An Engel Curve Analysis of Household Expenditure in New Zealand*

In this paper we estimate systems of Engel curves for expenditure on eight commodity groups by New Zealand households. Six model specifications are considered, and the preferred results are based on the Almost Ideal Demand System. The estimated expenditure elasticities and marginal budget shares are quite insensitive, at the sample mean, to the choice of functional form. The results are compared with those from other Australasian, British and American studies.     

An Incentive Approach to Banking Regulation

We examine the optimal design of a risk-adjusted deposit insurance scheme when the regulator has less information than the bank about the inherent risk of the bank's assets (adverse selection), and when the regulator is unable to monitor the extent to which bank resources are being directed away from normal operations toward activities that lower asset quality (moral hazard). Under a socially optimal insurance scheme: (1) asset quality is below the first-best level, (2) higher-quality banks have larger asset bases and face lower capital adequacy requirements than lower-quality banks, and (3) the probability of failure is equated across banks.     

Remuneration, Retention, and Reputation Incentives for Outside Directors

I study incentives received by outside directors in Fortune 500 firms from compensation, replacement, and the opportunity to obtain other directorships. Previous research has only shown these relations to apply under limited circumstances such as financial distress. Together these incentive mechanisms provide directors with wealth increases of approximately 11 cents per $1,000 rise in firm value. Although smaller than the performance sensitivities of CEOs, outside directors' incentives imply a change in wealth of about $285,000 for a 1 standard deviation (SD) change in typical firm performance. Cross‐sectional patterns of director equity awards conform to agency and financial theories.