Who's in charge here? Co‐CEOs,power gaps,and firm performance

At the pinnacles of organizations, comparative tests of unity of command and shared command are nearly impossible because only one individual sits atop most organizations. In organizations led by co‐CEOs, however, such a test is possible because co‐CEOs can truly share power. But do they? Our research pits the unity‐of‐command principle against the shared‐command principle and finds overall support for the former, even within the co‐CEO context. Our sample of 71 co‐CEO pairs at publicly traded U.S. firms shows that increasing power gaps between co‐CEOs are positively associated with firm performance. This positive association wanes and turns negative, however, as power gaps become very large. We conclude that whatever benefits the co‐CEO structure might offer likely lie outside the shared command paradigm. Copyright © 2014 John Wiley & Sons, Ltd.     

Ontology and Feminist Theorizing

There are large research, policy, and economic gaps between the ways US researchers and policy makers address the work/family bind amongst middleclass professionals and poor lone mothers. This is clearly seen in US welfare reform, an important piece of work/family legislation in the 1990s. The new rules make the work/family binds worse for low-income, poor mothers and do not alleviate poverty. With its clear expectation that poor mothers be employed, the legislation opens up new avenues to revamp low-wage work for breadwinners and to socialize the costs of caring for family. Closing the literature gap may help to close the policy gap, which, in turn, would promote more income equality.     

Divorce and female labor force participation: Evidence from times-series data and cointegration

The divorce rate in the United States has increased over the last 40 years. This increase was accompanied both by growing female labor force participation and rising female income. These changes were accompanied by a significant reduction in the birth rate for married women. This article uses time-series data and cointegration techniques to determine the direction of causality between these variables. Analysis of the impulse functions show that the divorce rate will increase if either female labor force participation or income increases. Positive innovations to the divorce rate increase the labor force participation rate of married women. Rising levels of income lead to greater female participation in the labor market.     

Medicaid, State Finances, and the Bottom Line for Businesses

Current Medicaid expenditures account for about nine percent of the federal budget and almost a quarter of state budgets and are growing rapidly. State Medicaid budgets are especially vulnerable to recession since states cannot incur large and sustained fiscal deficits. Without change, Medicaid burdens will cause state finances to be diverted from infrastructure and education, with negative effects on the costs and productivity of business. Also affecting business are the state governments experimenting with policies that shift Medicaid burdens to private employers. Simultaneously, the states are initiating efforts to ease Medicaid’s relentless cost increases and address its long-run problems. JEL Classification I180,H720     

Estimated elasticities from regulated and unregulated cost functions

Estimates of the Allen partial elasticities of substitution (AES) for a regulated cost function [Smith (1981)] are compared with those obtained from an unregulated cost function. The AES for capital and variable inputs are reasonably similar, but those between variable inputs differ significantly.     

The value of information in a principal-agent model with moral hazard: The ex post contracting case

In a principal-agent model with moral hazard, a signal about the principal?s technology — the stochastic mapping from the agent?s action to the outcome — is observed before the contract is offered. The signal is either uninformative (null information), informative and observed only by the principal (private information), or also observed by the agent (public information). We show that, from an ex ante standpoint (before the signal is observed): (i) the agent prefers private to both null and public information; (ii) the principal sometimes prefers null to both private and public information; and (iii) when the principal prefers public to null information, she prefers public to private information, whereas the agent prefers private to public information. In this last situation, we also show that (iv) for any separating equilibrium with private information, there exists a contract with public information that both strictly prefer.     

A Dynamic Analysis of the Demand for Life Insurance

Prior research suggests that neither the choice to own life insurance nor the amount purchased is consistently related to the presence of children in the household. While these perplexing findings are based on a static framework, we alternatively examine life insurance demand in a dynamic framework as a function of changes in household life cycle and financial condition. Our results indicate both a statistically and economically significant relation between life events, such as new parenthood, and the demand for life insurance. We also provide new evidence in support of the emergency fund hypothesis: households in which either spouse has become unemployed are more likely than other households to surrender their whole life insurance.     

Financial clusters,industry groups,and stock return correlations

Industry classifications are used by investors, economists, and policy makers for a great variety of purposes. The traditional economic‐activity‐based systems (Global Industry Classification Standard, North American Industry Classification System, Standard Industrial Classification, and Fama–French) have been supplemented in recent years by alternative classification systems. Our purpose is to provide another alternative system that forms classification groups based on the structure of firm financial statements. Using cluster analysis, a multivariate tool that forms groups where their characteristics are similar within groups and distinct across groups, we form clusters of large U.S. firms based on their common‐size financial statements (percentage breakdowns of balance sheets and income statements). We characterize the financial clusters based on their industry classifications and other economic information and assess the ability of financial clusters and industry groups, separately and jointly, to explain stock return correlations of all pairs of firms. Our results demonstrate that using financial clusters and industry groups together proves advantageous relative to using either alone.