐pay for rebuilding New Orleans's man‐made storm defenses, restoring natural storm protection, and improving evacuation options through a modernized transportation system. We target residents of the New Orleans metropolitan area as well as other U.S. citizens. Our results indicate that individuals are willing to pay for increased storm protection for New Orleans, but values differ among residents of the New Orleans metropolitan area and other U.S. citizens.     

Nash equilibria of games when players’ preferences are quasi‐transitive

Much of game theory is founded on the assumption that individual players are endowed with preferences that can be represented by a real‐valued utility function. However, in reality human preferences are often not transitive. This is especially true for the indifference relation, which can lead an individual to make a series of choices which in their totality would be viewed by the same individual as erroneous. There is a substantial literature that raises intricate questions about individual liberty and the role of government intervention in such contexts. The aim of this paper is not to go into these ethical matters but to provide a formal structure for such analysis by characterizing games where individual preferences are quasi‐transitive. The paper identifies a set of axioms which are sufficient for the existence of Nash equilibria in such “games.”     

IMPLEMENTING A ROBUST RISK MODEL FOR SOUTH AFRICAN EQUITY MARKETS: A PEAK‐OVER‐THRESHOLD APPROACH

This paper implements a market risk model for the South African equity market using daily returns of the Johannesburg Stock Exchange All Share Index. Firstly, we separate positive returns from negative returns and model them using the peak‐over‐threshold (POT) method in order to compute the downside as well as upside risk measures separately. We thereafter compute the value‐at‐risk (VAR) and the expected shortfall (ES) estimates corresponding to upside and downside risks. We bootstrap these risk measures and compute their standard errors and confidence intervals (CIs) to see whether they fall inside these CIs. Secondly, we compute out‐sample forecasts of VAR estimates using the POT method and the generalised autogressive conditional heteroscedasticity process. Three backtesting methodologies are employed: the unconditional and conditional coverage tests and the counting of number of exceptions according to Basel II green zone. We find that all our VAR and ES estimates are well inside their CIs and that at lower quantiles, parametric ES estimates are equal to POT‐ES estimates, although the difference between the two is more pronounced at higher quantiles (99% or higher). Furthermore, our market risk model falls into the Basel II green zone, as it produces fewer exceptions in out‐sample space.     

Impacts of Road Access on Subjective Well‐being in Timor‐Leste

The impacts of access to roads on subjective well‐being at the household level are empirically examined using Timor‐Leste's nationally representative surveys. This paper examines not only the quantity, but also the quality of road infrastructure and, thus, extends existing studies that only consider the benefits of road accessibility. It is found that proximity to main roads may not necessarily result in improved welfare. Instead, ensuring all‐weather access to roads appears to be a more significant factor in raising household well‐being. Specifically, road accessibility during the rainy season reduces the probability of households reporting a ‘less than adequate’ (low satisfaction) response by 13–25 percent. This suggests that in Timor‐Leste, and likely in other developing economies under similar conditions, maintenance of existing roads is more essential to well‐being than building more roads.     

Targeting Teaching Lecture Capture Learning: Do Students Perform Better Compared to Face‐to‐Face Classes?

Online learning has become more prevalent in colleges and universities as new technology is introduced. One such technology is lecture capture, which allows a live lecture to be recorded and packaged with classroom media and delivered online to many more students than a traditional face‐to‐face class. This article studies the selection process and educational outcome differences between students enrolled in a lecture capture and a face‐to‐face course in economic principles. Students could select either course format, both with the same instructor and course requirements, without capacity restrictions. We find that students’ attitudes toward online learning are the chief determinant of their choice of class over demographics, opportunity cost measures, or past online experiences. Additionally, our findings suggest that lecture capture students perform as well as those who take a face‐to‐face course when not accounting for self‐selection. When selection is taken into account, lecture capture is not significantly worse than face‐to‐face.     

Same‐sex relationship escalation with uncertain marriage legality: Theory and empirical implications

We develop a strategic model of same‐sex dating, cohabitation, and potential marriage with location‐specific marriage legality. With an initial illegal location, couples bargain over a relationship path that internalizes the probability of future legalization and potential migration‐for‐marriage. Our model generates testable, empirical implications on relationship hazard rates, migration, and utility due to changes in migration costs and legalization probabilities. Specifically, we show that decreased migration costs or increased legalization probabilities will increase relationship hazard rates (dissolution) for both daters and cohabitators. These changes will also decrease utility for an identifiable segment of the relationship quality distribution.     

Multi‐battle Contests: An Experimental Study

We examine behavior of subjects in simultaneous and sequential multi‐battle contests, where each individual battle is modeled as an all‐pay auction with complete information. In simultaneous best‐of‐three contests, subjects are predicted to make positive bids in all three battles, but we find that subjects often make positive bids in only two battles. In sequential contests, theory predicts sizable bids in the first battle and no bids in the subsequent battles. Contrary to this prediction, subjects significantly underbid in the first battle and overbid in subsequent battles. Consequently, instead of always ending in the second battle, contests often proceed to the third battle. Finally, although the aggregate bid in simultaneous contests is similar to that in sequential contests, in both settings, subjects make higher aggregate bids than predicted. The observed behavior of subjects can be rationalized by a combination of multidimensional iterative reasoning and a nonmonetary utility of winning.     

Inter‐communal institutions in medieval trade

This article examines the institutional structure of medieval overseas trade to explain why trade thrived even in the absence of the state. The literature has dealt mainly with intra‐coalition or intra‐community relations. However, the literature does not answer the question of how institutions could be created that could support interaction between a large number of distant communities and between merchants who did not necessarily know one another. This article presents such an institution that prevailed in the Baltic Sea region in the late middle ages, referred to here as the inter‐communal conciliation mechanism. In case of a dispute, conciliation took place between town councils, rather than the merchants involved in the dispute, thus combining individual liability and communal enforcement. Exploration of the documents reveals a task‐specific regularity of behaviour, which was the general practice among merchants to turn to the council of their own community when they had problems in a foreign town, instead of being obliged to solve disputes by themselves. This institution provided a permanent, centralized, and relatively impartial enforcement mechanism to respond to breaches. It was therefore well adapted to large, at least partially anonymous markets, such as the Baltic Sea region, with dozens of towns and thousands of merchants.     

Assessing the Impact of Agricultural Technology Adoption on Farmers' Well‐being Using Propensity‐Score Matching Analysis in Rural China

The present paper assesses the impact of improved upland rice technology on farmers' well‐being. The study uses propensity‐score matching to address the problem of ‘self‐selection,’ because technology adoption is not randomly assigned. It applies this procedure to household survey data collected in Yunnan, China in 2000, 2002 and 2004. The findings indicate that improved upland rice technology has a robust and positive effect on farmers' well‐being, as measured by income levels and the incidence of poverty. The effect of technology on well‐being shows a diminishing impact on producers' incomes. This implies that newer innovations are continuously needed to replace older technologies that have reached their saturation points.     

Household satisfaction: Past,present and future perspectives

In the past two decades South African quality of life has been measured at the individual level in nationwide surveys and studies of special groups using happiness and satisfaction measures. In 1993 the Southern Africa Labour and Development Research Unit (Saldru) pioneered a satisfaction measure to capture subjective well‐being at the household level for the Project for Statistics on Living Standards and Development (PSLSD). The article assesses the usefulness of the new indicator by comparing present household satisfaction with individual‐level satisfaction trends and with PSLSD measures of past and projected future satisfaction and household income and expenditure. It is concluded that the household satisfaction measure is a useful social indicator in that it yields consistent and readily interpretable results and is sensitive to income and expenditure differentials. In confirmation of findings from a recent cross‐national study, the higher income households in the Saldru study reported higher levels of perceived well‐being.     

Changing Graph Use in Corporate Annual Reports: A Time‐Series Analysis

Graphs in corporate annual reports form part of a powerfully designed annual report package that offers considerable potential for “impression management.” The primary purpose of this paper is to determine whether graph use depends on corporate performance. Time‐series analysis, not previously used in the financial graphs literature, allows discretionary changes in graph use by companies to be identified and related to changes in individual companies' corporate performance over time. Based on the prior financial graphs and accounting choice literature, we develop two hypotheses that relate changes in graph use to changes in corporate performance. These hypotheses focus on the aggregate and individual company levels. We base our analysis on the corporate annual reports of 137 top UK companies that were in continued existence during the five‐year period from 1988 to 1992. At both the aggregate and individual company levels, we find the decision to use key financial variable (KFV) graphs, the primary graphical choice, to be associated positively with corporate performance measures. This finding is consistent with the manipulation hypothesis ‐ that is, that financial graphs in corporate annual reports are used to “manage” favorably the reader's impression of company performance, and hence that there is a reporting bias.     

Financial distress and non‐executive director compensation: Evidence from state‐owned enterprises in South Africa post King III

Using a sample of South African state‐owned enterprises (SOEs), we examine the pre‐ and post‐period impact of King III on non‐executive director (NED) compensation with emphasis on financially distressed SOEs. This paper adopts a difference‐in‐differences analysis technique with repeated measures as the basis for testing the hypotheses. The revised Altman Z‐score model which incorporates features unique to emerging markets is used to measure financial distress. Our findings indicate that SOEs that adopted King III will increase NED compensation when the firm has a positive performance and will severely penalize NED when the firm faces financial distress. This study highlights the importance of well‐crafted corporate governance policies. It further sheds light on the importance of King III and how its implementation may prove vital for the success of an enterprise.     

Converging Mainlander and Native Taiwanese, 1949–2012

This paper uses a surname‐based methodology to estimate the intergenerational correlation between native Taiwanese and mainlanders during 1949–2012. It finds that mainlanders, who initially had an advantage in higher education and high profile occupations, regressed towards population average at a relatively constant rate, which is much higher than suggested by previous studies. This paper argues that the difference either reflects a group‐level inequality because of the impacts of kinships and extended families, or it measures the intergenerational correlation of an unobservable variable, the true underlying social status, which is imperfectly correlated with income, education, or occupation at the individual level.     

Sales and Firm Entry: The Case of Wal‐Mart

Temporary price reductions or “sales” have become increasingly important in the evolution of the price level. We present a model of repeated price competition to illustrate how entry causes incumbents to alternate between high and low prices. Using a six‐year panel of weekly observations from a grocery chain, we find that individual stores employ more sales as the distance to Wal‐Mart falls. Moreover, the increase in the frequency of sales was concentrated on the most popular products, suggesting the use of a loss‐leader strategy.     

Determinants of Well‐being and Poverty Changes in Cameroon: 2001–2007

Abstract: This paper identifies and decomposes sources that explain household economic well‐being in Cameroon. It uses the 2001 and 2007 Cameroon Household Consumption Surveys, synthetic variables constructed by the multiple correspondence analysis and econometric approaches that correct for potential endogeneity and unobserved heterogeneity in a step‐wise manner and simultaneously. Sources of well‐being that explain poverty are then decomposed into growth and redistribution components. Variables that significantly explain household economic well‐being are education, health, household size, fraction of active household members, working in the formal sector and area of residence. Decomposition analysis shows that the growth components largely account for changes in deprivation in terms of each regressed‐income source. With the exception of the income source education, redistribution components slowed down progress in alleviating shortfall in other regressed‐income sources. These results have implications for public interventions that affect education and health for all, labour market participation and infrastructure development.     

Cheating and Enforcement in Asymmetric Rank‐Order Tournaments

In rank‐order tournaments, undesirable but output‐enhancing activities, such as cheating, may occur. Cheating may be especially tempting when one player has an advantage over another. We show that when audit probabilities are low (high), the leading (trailing) player has more incentive to cheat. Furthermore, we show that “correlated” audits are more effective at decreasing the frequency of cheating than independent audits. Finally, we show that differential monitoring schemes, where contestants are audited based on either their initial position or final ranking, more efficiently achieve full deterrence than schemes that monitor contestants with equal probability.