Forecasting ultimate resource recovery

This paper considers Hubbert's model for forecasting ultimate resource recovery and its extensions by Kaufmann (1991, Resources and Energy 13, 111–127) and Cleveland and Kaufmann (1991, Energy Journal 12, 17–46). The emphasis of the paper is on econometric and forecasting issues, and it discusses alternative methods of estimating Hubbert's model. Using data on oil production in the U.S. lower 48 states, the paper reports the results of estimating the various specifications of the model and its extensions by the maximum-likelihood method, and provides the implied estimates for ultimate resource recovery and their associated standard errors. When economic factors are taken into account the estimates of ultimate resource recovery become state-dependent, and we find that in this case the estimates are higher than those obtained from the various specifications of Hubbert's original model. Although the accuracy of the estimates of ultimate recoverable reserves cannot be evaluated before oil reserves are actually exhausted, we examine how the various models estimated over the periods 1926–1985 and 1948–1985 perform in predicting oil production over the 1986–1990 period.     

Does pay affect productivity or react to it?: Examination of U.S. manufacturing

There may be a bi-directional relationship between wages and labor productivity. According to conventional theory, employers reward improvements in productivity by raising pay. It also has been argued that wage increases can provide an incentive to improve productivity. This study applies a technique by Geweke to identify the feedback between pay and productivity in U.S. manufacturing. For the 1949–1998 period, measures of directional feedback indicate that both “pay as reward” and “pay as incentive” behaviors have occurred, but the results vary across manufacturing subsectors.     

``Three Can Keep a Secret if Two are Dead' (Lavigne, 1996): Weak Ties as Infiltration Routes

Among several ways of trying to suppress terrorist conspiracies,infiltration has probably received the least attention.Impressionistic evidence suggests that conspiracies that carry outviolent attacks usually have a small number of participants, and thatlarge conspiracies either fail to materialize, fail to organize actualattacks, or are substantially less difficult to uncover. Due to theprevalence of weak social ties in larger groups there may be anintermediate group size, around 7–10 members, that is highly subjectto infiltration. Building on work by Freeman, Granovetter, and others,this study examines a few features of the social ecology ofinteraction ties. We introduce a procedure for counting,within groups of size $n$, all interacting pairs {P, Q},where P and Q are disjoint or nonoverlapping subsets(Freeman, 1992: 153) of a given group; these subsets usually contain more than one person, i.e., the interacting units do not invariably consist of individuals. This procedure generates interaction configurations having unique patterns of strong, weak, and ``weakest' ties – i.e., three levels of tie strength corresponding to core, primary, and secondary ties inFreeman's terminology – such that relatively weak ties predominatewithin larger conspiracies. We speculate about ways in which theseconfigurations may evolve through time.We then use a combinatorial analysisof group structure to develop arough calculation of the probability of infiltrating conspiracies ofsize $n$, and we show that relatively large conspiracies,having 7 or more members, tend to have interaction structures that make them highly vulnerable to infiltration. Finally, Collins' (1985: 170–172) approach to interaction-chain analysis suggests that, while in real situations it would be hard to anticipate departures from our probability model, attempts to ``turn around' conspirators with weak ties appear tohave a fairly high prospect of success.– But the child's sob in the silence– Curses deeper than the strong man in his wrath.– Elizabeth Barrett Browning, ``Cry of the children'     

The simple analytics of optimal growth with illegal migrants: A clarification

This paper reexamines the welfare effects of illegal immigration studied by Hazari and Sgro [The simple analytics of optimal growth with illegal migrants. Journal of Economic Dynamics and Control 28(1) 141–151]. In contrast to their negative conclusion, we obtain ambiguous welfare prediction which is due to the presence of two opposing effects at work: a positive exploitation effect and a negative intertemporal effect. With Cobb–Douglas production technology, we show that per capita domestic consumption rises in the presence of illegal migration.     

Are regulations the answer for emerging stock markets? Evidence from the Czech Republic and Poland

Does the emergence of a stock market require a well-developed legal and/or regulatory system? Although historical work by Neal and Davis [Neal, L., & Davis, L. (2005). The evolution of the rules and regulations of the first emerging markets: The London, New York, and Paris stock exchanges, 1792–1914. Quarterly Review of Economics and Finance, 45, 296–311] and Stringham [Stringham, E. (2003). The extralegal development of securities trading in seventeenth century Amsterdam. Quarterly Review of Economics and Finance, 43, 321–344] suggests that securities markets have successfully developed with little government oversight, numerous authors [including Black, B. (2001). The legal and institutional preconditions for strong securities markets. University of California Law Angeles Law Review, 48, 781–855; Coffee, J. (1999). Privatization and corporate governance: The lessons from securities market failure. Journal of Corporation Law, 25, 1–39; Frye, T. (2000). Brokers and bureaucrats: Building market institutions in Russia. Ann Arbor: University of Michigan Press; Glaeser, E., Johnson, S., & Shleifer, A. (2001). Coase versus the Coasians. Quarterly Journal of Economics, 116, 853–899; Mlčoch, L. (2000). Restructuring of property rights: An institutional view. In L. Mlčoch et al. (Eds.), Economic and Social Changes in Czech Society After 1989. Prague: The Karolinum Press; Pistor, K. (2001). Law as a determinant for equity market development – the experience of transition economies. In Peter Murrell (Ed.), The Value of Law in Transition Economies (pp. 249–287). Ann Arbor: Michigan University Press; Stiglitz, J. (1999). Whither reform. Ten years of the transition. Keynote Address, Annual Bank Conference on Development Economics, Washington, DC, April 28–30, 1999; Zhang, X. (2006). Financial market governance in developing countries: Getting the political underpinnings right. Journal of Developing Societies, 2, 169–196] argue that the Czech Republic and other Eastern European governments need more regulation for their newly created stock markets. They maintain that the Warsaw Stock Exchange, which is seen as more regulated, has outperformed the Prague Stock Exchange which is seen as largely unregulated. Thus increased regulations are a key to increased performance. This article, however, maintains that the evidence from the Czech experience has been misinterpreted. This article provides an in depth case study of the Czech stock market and finds that (a) Czech capital markets have been hindered by government intervention from their beginning, (b) that the evidence on Poland's superior performance is not as strong as suggested, and (c) that Czech regulators seem to be unqualified, lack the proper incentives, and are unlikely to benefit the market. Under these circumstances it appears that Neal and Davis (2005:311) are correct that increased government involvement is unlikely to improve the situation.     

Der Einfluss von Corporate Governance auf die Determinanten und Effekte von Investitionen

Zusammenfassung Der vorliegende Überblicksartikel kommt zu dem Schluss, dass das Corporate-Governance-Umfeld einer Firma den Zusammenhang zwischen den Investitionen (I) und Cash Flows (CF) und damit die Investitionsrenditen beeinflusst. Beide Erklärungsansätze für positive I-CF-Sensitivitäten – die Theorie der asymmetrischen Informationen (TAI) als auch die Manager-Diskretions-Theorie (MDT) – finden empirische Unterstützung in Unter-Stichproben von Firmen. Die TAI erscheint wahrscheinlicher für junge, kleine und familienkontrollierte Firmen. Enge Banken-Firmen-Beziehungen reduzieren Finanzierungsrestriktionen. Wesentliche Bestimmungsfaktoren der I-CF-Sensitivität sind auch die Rechtstradition des Landes, in der sich die Firma befindet, die Qualität des Rechnungswesens und die Eigentümerstruktur der Firma. Die empirische Evidenz über die Schätzung von Investitionsrenditen ist ebenfalls konsistent mit der Aussage, dass manche Firmen unterinvestieren (müssen), während andere überinvestieren. JEL classifications G31, G32     

Econometric analysis of structural systems with permanent and transitory shocks

This paper considers the implications of the permanent/transitory decomposition of shocks for identification of structural models in the general case where the model might contain more than one permanent structural shock. It provides a simple and intuitive generalization of the influential work of Blanchard and Quah [1989. The dynamic effects of aggregate demand and supply disturbances. The American Economic Review 79, 655–673], and shows that structural equations with known permanent shocks cannot contain error correction terms, thereby freeing up the latter to be used as instruments in estimating their parameters. The approach is illustrated by a re-examination of the identification schemes used by Wickens and Motto [2001. Estimating shocks and impulse response functions. Journal of Applied Econometrics 16, 371–387], Shapiro and Watson [1988. Sources of business cycle fluctuations. NBER Macroeconomics Annual 3, 111–148], King et al. [1991. Stochastic trends and economic fluctuations. American Economic Review 81, 819–840], Gali [1992. How well does the ISLM model fit postwar US data? Quarterly Journal of Economics 107, 709–735; 1999. Technology, employment, and the business cycle: Do technology shocks explain aggregate fluctuations? American Economic Review 89, 249–271] and Fisher [2006. The dynamic effects of neutral and investment-specific technology shocks. Journal of Political Economy 114, 413–451].     

The influence of authentic leadership behaviors on trust and work outcomes of health care staff

A key element of a healthy work environment is trust: trust between staff and their leaders. Authentic leadership is proposed as the core of effective leadership needed to build trust because of its clear focus on the positive role modeling of honesty, integrity, and high ethical standards in the development of leader‐follower relationships. A model linking authentic leadership behaviors with trust in management, perceptions of supportive groups and work outcomes (including voice or speaking‐up behavior, self‐rated job performance, and burnout) using secondary analysis procedures was examined. The hypothesized model was tested using structural equation modeling in two samples of health care employees from a western Canadian cancer care agency: clinical care providers including nurses, pharmacists, physicians, and other professionals (N = 147) and nonclinical employees including administrative, support, and research staff (N = 188). Findings suggest that supportive leader behavior and trust in management are necessary for staff to be willing to voice concerns and offer suggestions to improve the workplace and patient care.     

Cost and technical change: Effects from bank deregulation

Banks were substantially deregulated during the 1980s. This altered the cost-minimizing mix between deposit interest payments and operating expenses (capital and labor for branch convenience and free deposit services). Measured bank output was relatively unaffected by these changes. The proportion of deposits receiving higher interest rates increased more rapidly than factor quantities were reduced, so unit deposit costs rose. Consumers benefited, but the measured net effects for banks were negative, averaging –0.8% to –1.4% a year in net technical change from 1977 to 1988. These influences were measured three different ways and for both equilibrium and disequilibrium factor input specifications. All three approaches—a standard time trend, a time-specific index, and shifts in cross-sectional cost functions—gave consistent results. The results were robust whether measured at the banking firm or branch office level or on the cost frontier.     

Devaluating projects and the investment–uncertainty relationship

Sarkar (2000. On the investment–uncertainty relationship in a real options model. Journal of Economic Dynamics and Control, 24, 219–225) analyzes the investment–uncertainty relationship in a real-options model demonstrating that the widely accepted conclusion that uncertainty harms investment can be reversed. Wong (2006. The effect of uncertainty on investment timing in a real options model. Journal of Economic Dynamics and Control, forthcoming) confirms this point showing that more uncertainty can reduce the expected time to exercise the investment option. This paper deals with such an issue and attempts to integrate both Sarkar's and Wong's analysis.For risk-neutral investors, we show that uncertainty can favor investment only if projects devaluate over time. This conclusion does not hold in a CAPM framework, where we demonstrate that the relationship uncertainty/investment can be positive (a) even when the investment threshold increases with uncertainty and (b) in the case of projects negatively correlated with the market portfolio.     

Management of a capital stock by Strotz's naive planner

The capital management problem posed by R.H. Strotz is analyzed for the case of the ‘naive’ planner who fails to anticipate changes in his own preferences. By imposing progressively stronger restrictions on the primitives of the problem – namely, the discounting function, the utility index function, and the investment technology – the planner's behavior is characterized first as the solution to an ordinary differential equation and then via explicit formulae. Inasmuch as these characterizations leave the discounting function essentially unrestricted, the theory can accommodate, in particular, decision makers who discount time according to the hyperbolic and ‘quasi-hyperbolic’ curves used in applied work and said to be supported by psychological studies. Comparative statics of the model are discussed, as are extensions of the analysis to allow for credit constraints, limited foresight, and partial commitment.     

Limited arbitrage is necessary and sufficient for the existence of an equilibrium

In Chichilnisky (Working Paper No. 586, 1991), Chichilnisky (Working Paper No. 650, 1992) and Chichilnisky (Economic Theory, 1995, 5, 79–108), I introduced the concept of a global cone and used it to define a condition on endowments and preferences, ‘limited arbitrage’, which I showed to be necessary and sufficient for the existence of a competitive equilibrium. In response to a comment (Monteiro et al., Journal of Mathematical Economics, 1997, 26, 000-000), I show here that the authors misunderstood my results by focussing on brief announcements which cover other areas, social choice (Chichilnisky, American Economic Review, 1994, 427–434 and algebraic topology (Chichilnisky, Bulletin of the American Mathematical Society, 1993, 29, 189–207), rather than on the publication which contains may proofs on equilibrium. The comment's example is irrelevant to my results in Chichilnisky (Economic Theory, 1995, 5, 79–108) because it starts from different conditions. Limited arbitrae is always necessary and sufficient for the existence of a competitive equilibrium, with or without short sales, with the global cones as I defined them, and exactly as proved in Chichilnisky (Economic Theory, 1995, 5, 79–108).     

Does neighborhood income mix affect earnings of adults? New evidence from Sweden

This paper contributes to the literature on obtaining unbiased estimates of neighborhood effects, explored in the context of a centralized social welfare state. We employ a longitudinal database comprised of all working age adults in metropolitan Sweden 1991–1999 to investigate the degree to which neighborhood income mix relates to subsequent labor incomes of adults and how this relationship varies by gender and employment status. We control for unobserved, time-invariant individual characteristics by estimating a first-difference equation of changes in average incomes between the 1991–1995 and 1996–1999 periods. We further control for unobserved time varying characteristics through an analysis of non-movers. These methods substantially reduce the magnitude of the apparent effect of neighborhood shares of low-, middle- and high-income males. Nevertheless, statistically and substantively significant neighborhood effects persist, though relationships are nonlinear and vary by gender and employment status. Males who are not fully employed appear most sensitive to neighborhood economic mix in all contexts.     

Quarterly beta forecasting: An evaluation

Ever since the inception of betas as a measure of systematic risk, the forecast error in relation to this parameter has been a major concern to both academics and practitioners in finance. In order to reduce forecast error, this paper compares a series of competing models to forecast beta. Realized measures of asset return covariance and variance are computed and applied to forecast beta, following the advances in methodology of Andersen, Bollerslev, Diebold and Wu [Andersen, T. G., Bollerslev, T., Diebold, F. X., & Wu, J. (2005). A framework for exploring the macroeconomic determinants of systematic risk. American Economic Review, 95, 398–404; and Andersen, T. G., Bollerslev, T., Diebold, F. X., & Wu, J. (2006). Realized beta: Persistence and Predictability. In T. Fomby & D. Terrell (Eds.), Advances in Econometrics, vol 20B: Econometric Analysis of Economic and Financial Times Series., JAI Press, 1–40.]. This approach is compared with the constant beta model (the industry standard) and a variant, the random walk model. It is shown that an autoregressive model with two lags produces the lowest or close to the lowest error for quarterly stock beta forecasts. In general, the AR(2) model has a mean absolute forecast error half that of the constant beta model. This reduction in forecast error is a dramatic improvement over the benchmark constant model.     

Can excess bring success? CEO compensation and the psychological contract

Strategic human resource management involves creating and maintaining employee skills as well as encouraging employees to perform at their maximum. Both require developing the appropriate psychological contract between the organization and the employee [Human Resource Management Review 8 (1998) 265]. This is no less true for the chief executive officer (CEO), who plays a major role in creating organizational culture. Trust is a critical component in the success of HR activities [Research Management Review 7 (1997) 389], yet the HR literature is relatively silent about how to encourage CEOs to perform trust-generating behaviors. Research on psychological contracts suggests that in order to encourage trust-based behavior, it is necessary to foster a relational psychological contract with employees [Rousseau, D. M., & McLean Parks, J. (1993). The contracts of individuals and organizations. In L. L. Cummings & B. M. Staw (Eds.), Research in Organizational Behavior (pp. 1–43). Greenwich, CT: JAI Press]. However, the generally recommended CEO compensation practice (pay-for-performance) often risks violating the CEO's relational psychological contract. Conversely, the practice of providing golden parachutes (much criticized in the press) helps uphold the CEO's relational psychological contract. Implications are discussed.     

Evaluation of supplier capability and performance: A method for supply base reduction

Development of partnership with suppliers is widely recognised today as a potent tool for supply chain improvement. To develop an effective partnership, it is necessary to have a small supply base and an effort to reduce the supply base to a manageable level. Despite its overwhelming importance, models of supply base reduction are rare. Supplier sorting methods, used for pre-selection of suppliers and sometimes seen as methods for supply base reduction, have limitations ranging from (1) requirement of an exhaustive database of historical information (case-based reasoning), (2) inability to predefine the number of elements in a cluster (cluster analysis) and (3) inability to identify suppliers who are both highly capable as well as high performers (data envelopment analysis). In the present work, we develop a systematic framework for carrying out the supply base reduction process. The study assumes two important dimensions of suppliers—performance and capability. Performance of a supplier represents short-term effects on the achievement of supply chain objectives while supplier capability indicates long-term effects. Many of the performance and capability factors are imprecise in nature. In order to account for the imprecision involved in numerous subjective characteristics of suppliers, we use fuzzy set approach to measure the imprecision of these factors and rank a potential list of suppliers against their performance and capability. We then display their ranks in a ‘capability–performance matrix’ that helps a decision maker arrange the suppliers in decreasing order of preference. The desired numbers of suppliers are finally selected on the basis of this ordered list. The suggested framework will be of immense help to the practising managers in reducing the supply base—a prerequisite for building a strong supplier partnership and developing an effective supply chain.     

Price support and spreads in the IPO aftermarket: An empirical microstructure study

Using the inventory components of spreads as a measure of inventory holding-risk, we test the hypothesis of Hanley et al. [Hanley, K. W., Kumar, A., & Seguin, P. J. (1993). Price stabilization in the market for new issues. Journal of Financial Economics, 34, 177–197] that price supports reduce market makers’ inventory holding-risk in the aftermarket of initial public offerings (IPOs). We find that both spreads and their inventory components are significantly smaller in the earlier periods of the IPO aftermarket than those in the later periods. More importantly, the inventory components of spreads are significantly smaller for stocks without over-allotment options (OAOs) exercised, and for stocks with lower or negative initial returns which are more likely to have price supports. The results are consistent with the price support hypothesis.     

Is Normal Distribution due to Karl Gauss? Euler,his Family of Gamma Functions,and Place in History of Statistics

While Gauss (1777–1855) has primacy in explicating properties of the normal distribution, it is Euler (1707–1783) who is predominant with respect to analytical formulation of this function. This case is discussed within the context of uniform rendering of computer algorithms for higher transcendental functions.     

E-Leadership and Virtual Teams

In this paper we have identified some key challenges for E-leaders of virtual teams. Among the most salient of these are the following:

• The difficulty of keeping tight and loose controls on intermediate progress toward goals

• Promoting close cooperation among teams and team members in order to integrate deliverables

• Encouraging and recognizing emergent leaders in virtual teams

• Establishing explicit processes for archiving important written documentation

• Establishing and maintaining norms and procedures early in a team’s formation and development

• Establishing proper boundaries between home and work

Virtual team environments magnify the differences between good and bad projects, organizations, teams, and leaders. The nature of such projects is that there is little tolerance for ineffective leadership. There are some specific issues and techniques for mitigating the negative effects of more dispersed employees, but these are merely extensions of good leadership—they cannot make up for the lack of it.

SELECTED BIBLIOGRAPHY

An excellent reference for research on teams is M. E. Shaw, R. M. McIntyre, and E. Salas, “Measuring and Managing for Team Performance: Emerging Principles from Complex Environments,” in R. A. Guzzo and E. Salas, eds., Team Effectiveness and Decision Making in Organizations (San Francisco: Jossey-Bass, 1995). For a fuller discussion of teleworking and performance-management issues in virtual teams, see W. F. Cascio, “Managing a Virtual Workplace,” Academy of Management Executive, 2000, 14(3), 81–90, and also C. Joinson, “Managing Virtual Teams,” HRMagazine, June 2002, 69–73. Several sources discuss the issue of trust in virtual teams: D. Coutu, “Trust in Virtual Teams,” Harvard Business Review, May–June 1998, 20–21; S. L. Jarvenpaa, K. Knoll, and D. E. Leidner, “Is Anybody Out There? Antecedents of Trust in Global Virtual Teams,” Journal of Management Information Systems, 1998, 14(4), 29–64. See also Knoll and Jarvenpaa, “Working Together in Global Virtual Teams,” in M. Igbaria and M. Tan, eds., The Virtual Workplace (Hershey, PA: Idea Group Publishing, 1998).Estimates of the number of teleworkers vary. For examples, see Gartner Group, Report R-06-6639, November 18, 1998, and also Telework America survey, news release, October 23, 2001. We learned about CPP’s approach to managing virtual work arrangements through David Krantz, personal communication, August 20, 2002, Palo Alto, CA.There are several excellent references on emergent leaders. For example, see G. Lumsden and D. Lumsden, Communicating in Groups and Teams: Sharing Leadership (Belmont, CA: Wadsworth, 1993); Lumsden and Lumsden, Groups: Theory and Experience, 4th ed. (Boston: Houghton, 1993); R. W. Napier and M. K. Gershenfeld, Groups: Theory and Experience, 4th ed. (Boston: Houghton, 1989); and M. E. Shaw, Group Dynamics: The Psychology of Small Group Behavior, 3rd ed. (New York: McGraw-Hill, 1981).An excellent source for e-mail style is D. Angell and B. Heslop, The Elements of E-mail Style: Communicate Effectively via Electronic Mail (Reading, MA: Addison-Wesley Publishing Company, 1994). To read more on the growing demand for flexible work arrangements, see “The New World of Work: Flexibility is the Watchword,” Business Week, 10 January 2000, 36.For more on individualism and collectivism, see H. C. Triandis, “Cross-cultural Industrial and Organizational Psychology,” in H. C. Triandis, M. D. Dunnette, and L. M. Hough, eds., Handbook of Industrial and Organizational Psychology, 2nd ed., vol. 4 (Palo Alto, CA: Consulting Psychologists Press, 1994, 103–172).Executive SummaryAs the wired world brings us all closer together, at the same time as we are separated by time and distance, leadership in virtual teams becomes ever more important. Information technology makes it possible to build far-flung networks of organizational contributors, although unique leadership challenges accompany their formation and operation. This paper describes the growth of virtual teams, the various forms they assume, the kinds of information and support they need to function effectively, and the leadership challenges inherent in each form. We then provide workable, practical solutions to each of the leadership challenges identified.