Contractual preferences and moral biases: social identity and procedural fairness in the exclusion game experiment

Many people may suffer from moral biases when making allocation decisions having consequences to others. This means that some factors hinder people from finding, or constructing, their true social preferences in those situations. As a counterforce to this, numerous devices of moral priming have evolved—such as parenting, formal education as well as various formal and informal contracting procedures. This paper focuses on the influences of social identity and the perceived fairness of contracting procedures on subjects’ behaviour in situations of allocation decisions. The analysis of experimental data suggest, first, that males are less likely than females to engage in other-regarding behaviour in a pre-agreement situation where two active players divide an endowment among themselves and a third, passive, player. However, this difference disappeared after the joint contract of the rule of dividing the endowment was made. Second, it was found that students of economics are less likely than other students to behave in an other-regarding way before the contract; this difference remained also in decisions after the contract was made. Finally, both a random selection mechanism and a majority voting mechanism were rated fair by the majority of the subjects. However, the data suggests that fairness ratings are positively associated with compliant behavior only in the case of the majority voting mechanism.     

Modelling volatility by variance decomposition

In this paper, we propose two parametric alternatives to the standard GJR-GARCH model of Glosten et al. (1993), based on additive and multiplicative decompositions of the variance. They allow the variance of the model to have a smooth time-varying structure. The suggested parameterizations describe structural change in the conditional and unconditional variances where the transition between regimes over time is smooth. The main focus is on the multiplicative decomposition of the variance into an unconditional and conditional components. Estimation of the multiplicative model is discussed in detail. An empirical application to daily stock returns illustrates the functioning of the model. The results show that the ‘long memory type behaviour’ of the sample autocorrelation functions of the absolute returns can also be explained by deterministic changes in the unconditional variance.     

Intertemporal efficiency analysis of sales teams of a bank: Stochastic semi-nonparametric approach

The primary role of a bank branch is evolving from a service provider towards a sales channel. Previous branch-level studies of sales efficiency consider a static setting of a single time period, ignoring the stochastic nature of sales outcomes. In this paper, we examine efficiency and performance of sales teams in a bank branch network over time, taking into account the changing demand and operational conditions, as well as random disturbances. The intertemporal sales frontier is estimated from the panel of monthly data over the years 2007–2010 using the stochastic semi-nonparametric envelopment of data (StoNED) method. The efficiency scores of sales teams and the trajectories of performance over time allow managers and the sales force to learn from past events and to develop the managerial and work practices across the network. While this study focuses on the case of a specific bank, some of the innovative features of our approach are applicable to sales efficiency assessment in other banks and financial institutions, as well as other network-based sales organizations.     

Is corruption grease,grit or a gamble? Corruption increases variance of productivity across countries

The effect of corruption on economic growth has attracted interest in empirical development economics. The conventional view of corruption as impediment for growth has been challenged by the ‘grease-on-the-wheels’ hypothesis. We take a new perspective on the issue and suggest corruption as macro risk, referred to as a ‘gamble’ hypothesis. Using cross-country data and two alternative indicators of corruption, we find corruption to be a significant driver of heteroscedasticity in total productivity. This supports the new gamble hypothesis. We also note some misleading interpretations in the previously published frontier applications. To avoid these shortcomings, we apply a flexible semi-nonparametric estimator.     

Testing parameter constancy in linear models against stochastic stationary parameters

This paper considers testing parameter constancy in a linear model when the alternative is that a subset of the parameters follows a stationary vector autoregressive process of known finite order. This kind of a linear model is only identified under the alternative, which usually precludes finding a test statistic with an analytic null distribution. In the present situation, however, it is still possible to derive a test statistic with an asymptotic chi-squared distribution under the null hypothesis and this is done in the paper. The small-sample properties of the test statistic are investigated by simulation and found statisfactory. The test retains its power when the alternative to parameter constancy is a random walk parameter process.     

The Political Economy of Occupational Family Policies: Comparing Workplaces in Britain and Germany

With a shift in the political debate to more market‐driven social policy approaches during the past decade, politicians in a number of European countries have argued that employers should take on greater responsibilities in the provision of social policy. But why should employers get involved? After reviewing the relevant literature on firm‐level social policy, we analyse the conditions and causal pathways that lead to their provision. Our findings show that (i) the skill structure and level of the workforce are important conditions for firm‐level engagement; (ii) employers have usually been the ‘protagonists’; (iii) the role of unions has been more limited — in Germany they can largely be characterized as ‘consenters’, whereas in Britain, their impact is negligible; (iv) in accordance with the specific systems of industrial relations, the design in Germany very much follows the concept of social partnership; in Britain the design is usually based on unilateral management decisions; and (v) based on these conditions and causal pathways, ‘enclave social policy’ is the likely result of the expansionary policy development, although in Germany, these policies have the potential of becoming an element of ‘industrial citizenship’.     

Specification and Estimation of Production Functions Involving Damage Control Inputs: A Two-Stage, Semiparametric Approach

Productivity assessment of damage control inputs (such as pesticides) is complicated because their effect depends on the exposure to damage agents (such as pests). We discuss some open specification and estimation issues. The contribution is threefold. First, we elaborate the separability conditions for the damage control function and production function. Second, we employ a two-stage semiparametric technique to combine attractive features of both nonparametric and parametric approaches. Third, we model the interaction between pest exposure and damage control inputs by using slope dummies. An application to productivity analysis of small scale Bt cotton production in China illustrates the approach.     

Public Investment in Europe: Evolution and Determinants in perspective*

We describe the evolution of public investment and public capital stocks in Europe over the past three decades. Against this background, we analyse the macroeconomic determinants of public investment, with a special focus on its long‐term trend. We find that public investment has been determined by national income, the stance of budgetary policies and fiscal sustainability considerations. Neither the cost of financing nor the fiscal rules embodied in EMU have had a systemic impact on public investment. The significant downtrend that characterises the evolution of public investment in non‐cohesion countries is chiefly determined by drawn‐out episodes of fiscal consolidation, unrelated to EMU.     

Where Are They Now? An Analysis of the Life Cycle of Convertible Bonds

We study the determinants of the life convertible bonds' life span issued between 1980 and 1998. About 60% of the bonds survive either to a call or to their maturity. The issuers of the remaining bonds are delisted during the life of their bonds. Calls and delistings shorten the average life span of convertibles from the original 17 years to an effective life span of only seven years. Issuer's post‐issuance performance and investment behavior affect the effective life of convertibles. Our results support the sequential financing hypothesis, as bonds issued by firms with speedier investment schedules have shorter life spans.