Can Ecolabeling Schemes Preserve the Environment?

A three-stage game of production technology, signal and price competition is developed to study the impact of eco-labeling, in a duopoly model of vertical product differentiation. The production technology and the subsequent pollution level are non-observable by consumers. The only way to inform consumers about the environmental quality of the product is to stick an ecolabel on it. However, a polluting firm may also usurp the ecolabel by incurring a certain cost. By assuming that consumers are altruistic and willing to pay for environmental quality, we show that ecolabels can reduce the pollution level. Finally and importantly, under restrictive conditions on labeling cost, ecolabeling can constitute to some extent an environmentally effective and economically efficient policy. However, ecolabeling cannot alone internalize the whole negative externality until the optimum point.      

Labor market institutions and the cohesion of the middle class

We develop a simple model to study how relative wage rigidity affects equilibrium taxation. It is argued that relative wage rigidity, by compressing incomes within the middle class, leads to a lower degree of redistributive conflict within the politically important core of society, even though income inequality may increase for society as a whole. In the model, people vote first on wage rigidity and second on redistributive taxation. The rigid society has a ower tax rate than the flexible one. it is supported by the middle-class in the first stage, while the poor, the rich and the unemployed suffer from it.CERAS is a CNRS associate unit, while DELTA is a joint research unit ENS-CNRS-EHESS. This paper was prepared for the International Institute for Public Finance Congress, Lisbon, August 1995.     

Symposium on Harrison's “Lean and Mean”: A policy perspective

Conclusion It is unfortunate that Bennett Harrison has been trapped into a Manichean view of the world and that, in his attack on small business, he has found no lever other than a reliance on big business. The world is not as simple as he would appear to suggest. It is neither black nor white, but grey; coordination is neither vertical nor horizontal, but transversal.Yet one must welcome Harrison's polemical attack. It may yet serve as a catalyst that will enable the debate to go well beyond the large-firm/small-firms fixation (a somewhat sterile debate) into an exploration of the various forms of transversal coordination and of their relative merits in a rich variety of contexts. If this were to be the case, one might, in the future, see the present controversies surrounding Harrison's book as being something of a landmark, for while the book itself may have somewhat faded away into oblivion, the stimulating discussions generated by the book will have left behind what Gaston Bachelard would have called a surobject — a solid residue, a positive contribution to knowledge that would never have materialized without such a book (Bachelard, 1949).     

Comments on ’Urban diversity and fiscal decentralization’

In a recent and interesting paper published in this journal (Vol. 21, 1991, pp. 491–509), Henderson and Abdel-Rahman (HAR in what follows) study the consequences of a taste for diversity in a system of specialized cities. They show that the equilibrium city size is too big at the unregulated market equilibrium. Moreover, the decentralization of the first-best according to HAR is more demanding than in standard Tiebout models (they argue that autonomous local governments able to levy lump-sum taxes are needed). I argue on the contrary that under local public ownership of the land, the first-best is reached when the firms are able to control their wages. With absentee landowners, equilibrium city size is too small at the unregulated market equilibrium.     

Accounting behavior of German firms after an ADR issuance

This paper presents preliminary evidence on whether German corporations that issue American depositary receipts (ADR) experience a change in the level of garbling in earnings as expressed under German Generally Accepted Accounting Principles (GAAP). In a shareholder regime, a manager's objective is to maximize the company's stock price. Past literature suggests that this will lead managers to follow a policy of more disclosure. In stakeholder regimes, managers have an ill-defined objective function and their compensation is not typically sensitive to the price of the stock. This literature suggests that managers in stakeholder regimes will manipulate earnings to satisfy the various constituents of the firm. By issuing an ADR, a company changes its regime: shareholders become relatively more important to the manager. To maximize the stock price, managers should minimize the overall noise in accounting numbers even under local GAAP. The empirical results are generally consistent with this hypothesis, but a small sample size prevents drawing definitive conclusions.     

Decision making and brand choice by older consumers

Older adults constitute a rapidly growing demographic segment, but stereotypes persist about their consumer behavior. The goal of this review was to develop a more considered understanding of age-associated changes in consumer decision making. Our theoretical model suggests that age-associated changes in cognition, affect, and goals interact to make older consumers’ decision-making processes, brand choices, and habits different from those of younger adults. We first review literature on stereotypes about the elderly and then turn to an analysis of age differences in the inputs (cognition, affect, and goals) and the outcomes (decisions, brand choices, and habits) of decision processes.     

Temporary brand–retailer alliance model: the routes to purchase intentions for selective brands and mass retailers

We investigate a common but under-studied practice, the temporary alliance between a selective brand and a mass retailer, online or offline. Using a before-and-after methodology, we show how the attitude towards the new offer of a selective brand at a mass retailer plays a central mediating role. It is influenced by brand–retailer fit and product-category fit. It influences purchase intention towards the new offer, attitude changes towards the selective brand and mass retailer, and therefore purchase intention towards the brand and retailer. We also reveal a counterintuitive direct negative route from product-category fit to changes in purchase intention towards the retailer. To offer important managerial implications, we break out results for two selective brands and two types of mass retailers.     

Internal and contextual drivers of dairy restructuring: evidence from French mountainous areas and post‐quota prospects

The end of the milk quota system in Europe has resulted in substantial structural changes to the dairy industry, calling its future into question, especially in mountainous areas. This study analyzes the internal and contextual factors that influence dairy restructuring in French mountainous areas. Three complementary logit models are used to specify farmer decisions (e.g., dairy production exit, stability, and growth). Original and exhaustive geo‐located administrative datasets are combined to create a farm longitudinal dataset and characterize farm‐restructuring patterns on a fine geographical scale. Farm size, corporate legal status, and specialization are positively associated with farm growth. Viable diversification strategies through either farm processing or agro‐environmental scheme contracting are also highlighted. Farm sustainability is supported by the economic success of the local industry and the propensity to adopt extensive practices. With respect to public policy, dairy policy appears to have the strongest impact. Thus, the liberalization of dairy policy threatens the future of dairy farming, particularly in areas with low milk density and no production under labels. This work calls for a policy that promotes the collective dimension of dairy farm performance. The current rural development policy alone may be insufficient to support farms’ long‐term sustainability.     

Consistent High-precision Volatility from High-frequency Data

Estimates of daily volatility are investigated. Realized volatility can be computed from returns observed over time intervals of different sizes. For simple statistical reasons, volatility estimators based on high-frequency returns have been proposed, but such estimators are found to be strongly biased as compared to volatilities of daily returns. This bias originates from microstructure effects in the price formation. For foreign exchange, the relevant microstructure effect is the incoherent price formation, which leads to a strong negative first-order autocorrelation ρ(1)≃40 per cent for tick-by-tick returns and to the volatility bias. On the basis of a simple theoretical model for foreign exchange data, the incoherent term can be filtered away from the tick-by-tick price series. With filtered prices, the daily volatility can be estimated using the information contained in high-frequency data, providing a high-precision measure of volatility at any time interval.
(J.E.L.: C13, C22, C81).     

Using group ratings to assess household food security: Empirical evidence from southern Africa

This article addresses the reliability and validity of household welfare rankings using the Group Ratings (GR) method. The GR aimed to measure the food security status of 142 households in seven villages in Malawi. Sets of informant groups rated households from their own community. Results show that the reliability of the method was no more than fair to moderate, and was particularly low for households falling in the middle category of 'intermittently food insecure'. Consensus ratings from the GR sessions were then compared with a number of alternative indicators of food security from a quantitative household survey. GR were associated with the more visible aspects of food security, such as household asset and livestock holdings, but associations with less visible aspects of food security were weaker. The strength of these associations varied from village to village.