PROFIT SHARING AND EMPLOYEE OWNERSHIP: POLICY IMPLICATIONS

Various arguments extol public encouragement of profit sharing and Employee Stock Ownership Plans (ESOPs). Generally, advocates of public intervention cite externalities (market failure), provision of merit goods, or social transformation as bases for their arguments. To the extent that profit sharing and ESOPs increase productivity or reduce employer costs, no case exists for public intervention, since such advantages are internalized. Although Congress views retirement saving as a merit good, deferred profit sharing and ESOPs are no more deserving of public subsidy on that basis than are other forms of saving, such as pensions. Finally, the notion that ESOPs promote a social transformation by redistributing equity is untenable. One can make a case for government efforts to spread data and information about these plans. The potential macro stabilizing effects of profit sharing—but not ESOPs—provide a rationale for a tax subsidy to the former.     

TECHNOLOGICAL CHANGE, INEQUALITY AND WORK SHARING

The effects of technological change on wage inequality are usually studied under the assumption of exogenous supplies of skilled and unskilled workers. Moreover, in these studies there is no distinction between the stock (number of workers) and the flow (hours of work) dimension of labour services. In the present paper, we construct a model in which hours of work and technological change affect both the (relative) demand and supply of unskilled workers. The labour supply of unskilled workers (numbers of persons) is derived from a model of household labour supply in which households differ regarding the disutility suffered when both household members work. Combining together the (relative) supply and demand parts of the model we are able to establish technological change (either biased or neutral) as a plausible explanation of recent trends in wage inequality.     

MICRO-MACRO LINK FOR GOVERNMENT

In the Dutch statistics on government finance a micro/macro link is established. The paper describes why and how this has been done. It appears to be of relevance to the users of the statistics to present two different data sets: one according to an accounting/administrative point of view and one fitting in the National Accounts. The main features of the way in which these data sets are derived from the underlying bookkeeping documents are given and it is shown how they relate to the accounting and juridical structures of the various government agencies. It appears that in order to arrive at homogeneous data sets, adaptations are in order, mainly bearing on the entries; for the National Account data further transformations, relating to transactions as well as transactors, will appear necessary. It will be enunciated how the relation between these data sets is shown in the statistics on government finance and how, in the same course a micro/macro link is provided for.     

INVENTORY ACCOUNTING AND PROFIT EVALUATION

In an inventory model with exogenous sales, FIFO and LIFO criteria are formalized and compared with national account estimates for intermediate and finished good products. The model is simulated by utilizing manufacturing input and output prices for Italy (1970–88). LIFO and national account estimates of inventory are usually close and also imply reliable measures of output level and changes which can be shown by solving the quantity model. Conversely, FIFO exhibits larger profits and leads in real terms to unsatisfactory estimates of output changes.     

CONTROL ALLOCATION,REVENUE SHARING,AND JOINT OWNERSHIP*

This article develops a two‐period double moral hazard model with incomplete contracting to explore the implication of a possible adverse effect of unilateral control on the optimal revenue sharing and control allocation in a joint venture. We identify conditions under which joint ownership and control become optimal when unilateral control gives the controlling party opportunities to inefficiently extract private benefits at the expense of the joint revenue. Moreover, this adverse consequence of control may also lead to the separation of share ownership and control, i.e., it may be optimal for the minority owner to have the control rights.     

CREDIT, MONEY AND THE GOVERNMENT BUDGET CONSTRAINT

A credit market is introduced into an IS-LM model with wealth effects and the government budget constraint explicitly considered, The model is able to handle issues such as a credit market shock that would be impossible to examine in standard models without a credit market. The analysis of more standard policies or shocks is enhanced by recognition of the role of the credit market, thus supporting the view that such recognition is both feasible and warranted.     

COMPULSORY VOTING AND GOVERNMENT SPENDING

Crain and Leonard (1993) examine the effects of compulsory voting on the scale of government spending. The purpose of this comment is twofold. First, problems in the Grain and Leonard's approach are identified. The choice of government consumption, rather than expenditure, as representative of government spending is inappropriate and the classification of non-voters as net beneficiaries of government spending is questionable. Second, the composition of government expenditure is examined. Cross-country data tentatively suggests that voters benefit, relative to non-voters, from government expenditures on defence and economic services while non-voters benefit from government expenditure on health.     

POLITICAL PARTIES AND GOVERNMENT BEHAVIOUR

The paper attempts to explain and identify differences in party political behaviour in office, in terms of the weight they attach to unemployment and inflation. Reasons are advanced to suggest that incumbents do not take-up the median voter position, but instead pursue differentiated policies (i.e. make choices) which are both consistent with their known ideology (preferences) and with maximizing their share of the vote at the next election. The model is fitted with UK data, and the results are encouraging, providing some support for the notion that parties pursue politically-motivated policies throughout their term of office and not just in the run-up to elections.     

CHILD SUPPORT, ROUTINE INCOME WITHHOLDING, AND POST-DIVORCE INCOME

Policymakers are proposing child support reform as a way of reducing "welfare dependency" and countering the "feminization of poverty" while increasing the well-being of children living in single-parent households. The federal government and some states have begun to change laws regarding establishment of child support awards and collection of payments. The 1988 Family Support Act mandates routine income withholding of child support payments—i.e., collecting child support directly from the payer's paycheck. This article assesses the effects on post-divorce income by using data from a demonstration of routine withholding in ten Wisconsin counties. Unfortunately, these data conclude that routine income withholding has little effect on post-divorce income, at least in the year following divorce. The authors suggest three requirements for substantially increasing post-divorce income, as well as child support: (i) More family court cases must establish awards, (ii) The amount of those awards must be greater. (Hi) The collection rate for those who have awards must improve.     

EXCHANGE RATE,EXPECTED PROFIT AND CAPITAL STOCK ADJUSTMENT: JAPANESE EXPERIENCE

This paper empirically investigates the impact of exchange rate shocks on capital stock adjustment in the Japanese industry. An intertemporal optimization model is developed, in which an individual corporation in an open economy adjusts its capital stock according to Tobin's q. By explicitly considering the marginal q, the transmission mechanism from real exchange rate shocks to investment dynamics is examined based on the Vector Autoregressive model. Empirical evidence suggests that the depreciation of the Japanese yen increases the expected profitability of the firm and stimulates investment, especially in the machinery sector.