INTERNATIONAL PRICE COMPARISONS BASED UPON INCOMPLETE DATA*

This paper is directed at the following question: given an incomplete set of price data relating to goods or services in some category of output for each of a number of different countries, what arithmetic should be performed on the prices to get a meaningful representation of the relative category price-levels of the countries? In the course of developing an answer to the question, some broader matters are considered and illuminated. A comparison of category price-levels for different countries is analogous to a commonly-encountered problem in many areas, that of ranking ordinally or cardinally in one dimension a group of “entities”—persons, households, firms, industries, etc.—on the basis of sets of measurements associated with the individual entities. It is this point of view which dominates the following presentation.     

Credit Booms Gone Bust: Replication of Schularick and Taylor (AER 2012)

This paper replicates the results in Schularick and Taylor (American Economic Review 2012; 102 (2): 1029–1061; ST hereafter). Specifically, I replicate ST's results in the ‘narrow’ sense by reproducing their calculations in the open source econometrics package gretl. (Gretl is an acronym for Gnu Regression, Econometrics and Time‐series Laboratory. It is available for Windows, Mac and Linux at www.gretl.sourceforge.net .) I also demonstrate the robustness of ST's findings to different estimation methods. I obtain qualitatively similar results to ST via Bayesian estimation of both static and dynamic panel probit models. Finally, I show that the marginal effects of credit growth on the probability of a financial crisis vary considerably across the countries in the dataset. Copyright © 2016 John Wiley & Sons, Ltd.     

Trade Credit Management and the Decision to Use Factoring: An Empirical Study

This paper examines the firm's decision to use factoring amongst a cross-sectional sample of 655 manufacturing companies using a rich firm-level database. The paper develops and tests hypotheses that explain this particular choice of credit and financial management policy. We find strong evidence of a 'financing demand' explanation for the use of factoring, and also some support for theories which relate the decision to use a factor to the firm's product characteristics, to market characteristics and to the preferences of the factor (supply constraints). The motivation to use factoring, however, appears to be related more to a demand for asset-based finance from small companies than to firm-level choices about organisational structure.     

An Empirical Investigation of Trade Credit Demand

This paper investigates the motivations for a firm's demand for trade credit. Demand for credit is modelled as a function of transaction costs motivations, financing motivations, operational considerations, seller compliance issues and supplier marketing, whilst controlling for the firm's business environment and for firm characteristics such as size and industry. This paper builds on previous studies by considering a wider range of factors that can affect trade credit demand holistically on a single sample. It appears that the use of trade credit is widespread, and that it is generally perceived as an important short term financing option, although the availability of trade credit is not a major influence on supplier choice. The level of a firm's trade credit demand is found to be significantly influenced by transaction costs, financing, operational issues, marketing activities by suppliers, the firm's investment in trade debtors and firm size.     

When financial markets work too well: A cautious case for a securities transactions tax

Unlike most major industrialized nations, the United States does not impose an excise tax on securities transactions. This article examines the desirability and feasibility of implementating a U.S. Securities Transfer Excise Tax (STET) directed at curbing excesses associated with short-term speculation and at raising revenue. We conclude that strong economic efficiency arguments can be made in support of a STET that throws sand into the gears, in James Tobin's (1982) phrase, of our excessively well-functioning financial markets. Such a tax would have the beneficial effects of curbing instability introduced by speculation, reducing the diversion of resources into the financial sector of the economy, and lengthening the horizons of corporate managers. The efficiency benefits derived from curbing speculation are likely to exceed any costs of reduced liquidity or increased costs of capital that come from taxing financial transactions more heavily. The examples of Japan and the United Kingdom suggest that a STET is administratively feasible and can be implemented without crippling the competitiveness of U.S. financial markets. A STET at a .5% rate could raise revenues of at least $10 billion annually.     

Dysfunctional executive behavior: What can organizations do?

Much has been made of dysfunctional executive behavior in recent years. As such, the purpose of this article is to assist organizations in the design of executive work. To better construct a work environment that diminishes self-serving and unethical behavior, we propose that organizations structure an executive's work around three factors: the accountability environment, managerial discretion, and relationship composition. These factors are used to describe how organizations can better design executives’ work so as to promote more desirable executive behavior. We describe how these factors should be calibrated, as well as how they affect each other.     

Research Methods in Taxation Ethics: Developing the Defining Issues Test (DIT) for a Tax-Specific Scenario

This paper reports on the development of a research instrument designed to explore ethical reasoning in a tax context. This research instrument is a version of the Defining Issues Test (DIT) originally developed by Rest [1979a, Development in Judging Moral Issues (University of Minnesota Press, Minneapolis, MN); 1979b, Defining Issues Test (University of Minnesota Press, Minneapolis, MN)], but adapted to focus specifically on the environment encountered by tax practitioners. The paper explores reasons for developing a context- (and profession-) specific test, and details the manner in which this was undertaken. The study on which it is based aims to compare the reasoning of tax practitioners in the tax-specific context and in the general social context covered by the original DIT, and to compare this with the reasoning of non-specialists in these two contexts. The paper therefore also considers the issues that arise when using such tests to compare reasoning in different domains or to compare groups. The focus on instrument development to measure ethical reasoning in a specific domain will contribute to the literature on research methods in the area of the DIT and will facilitate cross-study comparisons.