On the informational content of advice: a theoretical and experimental study

This paper examines the market for advice and the underlying perception that advice is useful and informative. We do this by first providing a theoretical examination of the informational content of advice and then by setting up a series of experimental markets where this advice is sold. In these markets we provide bidders with a demographic profile of the “experts” offering advice.The results of our experiment generate several interesting findings. The raw bid data suggest that subjects bid significantly more for data than they do for advice. Second, in the market for advice there appears to be no consensus as to who are the best advisors although on average economists demand the highest mean price and women suffer a discount. In addition, we find that whether a subject suffers from a representativeness bias in the way he or she processes data has an impact on how he or she bids for advice and on his or her willingness to follow it once offered. Finally, we find that on average people impute a low level of informativeness onto advice, consistent with their bidding behavior for data versus advice.This work was done under grant number SES-0425118 of the National Science Foundation. The authors would like to recognize the Center for Experimental Social Science at New York University for its additional support. We also acknowledge the help of Elizabeth Potamites for her research assistance.     

Money, Sex and Happiness: An Empirical Study

The links between income, sexual behavior and reported happiness are studied using recent data on a sample of 16,000 adult Americans. The paper finds that sexual activity enters strongly positively in happiness equations. Higher income does not buy more sex or more sexual partners. Married people have more sex than those who are single, divorced, widowed or separated. The happiness‐maximizing number of sexual partners in the previous year is calculated to be 1. Highly educated females tend to have fewer sexual partners. Homosexuality has no statistically significant effect on happiness.     

Integrating ecosystem services into conservation assessments: A review

A call has been made for conservation planners to include ecosystem services into their assessments of conservation priority areas. The need to develop an integrated approach to meeting different conservation objectives and a shift in focus towards human wellbeing are some of the motivations behind this call. There is currently no widely accepted approach to planning for ecosystem services. This study contributes towards the development of this approach through a review of conservation assessments and the extent to which they include ecosystem services. Of the 476 conservation assessments identified by a set of search terms on the Web of Science, 100 were randomly selected for this review. Of these only seven had included ecosystem services, while another 13 had referred to ecosystem services as a rationale for conservation without including them in the assessment. The majority of assessments were based on biodiversity pattern data while 19 used data on ecological processes. A total of 11 of these 19 assessments used processes, which could be linked to services. Ecosystem services have witnessed an increase in attention received in conservation assessments since the year 2000, however trends were not apparent beyond this date. In order to assess which types of ecosystem services and how they have been accounted for in conservation assessments, we extended our review to include an additional nine conservation assessments which included ecosystem services. The majority included cultural ecosystem services, followed by regulatory, provisioning and supporting services respectively. We conclude with an analysis of the constraints and opportunities for the integration of ecosystem services into conservation assessments and highlight the urgent need for an appropriate framework for planning for ecosystem services.     

Taxation and household portfolio composition: US evidence from the 1980s and 1990s

This paper explores the relationship between household marginal income tax rates, the set of financial assets that households own, and the portfolio shares accounted for by each of these assets. It analyzes data from the 1983, 1989, 1992, 1995, and 1998 Surveys of Consumer Finances and develops a new algorithm for imputing federal marginal tax rates to households in these surveys. The empirical findings suggest that marginal tax rates have important effects on asset allocation decisions. The probability that a household owns tax-advantaged assets, such as tax-exempt bonds or assets held in tax-deferred accounts, is positively related to its tax rate on ordinary income. In addition, the portfolio share invested in corporate stock, which is taxed less heavily than interest bearing assets, is increasing in the household’s ordinary income tax rate. Holdings of heavily taxed assets, such as interest-bearing accounts, decline as a share of wealth as a household’s marginal tax rate increases.     

BANK INTEREST MARGINS AND BUSINESS START-UP COLLATERAL: TESTING FOR CONVEXITY

The paper investigates the relationship between bank interest rate margins and collateral for loans issued to new ventures. The analysis finds a convex U‐shaped relationship. The results indicate that while provision of collateral initially reduces bank exposure to risk (through security, more optimal levels of capital and lower moral hazard among entrepreneurs) that beyond a point, the positive risk‐wealth association gives rise to greater risk taking propensity among entrepreneurs and ultimately higher interest rates. This indicates that a lender's pricing policy may even somewhat help to level the competitive playing field between ventures launched by higher and moderately wealthy entrepreneurs.     

Art as an investment: Short and long-term comovements in major painting markets

This paper examines the short and long-term price linkages among major art and equity markets over the period 1976–2001. The art markets examined are Contemporary Masters, French Impressionists, Modern European, 19^th Century European, Old Masters, Surrealists, 20^th Century English and Modern US paintings. A global equity index (with dividends and capitalisation changes) is also included. Multivariate cointegration procedures, Granger non-causality tests, level VAR and generalised variance decomposition analyses based on error-correction and vector autoregressive models are conducted to analyse short and long-run relationships among these markets. The results indicate that there is a stationary long-run relationship and significant short and long run causal linkages between the various painting markets and between the equity market and painting markets. However, in terms of the percentage of variance explained most painting markets are relatively isolated, and other painting markets are generally more important than the equity market in explaining the variance that is not caused by innovations in the market itself. This suggests that opportunities for portfolio diversification in art works alone and in conjunction with equity markets exist, though in common with the literature in this area the study finds that the returns on paintings are much lower and the risks much higher than in conventional financial markets.The authors would like to thank delegates to the 14th Australasian Finance and Banking Conference, University of New South Wales, seminar participants at the Queensland University of Technology and Massey University, Masaki Katsuura, and two anonymous referees for helpful comments on earlier versions of this paper. The financial assistance of a Queensland University of Technology, Faculty of Business Research Initiative Grant is also gratefully acknowledged.     

WORLD OUTLOOK

After six years of steadily rising OECD output, fears of a significant rise in world inflation are now increasing. In the last year there has been a slight pick-up in inflation with producer prices up nearly d per cent. But prompt action by the Federal Reserve to raise interest rates before the presidential election appears to have damped inflationary expectations in the US and has given Japan and Germany an opportunity to tighten monetary policy without causing major currency fluctuations. It is also apparent that the other possible source of world inflation, commodity prices, is not a problem. OPEC over-production has ensured that the oil price remains weak and other commodity prices appear to have stopped rising after a brief acceleration at the beginning of the year. Nevertheless the major imbalances in world trade are declining only slowly and without a change in fiscal policy in the major economies it is difficult to believe that minor changes in monetary policy will be sufficient if the process of adjustment begins to falter. Despite these risks, we take a sanguine view of world prospects. Tighter monetary policy should effect a slowdown in world growth next year (already indicated by recent developments, particularly in the US) and this should be sufficient to control inflation which we expect to peak at just under 5 per cent at the beginning of next year. From 1990 onwards we see steady growth accompanied by low inflation.     

The Impact of Organizational Culture and Reshaping Capabilities on Change Implementation Success: The Mediating Role of Readiness for Change

abstract    It was hypothesized that employees' perceptions of an organizational culture strong in human relations values and open systems values would be associated with heightened levels of readiness for change which, in turn, would be predictive of change implementation success. Similarly, it was predicted that reshaping capabilities would lead to change implementation success, via its effects on employees' perceptions of readiness for change. Using a temporal research design, these propositions were tested for 67 employees working in a state government department who were about to undergo the implementation of a new end-user computing system in their workplace. Change implementation success was operationalized as user satisfaction and system usage. There was evidence to suggest that employees who perceived strong human relations values in their division at Time 1 reported higher levels of readiness for change at pre-implementation which, in turn, predicted system usage at Time 2. In addition, readiness for change mediated the relationship between reshaping capabilities and system usage. Analyses also revealed that pre-implementation levels of readiness for change exerted a positive main effect on employees' satisfaction with the system's accuracy, user friendliness, and formatting functions at post-implementation. These findings are discussed in terms of their theoretical contribution to the readiness for change literature, and in relation to the practical importance of developing positive change attitudes among employees if change initiatives are to be successful.     

Who Gains from the Demographic Dividend? Forecasting Income by Age

Changes in the population age structure are known to influence the total income per person, but little is known about whether the changes are equally shared across the population or are concentrated on particular age groups and/or birth cohorts. The answer to this question has potentially important implications for income inequality, human capital investment, and fertility decision-making. We propose a new model of intergenerational transfers which distinguishes between the effects of changes in population structure and the effects of changes in family age structure. Using age-specific data from annual income and expenditure surveys of Taiwan between 1978 and 1998, we show that changes in age structure have had a very favorable effect on Taiwan's income growth. The gains are not equally shared by all age groups, however. Children and young adults have benefited the most, while the elderly have benefited the least. The population and family age structures have independent effects on per capita income; the effect of the population age structure is most important. Generational differences in per capita income are closely related to intergenerational differences in earnings, suggesting only a weak form of altruism. Finally, we predict that, on average, population aging will adversely influence the per capita income growth in Taiwan in the coming decades.     

HOW SHOULD WE MEASURE THE “ECONOMIC” ASPECTS OF WELL‐BEING?

The Human Development Index (HDI) uses GDP per capita to measure “command over resources,” which implicitly makes the strong value judgment that inequality and insecurity do not matter. This paper presents revised estimates of the Index of Economic Well‐Being (IEWB) for the United States, the U.K., Canada, Australia, Germany, Norway and Sweden for the period 1980 to 2001 and demonstrates that replacing an index of the log per capita incomes with our IEWB as the “command over resources” component in the Human Development Index (HDI) affects the level and trend of the HDI, even among affluent nations. Because the IEWB recognizes four dimensions of command over resources (Current effective per capita Consumption flows, Net societal Accumulation of stocks of productive resources, Income Distribution and Economic Security), its use has a particularly large impact where underlying trends in these components diverge (e.g. the U.K. or the United States).