THE COST OF THE U.S. SUGAR PROGRAM REVISITED

The article analyzes the welfare cost of the U.S. sugar program using a multimarket model of U.S. sweetener markets. The latter includes raw crops, sugar extraction and refining, and sweetener users (food-processing industries and final consumers). The authors address the industrial organization of food industries using sweeteners and treat the United States as a large importer. With the removal of the program, this article estimates (all figures in 1999 dollars) that in 1998 cane growers, sugar beet growers, and processors would have lost $307, $650, and $89 million, respectively; sweetener users would have gained $1.9 billion. World prices would have increased by 13.2%. The deadweight loss of the program is estimated at $532 million.     

What's In It for Me? CEOs Whose Firms Are Acquired

We study benefits received by target chief executive officers(CEOs) in completed mergers and acquisitions. Certain targetCEOs negotiate large cash payments in the form of special bonusesor increased golden parachutes. These negotiated cash paymentsare positively associated with the CEO's prior excess compensationand negatively associated with the likelihood that the CEO becomesan executive of the acquiring company. Regression estimatessuggest that target shareholders receive lower acquisition premiain transactions involving extraordinary personal treatment ofthe CEO. Target CEOs experience very high turnover rates bothat the time of acquisition and, for those who remain employed,for several years thereafter.     

Dynamic R&D Competition, Research Line Diversity, and Intellectual Property Rights

This paper develops a simple model of sequential innovations with a diversity of research lines. Competitive strategies of firms for R&D are analyzed at each stage in a sequence of innovations. We compare two alternative regimes of enforcing patent law, as a mechanism to provide adequate incentives for R&D at each stage. The regime that protects the research line gives monopoly rights to an entire line of research, hence limiting the utilization of the previous knowledge and retarding subsequent innovations. The other regime protects the product, which facilitates the use of previous knowledge at the expense of providing inadequate protection to the ideas embodied in the product, and results in underinvestment in the first stage.     

Macroeconomic stabilization through monetary and fiscal policy coordination: Implications for European Monetary Union

In a two-country model, we consider the implications of monetary and fiscal policy coordination for macroeconomic stabilization. We show that the optimal regime is one of monetary and fiscal policy coordination under flexible exchange rates. In the context of the European Community, this suggests that the desire to fix exchange rates may not be costless. In addition, we show that fiscal coordination requires a relatively high degree of flexibility in fiscal policy. This result suggests that limits on the flexibility of fiscal policies, as suggested in the Delors Report, may hinder macroeconomic stabilization.     

Battling pirates? Patents may be the best defense

In the perilous high seas of international trade, girding the corporate ship with patents may be the best defense against piracy of your product or service ideas.     

On the dynamic effects of monetary and fiscal policy under floating exchange rates: Simulations with an asset market model

Zusammenfassung Die dynamischen Wirkungen der Geld- und Finanzpolitik bei floatenden Wechselkursen: Simulationen mit einem verm?genstheoretischen Modell.-Der Autor fügt in ein von Dornbusch entwickeltes Modell verz?gerte Anpassungen bei der Produktion und bei den Handelsstr?men ein, um die dynamischen Wirkungen der Geld- und Finanzpolitik bei floatenden Wechselkursen zu untersuchen. Trotz der Tatsache, da\ eine monet?re Expansion anfangs die Zinss?tze senkt, kann der Wechselkurs das Niveau seines neuen langfristigen Gleichgewichts unterschreiten. Dieses Ergebnis widerspricht früheren Behauptungen von Dornbusch und Fischer. Au\erdem führt eine fiskalische Expansion immer dazu, da\ der Wechselkurs sein neues langfristiges Gleichgewichtsniveau überschreitet. Schlie\lich konvergiert das System unter Schwingungen, wenn die Anpassungsverz?gerungen bei der Produktion und bei den Handelsstr?men verh?ltnism?\ig lang sind.

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Résumé Les effets dynamiques de la politique monétaire et fiscale sous des taux de change flottants: Des simulations avec un modèle du marché financier. — Dans cette étude on a introduit la retardation de l’ajustement de la production et des échanges commerciaux dans un modèle développé par Dornbusch pour analyser les effets dynamiques de la politique monétaire et fiscale sous des taux de change flottants. Malgré du fait que l’expansion monétaire abaisse le taux d’intérêt au début, le taux de change peut passer par au-dessous du nouveau niveau d’équilibre à long terme. Ce résultat contredit aux affirmations faites par Dornbusch et Fischer. En plus l’expansion fiscale fait toujours le taux de change passer par au-dessus de son nouveau niveau d’équilibre à long terme. Finalement, le système converge avec des oscillations si la retardation de la production et des échanges commerciaux est relativement étendue.

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Resumen Sobre los efectos dinámicos de la política monetaria y fiscal bajo tipos de cambio flotantes: simulaciones con un modelo “asset market”. — En estre trabajo se introducen desfasajes en el ajuste del producto y en el intercambio comercial en un modelo desarrollado por Dornbusch para analizar los efectos dinámicos de la politica monetaria y fiscal bajo tipos de cambio flotantes. A pesar de que la expansion monetaria inicialmente reduce las tasas de interés, el tipo de cambio puede no alcanzar su nuevo nivel de equilibrio de largo plazo. Este resultado contradice resultados obtenidos anteriormente por Dornbusch y Fischer. Además, la expansión fiscal siempre induce al tipo de cambio a superar su nuevo nivel de equilibrio de largo plazo. Finalmente, el sistema converge con oscilaciones si los desfasajes de producto y de comercio son relativamente largos.

     

Music format effects in radio advertising

Radio advertising performance was experimentally investigated to determine whether music format can moderate the persuasive effect of ads for low involvement type products. Recall, attitude toward the product, attitude toward the advertisement, and behavioral intention scores each provide support for the research hypothesis. As predicted, a highly involving music format produced the most consistently favorable effects for the products tested.     

Two-Stage Acquisitions, Free-Riding, and Corporate Control

This study examines two-stage acquisitions, focusing upon first- and second-stage excess returns for both acquired and acquiring firms, and analyzing the relation between acquisition returns and ownership interest. The evidence suggests that target firm shareholders do not free-ride. Evidence is also provided indicating that premiums are paid by the majority holder to acquire a remaining minority interest.     

UK Executive Bonuses and Transparency — A Research Note

High levels of executive pay in the USA and the UK have attracted journalistic and academic criticism to the effect that they constitute rent extraction by self‐interested executives rather than rewards for raising shareholder returns. The focus of most criticism has been on salary, severance payments and various long‐term incentives (particularly share options). However, executive bonuses have attracted little attention and have been only lightly regulated. This raises important questions. Has lighter regulation been associated with significant levels of rent extraction through bonuses, that is, a weak relation between bonus pay and shareholder returns? Have more transparent performance conditions attached to bonuses strengthened the relation, making rent extraction more difficult, or have they acted as camouflage for rent extraction, associated with higher bonus pay but lower pay‐performance responsiveness? Are measures of CEO power associated with larger bonuses? This empirical note provides the first, preliminary answers to these questions.