Assessing Preference Change on the US Supreme Court

The foundation upon which accounts of policy-motivated behaviorof Supreme Court justices are built consists of assumptionsabout the policy preferences of the justices. To date, mostscholars have assumed that the policy positions of Supreme Courtjustices remain consistent throughout the course of their careersand most measures of judicial ideology—such as Segal andCover scores—are time invariant. On its face, this assumptionis reasonable; Supreme Court justices serve with life tenureand are typically appointed after serving in other politicalor judicial roles. However, it is also possible that the worldviews,and thus the policy positions, of justices evolve through thecourse of their careers. In this article we use a Bayesian dynamicideal point model to investigate preference change on the USSupreme Court. The model allows for justices' ideal points tochange over time in a smooth fashion. We focus our attentionon the 16 justices who served for 10 or more terms and completedtheir service between the 1937 and 2003 terms. The results arestriking—14 of these 16 justices exhibit significant preferencechange. This has profound implications for the use of time-invariantpreference measures in applied work.     

The role of boundary solutions in principal-agent problems of the Holmström-Milgrom type

The paper extends the Holmström-Milgrom [B. Holmström, P. Milgrom, Aggregation and linearity in the provision of intertemporal incentives, Econometrica 55 (1987) 303-328] analysis of intertemporal incentive provision to allow for the implementation of actions on the boundary of the feasible set. Boundary actions provide the principal with some freedom in choosing incentive schemes. This can be used to reduce premia. The paper characterizes optimal incentive schemes for the continuous-time Brownian-motion model and its discrete-time approximations. Linearity of incentive schemes in “accounts” is confirmed. However, for models with effort costs depending only on mean returns, the availability of boundary actions destroys the linearity of optimal incentive schemes in profits.     

Office triage and the physician's supply curve

This paper contains a theoretical and empirical model of the physician firm. The utility maximizing physician chooses the number of hours of labor to supply and the mix between patient visits and time per visit. Theory suggests that a serious specification error may occur if one estimates the labor supply curve and patient demand curve without simultaneously estimating the mix between patient visits and time per visit. A Chi-Square specification test reveals that this “triage” model statistically dominates the simple supply/demand model. Estimation results indicate relevant backward-bending labor and negatively sloped service supply functions.     

Does Child Labour Displace Schooling? Evidence on Behavioural Responses to an Enrollment Subsidy

It is often argued that child labour comes at the expense of schooling and so perpetuates poverty for children from poor families. To test this claim we study the effects on children's labour force participation and school enrollments of the pure school-price change induced by a targeted enrollment subsidy in rural Bangladesh. Our theoretical model predicts that the subsidy increases schooling, but its effect on child labour is ambiguous. Our empirical model indicates that the subsidy increased schooling by far more than it reduced child labour. Substitution effects helped protect current incomes from the higher school attendance induced by the subsidy.     

How Do Banks Determine Capital? Evidence from Germany

Abstract. We analyse whether the determinants of capital found in the previous literature hold for the special German banking sector comprising three characteristic banking groups including savings banks, cooperative banks and other banks, which differ regarding their ownership and their access to the capital market. Through the use of accounting data from German banks between 1992 and 2001 we find evidence in accordance with the buffer theory of capital for all German banking groups. Furthermore, we also detect some remarkable differences between the three banking groups regarding their determination of capital due to institutional characteristics.     

Exit Deterrence

This paper is the first to provide a general context whereby potential entry can lead incumbent firms to permanently reduce the intensity of competition in a market. All previous results found that potential entry would lead to lower prices and greater competition. Examining markets where entry occurs by the acquisition of access rights from an existing incumbent, we demonstrate that, where competitive choices are strategic complements, a more efficient entrant may be unable to acquire those rights from a less efficient incumbent due to the unilateral accommodating behavior of the efficient incumbent. Similarly, such accommodating behavior may deter efficient investment by an incumbent. These results have implications as to how economists view potential entry and its benefits.     

CONVERTIBLE BOND PRICING MODELS

Convertible bonds are an important segment of the corporate bond market, with worldwide outstandings approaching US$235 billion. Simple pricing models value a convertible bond as being equivalent to a straight bond with an embedded option that enables the bond holder to convert to a specific amount of common stock. The straight bond is subject to both interest rate and credit risk, whereas the option to convert is dependent on the underlying stock price, which exposes the convertible bond holder to equity risk. The complexity of these features means that convertible bonds tend to be treated casually in major derivatives and corporate finance textbooks. This paper presents a survey of the theoretical and empirical aspects of convertible bond pricing. The limitations of these studies are highlighted to identify those areas of research that may improve the valuation process and facilitate the application of these securities for corporate financing.     

TESTING POVERTY LINES

In theory, a poverty line can be defined as the cost of a common (inter‐personally comparable) utility level across a population. But how can one know if this holds in practice? For groups sharing common consumption needs but facing different prices, the theory of revealed preference can be used to derive testable implications of utility consistency knowing only the “poverty bundles” and their prices. Heterogeneity in needs calls for extra information. We argue that subjective welfare data offer a credible means of testing utility consistency across different needs groups. A case study of Russia's official poverty lines shows how revealed preference tests can be used in conjunction with qualitative information on needs heterogeneity. The results lead us to question the utility consistency of Russia's official poverty lines.     

Outsourcing, Imports and Labour Demand

This paper examines the effects of purchased services and imported intermediate materials on the labour demand for different skills in German manufacturing sectors. We derive and estimate a factor demand system based on the generalised Box–Cox cost function nesting both the normalised quadratic and the translog functional form. We find that the impacts of output and capital growth are more important in explaining the demand for heterogeneous labour than substitution effects between labour and non–labour inputs. Similarly, the increasing use of both imported materials and purchased services is a consequence of output growth rather than input substitution.
JEL classification : J 23; O 33     

Managing Task Interdependencies in Multi-Team Projects: A Longitudinal Study

abstract    In this article we examine project-level and team-level managerial functions aimed at managing inter-team task interdependencies and investigate their effect on the performance of teams in a multi-team product development project. We hypothesize that team interface management (a team-level function) performed in the concept phase of a project, rather than the later development phase, is positively related to team performance at the project's conclusion (i.e. product quality, product cost, development budget, development time). Furthermore, we argue that project structuring and support (a project-level function) is important in both the concept and the development phases. We test our hypotheses empirically based on a 36 months longitudinal study of a product development project in the European automotive industry comprising 39 teams. The results show that team interface management is particularly important during the concept phase of the project. Project structuring and support is most important in the development phase of the project, while hindering team performance in the concept phase. Theoretical and practical implications are discussed.