A different perspective on operating leverage: Comments

A recent article in this journal by Dran (1991) suggests that the usual treatment of degree of operating leverage (DOL) is misleading because it improperly attributes the DOL to the ratio of fixed to total costs rather than the closeness of the firm’s output to breakeven. Managerial economics texts are clear in identification of DOL as an elasticity concept which varies with the nearness to break-even. Examples associating DOL with the relative level of fixed cost arise from association of higher fixed costs with higher breakeven points, and this appears to be the normal economic relationship.     

Productive behavior through the life course: An essay on the quality of life

Present patterns of productive activity are neither well recognized, optimal for society, nor in accordance with individual prefence. Although a great deal of attention has been given to meeting people's needs for income, medical care, and other services, the quality of their lives must also be defined by what they do for themselves and for others. In discovering present patterns of productive activity throughout the life course and optimizing those patterns, we will raise the quality of American life. To accomplish this task, two great changes are needed: we must recognize the full range of productive activities throughout the life course and give people the opportunity to modify the allocation of paid employment.     

Social Security, Poverty and Economic Transition: An Analysis for Bulgaria 1992–96

The paper addresses the issues of poverty and social security in a transitional environment on the basis of recent economic developments in Bulgaria. Special emphasis is placed on the need for a new type of social safety net stemming from the radical changes in the political and economic system. The evolution of the social security system in Bulgaria during the transition is analysed focusing on such elements as the pension system, unemployment benefits, child allowances, etc. The empirical analysis is based on extensive use of data from the Bulgarian Household Budget Surveys during the period 1992–1996. Poverty in Bulgaria is measured using different poverty measurements and some quantitative results showing the changing dimensions of poverty in the transition period are presented and discussed in the paper.EES or e-mail at Corresponding author. E-mail:     

Employer Penalties for Failure to Provide Individual Employee Notification Under the Family and Medical Leave Act: “Clarifications” Following Ragsdale v. Wolverine Worldwide, Inc.

This article examines the Supreme Court's ruling in Ragsdale v. Wolverine Worldwide, Inc. (2002) and considers its implications for employer and employee rights and responsibilities relative to implementing the FMLA policies. We provide an overview of the pre-decision regulatory environment including the general leave provisions of the FMLA and DOL's regulations requiring employer notification of leave designated as FMLA leave. We also identify those provisions that the decision did not alter and provide a broader consideration of the issues and implication of this decision for employers and employees.     

Pay Comparability Across and Within UK Boards: An Empirical Analysis of the Cash Pay Awards to CEOs and Other Board Members

Drawing on the literature on social comparison and equity theories, this paper analyses the determinants of, and the relationships between, the cash pay awards of CEOs and other board members for a sample of large UK companies over the period 1992–95. Our results suggest that external labour market and internal (i.e., within board) pay comparisons are important in explaining both CEO and other directors' pay awards. In the case of CEOs, however, there is evidence of an asymmetric adjustment to prior period pay anomalies, whereby the pay of the relatively underpaid executives displays significantly greater sensitivity to external market comparison pay levels. This asymmetric adjustment process results in a 'bidding-up' of average CEO pay relative to other board members over the four year period investigated.     

Wage–Setting Institutions, Unemployment, and Voters' Demand for Redistribution Policy

This paper examines unemployment, wages, and voters' demand for redistribution policy under three different labour market structures: laissez–faire, wage–setting by company or industrial unions, and wage–setting by a central union. Decisions on the level of taxes and benefits are made by majority rule. Taxes, wages, and unemployment are lowest under competitive wage–setting and highest with decentralised unions. A higher degree of centralisation of union wage–setting implies lower unemployment and taxes because a fiscal externality is internalised. Under some conditions about the composition of the population, the political–economic equilibrium can further be improved upon by cooperation between the government and the central union. This seems to have happened in the Netherlands where the unions and the government agreed to cut taxes and restrain wages, which has led to the 'Dutch Miracle'.     

Thermodynamics and process analysis for future economic scenarios

Economists are increasingly interested in forecasting future costs and benefits of policies for dealing with materials/energy fluxes, polluting emissions and environmental impacts on various scales, from sectoral to global. Computable general equilibrium (CGE) models are currently popular because they project demand and industrial structure into the future, along an equilibrium path. But they are applicable only to the extent that structural changes occur in or near equilibrium, independent of radical technological (or social) change. The alternative tool for analyzing economic implications of scenario assumptions is to use Leontief-type Input-Output (I-O) models. I-O models are unable to endogenize structural shifts (changing I-O coefficients). However, this can be a virtue when considering radical rather than incremental shifts. Postulated I-O tables can be used independently to check the internal consistency of scenarios. Or I-O models can be used to generate scenarios by linking them to econometric macro-drivers (which can, in principle, be CGE models). Explicit process analysis can be integrated, in principle, with I-O models. This hybrid scheme provides a natural means of satisfying physical constraints, especially the first and second laws of thermodynamics. This is important, to avoid constructing scenarios based on physically impossible processes. Process analysis is really the only available tool for constructing physically plausible alternative future I-O tables, and generating materials/energy and waste emissions coefficients. Explicit process analysis also helps avoid several problems characteristic of pure CGE or I-O models, viz. (1) aggregation errors (2) inability to handle arbitrary combinations of co-product and co-input relationships and (3) inability to reflect certain non-linearities such as internal feedback loops.     

On the existence of rational expectations equilibrium

We prove a theorem on the existence of rational expectations general economic equilibrium when agents condition on prices as well as on private information, and maximize the expectation of a state-dependent utility function. The key to the result is a new idealization of what it means for a set of empirical distributions to support agents' expectations. This idealization depends on the notion that agents compare their expectations with continuous versions of the random empirical distributions that are generated by the workings of the economy. The existence theorem covers all strictly concave utility functions, arbitrary distributions of the state variable, and situations in which the dimension of the state variable is large relative to the number of commodities.