Why the structure of capital and the useful lives of its components matter: A test based on a model of Austrian descent

This paper centers on the structure of capital and the useful lives of its components by considering an economy with two representative firms, one producing a necessity and another producing a luxury. This difference determines their reinvestment opportunities. Therefore, while the one applies replacement, the other adopts scrapping. However, as these capital policies lead to different service lives, the analysis confronts the issues raised by Miller (Review of Income and Wealth 29:284–296, 1982, Review of Income and Wealth 36:67–82, 1990) and deals with them by drawing on Haavelmo’s (A study in the theory of investment, Chicago: The University of Chicago Press, 1960) suggestions regarding the aggregation of capital. Among other findings, it turns out that the simulation results are highly robust, thus demonstrating that real-world implications may be even stronger than strictly suggested by the model.

Sequential decisions with tests

We consider a principal-agent problem where the principal wishes to be endorsed by a sequence of agents, but cannot truthfully reveal type. In the standard “herding” model, the agents learn from each other's decisions, which can lead to cascades on a given decision when later agents' private information is swamped. We augment the standard model to allow the principal to subject herself to a test designed to provide public information about her type. She must decide how tough a test to attempt from a continuum of test types, which involves trading off the higher probability of passing an easier test against the greater impact from passing a tougher test. We find that the principal will always choose to be tested, and will prefer a tough test to a neutral or easy one.     

Does monitoring decrease work effort?: The complementarity between agency and crowding-out theories

Agency theory assumes that tighter monitoring by the principal should motivate agents to increase their effort, whereas the “crowding-out” literature suggests that the opposite may occur. These two assertions are not necessarily contradictory provided that the nature of the employment relationship is taken into account [Frey, B., 1993. Does monitoring increase work effort? The rivalry between trust and loyalty. Econ. Inquiry 31, 663–670]. Results from controlled laboratory experiments show that many principals engage in costly monitoring, and most agents react to the disciplining effect of monitoring by increasing effort. However, we also find some evidence that effort is crowded out when monitoring is above a certain threshold. We identify that both interpersonal principal–agent links and concerns for the distribution of output payoff are important for the emergence of this crowding-out effect.     

Rural-to-urban migration, human capital, and agglomeration

A new general-equilibrium model that links together rural-to-urban migration, the externality effect of the average level of human capital, and agglomeration economies shows that in developing countries, unrestricted rural-to-urban migration reduces the average income of both rural and urban dwellers in equilibrium. Various measures aimed at curtailing rural-to-urban migration by unskilled workers can lead to a Pareto improvement for both the urban and rural dwellers. In addition, the government can raise social welfare by reducing the migration of skilled workers to the city. Moreover, without a restriction on rural-to-urban migration, a government's efforts to increase educational expenditure and thereby the number of skilled workers may not increase wage rates in the rural or urban areas.     

Compensation payments for habitat heterogeneity: Existence, efficiency, and fairness considerations

Compensation payments for voluntary conservation measures have become an important tool for biodiversity conservation worldwide. Each year substantial financial resources are spent on such measures, particularly in the context of agri-environmental schemes. In Europe, a debate has started on whether this money is spent effectively. In response to this debate it has been suggested that a portfolio of measures leading to habitat heterogeneity be implemented. Although payments for heterogeneous conservation measures have been analysed in the literature, it has never been questioned that payments can be designed in a way that encourages enough land users to carry out each conservation measure within a portfolio of measures. The purpose of this paper is to demonstrate that such payments do not always exist. Moreover, in cases where payments for habitat heterogeneity exist the payment scheme may require overcompensation of the land users, posing a limit to both efficiency and fairness considerations.     

Public perceptions of nursing careers: the influence of the media and nursing shortages

The high public regard for nurses has not necessarily translated into an adequate supply of individuals who are willing to be nurses. The expected future demand for nurse labor challenges us to look more closely at the public's perceptions of nursing and nursing careers, and consider how they are shaped by personal experience, media messages, and socio-demographic factors. As part of ongoing efforts to examine factors shaping the future of the nursing workforce, a national survey of Americans was conducted to probe attitudes toward the nursing profession and their experiences with nurses. The data in this national survey of the public about nursing demonstrate that the nursing profession is highly respected and that the vast majority of the general public would recommend nursing careers to qualified students. If the profession is so well thought of and so highly recommended, why are there persistent concerns that not enough people are becoming RNs to avoid or at least slow down the development of future shortages? A prolonged and persistent effort is needed to educate people about nursing careers, to stimulate the expanded production of nursing faculty, and to bring creative approaches to financing nursing education and workforce improvements to convert the large number of seriously interested candidates into the nursing profession.     

Bank incentives, contract design and bank runs

We study the Diamond-Dybvig [Bank runs, deposit insurance, and liquidity, J. Polit. Econ. 91 (1983) 401-419] model as developed in Green and Lin [Implementing efficient allocations in a model of financial intermediation, J. Econ. Theory 109 (2003) 1-23] and Peck and Shell [Equilibrium bank runs, J. Polit. Econ. 111 (2003) 103-123]. We dispense with the notion of a bank as a coalition of depositors. Instead, our bank is a self-interested agent with a technological advantage in record-keeping. We examine the implications of the resulting agency problem for the design of bank contracts and the possibility of bank-run equilibria. For a special case, we discover that the agency problem may or may not simplify the qualitative structure of bank liabilities. We also find that the uniqueness result in Green and Lin [Implementing efficient allocations in a model of financial intermediation, J. Econ. Theory 109 (2003) 1-23] is robust to our form of agency, but that the non-uniqueness result in Peck and Shell [Equilibrium bank runs, J. Polit. Econ. 111 (2003) 103-123] is not.     

Infrastructural change and secular economic development

Long-term economic development is determined by changes to the infrastructure, especially material and non-material infrastructural networks that link agents in different locations. The infrastructure consists of the slowly changing, collective arena that supports production, exchange, and consumption, such as the built environment, transport networks, and institutions. In the short run the infrastructure can be regarded as fixed. Changes to the infrastructure are under normal conditions small enough to be disregarded by producers and consumers. With the creation of a critical link of a network, there will however be a revolutionary restructuring of the arena. Critical links are here defined as additions to infrastructural networks that create opportunities for new information and transport flows between previously unconnected regions. Such a revolutionary restructuring of infrastructural networks has been called a logistical revolution. Certain institutional pre-conditions are necessary for a logistical revolution, while the creation of a critical link is both a necessary and a sufficient condition. This paper discusses the three logistical revolutions that occurred in the 13th century, around 1600, and in the 19th century, which each had crucial similarities with the current “information revolution.”     

Local environmental quality and life-satisfaction in Germany

Hitherto the task of valuing differences in environmental quality arising from air pollution and noise nuisance has been carried out mainly by using the hedonic price technique. This paper proposes a different approach to derive information on individual preferences for local environmental quality. It analyses data drawn from the German socio-economic panel in an attempt to explain differences in self-reported levels of well-being in terms of environmental quality. Mindful of existing research a large number of other explanatory variables are included to control for socio-demographic differences, economic circumstances as well as neighbourhood characteristics. Differences in local air quality and noise levels are measured by how much an individual feels affected by air pollution or noise exposure in their residential area. The evidence suggests that even when controlling for a range of other factors higher local air pollution and noise levels significantly diminish subjective well-being. But interestingly differences in perceived air and noise pollution are not capitalised into differences in house prices.     

Assessing information provision and respondent involvement effects on preferences

We develop a test of the effect of information and respondent involvement on preferences for passive-use values using three treatments. Individuals from a rural community participated in one of three groups, each with a different level of involvement in the valuation assessment. The first group was highly involved, attending three meetings which allowed for information acquisition and preference construction. The second group was involved in a single meeting, and the third group was minimally involved through telephone contact and the completion of a mail administered survey. The hypothesis examined was that the degree of involvement in the exercise would affect the magnitude and consistency of preferences across the groups. The hypothesis that the preferences differ was not accepted. Furthermore, the hypothesis that variances in preferences would be higher in less involved groups was also rejected. While the analysis is based on relatively small samples the findings suggest caution in claiming that increasing degrees of respondent involvement improve economic measures of trade-offs.