The Impact of EMU Enlargement on Structural Reforms: A Political Economy Approach

This paper analyzes the setting of labor market reforms in the European Monetary Union (EMU), as a political compromise pressured by the lobbying of business interests and trade unions. Using a common agency model of lobbying, we model the impact of distorted and non-distorted Central Bank monetary policy on EMU member state incentives to reform its labor market. Paradoxically, a majority of citizens who do not support the reform can lead to an optimal level of reform. We also show that, in a context of EMU enlargement, inflationary policy generates a status quo if there is a majority of non-supporters. Surprisingly, inflationary policy enhances the reform if the share of non-supporters over supporters increases, and weakens it if this share decreases.     

Factors of Immobility: Why the Unemployment Rate is Slow to Adjust

During the recent recession and the continuing recovery, the national unemployment rate has maintained a level that has only been observed one other time since the Great Depression. While the initial causes of the increased unemployment rate are documented, the adjustment process and reduction of unemployment rates back toward some natural rate has not been addressed empirically. In this paper, the authors analyze labor supply side factors that may cause unemployment rates to remain high for a longer period than the typical recession. The authors focus on the impact of unemployment insurance extensions, housing market contractions and the general breadth of the economic downturn as factors that slow the labor supply adjustment process and lead to prolonged high rates of unemployment.     

Estimating JP Morgan Chase's Profits From the Madoff Deposits

JP Morgan Chase had deposits from Bernard L. Madoff's investors totaling $5.5 billion at one point in 2008. The Chase account was supposedly where most of the funds in his Ponzi scheme were deposited. Any large deposit can be a considerable source of profit to a bank. Assuming that the deposits returned the bank's net interest margin and grew at a random geometric rate, this article estimates that JP Morgan Chase generated $435 million in after‐tax profits from this very large account over the course of 16 years. With JP Morgan Chase the target of pending lawsuits relating to the Madoff fraud, this article's methodology and results may be of interest to litigants, prosecutors, journalists, and academics.     

Standard Oil and Predatory Pricing: Myth Paralleling Fact

The Supreme Court in 1911, on the occasion of the first major test of the Sherman Act, ordered the dissolution of the Standard Oil Trust. In his 1958 paper John McGee argued that predatory pricing is, in general, irrational and, relying solely on the information in the Trial Record related to that decision, concluded that Standard Oil did not engage in predatory pricing. His paper has had an extraordinary influence on both antitrust policy in the United States and economic lore. This paper documents the breadth and scope of the influence of McGee’s paper and offers several possible explanations for it. We suggest four reasons: (1) the lack of a theoretical challenge for 25 years, (2) the failure of scholars to replicate McGee’s empirical findings, (3) the unique status of the Standard Oil case in the history of American antitrust and (4) the influence of the Chicago School on economic and legal thinking.     

Technology shocks and labor market dynamics: Some evidence and theory

A positive technology shock may lead to a rise or a fall in per capita hours, depending on how hours enter the empirical VAR model. We provide evidence that, independent of how hours enter the VAR, a positive technology shock leads to a weak response in nominal wage inflation, a modest decline in price inflation, and a modest rise in the real wage in the short-run and a permanent rise in the long-run. We then examine the ability of several competing theories to account for this VAR evidence. Our preferred model features sticky prices, sticky nominal wages, and habit formation. The same model also does well in accounting for the labor market evidence in the post-Volcker period.     

Parenthood and wildland recreation consumption: An unexplored phenomenon

The effects of parenthood on consumer decision making have not been systematically studied in prior research of the wildland recreation phenomenon. The present study utilizes data from the most recent National Survey of Recreation to assess the direct effects of parenthood on wilderness-related or wildland outdoor recreation behavior. Additionally, a framework for the conceptualization of the interrelationship between human values, demographics, attitudes toward the environment, wildland management policy variables, attitudes toward wildland recreation, and wildland recreation consumption is proposed. The findings suggest that parenthood is an important variable in understanding wildland outdoor recreation consumption. © 1993 John Wiley & Sons, Inc.     

Competition among European food distribution systems in concentrated markets

This research investigates the quality of competition among food stores in Sweden through a statistical evaluation of prices in two major food markets in the country. The analysis finds mixed results. There is evidence of superior market performance in the passage to the consumer of savings from scale economies and promotional discounts. At the same time indications of weakness were found in the difference in prices levels between major markets with similar costs and competitors employing the same technologies. Public policy recommendations to maintain high levels of competition are derived.     

Acquirers’ abnormal returns and the non-Big 4 auditor clientele effect

I analyze the effect of auditor choice on acquirers’ values around merger announcements and the factors affecting the interaction between auditor size and the market reaction to merger announcements. I find that acquirers audited by non-Big 4 accounting firms outperform those audited by Big 4 firms. This effect is more pronounced when the targets are privately held and when the likelihood of the auditors playing a prominent advisory role increases. While the largest auditing firms are usually assumed to offer superior services, the study suggests that smaller firms have a comparative advantage in assisting their clients in merger transactions.