Offshoring of Business Services in Small Open Economies: Toward a General-Equilibrium Modeling Approach

Trade in business services has been attracting attention from academic researchers, policy makers, and business journalists. While there are many anecdotes, there has been little in the way of formal theory applied to this issue. In this paper, we adapt a general model of fragmentation of production activities to try to capture the specific features of business services. Following a general discussion, we calibrate a numerical general-equilibrium simulation model to a situation in which both trade and foreign investment in services are initially banned to technically infeasible. We then compute three counter-factual scenarios: one in which trade but not investment in services is feasible or allowed, one in which investment but no trade is allowed, and one in which both trade and investment in services are allowed.     

The effects of disclosure type and audit committee expertise on Chief Audit Executives’ tolerance for financial misstatements

This study involves an experiment where 73 Chief Audit Executives and deputy Chief Audit Executives determine the amount of adjustment required to correct a misstatement. We manipulate the financial reporting location of the misstatement (recognized vs. disclosed) and the level of audit committee expertise (high vs. low). The results indicate that financial reporting location has significant effects on internal auditors’ decisions to correct misstatements. Specifically, internal auditors are more willing to waive disclosed misstatements relative to recognized misstatements. Contrary to expectations, the results do not indicate that increased audit committee expertise and associated increases in audit committee members’ perceived powers cause internal auditors to be less willing to waive misstatements.     

An empirical analysis of production distortions in the mid-Atlantic surf clam and ocean quahog fishery

This paper presents empirical evidence of production distortions under controlled access management in the Mid-Atlantic surf clam and ocean quahog fishery. Results indicate that vessels harvested multiple clam species even though the harvest technology exhibits diseconomies of scope. Vessels also operated in a region of the production surface where the marginal product of vessel capital services was negative. These distortions are explained by perverse regulations which restricted vessel capital replacement and severely limited fishing times.     

Employment and wages with sector-specific shocks and worker moral hazard

We study a model of worker moral hazard with identical workers and where sectoral prices are subject to stochastic shocks. When firms are short-run maximizers, employment is shown to be distorted downward relative to the case of certain prices, and more so the higher is the current price. This implies that employment is relatively insensitive to sectoral output-price changes, and that average employment and output are reduced when price volatility increases. When firms can commit to future employment levels, employment is greater in low-demand states (implying labor hoarding), and thus even less sensitive to shocks, while average employment is less distorted downward by uncertainty. The model gives a new explanation of how increased sector-specific volatility can lead to output losses, and of the possibility of negative comovements of unemployment and turnover.     

Long-term union-firm contracts

We explore the possibility for self-enforcing long-term contracts between a risk averse union and a risk neutral firm, when these have the option to strike an efficient bargian at every stage, and the state of the world is variable. It is shown that any long-term efficient wage agreement satisfying individual rationality constraints involves a more even income stream to the workers (except for the case when the discount rate is high) and can be implemented by a Subgame-perfect equilibrium (by the threat of returning to short-term bargaining). Moreover, any such constrained efficient agreement can be supported by the threat of triggering agreements which themselves are constrained efficient, i.e., it can be implemented by a Renegotiation-proof equilibrium.This paper is a revised version of Strand (1988) and is part of the research project Wage Formation and Unemployment at the SAF Center for Applied Research at the Department of Economics, University of Oslo. We would like to thank seminar participants at Cambridge University for pointing out an error of an earlier version. Thanks also to Terje Lensberg, Kjell Erik Lommerud, Lars Thorlund-Petersen, and two referees, as well as seminar participants at the 1989 EEA Conference in Augsburg and at the Universities of British Columbia, Haifa, and Maryland for helpful comments.     

Pollution Taxation and Revenue Recycling under Monopoly Unions

A model where a given number of firms determine their pollution-reducing production technologies upon establishment and workers form monopoly unions is used to study the possibility of "double dividends", i.e., simultaneous reductions in pollution and increases in employment, when the pollution tax is increased, and tax revenues recycled, in alternative ways. In all cases pollution is reduced. When output is subsidized, the effect of a pollution tax increase on employment is always neutral. When employment, and investments, are subsidized, employment increases when investments are, respectively, relatively insensitive and sensitive to pollution taxes. Of the three subsidy instruments, the employment subsidy is always the most, and the investment subsidy the least efficient solution.     

Change and commitment: beyond risk and responsibility

Risk and responsibility have always been linked philosophically in the Western tradition. The purpose of this article is to discuss possible alternatives to the centrality of the risk discourse, arguing that such alternatives call for a revision in the concept of responsibility, decoupling it from the aspirations of control over Nature and the future. It implies also a more complex relation between knowledge and action. Rather than believing that contemporary global challenges will be sufficiently met by being responsible under risk, we will explore how to stay committed in times of uncertainty and change.     

Strategic Leadership of Corporate Sustainability

Strategic leadership and corporate sustainability have recently come together in conspicuously explicit fashion through the emergence of top management team (TMT) positions with dedicated corporate sustainability responsibilities. These TMT positions, commonly referred to as “Chief Sustainability Officers,” have found their way into the upper echelons of many of the world’s largest corporations alongside more traditional TMT positions including the CEO and CFO. We explore this phenomenon and consider the following two questions: Why are corporate sustainability positions being installed to the TMT? What effects do corporate sustainability TMT positions have at their organizations? We consider these questions through strategic leadership and neoinstitutional theoretical frameworks. Through the latter, we also engage with Weberian considerations of bureaucracy. We find that the reasons why corporate sustainability TMT positions are installed can be in response to a crisis at the corporation for which its legitimacy is challenged. We also find the corporate sustainability TMT position can be installed proactively in an effort to realize external opportunities that may have otherwise gone unrealized without concerted attention and coordination afforded by a strategic level position. Regarding effects, we determine the position can relate to the establishment of bureaucratic structures dedicated to corporate sustainability within the corporation through which formalized processes and key performance indicators to drive corporate sustainability performances are established. In the face of our finding that many corporate sustainability TMT positions are being removed despite having only relatively recently been introduced to their respective TMTs, we find that the successful implementation of bureaucratic machinery can help considerations to sustainability extend beyond the tenure of a corporate sustainability position within the TMT.     

Why Financial Executives Do Bad Things: The Effects of the Slippery Slope and Tone at the Top on Misreporting Behavior

Journal of Business Ethics - While there is an extensive body of literature about the impact of sharing physical space on ethical consumption, and a growing body of literature that addresses the...