Complex Systems and the Merger Process

This paper considers how some of the generic principles that have emerged in the course of recent study and thinking around complex systems might be applied in a helpful way to the particular context of understanding the nature of the merger process. Theoretically, the paper stresses the connections between the processual and time-dependent nature of learning and knowledge acquisition and the systemic nature of socio-economic development and transformation. When carried into the substantive domain of mergers and their contribution to restructuring in the pharmaceuticals industry, we suggest that the complex systems approach provides a fruitful complement to alternative conceptual frameworks, albeit one which is still at an early stage of development in terms of this particular application.     

Increasing Dependency Ratios, Pensions and Tax Smoothing

The implication of increasing dependency ratios for pay–as–you–go, defined–benefit pension programmes are examined. Modifications aimed at smoothing contributions while maintaining benefits intact are analysed for both open and closed economies.
(J.E.L.: H2, F3, J1).     

ACCOUNTING FOR RISK AVERSION, VESTING, JOB TERMINATION RISK AND MULTIPLE EXERCISES IN VALUATION OF EMPLOYEE STOCK OPTIONS

We present a valuation framework that captures the main characteristics of employee stock options (ESOs), which financial regulations now require to be expensed in firms' accounting statements. The value of these options is much less than Black–Scholes prices for corresponding market-traded options due to the suboptimal exercising strategies of the holders, which arise from risk aversion, trading and hedging constraints, and job termination risk. We analyze the combined effect of all of these factors along with the standard ESO features of multiple exercising rights, and vesting periods. This leads to the study of a chain of nonlinear free-boundary problems of reaction-diffusion type. We find that job termination risk, vesting, finite maturity and non-zero interest rates are significant contributors to the ESO cost. However, we find that in the presence of vesting, the impact of allowing multiple exercise rights on ESO cost is negligible.     

Unskilled Migration: A Burden or a Boon for the Welfare State?

As relatively low earners, migrants are net beneficiaries of the welfare state. Therefore, in a static setup, migration may be resisted by the entire native-born population. However, it is shown that in a dynamic setup with a pension system, which is an important pillar of any welfare state, migration is beneficial to all income (high and low) and all age (old and young) groups, when the economy has good access to international capital markets. The pro-migration feature of the dynamic model is weakened and possibly overturned when the economy does not have good access to such markets. In this case, to the extent that factor prices are significantly affected by migration because of low substitution between labour and capital, low-skill native born and possibly also high-skill native born may lose.     

A note on internal and external reference in efficiency wage models

According to Bewley, a workers’ morale depends on being treated fairly within firms. This implies that the internal comparison of the own wage with wages paid to other workers within the firm affects individual effort determination. By contrast, the standard efficiency wage models only consider a comparison of the own wage with external income opportunities as the only determinant for individual effort. We provide a simple efficiency wage framework in which both the internal and external perspectives can affect individual effort determination. Our framework suggests that the internal reference is essential for the existence of real wage rigidity while the external reference ensures an upward-sloping wage-setting curve.      

Out of sight: problem sequences and epistemic boundaries of medical know-how on glaucoma

This paper analyses the process of knowledge growth in a branch of medical science. It proposes a study on the scientific advances in glaucoma research organized in two parts. The first presents a qualitative overview of the problem sequences that have characterized 150years of medical research in ophthalmology. This is complemented in the second part by a network analysis of scientific publications and collaborations of the last 50years. Medical knowledge, we surmise, is punctuated by patterns of specialization, diversification and coordination that emerge both within and among scientific, technical, institutional and organizational realms.