Consumer Behavior, Public Policy, and Country-of-Origin Labeling

Recent work by agricultural economists has failed to adequately identify why consumers desire country-of-origin labeling, a key piece of information needed to determine whether a market-failure exists. This paper brings to the attention of agricultural economists a sizable body of literature on country-of-origin effects from the marketing and business disciplines. Based on this literature, we draw a distinction between several consumer motivations for origin labels and we identify which of these is cause for public policy. We propose several research questions that require answers if the consequences of country-of-origin labeling policy are to be fully understood.     

On the Rate of Convergence of Discrete‐Time Contingent Claims

This paper characterizes the rate of convergence of discrete‐time multinomial option prices. We show that the rate of convergence depends on the smoothness of option payoff functions, and is much lower than commonly believed because option payoff functions are often of all‐or‐nothing type and are not continuously differentiable. To improve the accuracy, we propose two simple methods, an adjustment of the discrete‐time solution prior to maturity and smoothing of the payoff function, which yield solutions that converge to their continuous‐time limit at the maximum possible rate enjoyed by smooth payoff functions. We also propose an intuitive approach that systematically derives multinomial models by matching the moments of a normal distribution. A highly accurate trinomial model also is provided for interest rate derivatives. Numerical examples are carried out to show that the proposed methods yield fast and accurate results.     

DOLLARIZATION FOR ARGENTINA

In January 1999, President Carlos Menem suggested replacing the Argentine peso with the U.S. dollar. President Menem's announcement has sparked a debate throughout Latin America and Eastern Europe about what has been termed "dollarization." That debate prompted U.S. Treasury Secretary Robert Rubin to deliver a major policy speech on alternative exchange-rate regimes on April 21, 1999 and the U.S. Senate Banking Committee to hold dollarization hearings the following day featuring Fed Chairman Alan Greenspan and Deputy Secretary of the Treasury Lawrence Summers.
This article presents a case for officially dollarizing Argentina. Dollarization is not new. Unofficial dollarization is widespread in emerging market countries; in fact, as much as 70% of the stock of U.S. dollars now circulates abroad. Twenty-eight countries and dependent territories are officially dollarized. Although official dollarization would result in Argentina losing seigniorage of about 0.22 percent of GDP, the author estimates that this cost would be more than offset by a reduction in interest rates that would increase Argentina's trend rate of GDP growth by about two percent.
After debunking the most common criticisms of dollarization, the article closes by offering recommendations about the specific form of dollarization and presenting a detailed dollarization statute for Argentina. The author proposes a competitive currency regime for Argentina, one in which all foreign money would be legal tender.     

How do institutions affect corruption and the shadow economy?

This paper analyzes a simple model that captures the relationship between institutional quality, the shadow economy, and corruption. It shows that an improvement in institutional quality reduces the shadow economy and affects the corruption market. The exact relationship between corruption and institutional quality is, however, ambiguous and depends on the relative effectiveness of institutional quality in the shadow and corruption markets. The analytics also show that the shadow economy and corruption are substitutes. The predictions of the model are empirically tested and confirmed.     

Business Ethics on the Internet: 2

In a previous article the authors provided an introduction to using the internet as a resource for business ethics. In this sequel they look at newsgroups and chatrooms, and conclude by looking at the websites of Shell and a Shell critic on the controversial ethical aspects of its corporate policy and behaviour. Ben Fairweather is a Research Fellow, and Steve Dixon is Webmaster, at the Centre for Computing and Social Responsibility, De Montfort University, The Gateway, Leicester LEl 9BH, England (email: ccsr@dmu.ac.uk) (website http://www.ccsr.cms.dmu.ac.uk/).     

Analyst following and count-data econometrics

This paper reexamines the determinants of the number of analysts following a firm using econometric models based on count distributions. We replicate Bhushan's (1989) analyst-following study to demonstrate the effects of using count-data econometrics, in lieu of OLS, in studying phenomena where the dependent variable ranges among nonnegative integers. In contrast with the original paper, our findings indicate the number of institutional investors is inversely related with analyst following. We also provide econometric evidence to support the preferred use of the negative binomial model in estimating cross-sectional, analyst-following regressions.