Incentives,Monitoring, and Employee Stock Ownership Plans: New Evidence and Interpretations

This paper reviews the theory and evidence for agency theory‐based explanations for employee stock ownership plans found in the financial participation literature. The UK Workplace Employee Relations Survey 1998 is used to test whether share plans substitute for direct monitoring and individual incentives. Contrary to some predictions in the literature, individual incentives are found to be complements of share plans, while other measures of monitoring costs provide mixed results. However, it is found that monitoring costs and a wide range of performance targets explain the conjunction of stock plans and individual incentives. It is suggested that share plans are used to mitigate dysfunctional effects of individual incentives by engendering cooperation and trust, and by broadening the range and time frame of desired performance outcomes.     

Deriving Long-Run Inequality Series from Tax Data*

Prior to the last three decades, regular surveys on household income were rare or non-existent in many developed countries, making it difficult for economists to develop long-run series on income distribution. Using taxation statistics, which tend to be available over a longer time span, I propose a method for imputing the incomes of non-taxpayers, and deriving the underlying distribution of income. Because taxation statistics are typically disaggregated by gender, it is possible to derive separate income distribution series for men and women in countries where individuals file separately. I show that over the past four decades, the distribution of adult male incomes and the distribution of family incomes are highly correlated. Applying this method to Australia, I develop a new annual series for inequality from 1942 to 2001. Inequality fell in the 1950s and the 1970s, and rose during the 1980s and 1990s – a pattern similar to that in the UK.     

Liquidity Provision,Bank Capital,and the Macroeconomy

New bank equity must come from somewhere. In general equilibrium, raising bank capital requirements means either that banks produce less short‐term debt (as debt holders must become shareholders), or short‐term debt is not reduced and the banking system acquires nonbank equity (as the shareholders in nonbanks become shareholders in banks). The welfare effects involve a trade‐off because bank debt is special as it is used for transactions purposes, but more bank capital can reduce the chance of bank failure (producing welfare losses).     

Securitization and Bank Performance

Using predominantly precrisis U.S. commercial bank data, this paper employs a propensity score matching approach to analyze whether individual banks did improve their performance through securitization. On average, our results show that securitizing banks tend to be more profitable institutions, with higher credit risk exposure. Despite a more diversified funding structure, they face higher funding costs. We also find that securitizing banks tend to hold larger and less diversified loan portfolios, have less liquidity, and hold less capital. However, our analysis does not provide evidence to suggest that securitization had an impact upon bank performance.     

Fiscal policies and the institution of a tax state in Anglo‐Saxon England within a comparative context1

This article begins by noting that military revolutions and civil wars in early modern Europe provide an unduly narrow framework for understanding the transition from a domain to a tax state. Taking Anglo‐Saxon England as a case study, it is suggested that political restrictions led to the establishment of direct and indirect taxation, thereby providing rulers with revenues which surpassed those from domain resources. The main section of the article uses sources from coinage and wills to poetry and letters in order to give a general idea of the chronological development of a medieval tax state. This analysis challenges the views of the new fiscal historians, who argue that a collapse in a medieval domain state acts as the precondition for the emergence of a tax state. Instead, this article suggests that new policies arose because of the need of Anglo‐Saxon kings and their advisers to take account of the requirements of ecclesiastical authorities, as well as a heavy revenue imperative, in paying for resistance against the Vikings. The article ends with a discussion of the comparative applications of the contexts and catalysts which lead to the adoption of pioneering fiscal policies.     

Labor Force Participation and Monetary Policy in the Wake of the Great Recession

This paper provides compelling evidence that cyclical factors account for the bulk of the post‐2007 decline in the U.S. labor force participation rate (LFPR). We then formulate a stylized New Keynesian model in which the LFPR is practically acyclical during “normal times” but drops markedly following a large and persistent aggregate demand shock. These considerations have potentially crucial implications for the design of monetary policy, especially when interest rate adjustments are constrained by the zero lower bound; specifically, monetary policy can induce a more rapid recovery of the LFPR by allowing the unemployment rate to fall below its natural rate.