Corporate tax cuts,merger activity,and shareholder wealth

We study the impact of the Domestic Production Activities Deduction (DPAD) on mergers and acquisitions. DPAD reduces corporate tax rates on income from work or goods made in the U.S. Results indicate that the quantity and quality of acquisition bids by DPAD-advantaged firms conform to the predictions of the neoclassical theory of the firm and the theory of financial constraints. Specifically, bids, particularly those cash-financed, increase substantially in industries with large DPAD-related tax cuts and for firms with financial constraints. Moreover, DPAD improves acquisition quality where acquirers and targets are likely to generate incremental DPAD tax benefits through their merger.     

Quantifying and explaining parameter heterogeneity in the capital regulation-bank risk nexus

By examining the impact of capital regulation on bank risk-taking using a local estimation technique, this paper attempts to quantify for the first time the heterogeneous response of banks towards this type of regulation in banking sectors of western-type economies. Subsequently, using this information, we examine the sources of heterogeneity. The findings suggest that the impact of capital regulation on bank risk is very heterogeneous across banks and the sources of this heterogeneity can be traced into both bank and industry characteristics, as well as into macroeconomic conditions. An important implication of the findings is that common capital regulatory umbrellas are not sufficient to promote financial stability, especially if they are not accompanied by supervisory effectiveness. On the basis of our findings, we contend that more focus should be placed on the actions needed to restrain excessive risk-taking of banks.     

Optimal Countervailing Intervention

This paper examines the optimal countervailing measures in response to foreign subsidy. Two alternative objectives are considered: (1) to maintain the domestic producer price, or (2) to maintain the initial import level. Three different instruments are discussed: a tariff, a production subsidy, and a consumption tax. Their rankings in terms of welfare costs are established. One important finding is that, contrary to present convention, the optimal countervailing rate may have to exceed the foreign subsidy rate. [411]     

Reconciling microeconomic and macroeconomic estimates of price stickiness

This paper attempts to reconcile the high estimates of price stickiness from macroeconomic estimates of a New-Keynesian Phillips curve (NKPC) with the lower values obtained from surveys of firms’ pricing behaviour. This microeconomic evidence also suggests that the frequency with which firms adjust their prices varies across sectors. Building on the insights of Carvalho (2006), we present Monte Carlo evidence that suggests that in the presence of this heterogeneity estimates of the NKPC obtained using conventional methods, such as GMM, are likely to considerably overstate the degree of aggregate price stickiness. Furthermore, if roundabout production is a characteristic of the economy the NKPC will falsely suggest that a sizeable fraction of prices are indexed to past inflation. These problems arise because of a type of misspecification and a lack of suitable instruments.     

Bayesian inference in threshold stochastic frontier models

In this paper, we generalize the stochastic frontier model to allow for heterogeneous technologies and inefficiencies in a structured way that allows for l     

A Participatory Simulation to Facilitate Farmers' Adoption of Livestock Feeding Systems Based on Conservation Agriculture in the Uplands of Northern Vietnam

In the mountain areas of northern Vietnam, extensive husbandry of large-ruminants is limited by the lack of natural forage. Since 2000, the Mountain Agrarian System Program has been concerned with this issue and has evaluated technical alternatives aimed at sustainable integration of crop-livestock systems. One alternative consists of feeding systems for largeruminants based on cropping systems with plant cover. Diffusion of information about the new system is supported by a set of interactive communication tools for use between farmers and researchers. A participatory simulation method was developed that combines a compartmental model of the village territory with five technical innovations. Farmers simulate the adoption of the innovations they choose among food-forage cropping systems in rotation or in association, and urea-treated straw. They evaluate the quantity of forage that can be grown for their herd using the chosen set of techniques.

Simulations revealed farmers' constraints and objectives in adopting sustainable cropping systems on the hillsides while maintaining a small animal husbandry system. The results obtained by each farmer provide a useful basis for discussion about the implementation of innovation. This participatory simulation method could be more widely used to facilitate the diffusion of innovations such as integrating livestock feeding systems with conservation cropping practices.     

Market orientation: an option for universities to adopt?

• The primary objectives of this exploratory paper are to test the concept of market orientation adapted from related literature in the education context and to examine the effects of market orientation as a second‐order factor on university student satisfaction. The revised scale, validated through exploratory factor analysis and confirmatory factor analysis, constitutes a good fit. Specifically, the new scale is statistically and positively related with student satisfaction, indicating that market orientation is an important factor that leads to higher student satisfaction. The findings show that the degree to which students are satisfied with their choice of university depends significantly on how market oriented the university is. In other words, the effective application of market orientation strategy relates to student satisfaction and to the decisions they make when selecting a university. To that end, market orientation is an option for universities to adopt. The empirical results add to the meager and emerging literature on marketing and branding of universities and will be of interest of university administrators and marketing and branding managers of universities. The paper concludes by discussing conclusions, implications, limitations, and future research.

Copyright © 2015 John Wiley & Sons, Ltd.     

On the identification of the procurement model

Under multiplicative separability of the cost function, this paper investigates the identification of the procurement model. Moreover, we characterize the model restrictions on observables and show its observational equivalence to one where the function of private information is the identity.     

The dynamic impact of macroeconomic factors on initial public offerings: evidence from time-series analysis

This article examines the explanatory power and the dynamic impact of macroeconomic conditions on Initial Public Offering (IPO) activities in US during the period from 1970 to 2005. Applying time-series econometric techniques, we find the existence of long-run equilibrium relationships between IPO activities and selected macroeconomic variables. Stock market performance and volatility are shown to play the most important role in the timing of IPOs. The Fed funds rate and the 10 year US Treasury Bond (TB) yield play a comparable role in determining the amount of proceeds raised in the IPOs. There also exist different short-run dynamic adjustment mechanisms between IPOs and macroeconomic factors towards the long run equilibrium path and they are mostly completed within the period of 6 months to 1 year. The results have some useful implications for forecasting IPO activities.     

A study of zero-out auctions: testbed experiments of a process of allocating private rights to the use of public property

Summary This paper applies an experimental testbed methodology to the evaluation of a proposed mechanism for allocating the right to land at the New York airports. The mechanism is called a zero-out auction because it is supposed to allocate the rights efficiently like an auction while leaving all of the consumer's surplus with the buyers (as opposed to allocating some to the seller as would be the case with an ordinary auction). A new behavioral hypothesis is introduced to account for limited rationality of individuals and unusual behaviors of the process. The axiom, called theunbiased expectations hypothesis, does a good job of modeling individual behavior in the context of a game model.We acknowledge the financial support of the National Science Foundation and the Caltech Laboratory for Experimental Economics and Political Science. Comments by David Grether, John Ledyard, Michael Levine, Jennifer Reinganum, and Richard Sutch have been very helpful.