Who bribes in public contracting and why: worldwide evidence from firms

We study procurement bribery utilizing survey data from 11,000 enterprises in 125 countries. About one-third of managers report that firms like theirs bribe to secure a public contract, paying about 8 % of the contract value. Econometric estimations suggest that national governance factors, such as democratic accountability, press freedom, and rule of law, are associated with lower bribery. Larger and foreign-owned firms are less likely to bribe than smaller domestic ones. But among bribers, foreign and domestic firms pay similar amounts. Multinational firms appear sensitive to reputational risks in their home countries, but partially adapt to their host country environments.     

INFINITE HORIZON INCOMPLETE MARKETS WITH A CONTINUUM OF STATES

In this paper we address existence of equilibria in an incomplete markets economy with countably many periods and a continuum of states at each node of the infinite tree. We consider two models: one where agents have to honor their commitments and another where default is allowed. In both models, marginal utility of income, at each node, is shown to be bounded, and we prove existence by taking finite-dimensional approximations and applying Fatou's lemma sequentially.     

The optimal disposition decision for product returns

We provide an analytic model for the optimal disposition decision for product returns. The manager decides which product returns to accept for processing at the remanufacturing facility, and which ones to sell immediately as-is at a salvage value. High congestion levels in the remanufacturing facility delay the sale of the remanufactured product at the secondary market, decreasing the value at which it can be sold; this may imply a more attractive salvaging option. This is particularly important for high-tech products with short life cycles, such as computers and printers. We propose a two-step policy. In the first step, the returned product’s random processing time is observed. In the second step, a disposition decision is made: if the processing time is larger than a threshold k* the product is salvaged; otherwise the product is remanufactured. We provide an approximate procedure to compute k* in industrial settings. Our numerical study demonstrates the superiority of our policy over the current industrial practice ignoring the time value of money.     

An evolutionary game theory approach to the dynamics of the labour market: A formal and informal perspective

A stylized fact of the labour market in developing countries is that it is highly segmented in informality. One of the main factors that induce workers and firms into informality is an excessive regulatory system that makes formal economy little attractive. This study aims to analyze the dynamics of workers and firms’ entrance and withdrawal of the formal and informal economy, assessing the impact of taxes by using an evolutionary game theory approach in which economic agents decide for one these markets according to the expected pay-off. Moreover, the optimal relation between regulatory and enforcement action by the government is evaluated.     

Working under pressure: Evidence from the impacts of soccer fans on players’ performance

In this paper we study how pressure affects individual’s behavior. For this purpose we use sports data, where the attendance is a proxy for pressure, to investigate if the number of fans in the stadium affects the performance of the players. We overcome the reverse causality problem by proposing an instrument variable: a promotion in Brazil during which low cost tickets were assigned to random soccer matches. In contrast to previous literature, our results suggest that pressure does not significantly affect players’ behavior.     

Is inflation targeting a good remedy to control inflation?

Since the 1990s inflation targeting (IT) has been adopted by several central banks as a strategy for monetary policy. It is expected that the adoption of this monetary regime can reduce inflation and inflation volatility. This article is concerned with these issues and makes use of the Propensity Score Matching methodology on a sample of 180 countries for the period from 1990 to 2007. For analysis, the sample is split into two sets of countries (advanced and developing). The findings suggest that the adoption of IT is an ideal monetary regime for developing economies and, in addition to reducing inflation volatility, can drive inflation down to internationally acceptable levels. Regarding advanced economies, the adoption of IT does not appear to represent an advantageous strategy. In brief, the empirical results indicate that the adoption of IT is useful for countries that must enhance their credibility for the management of monetary policy.     

Tax policies and agency costs

We show that when large corporations are subject to a different tax system than smaller firms, the agency cost of under- and overinvestment is significantly altered. In contrast to the findings in the literature, the gap between the first- and second-best investment trigger prices do not move in lockstep with variations in the corporate tax rate, as in the case of a linear tax system. We show that the gap can either widen or shrink, depending on the tax policy design and regime. In addition, we find that the agency cost under a progressive tax regime is considerably larger than the agency cost under a regressive tax regime when equityholders have to bear all the investment costs. These results are reversed when managers have the ability to issue additional debt to finance the firm's expansion and transfer part of the investment costs to bondholders.     

Conditional risk-neutral density from option prices by local polynomial kernel smoothing with no-arbitrage constraints

Review of Derivatives Research - A new approach is considered to estimate risk-neutral densities (RND) within a kernel regression framework, through local cubic polynomial estimation using intraday...