Deriving utilities using the analytic hierarchy process

The analytic hierarchy process is used to derive the utilities of outcomes in a decision problem. Such utilities may be verifiable or adjusted by the familiar standard gamble procedure. For multiattribute outcomes, the methodology may be easier to employ than scoring rule procedures.     

Futures trading and hedging

In this article, Warren Lebeck, a leading advocate for the use and value of the futures markets, outlines the scope of the futures trading industry and explains some of the reasons for its rapid growth. He discusses hedging and its benefits, speculation, and their relation to international commodity agreements.     

Labor market differentials and the expected gain from search

Several recent empirical studies have used the residuals from estimated earnings equations as explanatory variables in models of on-the-job search and quit behavior. It has often been argued that the coefficients on these “market differential” variables are biased downward because estimated residuals overstate the “true” quasi-rent or disincentive to search for alternative employment. This argument—that observed wages include implicit payments for workplace and person-specific characteristics not fully specified in earnings models— ignores an opposing bias associated with the value of being able to reject unattractive wage offers. As a consequence, there is no unambiguous a priori relationship between estimated wage residuals and the theoretical expected gain from search. Some evidence bearing on the relative magnitudes of the two biases is discussed.     

An analysis of congruous relationships between self-images and product images

This study examined the congruous relationship between self-image and the image of a preferred brand. The empirical data supported past findings when similar analytical techniques were applied to the data. However, an alternative conceptualization of congruency as absolute rather than a relative phenomenon resulted in different findings. Subsequently, these results provide additional directions for theory building. The findings suggest that congruency often occurs at some distance from self-image (in the tails of the distributions) and that for many dimensions of image, other variables besides congruency may be more important in the purchase process. UAB The Authors wish to thank Wendy Martin, Ira Dolich and an unknown reviewer for their helpful comments.     

Effects of air quality regulation on the destination choice of relocating plants

Whether lax environmental regulations are an important attractionfor mobile capital remains one of the most controversial issuesin the area of regulatory federalism. While the extant literaturedoes a nice job of estimating the effects of environmental regulationon the spatial allocation of new plant births, one neglectedarea of research is the effect that environmental regulationhas on plant relocation decisions. This paper uses an annual(1980–90) county level panel data set to examine the relationshipbetween air quality regulatory stringency and the destinationchoice of relocating plants. We estimate empirical models usingboth parametric and semi-nonparametric specifications. Empiricalresults from both models suggest that air quality regulationsalter significantly the destination choices of relocating plants.     

Income Uncertainty and IRAs

In a precautionary savings setting, since Individual Retirement Accounts (IRAs) are poor substitutes for precautionary savings due to early withdrawal penalties, those facing more income uncertainty are expected to prefer more liquid assets. This paper investigates the role of income uncertainty in IRA participation. Confidential tax panel data is used to construct a measure of income uncertainty. Greater income uncertainty is found to have a negative influence on IRA participation for those in the immediate pre-retirement stage of the life-cycle. The results appear to be consistent with buffer-stock models of savings where income uncertainty is predicted to have a large effect on wealth accumulation beginning around age 50.     

Taxation and international banking

The purpose of this paper is an examination of the relationship between taxation and the working of international banking arrangements. The main task is directed to the ways taxation determinations by national authorities affect the ways international banks go about their business. International coordination through the Organisation for Economic Co-operation and Development (OECD) is a major focus of the analysis. There is no general exposition of principles bearing upon international taxation. Rather, attention is directed to the determination of tax obligations in any one jurisdiction. Thus, there is a close scrutiny of the mechanics of taxation in the international setting bringing out the uncertainties and the imponderables in any application. Much attention is given to structural arrangement in international banking as well as capital arrangements in any one jurisdiction and how this applies to and affects the banking group as a whole. The result is to bring out the complexity of the agenda for tax applications on a common basis across internationally operating groups. Most jurisdictions recognise that they cannot await common agreements because new instruments and arrangements emerge at very frequent intervals and their tax implications have to be addressed. There has to be relief from uncertainty if markets are to develop effectively. Thus, there is in an importance sense of partnership between tax authorities and market participants in many countries. International deliberations have taken too long.