Correlation of Labor and Civil Contracts Related to the Performance of Work: Preventing the Substitution of Concepts

Employee Responsibilities and Rights Journal - Legal relations arising from a civil law contract for the performance of work or the provision of services are not identical to labor relations, and...     

Debt, bargaining, and credibility in firm–supplier relationships

We examine optimal leverage for a downstream firm relying on implicit (self-enforcing) contracts with a supplier. Performing a leveraged recapitalization prior to bargaining increases the firm's share of total surplus. However, the resulting debt overhang limits the range of credible bonuses, resulting in low input quality. Optimal financial structure trades off bargaining benefits of debt with inefficiency resulting from overhang. Consistent with empirical evidence, the model predicts that leverage increases with supplier bargaining power (e.g., unionization rates) and decreases with utilization of non-verifiable inputs (e.g., human capital).     

Wholesale trade in Russia today

This paper compares the official and alternative statistical estimates of the financial performance of wholesale trade in 2001 and its dynamics in 2000–2004. The causes of the sector’s high profitability and the rise in turnover in recent years are ascertained. A comparative study of wholesale trade in the Soviet era and the present is made and the functions of wholesale in today’s Russia and economically advanced countries are contrasted. The negative role of wholesale trade in the present economy of Russia is demonstrated, which stems from the special characteristics of the functions it performs. The case is made for a sharp increase in the sector’s taxation and the amount of its possible tax load is calculated.     

Can the U.S. ethanol industry compete in the alternative fuels market?

The U.S. ethanol fuel industry has experienced preferential treatment from federal and state governments ever since the Energy Tax Act of 1978 exempted 10% ethanol/gasoline blend (gasohol) from the federal excise tax. Combined with a 54c/ /gal ethanol import tariff, this exemption was designed to provide incentives for the establishment and development of a U.S. ethanol industry. Despite these tax exemptions, until recently, the U.S. ethanol fuel industry was unable to expand from a limited regional market. Ethanol was dominated in the market by MTBE (methyl‐tertiary‐butyl ether). Only after MTBE was found to contaminate groundwater and consequently banned in many states did the demand for ethanol expand nationally. Limit pricing on the part of MTBE refiners is one hypothesis that may explain this lack of ethanol entry into the fuel‐additives market. As a test of this hypothesis, a structural vector autoregression (SVAR) model of the ethanol fuel market is developed. The results support the hypothesis of limit‐pricing behavior on the part of MTBE refiners, and suggest the U.S. corn‐based ethanol industry is vulnerable to limit‐price competition, which could recur. The dependence of the corn‐based ethanol price on supply determinants limits U.S. ethanol refiners' ability to price compete with sugar‐cane‐based ethanol refiners. Without federal support, U.S. ethanol refiners may find it difficult to compete with cheaper sugar‐cane‐refined ethanol, chiefly from Brazil.     

Evolution of heterogeneous beliefs and asset overvaluation

I analyze a model in which different agents have different non-rational expectations about the future price and cash flows of a risky asset. The beliefs in the society evolve according to a very general class of evolution functions that are monotone; that is if one type has increased its share in the population then all types with higher profit should also have increased their shares. I show that the price of the risky asset converges to the risk-neutral fundamental price even though all agents in the economy are risk-averse. The risky asset thus becomes overvalued as compared to the equilibrium with rational expectations. The overvaluation is a result of the evolution of beliefs and does not rely on such asymmetric assumptions as short-sale constraints or optimistic bias.     

Fatigue in Dynamic Tournaments

Employee overwork and fatigue are a concern of managers in many organizations, as they may increase health and safety risks and decrease productivity. The problem is especially severe in competitive environments, where compensation and promotions are awarded, explicitly or implicitly, on the basis of relative performance. We propose a theory for, and study experimentally, the phenomenon of fatigue in a dynamic competitive environment. We find that subjects react strongly to changes in the environment related to fatigue and follow the comparative statics of equilibrium predictions. At the same time, within a given environment, subjects behave as if they are unaware of the deteriorating effect of fatigue on their competitiveness.     

Estimating Consumption Responses to Income Shocks of Different Persistence Using Self‐Reported Income Measures

Models of intertemporal consumption choice posit that consumption reacts more strongly to income shocks with persistent effects than to shocks with temporary effects. This prediction is tested using data from the Estonian Household Budget Surveys for 2002–07. Questions in the survey make it possible to distinguish between two income components of different persistence, using the individual households’ subjective income classification. Estimations confirm that households distinguish income components of different persistence and react to these differently; the consumption response to income shocks with persistent effects is significantly higher than the response to shocks with only temporary effects. Further analysis reveals, however, that consumption also reacts to lagged shocks to temporary income even when the households are not liquidity constrained, suggesting that their behavior is not fully consistent with the standard forward‐looking unconstrained consumption models.     

Difference in interim performance and risk taking with short-sale constraints

Absent much theory, empirical works often rely on the following informal reasoning when looking for evidence of a mutual fund tournament: If there is a tournament, interim winners have incentives to decrease their portfolio volatility as they attempt to protect their lead, while interim losers are expected to increase their volatility so as to catch up with winners. We consider a rational model of a mutual fund tournament in the presence of short-sale constraints and find the opposite: Interim winners choose more volatile portfolios in equilibrium than interim losers. Several empirical works present evidence consistent with our model. However, based on the above informal argument, they appear to conclude against the tournament behavior. We argue that this conclusion is unwarranted. We also demonstrate that tournament incentives lead to differences in interim performance for otherwise identical managers and that mid-year trading volume is inversely related to mid-year stock return.     

Geographically explicit global modeling of land-use change, carbon sequestration, and biomass supply

This study aims to determine whether carbon sequestration policies could present a significant contribution to the global portfolio of climate change mitigation options. The objective is to model the effects of policies designed to induce landowners to change land use and management patterns with a view to sequester carbon or to reduce deforestation. The approach uses the spatially explicit Dynamic Integrated Model of Forestry and Alternative Land Use (DIMA) to quantify the economic potential of global forests. The model chooses which of the land-use processes (afforestation, reforestation, deforestation, or conservation and management options) would be applied in a specific location, based on land prices, cost of forest production and harvesting, site productivity, population density, and estimates of economic growth. The approach is relevant in that it (1) couples a revised and updated version of the Special Report on Emissions Scenarios with the dynamic development of climate policy implications through integration with the Model for Energy Supply Strategy Alternatives and their General Environmental Impact (MESSAGE); (2) is spatially explicit on a 0.5° grid; and (3) is constrained by guaranteeing food security and land for urban development. As outputs, DIMA produces 100-year forecasts of land-use change, carbon sequestration, impacts of carbon incentives (e.g., avoided deforestation), biomass for bioenergy, and climate policy impacts. The modeling results indicate that carbon sequestration policies could contribute to a significant part of the global portfolio of efficient climate mitigation policies, dependent upon carbon prices.