Does Team-Based Compensation Give Rise to Problems When Agents Vary in Their Ability?

This paper reports the results of an experiment on how team heterogeneity in terms of productivity influences both the revenue sharing proposed by the principal to the team and the employees' performance. Experimental evidence shows that when the team is heterogeneous, the principal does not try to motivate the agents through her sharing offer. Regardless of the level of team-based compensation, a large amount of free riding occurs since each agent is mainly influenced by his teammate's behavior. In contrast, when the team is homogeneous, agents are better able to cooperate, reciprocating the principal's offer.     

This is what the leading indicators lead

We propose an optimal filter to transform the Conference Board Composite Leading Index (CLI) into recession probabilities in the US economy. We also analyse the CLI's accuracy at anticipating US output growth. We compare the predictive performance of linear, VAR extensions of smooth transition regression and switching regimes, probit, non‐parametric models and conclude that a combination of the switching regimes and non‐parametric forecasts is the best strategy at predicting both the NBER business cycle schedule and GDP growth. This confirms the usefulness of CLI, even in a real‐time analysis. Copyright © 2002 John Wiley & Sons, Ltd.     

The politics of redistributive social insurance

This paper analyses the political support for a social insurance that includes elements of redistribution when there exists an imperfect private insurance alternative. Individuals differ both in their income and risk. The social insurance is compulsory and charges an income-related contribution with pooling of risks. The private insurance is voluntary and charges a contribution based on individual risks. However due to the adverse selection problem, private insurance companies provide only partial insurance. Adopting a non-expected utility model, we show that there is a general majority support for social insurance and that this support is increasing with risk aversion. We also show that a mixed insurance is politically impossible, regardless of the degree of redistribution of social insurance and the joint distribution of risk and income in the population. Lastly, we analyse how the political support for social insurance is affected by any change in its redistributive component and the possibility of using genetic tests.     

Preponderance of evidence

This paper investigates the incentive properties of the standard of proof for a finding of negligence when evidence about injurers’ behavior is imperfect. We show that a “more-likely-than-not” decision rule provides maximal incentives for potential tort-feasors to exert care. An injurer is then held liable whenever inadequate care appears more likely than due care, and not liable otherwise. Our analysis provides a deterrence rationale for the exclusionary rules of evidence found in common law and the preponderance of evidence standard of proof.     

Urbanization effects on survey nonresponse: a test within and across cities

This paper addresses differences in survey response across city size by applying an explanation from House and Wolf to areas within cities. The data are from Toronto, Hamilton and Kitchener, in Canada. Consistent with other literature, response falls sharply from largest to smallest place, but variation in response rates within the cities is negligible. The intra-city analysis is accomplished by factor analyzing variables such as population density, crime rate and ethnic structure, mostly computed for census tracts, into a variable labelled social disorganization. What House and Wolf termed compositional variation in response is handled by record linking with municipal assessment information. The analysis is based on micro data taking the people listed for the sample as unit of observation.     

The transformational management of conflict: A perspective from the early Christian church

An understanding of transformational leadership has been developed for many spheres of management, but not previously for organizational conflict. This paper analyzes a successful conflict mediation attempt in the early Christian church and draws from it elements of a model of the transformational management of conflict that can be applied by managers in many contemporary work organizations. The elements include (a) reframing the conflict, (b) a focus on a shared organizational vision, (c) the placement of responsibility for dispute resolution in the hands of organizational members directly and indirectly involved in conflict, and (d) the use of communication devices consistent with the desired outcome. The paper suggests skills necessary for managers to implement the model and implications for research on it.     

Educational Development and Labour Markets

For over a century and a half, there have been cyclical phases ofsaturation and shortage in the numbers of students enrolled at German and Prussian universities. Starting from thisobservations, this article constructs a neoclassical glutting theory. A two-fold hypothesis is put forward. Firstly,the behaviour of students in their choice of curriculum depends on the expected rewards. Indeed, the allocation of studentsto the various faculties depends on the comparative yields of the latter in terms of expected earnings and job availabilityin the corresponding professional sectors. Thus, the rewards expected by a student are represented by the earnings on thelabour market at a given moment and that he or she considers to be sustainable in time. Secondly, an attraction phenomenonmay appear for certain curricula when a shortage occurs in different professional sectors. Once the shortagehas been made up, the demand effect continues as a result of delay in the perception of the situation by young people.This may gradually lead to comparative over-production of qualifieduniversity leavers. This unbalanced situation diverts new cohorts ofstudents to other sectors ofeducation and may cause a new shortage, finally resulting in acyclical movement modulated according to job availability.     

Self-control in peer groups

Social influences on self-control underlie both self-help groups and many peer interactions among youths. To understand these phenomena, we analyze how observing each other's behavior affects individuals’ ability to deal with their own impulses. These endogenous informational spillovers lead to either a unique “good news” equilibrium that ameliorates behavior, a unique “bad news equilibrium” that worsens it, or to the coexistence of both. A welfare analysis shows that people will find social interactions valuable only when they have enough confidence in their own and others’ ability to resist temptation. The ideal partner, however, is someone with a slightly worse self-control problem than one's own: this makes his successes more encouraging, and his failures less discouraging.     

Linking Public Investment to Private Investment. The Case of Spanish Regions

Public investment constitutes one of the main instruments of regional policies. The existence of a direct link between infrastructure and regional income per capita is usually accepted. Literature also describes a positive effect of public investment on private capital accumulation. This paper seeks to provide new empirical evidence on this latter relationship for the case of Spanish regions over the period 1965–1997 using panel data methodology. The results show a positive effect of productive and social public investment (especially in education) on private investment. The spillover effects generated by the productive infrastructures located in other regions do not seem to encourage the private investment in neighbouring regions. Public consumption and interest rate exert a negative influence on private capital accumulation. These results are robust to changes in the econometric specification.