Business ethics: a SWOT exercise

This paper reflects on the present state of business ethics. The question has become more complex in an era of globalisation: cross‐border activities make it particularly difficult for companies to formulate effective ethical programmes which are true to core corporate values. The author presents his reflection in terms of a SWOT analysis, examining the strengths, weaknesses, opportunities and threats likely to be experienced by business ethics in the new millennium. He concludes that the challenge for business ethics is to work for global agreement on common values and common approaches to issues of integrity and trust in global business.     

Politics, Insurance Regulation, and Unfunded Pension Liabilities

ABSTRACT: Insurance regulators operate in an environment in which resources are scarce and issues are most often complex and not salient to affected persons. Consequently, regulatory agencies, such as the Pension Benefit Guaranty Corporation (PBGC), need to use resources efficiently by making issues salient and not complex if regulatory goals are to be attained. To further its goal of full funding of defined benefit pension plans, the PBGC annually published a list of the Top Fifty Companies With the Largest Underfunded Pension Liability (LIST). This article investigates the issue of the economic effects of pension plan disclosure by measuring the share price response of the companies included on the LIST; then policy implications are drawn. The event study findings show that, on average, publication of the LIST did not have a negative effect on firm value. However, cross-sectional analysis provides some support for the contention that publication of the LIST had an economic cost on LISTed firms. The authors' results show that the value of large firms on the PBGC's list is less negatively affected at arrival (ARRIVAL) than smaller LISTed firms. Conversely, when firms leave the list (DEPARTURE), the value of large growth-oriented firms is more negatively affected than the value of other firms that reduce their unfunded pension liability. From a policy perspective, as hypothesized by Meier (1991), the PBGC used its scarce resources effectively by publishing the LIST. The issue of unfunded pension liability became less complex and more salient to interested parties. Consequently, consumer groups and political elites provided their support to further the regulatory agency's stated goal, which was the full funding of defined benefit pension plans. Furthermore, increased awareness of the underfunding problem contributed to the passage of the Retirement Protection Act of 1994.     

International Pricing with Costly Consumer Arbitrage

Consumer arbitrage affects international pricing in several ways. If all consumers face the same arbitrage costs, a monopolist's profit increases with arbitrage costs, and world welfare declines with them (if output does not rise). If arbitrage costs differ across consumers, a monopolist may sell in a second country even if there is no local demand—it can use the second country to discriminate across consumers in the first country. Again, world welfare typically falls with arbitrage costs. When there is also local demand in the second country, world welfare may be increasing in arbitrage costs, even if output falls.     

Valuing flood disasters using the life satisfaction approach

This paper argues that life satisfaction data can be used to value natural disasters. We discuss the strengths of this approach, compare it to traditional methods and apply it to estimate and monetize utility losses caused by floods in 16 European countries between 1973 and 1998. Using combined cross-section and time-series data, we find a negative impact of floods on life satisfaction that is sizeable, robust and significant. The estimates are comparable to price discounts found in housing markets. In an exploratory analysis, we find that risk transfer mechanisms such as mandatory insurance have large mitigating effects.     

Energieeffizienz: größte Energiequelle oder Quell zusätzlicher Nachfrage?

Energy efficiency improvements are generally seen as the royal road to sustainability and energy security. The underlying idea is simple: if the same amount of output can be produced with fewer inputs, this saves resources and alleviates environmental issues. But this logic fails to recognise basic economic principles. Efficiency improvement may eventually stimulate energy consumption. This so-called rebound effect limits the effectiveness of policies inducing energy efficiency by means of standards. Policy makers should acknowledge this and take rebound into account when designing climate and energy policy.     

The brain drain, ‘educated unemployment’, human capital formation,and economic betterment1

Extending both the ‘harmful brain drain’ literature and the ‘beneficial brain gain’ literature, this paper analyzes both the negative and the positive impact of migration by skilled individuals in a unified framework. The paper extends the received literature on the ‘harmful brain drain’ by showing that in the short run, international migration can result in ‘educated unemployment’ and overeducation in developing countries, as well as a brain drain from these countries. A simulation suggests that the costs of ‘educated unemployment’ and overeducation can amount to significant losses for the individuals concerned, who may constitute a substantial proportion of the educated individuals. Adopting a dynamic framework, it is then shown that due to the positive externality effect of the prevailing, economy‐wide endowment of human capital on the formation of human capital, a relaxation in migration policy in both the current period and the preceding period can facilitate ‘take‐off’ of a developing country in the current period. Thus, it is suggested that while the migration of some educated individuals may reduce the social welfare of those who stay behind in the short run, it improves it in the long run.     

Analyzing economic market interactions as conflicts: New concepts to assess market-based policy instruments

Complementing market-based policy instruments with conflict analysis approaches provides a wider understanding of market situations and allows to identify minimal requirements regarding needs, power and conflict dynamics. If these are not met, a market cannot be successfully introduced or a liberalization process implemented. Conflict analysis offers a language better suited to the concerns of people negatively affected by new markets. Applying this language helps to counterbalance the predominance of economic concepts. This fosters mutual understanding and enhances the prospect for successful implementation of market-based policies. We illustrate the potential of conflict analysis with examples from water privatization and labeling.