Nash implementation through elementary mechanisms in economic environments

This paper identifies a class of mechanisms, called elementary mechanisms, which are (in a precisely defined sense) the “simplest” mechanisms that can implement efficient outcomes in economic environments. The class of social choice correspondences that can be implemented by elementary mechanisms is completely characterized in a variety of different economic contexts.     

The whip and the Bible: Punishment versus internalization

A variety of experimental and empirical research indicate that prosocial behavior is important for economic success. There are two sources of prosocial behavior: incentives and preferences. The latter, the willingness of individuals to “do their bit” for the group, we refer to as internalization, because we view it as something that a group can influence by appropriate investment. This implies that there is a trade-off between using incentives and internalization to encourage prosocial behavior. By examining this trade-off we shed light on the connection between social norms observed inside the laboratory and those observed outside in the field. For example, we show that a higher value of cooperation outside the laboratory may lower the use of incentives inside the laboratory even as it increases their usage outside. As an application we show that the model calibrated to experimental data makes reasonable out-of-sample quantitative forecasts.     

Education and Public Policy

This article surveys the literature on education as a matter of public policy. We present international comparisons of expenditure on education and then discuss the contribution of education to economic growth, distinguishing between growth accounting and regression approaches, but concluding that the picture is still confused. We assess the risky nature of investment in higher education and also discuss the link between educational experience and social class. We show that this, when studied in aggregate, accounts for less than half of the persistence of earnings between fathers and sons but it nevertheless does a good job of relating fathers’ and sons’ occupations. Finally, we look at the link between education and earnings in the UK. For most subjects, the private return to university education has held at over 15 per cent p.a. despite the introduction of fees. However, some subjects offer a negative return.     

A note on the exchange market pressure: the Korean experience, 1980–1987

This paper applies the exchange market pressure (EMP) model to Korea under a managed floating exchange rate. We show that the EMP model is superior to one concentrating solely on foreign reserve or exchange rate changes. Given that the balance of paymnets in Korea experienced a drastic turn to surplus during the estimated period, we checked the stability of the coefficients. The results show that the coefficients have remained stable.     

Trade Openness and Labor Force Participation in Africa: The Role of Political Institutions*

Trade liberalization is usually expected to lead to greater economic activity including higher labor force participation rates. Using data from forty‐eight Sub‐Saharan African countries over the period 1985–2012, we explore the impact of trade openness on labor force participation rates (LFPR), and examine how political institutions such as democracy, political rights, and civil liberties can play a role in driving this relationship in the above group of low‐income countries. The estimated marginal impact of openness on LFPR shows that LFPR is increasing with the level of institutional quality. In particular, political institutions are critical in enhancing the benefit from openness. Our conclusions are similar for male and female participation rates although the magnitudes of the former are higher, thus confirming that improving institutions can generate greater labor market benefits from trade in poor countries.     

Bus transportation crews planning by goal programming

In the present paper, an integer goal programming model formulation is presented for the bus transportation crews planning to find an optimal schedule in which each crew is assigned two days off (consecutive or non-consecutive) per week and several goals like upper and lower limits on the total number of crews having consecutive and/or non-consecutive days off on each day, lower limit on the number of crews having consecutive days off on the particular pairs of consecutive days, and minimization of the number of crews having non-consecutive days off, are taken into consideration. The model is demonstrated by a numerical example.     

Income distribution and income dynamics in the United Kingdom

In this paper, we propose a model of income dynamics which takes account of mobility both within and between jobs. The model is a hybrid of the mover‐stayer model of income dynamics and a geometric random walk. In any period, individuals face a discrete probability of ‘moving’, in which case their income is a random drawn from a stationary recurrent distribution. Otherwise, they ‘stay’ and incomes follow a geometric random walk. The model is estimated on income transition data for the United Kingdom from the British Household Panel Survey (BHPS) and provides a good explanation of observed non‐linearities in income dynamics. The steady‐state distribution of the model provides a good fit for the observed, cross‐sectional distribution of earnings. We also evaluate the impact of tertiary education on income transitions and on the long‐run distribution of incomes. Copyright © 2001 John Wiley & Sons, Ltd.     

Are Good Performers Bad Acquirers?

We examine how the market reacts to announcements of mergers and acquisitions (M&As) by well‐performing acquirers and evaluate the results in light of three hypotheses: 1) managerial ability, 2) empire building, and 3) chief executive officer (CEO) overconfidence. Our results indicate that an empire‐building motive drives the relationship between past superior operating performance and M&A announcements. Long‐term operating performance drops significantly for acquiring firms with past superior operating performance. Our evidence also indicates that the presence of insider directors helps to alleviate the negative perception of acquisitions made by firms with better operating performance or empire‐building CEOs.     

The Interpretation of Information and Corporate Disclosure Strategies

This paper analyzes a setting in which a firm's manager can credibly disclose facts, but not their valuation implications. Consequently, he is uncertain as to how those disclosed facts will be interpreted by investors. Introducing such uncertainty affects the manager's disclosure strategy in two important ways. First, it becomes a function of the market's prior valuation of the firm since that valuation provides a clue as to how future disclosures are likely to be interpreted by investors. Second, the disclosure strategy is no longer characterized, in general, by a single good news/bad news partition of the manager's private information.