Semi-parametric models for satisfaction with income

An overview is presented of some parametric and semi-parametric models, estimators, and specification tests that can be used to analyze ordered response variables. In particular, limited dependent variable models that generalize ordered probit are compared to regression models that generalize the linear model. These techniques are then applied to analyze how self-reported satisfaction with household income relates to household income, family composition, and other background variables. Data are drawn from the 1998 wave of the German Socio-Economic Panel. The results are used to estimate equivalence scales and the cost of children. We find that the standard ordered probit model is rejected, while some semi-parametric specifications survive specification tests against nonparametric alternatives. The estimated equivalence scales, however, are often similar for the parametric and semi-parametric specifications.JEL Classification: C14, C35, D12Correspondence to: Charles BellemareWe are grateful to an anonymous referee and to participants of a CeMMAP/ESG workshop at University College London and seminars at CentER (Tilburg University) and Humboldt University Berlin for useful comments.     

Dynamics of rural-urban migration in India: 1960-1981

"This paper analyzes a multi-sectoral simulation model of the Indian economy designed to isolate the sources of Indian economic growth and urbanization since 1960. The model shares many common traits with other computable general equilibrium (CGE) simulation models, and its underlying framework is neoclassical. The model stresses spatial issues so that it can provide predictions on rural/urban labor demands, and hence on migration flows. The central issue we seek to evaluate is whether a neoclassical development paradigm can explain adequately the somewhat paradoxical patterns of urbanization and economic growth observed in India since 1960. Our conclusion is a qualified, affirmative response, based on the model's ability to replicate key macroeconomic variables."     

CEO compensation and performance in US private foundations

In a large sample of US private foundations, we examine the association between CEO compensation and an accounting‐based measure of performance, administrative efficiency. We document a positive pay–performance association across time within foundations, but a negative association across foundations. We interpret our evidence as follows: some foundation boards reward CEOs for high administrative efficiency, which results in a positive pay–performance association. However, some foundations are poorly monitored relative than others, resulting in higher CEO compensation and lower efficiency.     

Endogenous selection or treatment model estimation

In a sample selection or treatment effects model, common unobservables may affect both the outcome and the probability of selection in unknown ways. This paper shows that the distribution function of potential outcomes, conditional on covariates, can be identified given an observed variable V$V$ that affects the treatment or selection probability in certain ways and is conditionally independent of the error terms in a model of potential outcomes. Selection model estimators based on this identification are provided, which take the form of simple weighted averages, GMM, or two stage least squares. These estimators permit endogenous and mismeasured regressors. Empirical applications are provided to estimation of a firm investment model and a schooling effects on wages model.     

Recent SEC prosecution and insider trading on forthcoming merger announcements

While trading on nonpublic information is illegal, the enforcement of this law has been elusive, particularly in the area of trading in advance of merger announcements. We examine the impact of insider trading on daily stock price changes for firms identified by the SEC in the Antoniu-Newman insider trading case. Using residual analysis, the abnormal returns occuring prior to the announcement are calculated and compared with a sample of 188 typical merger candidates not identified in the Antoniu-Newman case to determine whether or not there was an unusually large market reaction prior to the forthcoming merger announcement on the subset of merger candidates involved in the court procedure.     

Beyond the Opposition Between Altruism and Self-interest: Reciprocal Giving in Reward-Based Crowdfunding

The present article is a continuation of the debate two sets of authors (Bagus and Howden vs. Barnett and Block) have been engaging in regarding one type of maturity mismatching: borrowing short and lending long (BSLL). All four authors had agreed that this practice can set up the Austrian Business Cycle; the present author denies that BSLL would be a legitimate commercial interaction in the free society; Bagus and Howden continue to maintain that it would be licit. Our main criticism of Bagus and Howden is a reductio ad absurdum: that this opens them up to the charge of embracing the doctrine of market failure; this is something highly problematic for the two of them, since all four contributors to this debate are well-known supporters of laissez faire capitalism.     

Standardize or Customize: The Interactive Effects of HRM and Environment Uncertainty on MNC Subsidiary Performance

This study examines the impact of customizing (as opposed to standardizing) human resource management (HRM) practices on subsidiary performance in multinational corporations (MNCs). We examine how this relationship is influenced by environmental uncertainty. Hypotheses were tested using data from 92 subsidiaries of a large MNC operating in 27 countries. The results showed an interactive relationship between the customization of HRM practices and subsidiary environmental uncertainty on both financial (net profit) and nonfinancial (customer satisfaction) objective measures of subsidiary performance. The results of this study provide important empirical insights for researchers and practitioners into how HRM can be best configured to drive multiple performance outcomes for MNC subsidiaries. © 2014 Wiley Periodicals, Inc.     

Did state antiquity matter for the size of the informal economy?

Economics of Governance - This study investigates how state history influences the size of the informal sector. The study employs a two-stage least squares estimation technique with data from 91...     

Orderbook demand for corporate bonds

We examine the determinants of investor demand for corporate bond offerings using novel data on the primary market orderbook size. We find that credit risk and bond market presence are significant in explaining investor demand. These effects are more pronounced during the crisis periods including the global financial crisis and eurozone crisis as well as during the postcrisis periods. Our results also highlight the size of the bond investor order depends on information asymmetry costs and the benefit of diversifications, as investor demand is lower for new issuers as well as very frequent issuers. The levels of investor demand have important economic consequences for bond issuers as high investor demand shortens the time to subsequent bond issues and potentially reduces the firm's cost of capital at issuance.     

Reversibly greater downside risk aversion

The Geneva Risk and Insurance Review - It is shown that, for the Arrow–Pratt measure $$r_u=-u''/u'$$ and the third-order measure $$D_u=u'''/u'-3r_u^2,$$ an...