A MODEL OF ENDOGENOUS PAYOFF MOTIVES AND ENDOGENOUS TIMING IN A MIXED DUOPOLY*

A model of endogenous payoff motives and endogenous order of moves is analysed in a mixed duopoly. We find that, when a non‐negative price constraint is imposed on public and private firms' quantity choice, both firms always choose to be relative‐payoff‐maximisers, and both simultaneous move and sequential move can be sustained in equilibrium. In contrast, when non‐negative absolute profit constraint is imposed, public and private firms always choose to be absolute‐payoff‐maximisers, and only sequential move can be sustained in equilibrium.     

Who Pays for Protection in Australia?*

A simple model is used to measure the transfer effects resulting from protection in Australia. The model is not concerned with the deadweight losses associated with protection. The concept of ‘true’ protection is employed to construct a transfer matrix which shows how income is transferred between sectors. The results indicate that exporters are the sole losers from protection. The cost to Australian exporters is about 1.5 per cent of GDP.     

Entry,Trade, and Exporting over the Cycle

We study how international trade and exporting affect the cyclicality of establishment creation. We build a general equilibrium model with two features: (i) new establishments start small and grow gradually and (ii) exporters are persistently bigger and more productive than nonexporters. When establishments creation costs fluctuate with aggregate productivity, the model generates procyclical fluctuations in domestic establishments and importers. Without international trade, entry is weakly countercyclical and too smooth. The model generates reasonable fluctuations in the stock of importers, exporters, and domestic establishments. With an entry margin, output is hump‐shaped following a productivity shock and this hump is stronger with trade.     

Regime Shifts in Price‐Dividend Ratios and Expected Stock Returns: A Present‐Value Approach

We incorporate regime shifts in the mean of price‐dividend ratios into the present value model of van Binsbergen and Koijen (2010) who propose a latent variable approach to modeling expected returns and dividend growth rates. We find that accounting for regime shifts results in much lower persistence of expected returns and higher volatility of expected returns, and thus higher in‐sample predictability, when compared to the results from the van Binsbergen and Koijen (2010) model. We also show that the main source of the increase in the mean of price‐dividend ratios in the mid‐1990s is a decrease in the mean of expected returns.     

DOES THE EFFECTIVENESS OF BOARD OF DIRECTORS AFFECT FIRM PERFORMANCE OF CONSUMER CO‐OPERATIVES? THE CASE OF ICOOP KOREA

Consumer co‐operatives in Korea have been growing rapidly since they launched their own shops. If co‐operatives would be too much oriented to enlargement or economic growth, they might easily pay no attention to members’ participation which is one of the priorities in co‐operatives. It could lead to losing the value of co‐operatives. So it is important to adjust the balance between members’ participation and economic growth. This paper focuses on the role of board of directors in doing that. It aims to examine how effectiveness of the board influences members’ participation and the participation has effect on performance of co‐operatives in the case of iCOOP Korea. The variables such as communication with members and usage of management skills and knowledge are employed as measures of the effectiveness of the board in decision‐making process. The data are collected by survey the respondents of which are 222 directors of 30 primary co‐operatives. It is analyzed by Structural Equation Model. The findings of the research are as follows. Firstly, communication of the board with members increases the members’ democratic participation, and the increased participation contributes to improving the financial performance. Secondly, management skills and knowledge of the board does not have significant relations with the level of members’ participation, even though members’ economic participation has significantly positive relation with the financial performance. The findings imply that members’ voluntary participation will be increased when boards of co‐operatives try to reflect members’ needs in the decision making processes, and it can help the co‐operatives improve their financial performance. It suggests a clue for the trade‐off between the value of co‐operatives and growth of business which many co‐operatives are trying to resolve.     

STRATEGIC BUDGET CONSTRAINTS IN A UNIONIZED MIXED OLIGOPOLY

This paper considers the budget‐constraint problem where the government decides whether or not to impose a budget constraint on the public firm, assuming the public firm is less efficient than private firms. We find that imposing budget constraints on the public firm is the preferred choice because of the welfare‐improving effect. Our model suggests that the wage levels of the public firm can be lower or higher than those of private firms depending upon the degree of inefficiency. These results differ from Ishida and Matsushima's findings that in a unionized mixed duopoly, tight budget constraints can enhance social welfare when the public firm is as efficient as private firms.     

ORGANIC FOOD AND SUSTAINABLE AGRICULTURE

Over the past 50 years, the rapid transformation of agricultural technology has provided the benefits of lower prices and a smaller share of income spent on food. Developing and applying synthetic chemicals was instrumental in lowering costs of production and in increasing yields. Conventional agriculture today relies on substantial use of synthetic chemicals as key inputs. This leads to increasing concern over negative externalities, including risks to both human health and the environment. In response to these concerns, organic food has emerged as a rapidly expanding industry. This paper examines the role of organic agriculture and other low-input farming methods more sustainable within the context of policies designed to reduce negative externalities from using synthetic chemicals.     

Information Aggregation Bias and Samuelson's Dictum

Under the assumption of incomplete information, idiosyncratic shocks may not dissipate in the aggregate. An econometrician who incorrectly imposes complete information and applies the law of large numbers may be susceptible to information aggregation bias. Tests of aggregate economic theory will be misspecified even though tests of the same theory at the microlevel deliver the correct inference. A testable implication of information aggregation bias is “Samuelson's Dictum” or the idea that stock prices can simultaneously display “microefficiency” and “macroinefficiency;” an idea accredited to Paul Samuelson. Using firm-level data from the Center for Research in Security Prices, we present empirical evidence consistent with Samuelson's dictum. Specifically, we conduct two standard tests of the linear present value model of stock prices: a regression of future dividend changes on the dividend-price ratio and a test for excess volatility. We show that the dividend price ratio forecasts the future growth in dividends much more accurately at the firm level as predicted by the present value model, and that excess volatility can be rejected for most firms. When the same firms are aggregated into equal-weighted or cap-weighted portfolios, the estimated coefficients typically deviate from the present value model and “excess” volatility is observed; this is especially true for aggregates (e.g., S&P 500) that are used in most asset pricing studies. To investigate the source of our empirical findings, we propose a theory of aggregation bias based on incomplete information and segmented markets. Traders specializing in individual stocks conflate idiosyncratic and aggregate shocks to dividends. To an econometrician using aggregate data, these assumptions generate a rejection of the present value model even though individual traders are efficiently using their available information.     

Financial Reporting Quality and Wage Differentials: Evidence from Worker-Level Data

We examine whether financial reporting quality affects worker wages using employer-employee matched data in the United States. We find that low financial reporting quality is associated with a compensating wage differential—that is, a risk premium—using three distinct approaches while controlling for worker characteristics by (1) regressing wages on firm-year–level and firm-level reporting quality, (2) documenting wage changes when workers switch firms, and (3) estimating a structural approach that separates reporting quality from performance-related volatility. We find evidence consistent with two channels: performance pay and turnover risk, where workers bear risks from noise in performance measurement and unemployment, respectively. To mitigate endogeneity concerns, we show that—after the accounting scandals in 2002 and after the announcements of an internal control weakness (ICW)—former Arthur Andersen clients and ICW firms pay wage premiums to employees, with magnitudes between 0.9% and 2.8% of annual wages.     

Do Jobseekers Value Diversity Information? Evidence from a Field Experiment and Human Capital Disclosures

We examine how information about the diversity of a potential employer's workforce affects individuals’ job-seeking behavior. We embed a field experiment in job recommendation emails from a leading career advice agency in the United States. The experimental treatment involves highlighting a diversity metric to jobseekers. Our results indicate that disclosing diversity scores in job postings leads jobseekers to click on firms with higher diversity scores, with such effects varying across jobseeker demographics. A follow-up survey provides evidence on potential explanations for why jobseekers value diversity information. We then examine how jobseekers’ preferences for diversity relate to disclosure choices under the U.S. SEC Human Capital Disclosure requirement. We find that firms in industries characterized by higher jobseeker responsiveness to diversity information tend to voluntarily disclose diversity metrics in their 10-Ks under these new disclosure requirements.