Tournament Winner Proportion and its Effect on Effort: An Investigation of the Underlying Psychological Mechanisms

This study investigates the effects of the psychological mechanisms activated by different proportions of tournament winners on effort. Using a real-effort experiment that allows the evolution of social comparison, which is central to our theory, we show that firms can increase employee effort (and performance) by increasing the proportion of winners. Based on a causal model, we generate evidence for our theory that this effect is driven by relative performance concerns and bonus concerns, both of which depend on the proportion of tournament winners. In addition, we find that, over time, the change in effort is more negative the lower the proportion of winners. This effect is driven by the different behaviors of winners and losers in a previous tournament.     

Modelling the Ecological Comorbidity of Acute Respiratory Infection,Diarrhoea and Stunting among Children Under the Age of 5 Years in Somalia

The aim of this study was to assess spatial co‐occurrence of acute respiratory infections (ARI), diarrhoea and stunting among children of the age between 6 and 59 months in Somalia. Data were obtained from routine biannual nutrition surveys conducted by the Food and Agriculture Organization 2007–2010. A Bayesian hierarchical geostatistical shared component model was fitted to the residual spatial components of the three health conditions. Risk maps of the common spatial effects at 1×1 km resolution were derived. The empirical correlations of the enumeration area proportion were 0.37, 0.63 and 0.66 for ARI and stunting, diarrhoea and stunting and ARI and diarrhoea, respectively. Spatially, the posterior residual effects ranged 0.03–20.98, 0.16–6.37 and 0.08–9.66 for shared component between ARI and stunting, diarrhoea and stunting and ARI and diarrhoea, respectively. The analysis showed clearly that the spatial shared component between ARI, diarrhoea and stunting was higher in the southern part of the country. Interventions aimed at controlling and mitigating the adverse effects of these three childhood health conditions should focus on their common putative risk factors, particularly in the South in Somalia.     

Press freedom and jumps in stock prices

Press freedom varies substantially across countries. In a free environment, any news immediately becomes public knowledge through mediums including various electronic media and published materials. However, in an unfree environment, (economic) agents would have more discretionary powers to disclose good news immediately, while hiding bad news or releasing bad news slowly. We argue that this discretion affects stock prices and that stock markets in countries with a free press should be better processors of economic information. Using an equilibrium asset-pricing model in an economy under jump diffusion, we decompose the moments of the returns of international stock markets into a diffusive risk and a jump risk part. Using stock market data for a balanced panel of 50 countries, our results suggest that in countries with a free press, the better processing of bad news leads to more frequent negative jumps in stock prices. As a result, stock markets in those countries are characterized by higher volatility, driven by higher jump risk and more negative return asymmetry. The results are robust to the inclusion of various controls for governance and other country- or market-specific characteristics. We interpret these as good stock market characteristics because a free press improves welfare and increases economic growth.     

Did Hayek have a monetary theory of business cycles?

Joseph Schumpeter, a careful reader of Hayek, categorized Hayek??s theory of economic cycles as non-monetary. Almost every other source, including Hayek himself, categorized the theory as monetary. The issue turns on the concept of causality being used. The question of what causality concept to apply to complex phenomena has substantive implications for economic theory. A simple concept of causality, appropriate to the study of some physical phenomena, will mislead when applied to complex phenomena. We provide examples of errors in analysis that follow from the wrong choice of a causal paradigm.     

Optimal Management of Soil Quality Stocks and Long-Term Consequences of Land Degradation for Smallholder Farmers in Malawi

While soil degradation has long-term consequences, static models which form the bulk of studies on this topic in Africa, do not account for the inter-temporal dimensions of optimal resource management. This paper used an inter-temporal optimisation framework, which considered soil in a time-dependent resource extraction perspective. We have demonstrated that soil degradation is causing an enormous reduction in productive value of smallholder land in Malawi. Current user cost of soil quality among smallholder farmers, which represents annual loss in productive value of land, was estimated to be US$21 per hectare. Based on this value and land area under smallholder agriculture in Malawi, economic costs of soil degradation among smallholder farmers were estimated to amount to 14% of the agricultural GDP for Malawi. Although smallholder farmers’ current practices are sub-optimal to Steady State solutions, they are above static solutions. This demonstrates that smallholder farmers have some private incentives to invest in the soil quality stock. Smallholder farmers internalise some of the dynamic costs of soil degradation under the current practices. However, a sensitivity analysis on a slightly higher discount rate indicates that SS solutions closely resemble the prevailing smallholder farming practices. This suggests that smallholder farmers may be overexploiting soil quality stock because they have a high time preference. That is, they value the current consumption more than their future consumption and wellbeing. High levels of poverty in Malawi and serious lack of viable alternatives to subsistence farming may be influencing such behaviour. Promoting more viable land use alternatives than subsistence farming and formuling policies that help transform smallholder agriculture into a profitable enterprise will not only increase the cost of degrading the soil, but also encourage farmers to invest in the soil quality stock.     

Flexibility at different stages in the life cycle of projects: An empirical illustration of the “freedom to maneuver”

Many textbooks on project management present illustrations concerning the relative size of project attributes during different project phases. The derived models all have attributes in common, such as uncertainty, significance of decisions, and degree of freedom to maneuver, that are typically high in the beginning of the project and low in the end. At the same time, variables such as the accumulated cost and available information begin at low levels and end up at a high level at the end of the project. Based on empirical data from projects, this paper illustrates and quantifies one of these attributes, the freedom to maneuver, in different project phases.