How Do Firms Respond to Political Uncertainty? Evidence from U.S. Gubernatorial Elections

We examine the joint response to political uncertainty along two margins: changes in real activity and voluntary disclosure. We focus on within-firm variation in exposure to ex ante competitive U.S. gubernatorial elections using data on preelection poll margins and firms’ state exposures. Despite real activity falling in the years leading up to a close election, we find that voluntary disclosure increases both in frequency and content, including mentions of risk in filings that reference states holding elections. Our tests use a decomposition of 8-K filings into real activity and voluntary disclosure to address the endogenous complementarity between these two responses. These results hold when using alternative ex ante measures of political uncertainty based on term-limited incumbents, historically competitive offices, or state legislature gridlock. Both effects of political uncertainty are stronger for firms in highly regulated industries and weaker for those least exposed to the local market, linking the real activity and disclosure responses to uncertainty.     

ESTIMATING THE NON-ENVIRONMENTAL CONSEQUENCES OF GREENHOUSE GAS REDUCTIONS IS HARDER THAN YOU THINK

Top-down and bottom-up models of the non-environmental consequences of policies to reduce greenhouse gas emissions embody different implicit theories of economic organizations. Yet neither approach is explicit in showing the detailed computations that must be traced if the activities of firms are to be described realistically. Specification of firms' computational processes leads inevitably to a consideration of potential computational limits on the behavior of organizations. It is known that solutions of some standard economic problems are not effectively computable, and that the solutions to others are computationally intractable. These fundamental computational limits have strong implications for the theory of the firm, and recognizing their existence and importance suggests new policy approaches for reducing greenhouse gas emissions. (JEL C6, D2, L2, Q4)     

ENDANGERED SPECIES CONSERVATION ON PRIVATE LAND

This paper analyzes the effect of alternative institutional arrangements on the conservation of endangered species and economic activity on private land. Because a landowner does not capture the full value of species conservation, her preferences on land use will not coincide with social preferences. Under current law, the landowner has incentives to invest in lowering conservation value and to deny access to regulators in order to prevent collection of information. Paying compensation corrects many of these perverse incentives. An alternative approach is to limit the ability of landowners to affect the regulatory outcome. Whether it is better to entice landowners to make socially efficient decisions by paying compensation or to limit the ability of landowners to affect outcomes through changes in the regulatory regime depends on both practical implementation difficulties and distributive justice considerations.     

What Factors Lead Management to Support or Oppose Employee Participation—With and Without Works Councils? Hypotheses and Evidence from Germany

This paper provides the first econometric analysis to distinguish between works councils in establishments where managers have a positive or negative view toward employee involvement in decision making. We similarly distinguish between establishments where no council is present in which management supports or does not support worker participation. We stress the potential role of works councils and participation in motivating employees. Our theoretical analysis and empirical results from German manufacturing establishment data show that the structure of the workforce, principal‐agent problems between owners and managers, collective bargaining, direct employee involvement, human resource management practices, and market strategy and innovativeness all play important roles. Some conflicting conclusions in the works council literature may be due to the failure to distinguish among industrial relations participation regimes characterized by cooperative or uncooperative relationships between works councils and management.     

Testing Market Efficiency: Evidence From The NFL Sports Betting Market

This article examines the efficiency of the National Football League (NFL) betting market. The standard ordinary least squares (OLS) regression methodology is replaced by a probit model. This circumvents potential econometric problems, and allows us to implement more sophisticated betting strategies where bets are placed only when there is a relatively high probability of success. In-sample tests indicate that probit-based betting strategies generate statistically significant profits. Whereas the profitability of a number of these betting strategies is confirmed by out-of-sample testing, there is some inconsistency among the remaining out-of-sample predictions. Our results also suggest that widely documented inefficiencies in this market tend to dissipate over time.     

ECONOMIC MODELING AND THE FALSE TRADEOFF BETWEEN ENVIRONMENTAL PROTECTION AND ECONOMIC GROWTH

One important element of the current policy debate on what measures should be taken to reduce greenhouse gas emissions is the controversy over the costs of reducing those emissions. "Top-down" macroeconomic and general equilibrium models give much higher estimates of the costs than "bottom-up" models based on microeconomic and engineering data. This paper investigates the causes of the divergence between the two modeling approaches. The conventional top-down models incorporate strong implicit assumptions about maximization, technical progress, and organizational efficiency that predetermine their results. However, these assumptions are questionable on both theoretical and empirical grounds. Economic assessment of policy alternatives would benefit. from analyses that take account of the actual characteristics of business firms and other organizations that emit greenhouse gases in the course of their activities.     

Rural Adaptation in Russia: Who Responds and How Do We Measure It?

Utilizing survey data from 800 households in five regions of Russia, this article attempts to measure adaptation to reform stimuli according to socio-economic strata. While the orthodox literature has emphasized rural resistance to reform, in fact one of the main analytical obstacles is differentiating between adaptive and survival strategies. Time horizon is used as the primary criterion to distinguish between adaptive and survival behaviour. The article analyses adaptive responses by examining the use of rural credit, the operation of a household business, the enlargement of household land plots and a set of attitudes that taken together comprise an 'entrepreneurial spirit'.