Controlling characteristics of group insureds: risk rating

Employers seek to manage risk in their group health and life insurance plans through wellness programs and certain hiring practices. In both cases, the Americans with Disabilities Act may ultimately affect the use of these forms of risk rating on the grounds that they are discriminatory.     

Loyalty-based management

Despite a flurry of activities aimed at serving customers better, few companies have systematically revamped their operations with customer loyalty in mind. Instead, most have adopted improvement programs ad hoc, and paybacks haven't materialized. Building a highly loyal customer base must be integral to a company's basic business strategy. Loyalty leaders like MBNA credit cards are successful because they have designed their entire business systems around customer loyalty--a self-reinforcing system in which the company delivers superior value consistently and reinvents cash flows to find and keep high-quality customers and employees. The economic benefits of high customer loyalty are measurable. When a company consistently delivers superior value and wins customer loyalty, market share and revenues go up, and the cost of acquiring new customers goes down. The better economics mean the company can pay workers better, which sets off a whole chain of events. Increased pay boosts employee moral and commitment; as employees stay longer, their productivity goes up and training costs fall; employees' overall job satisfaction, combined with their experience, helps them serve customers better; and customers are then more inclined to stay loyal to the company. Finally, as the best customers and employees become part of the loyalty-based system, competitors are left to survive with less desirable customers and less talented employees. To compete on loyalty, a company must understand the relationships between customer retention and the other parts of the business--and be able to quantify the linkages between loyalty and profits. It involves rethinking and aligning four important aspects of the business: customers, product/service offering, employees, and measurement systems.     

An appropriate development strategy for Southern Africa∗

The limited successes achieved with development in the Third World and the national states in Southern Africa have necessitated a considerable change in development thinking and practice. The conventional developmental approach, which is based on growth models, is inappropriate for the conditions in the LDCs. A new development approach, coupled with an appropriate development strategy, has culminated in the development literature.

In this article the poverty problem in Southern Africa is outlined as a general background, whereafter the new development approach and a few guidelines for an appropriate development strategy is discussed. The application of the new strategy in the circumstances of Southern Africa is highlighted.     

Black americans and Ghanaians: Comparative patterns of internal migration

Conclusions For our purposes here, the analysis has been fruitful in that it has served to indicate and underscore in both general and specific terms the sources and determinants of migration movement and the destination of migrants. The qualitative analysis and the statistical test have led to several research conclusions. Both United States and Ghanaian migrants behave in accordance with the migration concepts examined. Common relationships between migration and economic opportunity are apparent. While push factors have generally initiated migratory movement among black Americans, particularly in respect to the South, both groups tend to move to regions with better economic opportunities. In both cases, migration is a negative function of distance, and a large labor force at the origin is a stimulus to out-migration at the origin.     

Consumption and Portfolio Choice over the Life Cycle

This article solves a realistically calibrated life cycle modelof consumption and portfolio choice with non-tradable laborincome and borrowing constraints. Since labor income substitutesfor riskless asset holdings, the optimal share invested in equitiesis roughly decreasing over life. We compute a measure of theimportance of human capital for investment behavior. We findthat ignoring labor income generates large utility costs, whilethe cost of ignoring only its risk is an order of magnitudesmaller, except when we allow for a disastrous labor incomeshock. Moreover, we study the implications of introducing endogenousborrowing constraints in this incomplete-markets setting.     

Firms' Off-Balance Sheet and Hybrid Debt Financing: Evidence from Their Book-Tax Reporting Differences

We match large U.S. corporations' tax returns during 1989–2001 to their financial statements to construct a firm‐level proxy of firms' use of off‐balance sheet and hybrid debt financing. We find that firms with less favorable prior‐period Standard & Poor's (S&P) bond ratings or higher leverage ratios in comparison to their industry report greater amounts of interest expense on their tax returns than to investors and creditors on their financial statements. These between‐firm results are consistent with credit‐constrained firms using more structured financing arrangements. Our within‐firm tests also suggest that firms use more structured financing arrangements when they enter into contractual loan agreements that provide incentives to manage debt ratings. Specifically, we find that after controlling for S&P bond rating and industry‐adjusted leverage, our sample firms report greater amounts of interest expenses for tax than for financial statement purposes when they enter into performance pricing contracts that use senior debt rating covenants to set interest rates. Furthermore, we find that the greatest book‐tax reporting changes occur when firms become closer to violating these debt rating covenants. These latter findings are consistent with firms' contractual debt covenants influencing their use of off‐balance sheet and hybrid debt financing.