Labor Responses,Regulation, and Business Churn

We develop a model of sluggish firm entry to explain short‐run labor responses to technology shocks. We show that the labor response to technology and its persistence depend on the degree of returns to labor and the rate of firm entry. Existing empirical results support our theory based on short‐run labor responses across U.S. industries. We derive closed‐form transition paths that show the result occurs because labor adjusts instantaneously while firms are sluggish, and closed‐form eigenvalues show that stricter entry regulation results in slower convergence to steady state. Finally, we show that our theoretical results hold in a quantitative model with capital accumulation and interest rate dynamics.     

Delegation versus Veto in Organizational Games of Strategic Communication

In organizations, principals use decision rules to govern a more informed agent's behavior. We compare two such rules: delegation and veto. Recent work suggests that delegation dominates veto unless the divergence in preferences between the principal and the agent is so large that informative communication cannot take place. We show that this result does not hold in a reasonable model of veto versus delegation. In this model, veto dominates delegation for any feasible divergence in preferences, if it induces the agent to shut down low quality proposals that he would otherwise implement and if such projects have sufficient likelihood.     

The changing distribution of earnings in Ireland, 1937 to 1968

Data from the Irish Census of Industrial Production are used to illuminate changes in the distribution of earnings from 1937 to 1968, an important period in Irish economic history, relevant to debates about globalization and inequality. Between the late 1930s and mid‐1950s there was a greater compression of earnings than in the US's ‘great compression’ of the same period. Sectoral data suggest that this occurred quite generally. The degree of integration with the British labour market is key, and the impact of out‐migration, wage controls during the Second World War, and industrial protection all merit in‐depth investigation.     

Decision Frequency and Synchronization Across Agents: Implications for Aggregate Consumption and Equity Return

This article examines a model in which decisions are made at fixed intervals and are unsynchronized across agents. Agents choose nondurable consumption and portfolio composition, and either or both can be chosen infrequently. A small utility cost is associated with both decisions being made infrequently. Calibrating returns to the U.S. economy, less frequent and unsynchronized decision-making delivers the low volatility of aggregate consumption growth and its low correlation with equity return found in U.S. data. Allowing portfolio rebalancing to occur every period has a negligible impact on the joint behavior of aggregate consumption and returns.     

The Monitoring Incentive of Transactional and Relationship Lenders: Evidence from the Syndicated Loan Market

We identify a group of lenders specializing in syndicating tradable loans (referred to as transactional lenders [TLs]). We show that borrowers borrowing from TLs experience worse operating performance and more severe credit quality deterioration after loan origination compared to those borrowing from relationship lenders. This difference in the postloan issue performance remains robust after controlling for the potential self‐selection of the lender type, or using percentage of traded loans out of all syndicated loans to capture lenders’ propensity for syndicating tradable loans. Our results also remains qualitatively the same after we drop various types of risky loans.     

THE IMPACT OF LOW‐INCOME HOME ENERGY ASSISTANCE PROGRAM PARTICIPATION ON HOUSEHOLD ENERGY INSECURITY

The impact of the low‐income home energy assistance program (LIHEAP), the single largest energy assistance program available to poor households in the United States has received little rigorous attention. If LIHEAP participation significantly improves low‐income household energy security, funding cuts or eliminating the program could negatively impact the poor. This article empirically estimates the impact of LIHEAP on household energy security. The results indicate participation in LIHEAP significantly increases energy security in low‐income households. Simulations suggest that elimination of the current household energy‐assistance safety net will decrease the number of low‐income energy secure households by over 17%. (JEL I38, Q48)     

Explaining the Magnitude of Liquidity Premia: The Roles of Return Predictability,Wealth Shocks,and State‐Dependent Transaction Costs

Constantinides (1986) documents how the impact of transaction costs on per‐annum liquidity premia in the standard dynamic allocation problem with i.i.d. returns is an order of magnitude smaller than the cost rate itself. Recent papers form portfolios sorted on liquidity measures and find spreads in expected per‐annum return that are the same order of magnitude as the transaction cost spread. When we allow returns to be predictable and introduce wealth shocks calibrated to labor income, transaction costs are able to produce per‐annum liquidity premia that are the same order of magnitude as the transaction cost spread.     

The Interrelation of Stock and Options Market Trading-Volume Data

This research empirically investigates the relation between common stock and call option trading volumes. The paper hyothesizes and tests a sequential flow of information between the stock and option markets. If information trading for CBOE-listed firms is predominantly accomplished through option trading, then existing research methodologies may be biased against finding any significant economic consequences in those instances where option listing is an important variable. Results indicate that trading in call options leads trading in the underlying shares, with a one-day lag.