Manufacturing outsourcing,onshoring, and global equilibrium

Manufacturing is now a national strategy for many countries to combat slow economic growth, and positively viewed with the current trend of onshoring foreign manufacturing operations. We develop a cross-country regression model that predicts manufacturing employment as a function of population growth, foreign direct investment, and purchasing power parity. Results through the year 2100 suggest that manufacturing is trending toward a global equilibrium with higher levels of manufacturing outputs but much lower levels of manufacturing employment. The reason is that countries tend to evolve from having little manufacturing to commodity manufacturing at large scale and low wages. As infrastructure and human capital develop, there is the tendency to pursue advanced manufacturing in support of higher valued goods. The manufacture of commodity products is then outsourced to those countries with lower costs justified by their less-developed infrastructure and human capital, and so the virtuous cycle continues. While this model suggests that current efforts in revitalization of domestic manufacturing would lead to an increase in wealth in the United States, the bad news is that these gains are unlikely to be sustainable in the long term. However, the good news is that manufacturing acts as a rising tide that raises all nations and our global quality of life.     

It's a secret: Marketing value and the denial of availability

Marketing thrives on secrets, yet surprisingly little formal attention has been paid to how the marketing of secrecy and the secrecy of marketing can play a significant role in contemporary organizations. We draw upon the fields of organizational studies, psychology, and marketing to develop a typology of secrets that reflects their marketing value and their knowledge value. Marketing secrets can have value to the firm (strategic value), to the customer (marketing value), or to both parties. Based on these two dimensions, we identify four different types of marketing secrets: (1) appealing secrets have high strategic value, as well as high marketing value; (2) mythical secrets mean little to the firm but a lot to the customer; (3) plain secrets are critical to the firm but are irrelevant to customers; and (4) weak secrets have neither strategic value nor marketing value. Our typology enables academics to formulate research questions regarding secrecy in marketing, and serves as a guide for practitioners in the construction of strategies that can exploit the strategic value of secrets by ‘romancing’ them, and increase their knowledge value by ‘educating’ the secrets.     

Relative price and inflation variability in a simple consumer search model

There is a large empirical literature on the effect of aggregate inflation on both price-level dispersion (relative price variability, RPV) and inflation rate dispersion (relative inflation variability, RIV) across goods or locations. Early empirical work of RIV has an explicit theoretical foundation in signal-extraction models. However, recent empirical work on RPV has produced results inconsistent with signal-extraction models. In particular, while RIV is increasing in the absolute value of inflation shocks, RPV is a negative monotonic function of inflation shocks. We show that consumer search theory offers a potential explanation for these apparently contradictory observations.     

Economic Analysis for the UK National Ecosystem Assessment: Synthesis and Scenario Valuation of Changes in Ecosystem Services

We combine natural science modelling and valuation techniques to present economic analyses of a variety of land use change scenarios generated for the UK National Ecosystem Assessment. Specifically, the agricultural, greenhouse gas, recreational and urban greenspace impacts of the envisioned land use changes are valued. Particular attention is given to the incorporation of spatial variation in the natural environment and to addressing issues such as biodiversity impacts where reliable values are not available. Results show that the incorporation of ecosystem services and their values within analyses can substantially change decisions.     

Increasing life expectancy and optimal retirement in general equilibrium

We analytically assess the effects of changes in longevity on the interest rate, the consumption-savings behavior, and the optimal retirement decision within a dynamic general equilibrium setting. We derive a simple sufficient condition for which the optimal retirement age always increases with life expectancy. Numerical assessment reveals that for realistic parameter values that reflect the situation in industrialized countries, the optimal retirement age indeed increases with life expectancy and the sufficient condition tends to be fulfilled. Together with the fact that the actual retirement age did not increase in industrialized countries over the last decades, while there have been large improvements in longevity, this leads us to conclude that strong monetary and institutional incentives for early retirement exist and these counteract the effects of increasing life expectancy. Our policy conclusion is that the retirement age should be partially linked to life expectancy and that incentives for early retirement should be removed.     

The best-shot all-pay (group) auction with complete information

We analyze an all-pay group contest in which individual members’ efforts are aggregated via the best-shot technology and the prize is a public good for the winning group. The interplay of within-group free-riding and across-group competition allows for a wide variety of equilibria, according to how well groups overcome internal free-riding. In contrast with the existing literature, we derive equilibria of a symmetric model in which multiple agents per group are active. Our findings differ qualitatively from those of the individualistic all-pay auction: rents are not necessarily dissipated in equilibrium, total expected efforts vary across equilibria, and participation is expected to be greater. Moreover, equilibria with greater symmetry of behavior within a group are shown to have more “wasted” effort but also greater payoffs as overall efforts are lower. In contrast to standard economic intuition, free-riding can be beneficial for players as it reduces competition among groups. Examples of asymmetric group contests are also studied.     

OPTIMISM AND PESSIMISM IN GAMES

This article considers the impact of ambiguity in strategic situations. It extends the existing literature on games with ambiguity‐averse players by allowing for optimistic responses to ambiguity. We use the CEU model of ambiguity with a class of capacities introduced by Jaffrray and Philippe (Mathematics of Operations Research 22 (1997), 165–85), which allows us to distinguish ambiguity from ambiguity‐attitude, and propose a new solution concept, equilibrium under ambiguity (EUA), for players who may be characterized by ambiguity‐preference. Applying EUA, we study comparative statics of changes in ambiguity‐attitude in games with strategic complements. This extends work in Eichberger and Kelsey (Journal of Economic Theory 106 (2002), 436–66) on the effects of increasing ambiguity if players are ambiguity averse.     

Feel Good,Do-Good!? On Consistency and Compensation in Moral Self-Regulation

Studies in the behavioral ethics and moral psychology traditions have begun to reveal the important roles of self-related processes that underlie moral behavior. Unfortunately, this research has resulted in two distinct and opposing streams of findings that are usually referred to as moral consistency and moral compensation. Moral consistency research shows that a salient self-concept as a moral person promotes moral behavior. Conversely, moral compensation research reveals that a salient self-concept as an immoral person promotes moral behavior. This study’s aim was to integrate these two literatures. We argued that compensation forms a reactive, “damage control” response in social situations, whereas consistency derives from a more proactive approach to reputation building and maintenance. Two experiments supported this prediction in showing that cognitive depletion (i.e., resulting in a reactive approach) results in moral compensation whereas consistency results when cognitive resources are available (i.e., resulting in a proactive approach). Experiment 2 revealed that these processes originate from reputational (rather than moral) considerations by showing that they emerge only under conditions of accountability. It can thus be concluded that reputational concerns are important for both moral compensation and moral consistency processes, and that which of these two prevails depends on the perspective that people take: a reactive or a proactive approach.     

Leaders’ Personal Wisdom and Leader–Member Exchange Quality: The Role of Individualized Consideration

Business scholars have recently proposed that the virtue of personal wisdom may predict leadership behaviors and the quality of leader–follower relationships. This study investigated relationships among leaders’ personal wisdom—defined as the integration of advanced cognitive, reflective, and affective personality characteristics (Ardelt, Hum Dev 47:257–285, 2004)—transformational leadership behaviors, and leader–member exchange (LMX) quality. It was hypothesized that leaders’ personal wisdom positively predicts LMX quality and that intellectual stimulation and individualized consideration, two dimensions of transformational leadership, mediate this relationship. Data came from 75 religious leaders and 1–3 employees of each leader (N = 158). Results showed that leaders’ personal wisdom had a positive indirect effect on follower ratings of LMX quality through individualized consideration, even after controlling for Big Five personality traits, emotional intelligence, and narcissism. In contrast, intellectual stimulation and the other two dimensions of transformational leadership (idealized influence and inspirational motivation) did not mediate the positive relationship between leaders’ personal wisdom and LMX quality. Implications for future research on personal wisdom and leadership are discussed, and some tentative suggestions for leadership development are outlined.     

Persistence of innovation and firm’s growth: evidence from a panel of SME and large Spanish manufacturing firms

This paper estimates the effect of persistence of innovation on employment in Spanish manufacturing firms during the period 1990–2008. Using GMM-system estimations, we study the importance of persistence of product and process innovation on employment growth according to the size of the firms. The results support that process innovation shows a positive effect on employment, especially for SMEs, while the effect of product innovation is not significant. The study also distinguishes that this effect appears in the contemporaneous year but it increases with the number of lags. This result confirms that compensation effects of process innovation may appear with a certain delay justifying the importance for SMEs of being persistent in innovation strategies to make them compatible with employment growth.