Market Imperfections and Land Productivity in the Ethiopian Highlands

This study analyses how market imperfections affect land productivity in a degraded low‐potential cereal‐livestock economy in the Ethiopian highlands. A wide array of variables is used to control for land quality in the analysis. Results of three different selection models were compared with least squares models using the HC3 heteroskedasticity‐consistent covariance matrix estimator. Market imperfections in labour and land markets were found to affect land productivity. Land productivity was positively correlated with household male and female labour force per unit of land. Female‐headed households achieved much lower land productivity than male‐headed households. Old age of household heads was also correlated with lower land productivity. Imperfections in the rental market for oxen appeared to cause overstocking of oxen by some households. Conservation technologies had no significant positive short‐run effect on land productivity. The main results were consistent across the different econometric models.     

Corporate financing decisions when investors take the path of least resistance

We argue that inertial behavior on the part of investors can have significant consequences for corporate financial policy. One implication of investor inertia is that it improves the terms for the acquiring firm in a stock-for-stock merger, because acquirer shares are placed in the hands of investors, who, independent of their beliefs, do not resell these shares on the open market. In the presence of a downward-sloping demand curve, this leads to a reduction in price pressure and, hence, to cheaper equity financing. We develop a simple model to illustrate this idea and present supporting empirical evidence.     

Collaborating with Competitors: How Do Small Firm Accounting Associations and Networks Successfully Manage Coopetitive Tensions?*

The “coopetition” paradox exists when two or more organizations are simultaneously involved in cooperative and competitive interactions. In the accounting industry, small firms encounter coopetition when they align themselves with other independent firms to form accounting associations and networks (AANs). AANs are a type of interorganizational relationship (IOR) that provide opportunities for member firms to collaborate by sharing important resources such as expertise, best practices, and manpower. However, member firms also compete in the marketplace for clients and human capital, which incentivizes uncooperative and opportunistic behavior. If managed inadequately, coopetitive tensions can significantly hamper AAN benefits and may lead to IOR failure. Given the considerable longevity of AANs, we interview 42 high‐level accounting professionals to understand AANs' apparent successful management of these tensions. Leveraging coopetition and IOR theory, our analysis suggests that transactional mechanisms (contractual agreements, organizational structure, selection/monitoring processes) and relational mechanisms (trust, social ties, reciprocity) play key roles in encouraging healthy cooperation and competition among member firms. One of our main conclusions is that these mechanisms contribute to AAN success because they are leveraged comprehensively across each IOR life cycle phase, and they are mutually reinforcing, with transactional mechanisms providing the foundation to inspire confidence and encourage the development of relational mechanisms. Our research enriches existing accounting and coopetition literature, provides a new perspective for AANs, and responds to calls to understand key factors of IOR success.     

The Squam Lake Report: Fixing the Financial System*

In these excerpts from The Squam Lake Report, fifteen distinguished economists analyze where the global financial system failed, and how such failures might be prevented (or at least their damage better contained) in the future. Although there were many contributing factors to the crisis—including “agency” problems throughout the financial system and a bankruptcy code poorly suited for reorganizing financial firms—at the core of the problem is a potential conflict between the risk-taking proclivity of financial institutions and the interests of the economy at large that must be managed at least in part through more effective regulation. The Squam Lake Report provides a nonpartisan plan to transform the regulation of financial markets in ways designed to limit systemic risk while preserving—to the extent possible and prudent—the economies of scale and scope that justify the existence of today's large financial institutions. To reduce the risks that large banks will fail, the authors call for higher capital requirements based on more effective assessments of the risks of bank assets and liabilities, as well as a new systemic regulator that should be part of the central bank. To reduce the costs of failure when it occurs, the authors propose that banks be required to create “living wills” laying out their plan to sell assets or shut down operations in the event of financial trouble. As part of that plan, regulators are urged to “aggressively encourage” banks to issue “contingent” debt capital securities that convert into equity.     

Longitude matters: Time zones and the location of foreign direct investment

Using bilateral foreign direct investment (FDI) data, we find that differences in time zones have a negative and significant effect on the location of FDI. We show that this finding is robust across different specifications, estimation methods and proxies for time zone differences. Time zones also have a negative effect on trade, but this effect is smaller than that on FDI. Finally, the impact of the time zone effect has increased over time, suggesting that it is not likely to vanish with the introduction of new information technologies.     

An economic analysis of the EU Commission’s proposal for a new consumer credit directive

The debate on ratification or revision of the proposed new Consumer Credit Directive continues. The European Parliament neither rejected nor approved the Commission’s proposal at the plenary session on November 5, 2003. While the Commission insists on defending the merits of the proposal, the LAC Rapporteur Würmeling calls for a complete modification. This article is intended to serve as a navigation guide past the holes and obstacles on the winding ratification path.     

Using the Analytical Hierarchy Process (AHP) to Construct a Measure of the Magnitude of Consequences Component of Moral Intensity

The purpose of this work is to elaborate an empirically grounded mathematical model of the magnitude of consequences component of “moral intensity” (Jones, Academy of Management Review 16(2),366, 1991) that can be used to evaluate different ethical situations. The model is built using the analytical hierarchy process (AHP) (Saaty, The Analytic Hierarchy Process, 1980) and empirical data from the legal profession. One contribution of our work is that it illustrates how AHP can be applied in the field of ethics. Following a review of the literature, we discuss the development of the model. We then illustrate how the model can be used to rank-order three well-known ethical reasoning cases in terms of the magnitude of consequences. The work concludes with implications for theory, practice, and future research. Specifically we discuss how this work extends the previous work by Collins (Journal of Business Ethics 8, 1, 1989) regarding the nature of harm variable. We also discuss the contribution this work makes in the development of ethical scenarios used to test hypotheses in the field of business ethics. Finally, we discuss how the model can be used for after-action review, contribute to organizational learning, train employees in ethical reasoning, and aid in the design and development of decision support systems that support ethical reasoning.     

A dynamic interregional theory of migration and population growth

The authors attempt to bring the theory of regional amenity value determination together with a theoretical framework on migration to form a cohesive theoretical model. They build on previous efforts to do this by introducing factors such as the housing market and determination of the equilibrium level of real full income. The implied geographical focus is on the United States.