Entrepreneurship and asymmetric information in input markets

Entrepreneurs starting new firms face two sorts of asymmetric information problems. Information about the quality of new investments may be private, leading to adverse selection in credit markets, and entrepreneurs may not observe the quality of workers applying for jobs, resulting in adverse selection in labor markets. We construct a simple model to illustrate some consequences of new firms facing both sorts of asymmetric information. The market equilibrium can involve an excess supply of workers entering the entrepreneurial sector, as well as credit rationing. Equilibrium outcomes mismatch workers to firms, and will generally result in an inefficient number of both entrepreneurs and workers opting for the entrepreneurial sector. Taxes or subsidies on new firms and on wages can improve efficiency, but a second-best optimum can only be achieved if it is optimal to induce an excess supply of workers to enter the entrepreneurial sector.     

Can partial fiscal coordination be welfare worsening?: A model of tax competition

Most work on tax competition argues that mobile factors tend to be undertaxed except if there is coordination of tax policies. Full coordination is not however always feasible, and as a consequence some measures of partial coordination have been proposed such as minimal withholding taxes on interest income. We show that partial coordination can be in some instances welfare worsening and that then no coordination is to be preferred.     

Understanding the decline in Japan's saving rate in the new millennium

The decline in Japan's household saving rate accelerated sharply after the domestic banking crisis in 1997/98, but then decelerated again from around 2004/05. Such nonlinear movement in the saving rate cannot be explained by the monotonic trend of population aging alone. First, we statistically confirm the existence of such nonlinearity in aggregate data. Second, extending the life-cycle and the permanent income hypothesis (LCPIH), we exhibit that a significant decline in household income growth in the late 1990s and early 2000s plays a major role in creating the sharp saving rate decline in the same period. Third, using income and consumption data from the Family Income and Expenditure Survey, it is shown that different saving rate variations of different age groups, responding to heterogeneous income shocks, have contributed to generating the recent aggregate saving rate fluctuations. In particular, the income slow down in early 2000s of older working households provide a major contribution to aggregate saving rate decline.     

Cooperation and Institution in Games

Based on recent developments in non‐cooperative coalitional bargaining theory, I review game theoretical analyses of cooperation and institution. First, I present basic results of the random‐proposer model and apply them to the problem of involuntary unemployment in a labour market. I discuss extensions to cooperative games with externalities and incomplete information. Next, I consider the enforceability of an agreement as an institutional foundation of cooperation. I re‐examine the contractarian approach to the problem of cooperation from the viewpoint that individuals may voluntarily create an enforcement institution.     

Executive succession and strategic change in Japan

Scholars studying upper echelons have found that executive succession can serve as an important adaptation mechanism. The bulk of these findings, however, derive from market‐based governance settings, which raises an issue of contextual robustness. This study examines this issue by investigating the link between executive succession and strategic change in Japan, a context noted for relatively weak market‐based corporate governance and lack of board independence. We find a greater likelihood of strategic change after non‐routine executive succession, with the extent of change unaffected by firm performance. Routine succession in the case of a powerful prior president leads to less post‐succession strategic change. Copyright © 2014 John Wiley & Sons, Ltd.     

Fiscal Externalities and Efficient Transfers in a Federation

This paper investigates properties of the second best allocation in a fiscal federal system in which both federal tax and intergovernmental grants are involved and the taxation is distortionary. Also, optimal federal grants and tax policies in a decentralized fiscal system are examined. Our major findings are: (i) the second best does not require the equalization of marginal cost of public funds across regions in a conventional form; (ii) matching grants based on either the local tax rates or tax revenues should be introduced to internalize the tax externality; and (iii) once lump-sum and matching grants are optimized, federal tax policy becomes redundant so the optimal fiscal gap is indeterminate.     

The Interdependent Telecommunications Demand and Efficient Price Structure

Rapid growth of mobile telecommunications is a widespread phenomenon in the world. This emerging network is supposed to be closely interdependent with the wire-based network. In this paper, after reviewing the Japanese regulatory scheme for mobile telecommunications, we investigate the interdependency by estimating both price elasticities and network effects among them. The own-price elasticities are relatively high, and the substitution, as well as the network, effect is substantial. Moreover, the resulting super-elasticities of mobile telephones are consistently larger than those of fixed-line telephones. These findings indicate that the Ramsey optimal price structure may have required a lower price–cost margin of mobile networks, relative to that of fixed-line networks. It should be noted, however, that the difference in super-elasticity between the two networks seems to have substantially diminished during our sample period. J. Japan. Int. Econ., December 1999, 13(4), pp. 311–335. Shinshu University, Nagano 390-8621, Japan and InfoCom Research Institute, Tokyo 107-0062, Japan. Copyright 1999 Academic Press.Journal of Economic Literature Classification Numbers: D12, L43, L96.     

Non-cooperative bargaining and the incomplete informational core

In an exchange economy with incomplete information, the signaling core is defined by the set of state-contingent allocations to which no coalitions object under informational leakage through proposals by informed agents. An objection underlying the signaling core is supported by a sequential equilibrium of an ultimatum bargaining game with an informed proposer. We prove that a stationary sequential equilibrium allocation in a Rubinstein-type sequential bargaining game with a restart rule belongs to the signaling core if the belief of players satisfies a self-selection property.     

What does futures market interest tell us about the macroeconomy and asset prices?

Economists have traditionally viewed futures prices as fully informative about future economic activity and asset prices. We argue that open interest could be more informative than futures prices in the presence of hedging demand and limited risk absorption capacity in futures markets. We find that movements in open interest are highly pro-cyclical, correlated with both macroeconomic activity and movements in asset prices. Movements in commodity market interest predict commodity returns, bond returns, and movements in the short rate even after controlling for other known predictors. To a lesser degree, movements in open interest predict returns in currency, bond, and stock markets.     

The effect of foreign aid on corruption: A quantile regression approach

This paper investigates the effect of foreign aid on corruption using a quantile regression method. We show that foreign aid generally reduces corruption, and its reduction effect is greater in less corrupt countries. Moreover, this effect is different by different donor countries.