Optimal CEO Compensation with Search: Theory and Empirical Evidence

We integrate an agency problem into search theory to study executive compensation in a market equilibrium. A CEO can choose to stay or quit and search after privately observing an idiosyncratic shock to the firm. The market equilibrium endogenizes CEOs’ and firms’ outside options and captures contracting externalities. We show that the optimal pay‐to‐performance ratio is less than one even when the CEO is risk neutral. Moreover, the equilibrium pay‐to‐performance sensitivity depends positively on a firm's idiosyncratic risk and negatively on the systematic risk. Our empirical tests using executive compensation data confirm these results.     

Older Americans' knowledge of consumer rights and legal protection

Consumer knowledge and legal protection were measured in a telephone survey of a stratified random national sample of 1,305 older adults in the United States. The sample was divided into five age groups: 25–49, 50–64, 65–74, 75–84 and 85 and older. Respondents were aksed eight questions dealing with knowledge of consumer rights and protection. Consumer knowledge was poor and was not gender specific. As the age of the respondents increased, their knowledge score decreased. Those who were married or who were previously married scored higher than other groups.     

Financial Contagion in the Laboratory: Does Network Structure Matter?

We explore the role of interbank network structure and premature liquidation costs for the likelihood of financial contagions in a laboratory experiment. We consider complete versus incomplete networks of banks linked together by interbank deposits, and we further vary premature liquidation costs. Subjects play the role of depositors deciding whether or not to withdraw funds from their interconnected bank. We find that when liquidation costs are high, a complete network structure is significantly less vulnerable to financial contagions than an incomplete network structure. However, when liquidation costs are low, network structure is less important for the frequency of financial contagions.     

The earl of Derby and his tenants: sales of Royalist land during the Interregnum revisited1

This article examines the archives of the earls of Derby alongside related governmental papers to provide a new perspective on the Royalist land sales. It revisits Thirsk's pioneering work and, while upholding its significance, argues that historians can go further in understanding the social and economic consequences of the land sales. The identity, motivation, and activity of the Interregnum purchasers are re‐assessed, and it is suggested that the role of tenants was greater and more complex than has been appreciated. The case study will hopefully shed further light on a part of the Revolution land settlement story which has been underplayed.     

Emerging Class Relations in the Mekong River Delta of Vietnam: A Network Analysis

Neoclassical theory has not succeeded in explaining the relationship between increasing landlessness and class differentiation in rural southern Vietnam. In this paper, we take a relational approach, using statistical techniques from social network theory, to examine the governance structure of markets in a commune of Tra Vinh province in the Mekong River Delta. We demonstrate that new opportunities provided by the process of market development are accessible only to those households controlling the right bundles of resources in the core agricultural production and trading system of the area. Further, industrial employment is available only to those who have, at some stage, controlled land, while those who have never participated in the land and rice markets are confined to casual agricultural labour. The governance structure, embedded informally in relatively stable market networks, therefore reproduces class divisions.     

Productivity and Inflation: a Paradox

In his Budget speech, Mr. Lawson drew attention to the greatly improved record of productivity growth in UK manufacturing:
"During the 1960s, and again in the 1970s, growth in manufacturing productivity in the UK was the lowest of all the seven major industrial countries in the world. During the 1980s, our annual rate of growth of output per head in manufacturing has been the highest of all the seven major industrial countries."
Ironically this success in regard to productivity may cause a problem in regard to inflation if the UK moves to a fixed exchange rate policy within the EMS. In this Viewpoint we report the consequence of such a move and also describe the possible required rise in the exchange rate if price stability is to be attained. We show that price stability requires the exchange rate to rise (i) to offset world inflation and (ii) to compensate for the productivity gap between the traded and non-traded sectors.