Optimal Categorical Transfer Payments: The Welfare Economics of Limited Lump-Sum Redistribution

Despite their importance in tax-transfer systems, categorical transfer payments, based on (nearly) exogenous characteristics such as disability or date of birth, have been deemphasized in optimal-tax analysis. I use the well-developed theory of first-best redistribution to clarify the welfare economics of categorical transfers, which are a form of limited lump-sum redistribution. The comparison to first-best redistribution explains how categorical transfers affect groups' labor supplies and utility levels, why the use of categorical transfers is inversely related to the planner's inequality aversion, and why their use reduces the optimal income tax rate.     

Robots Don't Get Sick or Get Paid Overtime, but Are They a Profitable Option for Milking Cows?

Mason Dixon Farms, a dairy known worldwide for its adoption and innovation of new technologies, is considering the purchase of forty robotic milking units to service its 2,000 cow herd. The purchase requires a $6 million investment plus any additional buildings and equipment necessary. Their alternative is a $1 million carousel milking parlor. This case asks students to assess Mason Dixon's decision by performing a capital budgeting analysis. One of Mason Dixon Farms' explicit objectives is to reduce its use of milking laborers. The results allow students to draw conclusions about the value of reducing labor management under this scenario.     

Collective bargaining and new work regimes: ‘too important to be left to bosses’

The formal negotiations process remains perhaps the least‐studied moment of collective bargaining. Drawing on ideal types of ‘distributive’ and ‘integrative’ bargaining and the ‘formal/informal’ distinction, this article reports non‐participant observation and ethnographic research into the negotiations process that enabled a change agreement in a British multinational, hereafter anonymised as FMCG. Informal bargaining relations provided the backdrop to—and emerged within—the formal negotiations process. Formal bargaining established new employment contracts based on a simplified internal labour market and generated the joint governance processes to enable and regulate the change process. Neither management nor union strategy was wholly derived from rational, interest‐based positions. The negotiations process was essential to strategy formation and to the emergence of sufficient ‘integrative’ bargaining for all parties to devise and approve new processual institutions and norms to deliver a more flexible labour process and to restore the long‐run viability for ‘distributive’ bargaining.     

Psychology, Behavioral Economics, and Public Policy

Economics has typically been the social science of choice to inform public policy and policymakers. In the current paper we contemplate the role behavioral science can play in enlightening policymakers. In particular, we provide some examples of research that has and can be used to inform policy, reflect on the kind of behavioral science that is important for policy, and approaches for convincing policy-makers to listen to behavioral scientists. We suggest that policymakers are unlikely to invest the time translating behavioral research into its policy implications, and researchers interested in influencing public policy must therefore invest substantial effort, and direct that effort differently than in standard research practices.     

An Examination of the Long Run Performance of UK Acquiring Firms

This study examines a comprehensive data set of large domestic takeovers by UK listed companies between 1984 and 1992. The contribution of this paper is to show, by using a series of models of abnormal returns, together with the Ibbotson (1975) 'Returns Across Time Series' model and a simple cross-sectional model of returns across all listed UK companies, that the average abnormal return for up to two years post-acquisition is unambiguously and significantly negative. In particular, acquirers financing a takeover through equity, and single (as opposed to regular) acquirers exhibit significant negative performance. There is also some evidence to suggest that diversifying acquirers perform worse than non-diversifying acquirers and that recommended bids are associated with poorer subsequent under-performance by acquirers than are hostile bids.     

BIVARIATE BINOMIAL OPTIONS PRICING WITH GENERALIZED INTEREST RATE PROCESSES

We extend existing pricing models and develop a bivariate binomial option pricing technique that accommodates correlated state variables. This technique offers the ability to price American-style options, thereby accommodating early exercise, despite the existence of two correlated underlying state variables. Our technique is computationally efficient and can be further generalized for multiple-state variables, albeit with an accompanying rise in computational expense.