Internalization of externalities and local government consolidation: empirical evidence from Japan

The fact that jurisdictional consolidation overcomes externality problems in the provision of local public goods is one of the best-known benefits of consolidation in the theoretical literature. Nevertheless, previous studies provide little evidence of how public service spillover effects influence consolidation decisions. This study empirically tests the hypothesis that spillovers induce consolidation, using voting data on the consolidation of Japanese municipalities. The extent of spillovers is measured by estimating the demand function for public goods with externalities. It is found that residents of the municipalities that can internalize a large amount of public goods spillovers through municipal consolidation tend to favor consolidation. This result supports the theoretical inference that spillovers in local public goods affect utility gains from jurisdiction integration, thus serving as one of the key impetuses for boundary reform. Moreover, after controlling for the spillover effects, economies of scale, population share, differences in median income, and unconditional grants can help explain consolidation preference.     

Firm age and performance

Amid increasing interest in firm age and its effects on firm performance, this special issue offers an exhaustive review of the literature and a novel collection of evidence on the effects of firm age on performance, including a special focus of interest on innovation performance, financial performance, exports, survival and growth. This editorial positions the theme in the extant literature, and provides key definitions and challenges ahead in the field of evolutionary economics. It introduces the collection of articles composing the special issue. The papers offer a diversity of country contexts, as well as analytical approaches and methods. They include an exhaustive review of the literature on age and firms’ performance, and present original empirical studies focusing on the effects of age on firms’ economic outcomes on the one hand, and on innovation outcomes on the other hand. While most of the papers use econometric analysis, the level of analysis ranges from firm to individual.     

“Just a Little Respect”: Effects of a Layoff Agent’s Actions on Employees’ Reactions to a Dismissal Notification Meeting

For several decades, most discussion on financial fraud has centered on the fraud triangle, which has evolved over time through various extensions and re-interpretations. While this has served the profession well, the articulation of the human side of the act is indirect and diffused. To address this limitation, this research develops a model to explain the role of human desires, intentions, and actions in indulgence of, or resistance to, the act of financial fraud. Evidence from religion, philosophy, sociology, neurology, behavioral economics, and social psychology is integrated to develop and support an alternative fraud model, called the disposition-based fraud model (DFM). To articulate the model, its two primary components, disposition and temptation, are further developed and extended. Although the DFM is generally applicable to any act of fraud, this paper focuses on executive fraud. The similarities and differences between the DFM and extant fraud models are discussed. Importantly, in light of the DFM, a re-interpretation of the fraud triangle is made to improve our understanding of the human element in it. Additionally, potential implications of the model for corporate governance are discussed, suggestions for further research are offered, and the DFM’s strengths and limitations are noted.     

Framing Sustainable Consumption in Different Ways: Policy Lessons from Two Participatory Systems Mapping Exercises in Hungary

Sustainable consumption as a complex phenomenon at the boundaries of different (ecological, economic, social) systems requires theoretical approaches that do justice to its complex causality and dynamism. Participatory systems mapping offers a tool to achieve this purpose. Its policy relevance lies in its ability to include diverse views, multiple actors, and offer options for policy intervention. The research reported here applied participatory systems mapping in order to define and identify system boundaries for sustainable consumption and uncover perceived causal relationships among the determining factors of sustainable consumption. By revealing the mental models of an expert and a conscious consumer panel on sustainable consumption in general, we can shed light on the cognitive constructions of sustainable consumption and identify most important boundaries that were chosen and their implications on policy-making. The expert panel framed the boundaries as lack of sustainable consumption, while the conscious consumer panel employed a positive framing as strong communities in sustainable consumption. The two panels also differed in their focus on scale: Experts targeted the national scale, while conscious consumers concentrated at the local scale.     

Exchange Rate Pass-Through and the Role of Market Shares

This paper examines the effects of changing market shares on exchange rate pass-through to US import prices. Based on a static model of imperfect competition, I predict that a country with a larger share of a host’s import market will have lower pass-through than its competitors. Using highly disaggregated data on US imports, I implement rolling regressions to calculate unique quarterly values of pass-through for specific goods from each exporting country. These values are compared across market shares, indicating a general trend of decreasing pass-through for larger shares. Most specifically, as predicted by the model, the country holding the largest share of the market has significantly lower pass-through than its competitors. The negative relationship between pass-through and market share holds across most categories of goods, most notably the larger categories of imports. Lastly, I show the market share effect is stronger following larger fluctuations in the exchange rate, particularly after large dollar appreciations.     

Implementing industrial policy: How to choose?

There has been a resurgence of interest in industrial policy in higher income as well as in emerging and still developing economies, in part due to a renewed interest in the role of economic structure, with industrial policy interpreted as interventions designed to shift resources into higher return, higher growth activities. Dialogue with the private sector is critical but central to policy choice is how far policy should be applied on a vertical as opposed to a horizontal basis. This paper surveys the techniques available to guide selectivity, focusing in particular on trade-based indicators. It concludes that whilst in practice some selectivity is necessary, there is a limit as to how far this can be guided by objective indicators and flexibility and experimentation will be required in the application of policy.     

A New Regulatory Paradigm for the Digital Sector in Europe

The new regulatory framework in the digital sector in Europe is likely to fall short of expectations. A fragmented digital market with insuffi cient incentives for investment is the probable outcome. European regulators should abandon their approach in favour of a new and more flexible set of ideas discussed in this paper.     

An investigation of factors affecting the visits of online crowdsourcing and labor platforms

Nowadays, the economic activities have become increasingly digital since hundreds of millions of Internet users are using crowdsourcing platforms either to work at an online job as workers, or as a model of problem-solving and production as requesters. This growing workforce makes it necessary from the perspective of the online platforms, to fully understand the business dimensions of this emerging and innovative “online labor” phenomenon, which can rapidly change the future of work and work organization in the online world. This paper aims to investigate and analyze the visits of online labor platforms that offer crowdsourcing and crowdfunding services. Using websites’ metrics data drawn from Alexa for the time period 2012-2016 the paper uses Ordinary Least Squares (OLS) and Fixed Effects (FE) regression analysis to examine correlations between visits and website characteristics. The research shows that the sessions of an online labor marketplace website from mobile devices have an increasing trend to be positively correlated to the quality mechanisms a website deploys as well as on location-dependent factors. The results are expected to provide insights on how the online labor website characteristics affect their traffic and thus inform about their evolution and improvement.     

CEO internal experience and voluntary disclosure quality: Evidence from management forecasts

Internally‐promoted CEOs should have a deep understanding of their firm's products, supply chain, operations, business climate, corporate culture, and how to navigate among employees to get the information they need. Thus, we argue that internally‐promoted CEOs are likely to produce higher quality disclosure than outsider CEOs. Using a sample of US firms from the S&P1500 index from 2001 to 2011, we hand‐collect whether a CEO is hired from inside the firm and, if so, the number of years they worked at the firm before becoming CEO. We then examine whether managers with more internal experience issue higher quality disclosures and offer three main findings. First, CEOs with more internal experience are more likely to issue voluntary earnings forecasts than those managers with less internal experience as well as those managers hired from outside the firm. Second, CEOs with more internal experience issue more accurate earnings forecasts than those managers with less internal experience as well as those managers hired from outside the firm. Finally, investors react more strongly to forecasts issued by insider CEOs than to those issued by outsider CEOs. In additional analysis, we find no evidence that these results extend to mandatory reporting quality (i.e., accruals quality, restatements, or internal control weaknesses), perhaps because mandatory disclosure is subjected to heavy oversight by the board of directors, auditors, and regulators. Overall, our findings suggest that when managers have work experience with the firm prior to becoming the CEO, the firm's voluntary disclosure is of higher quality.