Moral Hazard and Bargaining Power

Abstract. We introduce bargaining power in a moral hazard framework where parties are risk-neutral and the agent is financially constrained. We show that the same contract emerges if the concept of bargaining power is analyzed in either of the following three frameworks: in a standard principal–agent (P–A) framework by varying the agent's outside opportunity, in an alternating offer game, and in a generalized Nash-bargaining game. However, for sufficiently low levels of the agent's bargaining power, increasing it marginally does affect the equilibrium in the Nash-bargaining game, but not in the P–A model and in the alternating offer game.     

Technology adoption under hidden information

We consider a firm where workers have pre-contractual private information regarding their cost of production. Before contracting takes place, the owner of the firm can adopt a new technology that reduces production costs for each type of worker. We show that technology adoption may have an adverse rent effect that counteracts the cost-reducing effect. This is the case whenever the new technology reduces the costs of more efficient types more strongly. Nevertheless, if the owner contracts directly with a worker (two-tier hierarchy), the cost-reducing effect always dominates. By contrast, if the firm has more hierarchical tiers such that contracting with the worker is delegated to a manager, the rent effect may prevail. Then, the owner does not adopt the new technology, even if it is costlessly available.     

Informal investors in the Ottawa-Carleton region: experiences and expectations

This research reports on the investment experience of a sample of informal investors in the Ottawa-Carleton area who have made 156 investments involving $16 million between 1981 and 1986. In addition, the expectations and requirements of these investors with respect to future investments are presented. It is found that investors surveyed seemed to hold realistic expectations regarding the outcome of their risk capital investments. It is also found that the informal marketplace for risk capital is both a local and a personal marketplace. Whereas our knowledge of the characteristics and motivations of informal investors remains incomplete, questions are raised regarding the impact of various public policy incentives that seem to have been targeted at informal investors. An agenda for future research is specified.     

Left behind to farm? Women's labor re-allocation in rural China

The transformation of work during China's rapid economic development is associated with a substantial but little noticed re-allocation of traditional farm labor among women, with some doing much less and some much more. We study how the health, work and time allocation of non-migrant women are affected by the migration of others in their household. We find little impact on their health outcomes but do find that the women left behind are doing more farm work than would have otherwise been the case. We show that this may be a persistent effect, and not just temporary re-allocation. In stark contrast, no such impacts are found for left-behind men.     

Can outstanding performance also be long‐standing?

Best practices in the business world are often identified by benchmarking in relation to products and the processes by which those products are created and delivered. This can take place inside a specific industry, but also in other industries and different countries. There, the main challenge for global firms is to decide how and how far to adapt those practices to the local environment, which is, in most cases, very different from their domestic markets. This article examines the performance of selected companies from various industries that have, in recent years, successfully developed and implemented new business concepts and new business processes in both their domestic and global markets while implementing their global strategy. The article also seeks to identify and evaluate the pitfalls or difficulties they had to face, as well as to compare their results with the objectives they wanted to achieve. © 2008 Wiley Periodicals, Inc.     

The Distribution of Subsidies through Public Health Services in Indonesia, 1978-87

Indonesia has made great progress during the past fifteen yearsin enhancing the command of the poor over privately providedgoods, such as food, clothing, and housing. Has similar progressbeen made in improving their access to publicly provided socialservices? The article looks at how the use of health servicesand the incidence of subsidies in the health sector varied acrosssocioeconomic groups in Indonesia in 1987. It also examineshow the distributions of utilization and subsidies altered between1978 and 1987. The findings indicate that changes in utilizationpatterns and in the incidence of subsidies have been pro-poor.Disparities in access and utilization have diminished. However,public spending on health care is not yet well targeted.     

A cross-section analysis of household demand for food and nutrients in Tanzania

Undernutrition and malnutrition are still problems of unacceptable proportions in many developing countries. However, the debate on the roles of income and other socio-economic variables such as women’s education and household size on food and nutrient demand continues. This study examines the demand for food and nutrients amongst households in Tanzania, using recent survey data. A quadratic almost ideal demand system (QUAIDS) is employed to estimate price and expenditure elasticities, as well as the impact of socio-economic variables on food demand patterns. A moment-based instrumental variable approach is then used to analyse the determinants of nutrient demand. The results show that income and other socio-economic variables exert significant effects on the demand for food and nutrients. The estimated expenditure elasticities for the nutrients range from 0.307 for iron to 1.26 for Vitamin B₁₂. The elasticities are higher for those micronutrients that are consumed through animal products and lower for those micronutrients that are mainly obtained through staple foods. These results reflect the higher expenditure elasticities for meat, fish, eggs, milk, and milk products, as well as fruits and vegetables, relative to cereals and pulses, reinforcing the assertion that the demand for Vitamins A and B₁₂, as well as calcium and zinc will increase with rising income.     

The trade and environment nexus in Mexican agriculture. A general equilibrium analysis

This paper analyzes linkages between growth, trade and the environment in Mexican agriculture with an empirical economy-wide model. The investigation considers trade liberalization, environmental policy reform, and their coordination. The analysis decomposes the change in pollution emission induced by changes in the sectoral composition of production, effects of technology on emission intensity, and aggregate Scale effects. Outward orientation alone induces a contraction of aggregate agricultural output, but promotes growth and pollution in some agricultural sectors. Overall, free trade does not induce wholesale specialization in dirty agricultural activities. Environmental taxes on pollution emitted in agricultural sectors have a moderate negative impact on agricultural output, except for the tax on water-borne toxic chemicals. More liberal trade combined with targeted effluent taxes can achieve significant environmental mitigation and efficiency gains, but with the implication of a contraction of most agricultural sectors.     

Marshallian Externalities And The Emergence And Spatial Stability Of Technological Enclaves *

Technological dualism often is found to be associated with the geographical clustering of firms that use the same techniques. To shed further light on these localization phenomena, we analyze the long-run dynamic behavior of a system in which firms' choices among alternative production methods (each of which requires a technique-specific input) are influenced by both firm-specific random shocks and Marshallian ‘industrial neighborhood’ effects. The latter are local factor market externalities that tend to lower the relative marginal costs d those inputs that are used most extensively in the immediate locale. The model developed here focuses on labor market externalities affecting the supply conditions for workers with technology-specific skills, and their effect on the choices made by producers at various sites whose choice of technique is subject to periodic revisions. A special structure familiar in the applied theory of Markov random fields, the stochastic Ising model. provides a reduced-form representation of this dynamic spatial system. The general properties of models of this type and their application in economics are considered. Discrete time numerical simulations of the behavior of an ensemble of firms (located at the nodes of a finite lattice formed on a two-dimensional (orus) shows that positive neighborhood externalities effects do not necessarily result in the uniquitous diffusion of one of the two available technologies. Instead. this system exhibits a spatially localized form of ‘technological dualism," in which at least two technological enclaves emerge and undergo path-dependent evolution. The temporal durations of these spatial patterns in technology adoption are affected by parameters of the Ising model that can be given a straightforward economic interpretation