Looking for Someone to Blame: Delegation,Cognitive Dissonance,and the Disposition Effect

We analyze brokerage data and an experiment to test a cognitive dissonance based theory of trading: investors avoid realizing losses because they dislike admitting that past purchases were mistakes, but delegation reverses this effect by allowing the investor to blame the manager instead. Using individual trading data, we show that the disposition effect—the propensity to realize past gains more than past losses—applies only to nondelegated assets like individual stocks; delegated assets, like mutual funds, exhibit a robust reverse‐disposition effect. In an experiment, we show that increasing investors' cognitive dissonance results in both a larger disposition effect in stocks and a larger reverse‐disposition effect in funds. Additionally, increasing the salience of delegation increases the reverse‐disposition effect in funds. Cognitive dissonance provides a unified explanation for apparently contradictory investor behavior across asset classes and has implications for personal investment decisions, mutual fund management, and intermediation.     

Overskilling,Job Insecurity,and Career Mobility

This paper uses longitudinal data from Australia to examine the extent to which overskilling—the extent to which work‐related skills and abilities are utilized in current employment—is a transitory phenomenon. The results suggest that while overskilled workers are much more likely to want to quit their current job, they are also relatively unconfident of finding an improved job match. Furthermore, some of the greater mobility observed among overskilled workers is due to involuntary job separations, and even where job separations are voluntary, the majority of moves do not result in improved skills matches.     

Villeinage in England: a regional case study,c.1250–c.13491

Between 1200 and 1349, villeinage was not prominent in Suffolk, and, even in those places where it was locally significant, many of its exactions were lightly enforced. The gap between the theory and practice of villeinage was maintained by custom, although this article emphasizes both the importance of regional custom and its mutability. The relative insignificance of villeinage here has two main implications: first, villeinage cannot have caused any crisis of agrarian productivity before the Black Death; and second, its subsequent dissolution cannot have been the prime mover behind the transformation of the landholding structure and the emergence of agrarian capitalism.     

Using Nonfinancial Measures to Assess Fraud Risk

This study examines whether auditors can effectively use nonfinancial measures (NFMs) to assess the reasonableness of financial performance and, thereby, help detect financial statement fraud (hereafter, fraud). If auditors or other interested parties (e.g., directors, lenders, investors, or regulators) can identify NFMs (e.g., facilities growth) that are correlated with financial measures (e.g., revenue growth), inconsistent patterns between the NFMs and financial measures can be used to detect firms with high fraud risk. We find that the  difference  between financial and nonfinancial performance is significantly greater for firms that committed fraud than for their nonfraud competitors. We also find that this difference is a significant fraud indicator when included in a model containing variables that have previously been linked to the likelihood of fraud. Overall, our results provide empirical evidence suggesting that NFMs can be effectively used to assess fraud risk.     

STATE PATTERNS IN FAMILY INCOME INEQUALITY

It is well known that U.S. income inequality began to increase in the 1970s and increased sharply in the 1980s. Yet, what is less well known is that this upward trend was not uniform across states. Some states experienced almost no increase in family income inequality, while other states experienced dramatic increases. We use the variation in state trends to examine factors that may underlie shifts in U.S. income inequality. Among numerous factors, we include variables that allow us to examine the role that state and local economic development policy may play. Also, in examining state income inequality differences that could not be explained by economic factors, we explore the possibility that cultural and social norm factors affect state income inequality.     

EFFICIENCY EFFECTS OF CHANGES IN COMMONWEALTH GRANTS TO THE STATES: A CGE ANALYSIS*

This paper describes CSF, a general equilibrium model encompassing factors of relevance to economic efficiency in Federal/State funding including: interstate differences in tax bases and unit costs of State‐provided goods; factor mobility; congestion; State‐government behaviour incorporating the possibility that governments in subsidised States embark on expenditures with low benefit/cost ratios (flypaper effects); fiscal externalities; and non‐discretionary expenditures in each State associated with special national responsibilities. The model is applied to Australia where Federal/State funding is a major political and economic issue. Welfare effects of moving from the present Australian funding system based on fiscal equalisation to a system of equal‐per‐capita grants are calculated. CSF implies that the welfare gain from this move would be small. The most important source of potential welfare gain is a reduction in flypaper effects. The recognition of congestion externalities can eliminate the small welfare gain, but only under seemingly extreme assumptions. The results are not very sensitive to variations in assumptions concerning population mobility and fiscal externalities.     

RESIDENTIAL PHOTOVOLTAIC ENERGY SYSTEMS IN CALIFORNIA: THE EFFECT ON HOME SALES PRICES

Relatively little research exists estimating the marginal impacts of photovoltaic (PV) energy systems on home sale prices. Using a large data set of California homes that sold from 2000 through mid‐2009, we find strong evidence, despite a variety of robustness checks, that existing homes with PV systems sold for a premium over comparable homes without PV systems, implying a near full return on investment. Premiums for new homes are found to be considerably lower than those for existing homes, implying, potentially, a trade‐off between price and sales velocity. The results have significant implications for homeowners, builders, appraisers, lenders, and policymakers. (JEL R31, D12, C33)     

FIRM‐LEVEL DETERMINANTS OF POLITICAL INFLUENCE

This paper uses a large cross‐country survey of business firms to assess their influence on government policies. When controlling for endogeneity, we find that such an influence is associated with larger firms and to a lesser extent with government ownership, but not with the degree of competition. We also find that firms' perception of being politically influential is enhanced with the country's level of institutional quality.