An alternative proof of Fishburn’s axiomatization of lexicographic preferences

We present an alternative proof of Fishburn’s (1975) axiomatization of lexicographic preferences. The essence of our proof lies in identifying “an extremely pivotal factor”. Our proof reconfirms the strong interconnections between Arrow’s and Gibbard–Satterthwaite’s theorems with Fishburn’s axiomatization.     

Financial liberalization and the selection of emigrants: a cross-national analysis

This paper explores the impact of financial liberalization on the migration of high skilled labor from 46 countries to the Organization for Economic Cooperation and Development, taken at 5-year intervals over the period 1985–2000. Using an exploratory factor analysis, we are able to distinguish between two dimensions of financial liberalization, namely the robustness of the markets and their freedom from direct government control. We find that a standard deviation improvement in the robustness of the source country financial sector magnifies the extent of skilled emigration by a factor of about 3.9–5.1 % points on the average. However, a corresponding increase in the freedom of the source country financial sector from government control has a statistically insignificant impact. Further, the impact of improved financial sector robustness on selection is more pronounced for countries with a better quality of institutions in terms of the perceived credibility of the regime in terms of its ability to protect property rights.     

The European unemployment problem: its cause and cure

The stubbornly high unemployment experienced by European countries since the mid-1970s have led to a major reconsideration of the natural rate paradigm. Traditional theories which describe movements of unemployment as fluctuations around a moving natural rate have been challenged by hysteresis theories. The question arises how one can discriminate between these competing theories. To this end, we estimate a time-varying parameter model of the unemployment rate for the US, UK, Germany, and France. The parameters of the model were estimated jointly by maximum likelihood estimation using the Kalman filter algorithm. When the moving natural rate model is tested against the alternative of a unit root process, the unit root hypothesis is resoundingly rejected. Among the determinants of the natural rate institutions that alter labour market incentives for workers appear to have been more important than institutions that affect labour demand.     

Customer portfolio composition and customer equity feedback effects: Student diversity and acquisition in educational communities

Researchers in marketing have long recognized that current populations of customers can influence the behavior of prospective customers. This paper draws on existing marketing theories to empirically examine how changes in student body demographic segments influence future demand for MBA programs. Using a longitudinal analysis of data spanning 18 years, we find that higher proportion of female students leads to significant increases in future applications. This implies a marketing rationale for business schools in encouraging gender diversity. In contrast, we find evidence of prejudice towards minority and international students among business school applicants. We discuss the results of the analysis in the context of the current affirmative action debate and changes in demographic trends.     

The relationship between conditional value at risk and option prices with a closed-form solution

Options and CVaR (conditional value at risk) are significant areas of research in their own right; moreover, both are important to risk management and understanding of risk. Despite the importance and the overlap of interests in CVaR and options, the literature relating the two is virtually non-existent. In this paper we derive a model-free, simple and closed-form analytic equation that determines the CVaR associated with a put option. This relation is model free and is applicable in complete and incomplete markets. We show that we can account for implied volatility effects using the CVaR risk of options. We show how the relation between options and CVaR has important risk management implications, particularly in terms of integrated risk management and preventing arbitrage opportunities. We conduct numerical experiments to demonstrate obtaining CVaR from empirical options data.     

Product market power and management’s action to avoid earnings disappointment

We investigate the empirical relationship between a firm’s product market power and its management’s action to use real-activity-based earnings management techniques to avoid earnings disappointment by meeting or beating earnings targets such as analysts’ earnings forecasts, positive earnings, or higher earnings relative to previous years. While there is a general consensus that product market competition in an industry affects management’s operating and financial decisions, and thus is an important intervening factor in a firm’s strategies for many economic situations (Nickell in J Political Econ 104:724–746, 1996; Porter in The competitive advantage of nations. Macmillan, London, 1990), the linkage between product market power, managerial incentives, and financial reporting quality has so far received little academic attention. Our analyses show that while the firms manage both accruals and real activities in varying degrees, the firms having greater product market power with the ability to differentiate their products to earn additional revenue, if necessary, are less inclined to engage in real-activity-based earnings management in certain suspect economic situations compared to the firms with less market power. We, however, do not find any significant relationship between product market power and accrual-based earnings management.     

THE COORDINATED REFORM OF TARIFFS AND INDIRECT TAXES

Tariff reduction designed to encourage outward-oriented developmentwill work only if alternative sources can be found to replenishrevenue lost in the cause of reducing protection. Integratedreform of tariffs with taxes would seem to be the answer, butso far analysts have often tended to treat the two instrumentsseparately. This article looks at the tariff and tax instruments used bydeveloping countries to protect their producers and to increasetheir revenues, and then lays out the contours of an integratedstructure for taxes with tariffs. This structure takes intoaccount not only objectives of efficiency and equity but alsoconstrained administrative capacity. The analysis concludeswith an examination of how these ideas may be used to guidethe coordinated reform of tax and tariff structures.