Some evidence on the role of money illusion in labor supply behavior

The Keynesian idea that workers are subject to money illusion in their labor supply decisions is tested by estimating a labor supply function that includes the price level as an independent variable. The model is estimated with data drawn from various BLS publications and is aggregated by SMSA. The results indicate a significant negative supply response to price-level changes after controlling for the nominal wage rate, income, and the SMSA's unemployment rate. There is no significant difference between workers' supply response to the price level and the nominal wage rate, which suggests that workers are not subject to money illusion.     

Time structure of production and the theory of international trade

This paper reexamines aspects of international trade theory by taking account of the time required for transforming inputs into outputs. The discussion focuses explicitly upon the time structure of production, characterized by profiles of inputs and outputs over time. Each of the model's two consumer-good sectors has different flow-input flow-output technology, with which labor produces heterogeneous capital goods and final output. As shown by the analysis, intersectoral differences in the time structure of production have important implications for the impact of world trade on a country's employment of labor, accumulation of capital and level of income.     

Oil price shocks in a portfolio-balance model

In the 1970s oil price increases were often associated with downward pressure on the foreign exchange value of the dollar. In order to identify the factors generating this association, we examine an oil price shock in a portfolio-balance framework where a wealth transfer is generated by altered current account positions. We show that the exchange-rate impact of higher oil prices depends importantly on the asset prefernces of both oil importers and oil exporters, as well as exchange rate expectations, which are influenced by countries' abilities to adjust to higher oil prices.     

An extension of Bale's labor displacement cost estimates

Bale (1976) failed to extend his labor displacement cost estimates to the more interesting question of whether these costs outweigh gains from trade liberalization. This note addresses that question by applying Bale's estimates to Magee's (1972) study of the welfare effects of U.S. trade restrictions. Our results indicate that gains far outweigh costs of tariff removal on imports directly competing with U.S. production.     

Competitive strategies and performance in technology-based industries

A model is proposed for relating a technology-based firm's investments in R&D and marketing to its level of performance. The model is based on a homothetic performance function form that is maintained to best represent unique differences among the competitive strategies of firms or groups of firms within an industry. It also permits explicit estimation of returns to scale with respect to investments in R&D and marketing for the industry as a whole. The empirical analysis strongly supports the existence of a heterogenous competitive structure in a technology-based industry with the returns-to-scale estimates varying among the industries studied. The model implies that desirable increases in competition occur through the interaction of individual firms and possibly strategic groups. It also implies the possibility of less than perfect substitution of resources across competitive strategies within an industry. Thus future models of competition should not be based entirely on size-related measures.     

Financial determinants of systematic risk in real estate investment trusts

Financial theory and empirical evidence suggest that a firm's systematic, or market related, risk is related to its financial conditions. This study empirically investigates the financial determinants of systematic risk for Real Estate Investment Trusts (REITs). The study is an examination of sample of 32 REITs for the period 1976–1978. The results indicate that systematic risk varies directly with financial leverage, business risk, and advisor fee. The explanatory power of the relationship between systematic risk and financial variables exceeds that of previous studies wherein firms were pooled across industry groups. The higher explanatory power observed even with limited data suggests that better estimates of coefficients of financial determinants of systematic risk may be obtained through analysis conducted on an industry by industry basis. Furthermore, such industry-specific analysis provides useful results to practicing financial managers in their financial policy considerations. With the knowledge of how the financial decisions affect the firm's systematic risk, a manager may be able to manipulate those variables so as to reduce the systematic risk for his or her firm and thus increase the market value of the firm's securities.     

The calculation of bilateral trade patterns in a Ricardian model with intermediate products and barriers to trade

After arguing for a computational approach to the theory of international trade the paper presents an algorithm for solving a generalized Ricardian two-country model. The algorithm focuses on the ‘critical exchange ratios’ at which the pattern of specialization changes. In the absence of barriers to trade there is one exchange ratio (defined as the value of one country's labor in terms of the other country's labor) at which production of a good moves from one country to the other. With barriers to trade there are two critical ratios for each good, between which it is not traded. Taking the critical ratios in sequence the trade balance can be calculated as a discontinuous function of the exchange rate; where the balance equals zero (or some given transfer) the problem is solved. The method works with arbitrary demand functions and can handle intermediate products.     

Moral consequences of a seller's market: Polish experience

The article is an analysis of the moral consequences of permanent and major shortages in supply for producers, distributors, and especially consumers. The analysis is based on the author's long experience, obtained in Poland during observations and studies of the behaviour of economic units and consumers. The conclusions presented can be generally applied to centrally planned economies. Similar studies are lacking in countries characterized by an `economics of shortage'. Immoral behaviour is reflected in the negligence of the socially accepted system of values and moral norms. In ‘economics of shortage’ this system has been largely destroyed, making moral evaluation of behaviour rather difficult. The seller's market puts society in a situation characterized by a conflict between the law and moral norms; it restricts distributive justice; makes it easier to infringe upon somebody's property; induces fraudulent activities to the detriment of the consumer; restricts the individual's freedom and the consumer's sovereignty; dehumanizes the consumption process; violates human dignity; carries a threat for family life and generates interhuman conflicts. Decisions concerning production and products do not make sufficient allowances for the needs of end users in the sphere of quality, assortment, information transmitted to consumers, and new product development. There exist, in parallel, different systems of allocation of goods and services: administrative allotment, government-controlled outlets, grey and black markets. The purchase of a product itself stretches in time and involves considerable obstacles. The consumer is forced to continue searching and queuing, compulsory substitution, compulsory spending of money and compulsory savings. All this paves the way for unethical behaviour of both sellers and consumers. Among consumers there can be seen symptoms of alienation from the market.     

Social irresponsibility in management

Previously published research suggested that the typical manager may be expected to harm others in his role as a manager. Further support for this was drawn from the Panalba role-playing case. None of the 57 control groups in this case were willing to remove a dangerous drug from the market. In fact, 79% of these groups took active steps to prevent its removal. This decision was classified as irresponsible by 97% of the respondents to a questionnaire. Because the role exerts such powerful effects, an attempt was made to modify subjects' perceptions of their role so that managers would feel responsible to all of the firm's interest groups. Some subjects were told that board members should represent all interest groups; other subjects were placed on boards of directors where the different groups were represented. Subjects in both groups also received information on the impact of the decisions upon stockholders, employees, and customers. The percentage of irresponsible decisions was reduced under these conditions as only 22% of the 116 groups selected the highly irresponsible decision.     

The performance appraisal: A critique and an alternative

Performance appraisals are a standard ingredient in the employer-employee relationship. How else is a manager to deal honestly with a subordinate regarding his shortcomings and his strengths, its adherents would ask. Most would agree, nonetheless, that undue anxiety is generated-both for the manager and the employee-by the appraisal interview. Is this anxiety constructive or destructive? The author describes the dynamics of the evaluation system. Beginning with some studies which conclude that the appraisal system is counterproductive of its stated goals, he illustrates how man's fundamental psychological processes operate against this procedure. He recommends, instead, management by objectives as a technique which releases each individual's potential and emphasizes his contribution to the working environment.     

Uncertainty,organizational form,and x-efficiency

When the firm is uncertain about the efficiency units of labor that it employs, some organizational forms—franchise, owner-operated, and multiplant firms— may be more profitable than others. As a result, particular organizational forms may dominate an industry with uncertain inputs. Conversely, various organizational forms may be selected by a company selecting producing units that will maximize the decision maker's expected utility of profits. This paper offers an alternative view of firm attributes associated with x-efficiency.     

Formulating a strategic portfolio of profitable retail market segments for commercial banks

A profit contribution study of commercial bank retail customers reveals systematic relationships with family life cycle, social stratification, and relative income class. The analysis leads to the conclusion that a bank's continued retail growth and profitability depend in a crucial way on its ability to attain a balanced portfolio of three key high profit market segments. To attain this mix, banks must intensify product development efforts oriented to the asset management needs of upscale customers during the later stages of the family life cycle. It is interesting to note that these three market segments are expected to attain the highest population growth rates in the decades ahead as the age distribution of the population changes.     

Liquidity constraints in sequential economics

This paper models an individual trader's optimization problem as he visits a number of markets in sequence, paying and receiving cash with each transaction. Since traders can sometimes sell before they buy, Clower's rigid dichotomized budget constraint need not hold. In fact, the neoclassical budget constraint and Clower's dichotomized constraint turn up as polar cases of the more generalized temporal sequence of constraints presented here. The analysis is primarily microlevel, though there is some informal discussion of related systemwide monetary problems.     

The FTC's handling of puffery and other selling claims made “by implication”

The Federal Trade Commission's handling of alleged false advertising representations that are made by implication is examined. Alleged false advertising presentations are held to be implied to the public by the advertiser even though they are not literally stated in his advertisement. The FTC has extended its reach over this kind of misrepresentation in recent years. Cases for 1970–76 are identified, and a catalog is developed of ten types of implications that have been attacked as deceptive during this period. Some, such as the Expansion Implication, are types established as deceptive in earlier years; others, such as the Reasonable Basis Implication, were not attacked prior to the 1970s. Some types, such as the Uniqueness Implication, have been given considerable publicity; others, such as the Inconspicuous Context Implication, are newly categorized in this paper. The consequences of FTC's identification of these types of implications, and of its growing attention to the possibility of misrepresentation by implication, are discussed in detail. A prediction is offered that attention to implications will continue to increase for some time in the future. Puffery is discussed as a category which the FTC might recognize in the future as a type of implied misrepresentation; a rationale is offered for regulating such claims. The role of the researcher is examined, using the assumption that greater attention to misrepresentation that extends beyond a message's literal meaning will produce a greater need for research. The researcher will have attractive opportunities for such work, but will have to confront the problem that playing an advocacy role in legal proceedings may involve significant conflicts with the impartial role that is appropriate for the academic researcher.     

Comparative dynamics in a life cycle theory of the firm

Important insights and contributions to the corporate financial manager's decision problem have been provided by the balanced-growth financial modeling literature, e.g., see [4, 5, 8, 10, 11, 13, 15]. In the spirit of this research, the objective of this paper is twofold. First, a normative model of the dynamic financial planning process in a deterministic environment is constructed wherein the traditional, steady-state assumptions are relaxed. In contrast to prior models, the firm is allowed to pay a liquidating dividend and faces a time-dependent investment rate of return, interest rate, and equity discount rate. Necessary and sufficient conditions for the levered firm's optimal investment-financing-dividend policy decisions which maximize the wealth of its investors are developed, and a solution synthesis technique is employed to catalogue the different decisions at each time instant in terms of three earnings-growth stages over the firm's life cycle. Over this life cycle, the firm experiences high, low, and negative growth stages, with the latter stage distinguished by a liquidating dividend payout and retirement of debt outstanding. Secondly, the life cycle depiction further permits an analysis of the effects, in terms of both direction and magnitude, on the optimal duration of the firm's different growth stages and optimal growth rates due to changes in the firm's return on investment, debt-equity ratio, borrowing rate, equity discount rate, depreciation rate, and flotation costs via a comparative dynamics and simulation framework. Changes in the return on investment are found to have the most influence on the duration of the firm's growth periods and their respective earnings growth rates, while changes in the mix of financing and depreciation rate tend to have the least effect. Furthermore, the magnitudinal impact of marginal changes in any of the above firm variables is greatest at low levels of debt-to-equity and growth-in-earnings and quickly dissipates as the degree of leverage increases.     

The role of networks in the entrepreneurial process

The extent to which the entrepreneur interacts with the networks in his local environment during the process of starting a new firm was studied. This study was based on the premise that, during this process, he is seeking not only the resources of equipment, space, and money, but also advice, information, and reassurance. Consequently the help and guidance received from both the formal networks (banks, accountants, lawyers, SBA) and the informal networks (family, friends, business contacts) will influence the nature of the firm substantially.The study was conducted in St. Joseph County, Indiana, a county that has experienced the same economic problems as many other towns in the midwest smoke-stack belt during the 1970s. In 1982, in response to this general decline in the business climate, a fund was raised to create and manage a new industrial strategy. Before this, there was no collective strategy for nurturing either the small firm or the new firm. Therefore, in order to determine the extent to which an interventionist strategy was appropriate, a research project was designed that posed three basic questions: what does the environment look like; does it need changing; and, if so, in what ways? This article reports part of that study—a survey of firms that had started in the county in the previous five years (1977–1982). It was concerned with two issues: the characteristics of the St.Joseph County entrepreneur and the usage of the formal and informal networks.The results of the survey show that the aggregate characteristics of the St. Joseph County entrepreneur are similar to those found in other studies. The new firms were founded by local people from small firms who started their small firms in similar industries that were local in nature. Moreover, the majority (90%) not only started small, but also grew very little subsequently—firms that have been classified elsewhere as life-style ventures. It is to be expected that such people would have a strong local network, both formal and informal, particularly in a county with a population of only 220,000. However, the results of the second part of the study showed that the main sources of help in assembling the resources of raw materials, supplies, equipment, space, employees, and orders were the informal contacts of family, friends, and colleagues. The only institution that was mentioned with any regularity was the bank, which was approached towards the end of the process when many of the resources were assembled and the elements of the business set in the entrepreneur's mind. This was not because the formal sources were unwilling to offer guidance, but rather that the entrepreneur and his social network appeared to be unaware of what was available. Moreover, in using only business contacts, family, and friends, the entrepreneur was likely to re-create the elements of previous employment, even when he was starting business in an entirely new market. Further, there was no significant difference between growth and no-growth firms. It would appear that in this county, the formal network was uniformally inefficient.This research shows that a major aim of the new strategy should be to increase the awareness of the community to the formal sources and types of help that are available. However, whilst most of the institutions are prepared to solve specific problems, they are not in the business of diagnosis or counseling. The network needs a hub or an enterprise office.The data on the start-up process and the role of networks in relation to new firms are very sparse and often anecdotal. This study was conducted in one environment, a small midwest county with a jaded entrepreneurial tradition. Further studies are necessary. Research questions include the extent to which networking is crucial in the start-up process, the length of time it took for the sophisticated networks of Boston's Route 128 and California's Silicon Valley to develop, and the effect of different geographic, cultural, and economic conditions. Only in this way is it possible to determine the extent to which regional, regeneration strategies for new firm creation should be county specific rather than state or country wide.     

融资约束与我国企业对外直接投资——基于浙江省微观企业数据的实证研究

企业对外直接投资是我国当前重要的外向经济发展战略,因此探明其影响因素对于深化对外开放具有重要意义。文章在此背景下从微观企业角度研究融资约束如何影响企业对外直接投资,构建理论框架阐明融资约束的提升会制约劳动密集型企业的对外直接投资决策,但是会逆向促进资本密集型企业的对外直接投资决策;在此基础上,通过匹配《中国工业企业数据库》和《中国境外投资企业（机构）名录》中的浙江省企业数据在微观上验证了理论推论。进一步地,分样本数据回归表明国有企业、外资企业和重工业企业对外直接投资不受融资约束制约,而非国有企业、非外资企业和轻工业企业对外直接投资受融资约束影响明显。此外,文章通过零膨胀回归和排序数据回归发现较低（高）的融资约束增加了劳动（资本）密集型企业的对外直接投资项目数并加快其投资决策时间,与对外直接投资倾向的影响机制一致。     

Motivating managers with money: How to assess and reward performance

Does money motivate managers? Many current compensation programs are merely annual bonuses or profit-sharing plans. Seldom is an executive rewarded for actual improvement in performance. The author looks at the situation from two angles: salary administration and incentive bonus administration. First, there must be equality between salary earned and salary received. Second, a company has to establish criteria for evaluating an employee's earned income. The author suggests that an employee's evaluation be based on his observable daily performance, rather than on vague concepts such as his willingness to cooperate or his loyalty to the firm. When a company does award bonuses it should give them for performance that exceeds the daily criteria, and it should pay the bonus immediately.     

Microeconomic influences on operating leverage

The concept of operating leverage generally has been visualized in the context of linear break-even analysis. This paper evaluates the properties of two measures of the degree of operating leverage using a more general short-run microeconomic model of the firm. In this model, the degree of operating leverage is related positively to the price elasticity of demand for a firm's output, to its elasticity of supply for an input, and to its output elasticity. In addition, operating leverage measures are usually derived from models inconsistent with firm wealth maximizing behavior and are too simplistiic for complex models with stochastic demand, supply, and production functions.     

How optimal distinctiveness affects new ventures' failure risk: A contingency perspective

In this article, we apply the concept of optimal distinctiveness to test whether category spanning has a nonlinear effect on new ventures' risk to fail. We argue that by being optimally distinct, i.e., by attaining a level of category spanning that allows new ventures to benefit from balancing the competing needs of conformity with and differentiation from competitors, new ventures can improve their survival chances. In addition, we argue that the relevance of optimal distinctiveness varies with a venture's age and a category's density. We tested our hypotheses using data from 1668 metal bands that were founded in the United Kingdom between 1967 and 2005. The results indicate that optimal distinctiveness is relevant to new ventures' failure risk. Moreover, we show that venture age attenuates the relevance of optimal distinctiveness, whereas category density strengthens that factor's relevance.