To Spend the U.S. Government Surplus or to Increase the Deficit? A Numerical Analysis of the Policy Options

This paper provides a numerical analysis of the likely benefits from adopting alternative ways of reducing the projected fiscal surplus (as of the summer 2001) in the United States economy. Calibrating a small growth model, our results suggest that investing the surplus in public capital is likely to yield the greatest long-run welfare gains, although decreasing the capital income tax is only marginally inferior. Both these options dominate increasing government consumption expenditure or decreasing the tax on labor income. By shifting resources from consumption toward capital the two superior policies involve sharp intertemporal tradeoffs in welfare; significant short-run welfare losses are more than compensated by large long-run welfare gains. By contrast, the two inferior options are gradually welfare-improving through time. A crucial factor in determining the benefits of reducing the government surplus through spending is the size of the government sector relative to the social optimum. We find that the second-best optimum is to increase both forms of government expenditure to their respective social optima, while at the same time restructuring taxes by reducing the tax on capital and raising the tax on wage income to achieve the targeted reduction in the surplus. J. Japan. Int. Econ., December 2002, 16(4), pp. 405–435. Department of Economics, University of Washington, Seattle, Washington; and Department of Economics, Terry College of Business, University of Georgia, Atlanta, Georgia. © 2002 Elsevier Science (USA).Journal of Economic Literature Classification Numbers: E62, O41.     

An alternative approach to discriminating multivariate populations and its applications to marketing research

A new method for discriminating among multivariate populations, called the Hausdorff procedure, is introduced to the marketing literature. Rules for classification are defined and a limited simulation study is conducted. For the simulation, both the level of collinearity among the discriminating variables and the level of overlap among the populations are varied. The results indicate that this new procedure is particularly suitable when there is either a high degree of collinearity among the predictor variables or considerable overlap of the populations being investigated. The Hausdorff procedure is also applied to two sets of consumer data. In each instance, it is found to be superior to linear discriminant analysis with respect to the percentage of correct classifications.     

Financial literacy: A comparative study across four countries

This study analysed differences in financial literacy across four countries: Canada, Italy, the UK and the US. The purpose was to understand whether factors associated with financial literacy in one country can be generalized to other countries as well or whether unique national characteristics make it necessary to examine financial literacy in each country individually. A financial literacy index, based on the number of correct answers to four multiple‐choice questions, was used to test the relevance of country of origin to financial literacy. Results suggest significant differences among countries indicating that there are national and cultural differences in what households know and need to know about their personal finances. Policy makers should consider these differences when developing financial literacy assessment tools for their respective countries.     

Paying the expected externality for a price quote achieves bargaining efficiency

A seller and buyer have reservation prices x and y. Each has a subjective distribution on the other's reservation price. Paying an offer or the expected benefit the other participant receives from his offer induces honest price quotations, hence efficiency: sale iff y> x.     

Capital Income Taxes and Growth in a Stochastic Economy: A Numerical Analysis of the Role of Risk Aversion and Intertemporal Substitution

This paper undertakes a numerical analysis of the effects of changes in the tax rates on domestic and foreign capital income in a stochastically growing open economy under recursive preferences, in which the rate of time preference, ?, and the coefficient of risk aversion, R, can be set independently. The responses of the equilibrium growth rate, its volatility, and welfare to changes in the tax changes considered are highly sensitive to the independent variations in both ? and R. Consequently, the errors committed by using the conventional constant elasticity utility function, even for small violations of the compatibility condition (R= 1/?) can be significant, suggesting that this functional form should be employed with caution.     

Strategy,human capital investments,business‐domain capabilities,and performance: a study in the global software services industry

Research summary : In knowledge‐based industries, continuous human capital investments are essential for firms to enhance capabilities and sustain competitive advantage. However, such investments present a dilemma for firms, because human resources are mobile. Using detailed project‐level operational, financial, and human capital data from a leading multinational firm in the global IT services industry, this study finds that deliberate investments in improving general human capital can help firms develop superior capabilities and maintain high profits. This paper identifies two types of capabilities essential for success in this industry—technological and business‐domain capabilities—and provides empirical evidence justifying such investments. Theoretical and practical implications of capability‐seeking general human capital investments are discussed. Managerial summary : The primary managerial implication of this research is that capability‐seeking investments in developing general human capital through strategic learning (training and internal certifications) can enhance firm performance. Although investing in general human capital is risky, the firm considered this a strategic necessity in order to thrive in the fast paced IT services industry. By leveraging general technological skills in combination with business‐domain knowledge to address customer's business problems firms can earn and sustain higher profits. Our study also demonstrates how a developing‐country firm responded to strong competitive challenge from global rivals possessing superior capabilities by upgrading the capabilities of its employees through internal development. In doing so the firm was able to narrow the capability gap vis‐à‐vis its foreign peers and expand its business globally. Copyright © 2016 John Wiley & Sons, Ltd.     

Corporate social responsibility performance,financial distress and firm life cycle: evidence from Australia

This study examines the association between corporate social responsibility (CSR) performance and financial distress and additionally the moderating impact of firm life cycle stages on that association. Based on a sample of 651 publicly listed Australian firm‐years’ data covering the 2007–2013 period, our regression results show that positive CSR activity significantly reduces financial distress of the firm. In addition, the negative association between positive CSR performance and financial distress is more pronounced for firms in mature life cycle stages. Our results are robust to alternative proxy measures of financial distress, CSR performance and life cycle stages.     

Cultural differences and shareholder value in related mergers: Linking equity and human capital

Merger literature suggests that the relationship between shareholder gains and the relatedness of merging firms is contingent upon the compatibility of the two firms' top management cultures. This hypothesis is tested by surveying the perceptions of cultural differences of top management teams of recently acquired firms, and then relating these perceptions to related stock market gains to the buying firms. The findings suggest a strong inverse relationship between perceptions of cultural differences and shareholder gains, after controlling for perceptions of the buying firm's tolerance for multiculturalism and the relative size of the merging firms.     

Impact of actual service provider failure on the satisfaction with aggregator

The purpose of the paper is to investigate the impact of the failure caused by the actual service provider on consumer satisfaction with the aggregator firm, where the aggregator firm works as a bridge between the consumers and the actual service providers using technology, resources, information etc., thus reducing the information search cost, process-related costs, and quality risks for the consumers. We have applied retrospective experience sampling to collect data and used structural equation modeling to validate the conceptual model of the study. We found that people consider the actual service provider’s failure as the aggregator firm’s responsibility when the attributional factors (control and stability) are strong. Moreover, when consumers perceive that the aggregator firm is responsible, they will ask for less punishment of the actual service provider and more monetary compensation. Additionally, severity of the failure increases the consumer’s recovery expectations. However, the sense of power of the consumers leads to increasing expectations of punishment of actual service provider and decreasing expectations of monetary compensation. Lastly, the actual monetary compensation or actual punishment of the service provider leads to higher level of satisfaction for the consumers. We discussed the implications of the results in the light of relationship management and service recovery design of aggregator firms.