Taxes on labour and unemployment in a shirking model with union bargaining

This paper studies the impact of a cut in labour taxes in a model that combines two explanations for equilibrium unemployment: employee shirking and union bargaining. It is shown that if the ratio of unemployment compensation to the net-of-tax wages is kept fixed, a tax cut leads to higher unemployment. When the unemployment benefits are fixed in real terms, the effect of a tax cut on unemployment is ambiguous. Adverse employment effects are ruled out if unions are powerless or the labour share is constant.     

Return decomposition of absolute-performance multi-asset class portfolios

The asset management industry is increasingly confronted with the investor’s demand for absolute-performance portfolios. Beside the challenge to come up with appropriate investment strategies, asset managers also face the problem of explaining the achieved results, especially whether these results were due to luck or skill. This last problem is even more complex because the methods currently available for evaluating the performance of an asset manager are not appropriate for absolute-performance portfolios. This article addresses this problem and presents a practical solution, especially for absolute-performance multi-asset class portfolios.      

What’s in the news? The ambiguity of the information content of index reconstitutions in Germany

We analyze stock price behavior around reconstitutions of the German DAX index family from 1990 to 2013. The strong price run-up of added stocks in the 2 months preceding the announcement date remains robust until 2 months after the effective date (ED), and is fully reversed 5 months later. Conversely, stock prices of deleted firms are under pressure until 10 months after the ED. Unlike most previous studies, we find that outright entries and exits have temporary price effects, as do additions to and deletions from better-known indices; however, promotions and demotions related to lesser-known indices command permanent stock price responses. Rather surprisingly, deleted stocks consistently earn higher abnormal returns than added stocks in the 5-year post-event period. Specifically, the return differential levels out at 77.3%. We establish that this differential in permanent stock prices is attributable to differences in operating performance and media coverage. In practice, index reconstitutions do not appear to give unambiguous signals about the long-run investment appeal of affected firms. However, index fund managers not constrained by tracking error minimization would be better off holding deleted stocks for 5 years after the ED.     

Nosy Preferences,Benevolence, and Efficiency

We explore the implications of “nosy” preferences—when individuals have rankings over the specific actions of others—using recent theoretical results in the behavioral economics literature. Our model jointly captures preference interdependence over utilities (benevolence) and actions (nosiness). We apply the model to two well‐known environments. The first is a classic social choice problem; the second is a model of relative consumption concerns. For the former we characterize the existence of the impossibility once the social choice problem has been modeled as a behavioral game. For the latter we characterize when the negative externality arising from relative consumption concerns can be overcome without a policy intervention.     

The impact of data revisions on the robustness of growth determinants—a note on ‘determinants of economic growth: Will data tell?’

Ciccone and Jarociński (American Economic Journal: Macroeconomics 2010; 2 : 222–246) show that inference in Bayesian model averaging (BMA) can be highly sensitive to small data perturbations. In particular, they demonstrate that the importance attributed to potential growth determinants varies tremendously over different revisions of international income data. They conclude that ‘agnostic’ priors appear too sensitive for this strand of growth empirics. In response, we show that the found instability owes much to a specific BMA set‐up: first, comparing the same countries over data revisions improves robustness; second, much of the remaining variation can be reduced by applying an evenly ‘agnostic’ but flexible prior. Copyright © 2012 John Wiley & Sons, Ltd.     

Implementation of Sustainability Management and Company Size: A Knowledge‐Based View

Implementing corporate sustainability strategies requires knowledge and application of sustainability management tools. While much progress has been made in developing such tools in both small and medium‐sized enterprises (SMEs) and large companies, the literature claims company size positively affects application. However, the role of knowledge as a mediating factor has not yet been investigated. Using the knowledge‐based view as a theoretical underpinning, this paper draws on empirical survey data from SMEs and large companies in Germany. It analyzes how company size affects the degree of knowledge and application of sustainability management tools. Even though the results reaffirm that SMEs know and apply significantly less tools, company size does not influence the share of tools applied once they are known. Thus, knowledge is identified as a key difference between SMEs and large companies as well as an important mediator to promote sustainability management. Copyright © 2014 John Wiley & Sons, Ltd and ERP Environment