Generalized least squares inference in panel and multilevel models with serial correlation and fixed effects

In this paper, I consider generalized least squares (GLS) estimation in fixed effects panel and multilevel models with autocorrelation. The presence of fixed effects complicates implementation of GLS as estimating the fixed effects will typically render standard estimators of the covariance parameters necessary for obtaining feasible GLS estimates inconsistent. I focus on the case where the disturbances follow an AR(p) process and offer a simple to implement bias-correction for the AR coefficients. The usefulness of GLS and the derived bias-correction for the parameters of the autoregressive process is illustrated through a simulation study which uses data from the Current Population Survey.     

Equilibrium selection in coordination games with simultaneous play

Summary. We apply the dynamic stochastic framework proposed in recent evolutionary literature to a class of coordination games played simultaneously by the entire population. In these games payoffs, and hence best replies, are determined by a summary statistic of the population strategy profile. We demonstrate that with simultaneous play, the equilibrium selection depends crucially on how best responses to the summary statistic remain piece-wise constant. In fact, all the strict Nash equilibria in the underlying stage game can be made stochastically stable depending on how the best response mapping generates piece-wise constant best responses. Received: February 12, 2001; revised version: October 29, 2001     

The Psychology of Billing

Contracting between tax entities and tax professionals occurs millions of times every year, yet little is known about the nature of these economic interactions. This study examines the effect of commonly occurring contextual factors on tax professionals’ billing decisions for tax research. These contextual factors are unrelated to the tax research itself and the time it takes to conduct the tax research, but we find that billing decisions are strongly influenced by the three non‐time‐related contextual factors that we manipulate. Initial client volume impacts amounts billed for tax research, with lower initial client volume resulting in higher per client fees. Further, we find that initial billing decisions serve as value billing benchmarks for unanticipated subsequent clients who benefit from research conducted for initial clients. As a result, subsequent clients are billed higher fees when they follow a smaller number of initial clients. We also find that client referrals are billed higher fees than nonclient referrals because professionals attempt to avoid making initial clients feel as though they have been treated unfairly relative to subsequent clients who would otherwise be billed lower fees. The results of this study are relevant beyond the traditional confines of accounting research—they are relevant to the millions of tax entities that contract with tax professionals each year.     

The executive compensation implications of the tax component of earnings

We extend prior research by examining the weight applied to earnings generated by changes in ETRs (i.e., the tax component of earnings) in determining CEO and CFO compensation. We examine both bonus and total compensation and find that the predicted relationships between compensation and the tax component of earnings are largely limited to bonus compensation. This is not surprising since bonus compensation represents an unambiguous link between contemporaneous performance and compensation, while equity compensation is in part determined by agency considerations. Our evidence suggests that both CEOs and CFOs are compensated for the tax component of earnings. We find that CEOs are rewarded equally for the tax component of earnings relative to other components of earnings, while CFOs are rewarded more for the tax component of earnings relative to other components of earnings. Additionally, the weight applied to the tax component of earnings when determining CFO bonus compensation is greater when; (1) the tax component of earnings does not appear to be related to earnings management; (2) ETRs decrease rather than increase, (3) the firm pays bonus based on after-tax earnings rather than pre-tax earnings, and (4) the firm is tax aggressive rather than non-tax aggressive. The variations in the weighting of the tax component of earnings for CFO bonus compensation noted above in combination with evidence that CEO bonus compensation is indifferent to ETR-related earnings versus other components of earnings, suggests that the tax component of earnings is a contractual component of CFO bonus compensation.     

MNC strategies and linkage effects in developing countries

The study addresses the implications MNC strategies have for linkage effects in developing countries. Two contrasting MNC strategies, which reflect an integration-responsiveness dichotomy, are scrutinized in terms of their effects on jobs among local linkage partners in developing countries. It is hypothesized that the investments of MNCs pursuing local responsiveness create more jobs among local linkage partners, but imply less job upgrading, when compared to investments undertaken by MNCs following strategies of global integration. The hypotheses are tested on a sample of Danish MNCs with extensive investments in developing countries.     

EZB-Schuldverschreibungen — neue Verwendung für ein altes Instrument?

Wirtschaftsdienst - Als Reaktion auf die Corona-Krise haben die Notenbanken des Eurosystems ihre Anleihekäufe im Rahmen des APP-Programms weiter aufgestockt und um das PEPP-Programm erweitert....     

Nonlinearity and temporal dependence

Nonlinearities in the drift and diffusion coefficients influence temporal dependence in diffusion models. We study this link using three measures of temporal dependence: ρ-mixing$\rho \text{-}mixing$, β-mixing$\beta \text{-}mixing$ and α-mixing$\alpha \text{-}mixing$. Stationary diffusions that are ρ-mixing$\rho \text{-}mixing$ have mixing coefficients that decay exponentially to zero. When they fail to be ρ-mixing$\rho \text{-}mixing$, they are still β-mixing$\beta \text{-}mixing$ and α-mixing$\alpha \text{-}mixing$; but coefficient decay is slower than exponential. For such processes we find transformations of the Markov states that have finite variances but infinite spectral densities at frequency zero. The resulting spectral densities behave like those of stochastic processes with long memory. Finally we show how state dependent, Poisson sampling alters the temporal dependence.     

Capacity constraints, asymmetries, and the business cycle

We study how an occasionally binding capacity constraint affects the properties of business cycles. A real business cycle model is constructed where production takes place at individual plants and the number of plants operated varies over the cycle. The capacity constraint binds in states where all plants are operated. We derive the aggregate production function for this economy, which turns out to differ from the standard Cobb–Douglas function while retaining its desirable properties. The business cycle features of this one-sector growth model are similar to those of a standard real business cycle model in most respects. Our model does, however, display some properties of actual economies that standard models do not. In particular, business cycles in our model are asymmetric—troughs are deeper on average than peaks are tall. Also, labor's share of income is counter-cyclical, as it is in US data.     

Morphological analysis for health care systems planning

Health care planners are continually challenged by the difficulty of ordering and understanding of the complexities of health care delivery systems. Methods are needed which can aid in extending thought processes into multi-dimensional solution space and rationalizing the thinking of various health care interests. This paper describes a useful approach to designing and evaluating health care systems utilizing a case study of a large metropolitan community.