Sources of Inequality: Measuring the Contributions of Income Sources to Rising Family Income Inequality

We develop a simulation method for measuring the impact of changes in the distributions of the main income sources on growth in family income inequality. We simulate the entire distribution of family income under the counterfactual, “What if the distribution of each source had not changed?” The simulation method allows us to evaluate the impact of changes at any point in the distribution as well as with multiple measures of inequality. We incorporate married‐couple and single‐person families, appropriately accounting for changes in the proportion married. We apply the simulation method to investigate the impact of changes in male earnings, female earnings, and capital income on the distribution of family income in the United States between 1969 and 1999. We find that changes in the distribution of male earnings account for more of the growth in family income inequality than do changes in any other source of income. Changes in the distribution of female earnings have reduced family income inequality.     

Developing a Normatively Grounded Research Agenda for Fair Trade: Examining the Case of Canada

This paper examines two issues related to research of certified fair trade goods. The first is the question of how agendas for fair trade research should be developed. The second issue is the existence of major gaps in the fair trade literature, including the study of the particular features of fair trade practice in individual northern countries. In taking up the first of these issues, the paper proposes that normative analysis should provide the basis for developing research agendas. Such an approach is important to ensure that the necessary types of questions to make normative judgments and policy decisions are posed and that biases that tend to favor mainstreaming practices in the generation of knowledge are minimized. The paper addresses the second research issue by examining the development of research agendas at the level of individual countries, using Canada as a case.     

Connecting two markets: An equilibrium framework for shorts,longs, and stock loans

We analyze a reduced-form framework for understanding the equity loan market's impact on share prices. We show that hard-to-borrow stocks will have distinct return patterns, responding more to shocks in the supply of shares available, and to changes in the heterogeneity of investor beliefs, than other stocks. We conduct two empirical tests in which we find strong support for these equilibrium predictions. In our first test, we take advantage of a tax-driven exogenous shock to share loan supply and find that when supply is reduced around dividend record dates, prices of hard-to-borrow stocks increase 1.1% while prices of easy-to-borrow stocks are unaffected. In our second test, we find that hard-to-borrow stocks have 4.8% lower three-month returns than other stocks, with negative returns concentrated in stocks with high heterogeneity in investor beliefs. Thus, we extend the Diether, Malloy, and Scherbina (2002) result that stocks with a greater dispersion of investor beliefs have lower returns.     

Preventing bank panics: The role of the regulator's preferences

How do the preferences of a banking authority affect its decision making in periods of distress and thus financial stability? We study this question in a version of Diamond and Dybvig (1983) with a monopolistic bank and a time-consistent policy response by a banking authority. We show that limited commitment on the part of the banking authority may induce fragility but the banking authority's incentives are also an important determining factor in the degree of financial stability. In particular, under a simple suspension scheme, delegating a banking authority who places sufficient weight on a banker's welfare acts as a commitment device and prevents runs, in analogy with how a Rogoff (1985) “conservative” central banker helps reduce inflation bias. In contrast, once interventions take the form of payment rescheduling, the scope for the bank's susceptibility to a panic increases should the banking authority put more weight on monopoly rents. Identifying such an aspect of vulnerability suggests that appointing a banking authority whose objective function deviates from that of depositors may have unintended consequences.     

Market and regulatory forces in the pricing of legal services

New data on individual law firms and attorneys is used to examine the effects of professional licensing restrictions and market forces on prices of legal services. The data allow detailed testing of the hypothesis that licensing restrictions serve to increase the price of professional services as well as the incomes of those providing these services. In general, little support is found for this hypothesis. Instead, the estimates show that market forces are most important in explaining variations in prices and attorney incomes.Dean Lueck is on leave from Louisiana State University. We thank William Boiger, Executive Director of the National Resource Center for Consumers of Legal Services, for providing data on law firms. Andrew Dick, Philip Hersch, Andy Kleit, Bill Kovacic, Fred McChesney, Jeff Moore, and two anonymous referees provided helpful comments on earlier versions. Chris Diener, Jim Larkins, Robert Pace, and Darrin Timothy provided research assistance.     

Three Realms of Corporate Responsibility: Distinguishing Legitmacy, Morality and Ethics

In the mid-1960s and 1970s the field of business ethics saw a basic shift in emphasis from personal responsibility to corporate responsibility. While the notion of corporate responsibility has come to be a dominant concept in the field of business ethics since that time, it is a contested concept that admits of a range of conceptions. A concern underlying this paper is that many of these conceptions are less adequate than they might be. This paper has two overlapping goals. First, it seeks to elaborate a more adequate conception of corporate responsibility by drawing upon critical theory to distinguish three different normative realms (viz., legitimacy, morality and ethics). Second, the paper attempts to indicate from a critical theory perspective the nature of corporate responsibilities in each of these realms. The paper begins with a short introduction to German critical theory and an explanation of the different normative realms. The following three sections elaborate in turn the responsibilities of corporations in each on the three normative realms. Finally, the conclusion attempts to indicate some of the advantages of a critical theory conception of corporate responsibility.     

Institutional Adjustment,Instrumental Efficiency,and Reasonable Value

Abstract:

In this paper, we apply Celso Furtado’s vision of the process of economic development to the United States’ economy. Furtado was a creator of Latin American structuralism and continues to be one of the region’s most influential economists. Yet, he is little known in the English literature. As we argue, there are few academics who offer a theoretical framework capable of robustly evaluating the current trajectory of U.S. economic development with the depth of Furtado. Through his analytical lens, and with some help from John Maynard Keynes, we examine the present reality, as well as the more remote economic history of the US. We argue that, seen through Furtado’s lens, the US can now be accurately described as an under-developing economy.