A MODEL OF SELF‐FULFILLING FINANCIAL CRISES*

This paper combines the structural weakness and the self‐fulfilling panic view to explain the cause of the East Asian crises. In this model economy, the diversification strategies induce conglomerate firms to overinvest. They accumulate losses due to their unprofitable sectors and then compensate by obtaining bank loans. Domestic banks, which borrow from foreign banks, lend money as long as the total amount of accumulated loans remains within the firms’ collateral value. The model shows that if the debt to collateral value ratio belongs to a certain range a self‐fulfilling crisis can occur due to the self‐fulfilling expectations of foreign investors.     

DURABLE GOODS MONOPOLISTS AND BACKWARD COMPATIBILITY*

This paper provides an economic analysis on the choice of backward compatibility by a durable goods monopolist in the presence of network effects. We examine the time inconsistency problem faced by a monopolist in its dynamic provision of two compatible products. We suggest an economic reason why, and when it will be strategically optimal, for the monopolist to choose backward compatibility even though it is socially undesirable, and not to choose forward compatibility even though it is technologically possible. We also investigate the compatibility choices with and without price discrimination, and compare market outcomes with the social optimum. Two different social inefficiencies (planned obsolescence) which arise from the viewpoints of optimal consumption and optimal compatibility are discussed.     

Credit Market Frictions and Coessentiality of Money and Credit

We explore how credit market frictions matter for the coessentiality of money and credit. Limited commitment calls for credit limits that are tailored according to borrowers' productivity. Under an adverse selection problem caused by asymmetric information, however, lenders impose the credit limit of the low-productivity borrower onto the high-productivity borrower. If productivities differ sufficiently between borrowers, the high-productivity borrower is credit-constrained and is willing to hold money to compensate for the deficiency of their credit limit, whereas the low-productivity borrower is not. This implies the coessentiality of money and credit in the sense that their simultaneous use improves welfare.     

Ethno-cultural diversity and organizational effectiveness: a field study

This paper examines the relationship between ethno-cultural diversity and attitudinal and non-attitudinal measures of organizational performance in a field setting. Data were collected from ninety-eight respondents in seven branches of a leading Canadian bank. As compared to culturally homogeneous branches, the culturally heterogeneous branches experienced lower levels of absenteeism and achieved higher productivity and financial profitability despite their lower scores on job satisfaction, organizational commitment and workplace coherence, and higher rates of turnover. These relationships were moderated by age, job tenure, organizational position, children's age, location of education and previous employment, birthplace and education level.     

Discriminating between alternative measures of over-education

Five over-education measures are evaluated empirically on the basis of encompassing tests. The measures are based on job analysis (JA), worker-assessment of the required level to do the job (WAd), worker-assessment of the required level to get the job (WAg), the mean educational level of realized matches (RMmn), and the modal level of realized matches (RMml). Over- and under-education are linked to wages, job satisfaction, mobility and training participation. For none of the outcome variables, the JA model is encompassed by another model. Given the risk on systematic errors, this is a sufficient condition to prefer a carefully conducted JA to any other measure. The most reliable solution is to use the JA measure as an instrument for the WAd measure.     

Growing richer and taller: Explaining change in the distribution of child nutritional status during Vietnam's economic boom

Over a five-year period in the 1990s Vietnam experienced annual economic growth of more than 8% and a 15 point decrease in the proportion of children chronically malnourished (stunted). We estimate the extent to which changes in the distribution of child nutritional status can be explained by changes in the level and distribution of income, and of other covariates. This is done using data from the 1993 and 1998 Vietnam Living Standards Surveys and a flexible decomposition technique based on quantile regression that explains change throughout the complete distribution of child height. One-half of the decrease in the proportion of children stunted is explained by changes in the distributions of covariates and 35% is explained by change in the distribution of income. Covariates, including income, explain less of the decrease in very severe malnutrition, which is largely attributable to change in the conditional distribution of child height.     

THE DETERMINANTS OF LAWS RESTRICTING YOUTH ACCESS TO TOBACCO

Since many smokers begin consuming tobacco products in their adolescent years, many states have adopted a variety of restrictions on youth access to tobacco, which studies show reduces the demand for tobacco among this cohort. This paper takes a different track by addressing the demand for youth access restrictions. Specifically, using a random effects Probit procedure, which controls for the endogeneity of cigarette consumption and taxation, we examine the determinants of nine methods commonly used by states to restrict youth access to tobacco . ( JEL H70, I18)     

Aggregate Implications of Heterogeneous Households in a Sticky‐Price Model

This paper analyzes the role of heterogeneous households in propagating shocks over the business cycle by generalizing a basic sticky‐price model to allow for imperfect risk sharing between households that differ in labor incomes. I show that imperfectly insured household consumption distorts household incentive to supply labor hours through an idiosyncratic income effect, which in turn generates strategic complementarities in price setting and thus amplifies business cycle fluctuations. This mechanism diminishes the role of nominal rigidities and makes sticky‐price models more consistent with microeconomic evidence on the frequency of price changes.