Optimal Dissent in Organizations

We model an organization as a two-agent hierarchy: an informed Decision Maker in charge of selecting projects and a (possibly) uninformed Implementer in charge of their execution. Both have intrinsic preferences over projects. This paper models the costs and benefits of divergence between their preferences, that is, dissent within the organization. Dissent is useful to (1) foster the use of objective (and sometimes private) information in decision making and (2) give credibility to the Decision Maker's choices. However, dissent comes at the cost of hurting the Implementer's intrinsic motivation, thereby impairing organizational efficiency. We show that dissent can be optimal, in particular, when information is useful and uncertainty is high. Moreover, dissent remains an optimal organizational form even when Implementers can choose their employer or when Decision Makers have real authority over hiring decisions.

Workers do, and managers figure out what to do.
                                            F. Knight (1921)

     

THE ROLE OF COST IN DETERMINING WHEN FIRMS OFFER BUNDLES*

We model competitive bundling and tying, allowing for marginal cost savings from bundling, fixed costs of product offerings, and variation in customer preferences. Pure bundling can arise either because few people demand only one component or because, with high fixed costs, a single product efficiently satisfies customers with diverse tastes. We conclude by analyzing empirically the bundling of pain relievers with decongestants. The discount for the bundled product is large. We argue that our model provides a simpler, more compelling explanation for the size of the discount than the demand‐centered approach to bundling by a monopolist.     

Do Casual Workers Find Permanent Full-Time Employment? Evidence from the Australian Youth Survey

The growth of casual employment in Australia is sometimes viewed with concern. Such 'non-standard' forms of employment are often associated with intermittent labour force attachment, underemployment and low income. In this paper, we use data from the Australian Youth Survey to analyze the transition from casual work to full-time permanent jobs. In the short term, gender, employer-provided training and the receipt of government benefits are among the more important factors affecting the transition. However, these factors are less important in the long term. Overall, the results suggest that casual employment may be more of a 'stepping stone' than a 'dead-end'.     

An Error Component Logit Analysis of Corporate Bankruptcy and Insolvency Risk in Australia

This paper introduces a four-state failure model to depict a wider range of distress scenarios that public companies typically face in the real world. We use a multinomial error component logit model to analyse firm failure, a major advance on the modelling techniques used in previous research. The error component logit model, being an extension of the more familiar mixed logit model, relaxes several questionable statistical assumptions associated with standard models. Using a sample of Australian firms we provide an interpretative illustration of the error component logit model and contrast its behavioural performance with the standard logit model widely used in previous research.     

ASSESSING THE COMPETITION FACED BY OIL PIPELINES

This paper assesses the competition faced by oil pipelines. It also uses a new procedure and new data to test whether oil pipeline markets are competitive or monopolistic, under standard definitions. The key innovation of the paper is a new approach to the definition of the relevant market(s) in which oil pipelines operate. While recognizing that pipeline monopsony also could be a problem under certain conditions, the paper argues that these conditions are unlikely to arise and that if they do, it is unclear whether pipeline owners would be in a position to exploit them. The study offers new evidence to fuel the 80-year-old debate over pipeline rates and regulation.     

Immigration of Nurses

This paper examines the effects of immigration on a specific occupation, registered nurses (RNs). To learn whether immigrant nurses reduced the earnings of RNs, we applied techniques developed by Goldin (1994) and Borjas, Freeman, and Katz (1996), but found the effect of immigrant penetration either positive or insignificant. We also found that the supply of immigrant RNs was far more elastic than the supply coming from natives. It is often argued that it will be hard to detect negative effects on wages and employment of natives in local markets, because natives will avoid a market which many immigrants have entered. This study finds no support for this hypothesis in this market, based on data that measures the rate of entry of RNs exactly. We find no adverse effect of immigration on native workers in this occupation.     

CONTRACTING FOR AN INNOVATION UNDER BILATERAL ASYMMETRIC INFORMATION*

We analyze licensing contracts between informed innovators and developers exerting profit‐increasing effort. Those contracts must simultaneously induce innovators to convey information on the value of their ideas, while inducing developers to exert effort and protecting the innovators' intellectual property rights. We show that the best innovators signal themselves by taking more royalties even if it reduces the developers' share of returns and their incentives. Moreover, royalties are more likely to be used when property rights are easy to enforce and pre‐contractual evidence on innovation quality is hard to produce.     

Primary Commodity Prices and the Terms of Trade*

This paper provides a survey of a range of issues involved in the analysis of primary commodity prices and the terms of trade. Particular emphasis is placed upon the long-run behaviour of the terms of trade between primary commodities and manufactures and the paper presents some new evidence regarding the long-run behaviour of Australia's terms of trade.     

ARMY RECRUITING IN A CHANGING ENVIRONMENT

Army recruiting is sensitive to fluctuations in labor market conditions. Declines in unemployment over the past several years have led to decreases in the number and quality of enlistments. The Army has several discretionary policy tools that it can use to reduce cyclical variations in recruiting. However, budget constraints and other external requirements often limit the flexibility of these tools. More recently, the recruiting outlook turned favorable for the Army, primarily due to planned reductions in end strength. These reductions imply a 20 to 30 percent drop in total enlistment requirements over the next several years compared with 1989 levels. The danger is that dramatic budget cuts will impair the manpower quality goals of recruiting. Recruiting cuts alone should not be the only means of meeting end-strength reductions to 1995.