Inequality and entrepreneurial thresholds

We explore the relationship between inequality and entrepreneurial activity. Drawing on cross-sectional data from a largescale survey of the economic conditions of individuals across India, we develop a number of dimensions of inequality to explore empirically how inequality interacts with entrepreneurship, operationalized as self-employment or as employing other people. We find compelling evidence that there are thresholds to becoming self-employed, and even more so to assembling the combinations of resources and personal attributes required to become an employer. Greater inequality leaves more people unable to make the transition to self-employment, leaving casual laboring as the occupation of necessity. At the same time, inequality increases the number of employers in a society, by concentrating resources - particularly land and finance - enough for significant numbers of people to be able to cross this higher threshold. Lastly, greater differentiation into social or religious groups curtails the ability to cross either entrepreneurial threshold, presumably by limiting the extent and benefits of social networks of value for entrepreneurship.     

Krazy Kimmy's: A Case in Fraud Examination

This two‐part case allows for maximum student engagement through preparation, in‐class discussion, and through a Part B case that is part of the Teaching Note. Through this case, students work to identify possible fraud schemes, plan an investigation, and perform horizontal analysis calculations. Students will learn about the concept of ethical hacking, red flag identification, internal control weaknesses, and investigation considerations for fraud schemes. Further, in‐class planning for next steps and investigation can occur, providing an opportunity for group work and in‐depth learning. This case offers flexibility for instructors in that it can be covered over one class or multiple classes, or can be assigned as an independent or group assignment. This teaching note provides an overview of the case along with guidance for teaching this case.     

江苏沿江八市物流联合配送初探

首先论述了沿江八市（南京、苏州、无锡、常州、镇江、南通、扬州、泰州），实行联合配送的必要性，其次分析了沿江八市实行联合配送的优势条件，探讨了沿江八市实行联合配送的难点之所在及解决办法，最后着重就沿江八市实行联合配送的神经中枢——联合配送信息平台的构建，提出了一些看法和建议。     

A note on cheap talk and burned money

Austen-Smith and Banks [Cheap talk and burned money, J. Econ. Theory 91(1) (2000) 1-16] study how money burning can expand the set of pure cheap talk equilibria of Crawford and Sobel [Strategic information transmission, Econometrica 50(6) (1982) 1431-1451]. I identify an error in the main Theorem of Austen-Smith and Banks, and provide a variant that preserves some of the important implications. I also prove that cheap talk can be influential with money burning if and only if it can be influential without money burning. This strengthens a result of Austen-Smith and Banks, but uncovers other errors in their analysis. Finally, an open conjecture of theirs is proved correct.     

Preponderance of evidence

This paper investigates the incentive properties of the standard of proof for a finding of negligence when evidence about injurers’ behavior is imperfect. We show that a “more-likely-than-not” decision rule provides maximal incentives for potential tort-feasors to exert care. An injurer is then held liable whenever inadequate care appears more likely than due care, and not liable otherwise. Our analysis provides a deterrence rationale for the exclusionary rules of evidence found in common law and the preponderance of evidence standard of proof.     

Price and quantity regulation in general equilibrium

We consider a general equilibrium model with a production externality (e.g. pollution), where the regulator does not observe firm productivity shocks. We examine quantity (permit) regulation and price (tax) regulation. The quantity of permits issued by the regulator are independent of the productivity shock, since shocks are unobserved. Price regulation implies use of the regulated input is an increasing function of the productivity shock because firms take advantage of a good productivity shock by increasing input use. Thus price regulation generates higher average, but more variable, production. Therefore, we show that in general equilibrium the relative advantage of quantity versus price regulation depends not only on the slopes of marginal benefits and costs, but on general equilibrium effects such as risk aversion. The general equilibrium effects are often more important than the slopes of the marginal benefits and cost curves. In the simplest model, a reasonable risk aversion coefficient implies quantity regulation generates higher welfare regardless of the benefit function.     

Delays and equilibria with large and small information in social learning

The general model of social learning with irreversible investment and endogenous timing is analyzed for any distribution of private informations. Strategic complementarities and multiple equilibria appear which are generated solely by information externalities. Different equilibria generate strikingly different amounts of information. The impacts of various assumptions (bounded beliefs, large number of agents, discrete time and short periods) are examined carefully. The properties are robust to the introduction of observation noise with a continuum of agents.     

Contract renegotiation in a continuous state space

Summary. When players are unable to write complete state contingent contracts it is shown, within the context of a non-cooperative contracting-renegotiation game, that the only subgame perfect equilibrium allocations are those that correspond to the set of first-best allocations. Players are able to implement this set of allocations by signing an initial contract that is subsequently renegotiated in all states of the world. The contracting-renegotiation problem is complicated in an interesting way by assuming that the state space is continuous. The issue of the existence of an initial contract, that is subsequently renegotiated to the set of first-best allocations, must be resolved. Unlike Aghion, Dewatripont and Rey [1994], the results here do not require nor depend upon the comonotonicity of the objective functions. Received: January 27, 1995; revised version July 1, 1996     

Macroeconomic consequences of terror: theory and the case of Israel

This paper analyzes the effect of terror on the economy. Terror endangers life such that the value of the future relative to the present is reduced. Hence, due to a rise in terror activity, investment goes down, and in the long run income and consumption go down as well. Governments can offset terror by putting tax revenues into the production of security. Facing a tide in terror, a government that acts optimally increases the proportion of output spent on defense, but does not fully offset the tide. Thus, when terror peaks the long run equilibrium with an optimizing government is of lower output and welfare. Next, we show that this theory of terror and the economy, helps to understand changes in trend and business cycle of the Israeli economy. The estimates show that terror has a large impact on the aggregate economy. Continued terror, at the level of the death toll by about the same size as due to car accidents, is expected to decrease annual consumption per capita by about 5% in 2004. Had Israel not suffered from terror during the last 3 years, we estimate that the output per capita would have been 10% higher than it is today.     

Managers’ segment disclosure choices under IFRS 8: EU evidence

We examine the impact of proprietary and agency cost motives on segment disclosure quality and quantity and how the adoption of the principle IFRS 8 affects this impact. By using hand-collected data, our results show that proprietary and agency costs play a relevant role in determining the quality and quantity of segment disclosure. We find that proprietary costs are a particularly relevant reason for providing lower segment disclosure quality post-IFRS 8. Our results also suggest that firms’ segment disclosure choice is dependent on disclosure dimension. These results contribute to the ongoing debate regarding IFRS 8 and have valuable implications for accounting regulators.