Growth, inequality, and welfare: comparisons across space and time

We propose and apply several welfare measures that combine averageincome with a measure of inequality to undertake cross-countrycomparisons of aggregate welfare for the 1970 to 2000 period.Our welfare measures, which are based on theoretical and empiricalfindings on the role of inequality in social welfare, drasticallychange the impression of levels of welfare, significantly affectthe welfare ranking of countries in different benchmark years,affect changes in ranking over time, and affect convergencebetween industrialized and developing countries. While the resultsare sensitive to the type of inequality and its presumed effecton welfare, the results are robust to different ways to addresscomparability problems inherent in the inequality data used.     

Portfolio optimization under convex incentive schemes

We consider the terminal wealth utility maximization problem from the point of view of a portfolio manager who is paid by an incentive scheme, which is given as a convex function g of the terminal wealth. The manager’s own utility function U is assumed to be smooth and strictly concave; however, the resulting utility function U°g fails to be concave. As a consequence, the problem considered here does not fit into the classical portfolio optimization theory. Using duality theory, we prove wealth-independent existence and uniqueness of the optimal portfolio in general (incomplete) semimartingale markets as long as the unique optimizer of the dual problem has a continuous law. In many cases, this existence and uniqueness result is independent of the incentive scheme and depends only on the structure of the set of equivalent local martingale measures. As examples, we discuss (complete) one-dimensional models as well as (incomplete) lognormal mixture and popular stochastic volatility models. We also provide a detailed analysis of the case where the unique optimizer of the dual problem does not have a continuous law, leading to optimization problems whose solvability by duality methods depends on the initial wealth of the investor.     

Profession and residency matter: Farmers' preferences for farmland price regulation in Germany

Local farmers' preferences for farmland price regulations in competitive markets have not been studied systematically. We investigate farmers' preferences in Germany, where recent price increases have driven calls for regulatory changes. The results of an online vignette experiment show that farmers prefer stricter regulation against the admission of non-local (but even more so of non-farmer) land buyers. Our analysis also shows that local farmers' preferences are motivated primarily by self-interest rather than adherence to principles. We conclude that most farmers prefer price regulations that consider their particular concerns about increasing competition in Germany.     

Idiosyncratic risk and the cost of capital: the case of electricity networks

We analyze the treatment and impact of idiosyncratic or firm-specific risk in regulation. Regulatory authorities regularly ignore firm-specific characteristics, such as size or asset ages, implying different risk exposure in incentive regulation. In contrast, it is common to apply only a single benchmark, the weighted average cost of capital, uniformly to all firms. This will lead to implicit discrimination. We combine models of firm-specific risk, liquidity management and regulatory rate setting to investigate impacts on capital costs. We focus on the example of the impact of component failures for electricity network operators. In a simulation model for Germany, we find that capital costs increase by \(\sim \) 0.2 to 3.0 % points depending on the size of the firm (in the range of 3–40 % of total cost of capital). Regulation of monopolistic bottlenecks should take these risks into account to avoid implicit discrimination.     

Corporate social responsibility: Doing well by doing good

Saving the rain forest from yet another palm oil plantation would certainly garner a company favorable attention from environmentalists, but how would its shareholders react? In this article, we show that by strategically practicing corporate social responsibility (CSR), a company can ‘do well by doing good’; in other words, it can make a profit and make the world a better place at the same time. CSR is regarded as voluntary corporate commitment to exceed the explicit and implicit obligations imposed on a company by society's expectations of conventional corporate behavior. Hence, CSR is a way of promoting social trends in order to enhance society's basic order, which we define as consisting of obligations that cover both the legal framework and social conventions. Due to globalization, companies are now less constrained by society's basic order than they have been in the past. Because different countries have different laws and standards, there are more ways to get away with less than ideal behavior in the quest for greater and greater profits. Nearly everyone agrees that this is not a good thing, but what can be done? Via this article, we offer an understanding of CSR that could be the answer. Herein, we contend that practicing CSR is not altruistic do-gooding, but rather a way for both companies and society to prosper. This is especially true when CSR is conceived of as a long-range plan of action.     

The Effectiveness of Government Promotion of Advanced Manufacturing Technologies (AMT): An Economic Analysis Based on Swiss Micro Data

This paper describes the approach applied and the results of an evaluation of the effects of the Swiss government programme to promote the diffusion of Advanced Manufacturing Technologies (AMT) from 1990 to 1996. The method used is based on specifying and econometrically estimating with firm data simultaneously an adoption equation which, besides the main explanatory variables as proposed by the theory of technology diffusion, includes a policy variable, and a policy equation with a set of firm characteristics and an adoption variable as regressors. The results are consistent with a positive impact of promotion on adoption of AMT, particularly a more intensive adoption of AMT for firms which did not use AMT when the programme started.     

Expanding Insights on the Diversity Climate–Performance Link: The Role of Workgroup Discrimination and Group Size

The present study extends knowledge of the performance consequences of workgroup diversity climate. Building upon Kopelman, Brief, and Guzzo's ( 1990 ) climate model of productivity, we introduce workgroup discrimination as a behavioral mediator that explains the positive effects of diversity climate on workgroup performance. In addition, we investigate group size as a moderator upon which this mediated relationship depends. We test these moderated‐mediated propositions using a split‐sample design and data from 248 military workgroups comprising 8,707 respondents. Findings from structural equation modeling reveal that diversity climate is consistently positively related to workgroup performance and that this relationship is mediated by discrimination. Results yield a pattern of moderated mediation, in that the indirect relationship between workgroup diversity climate (through perceptions of workgroup discrimination) and group performance was more pronounced in larger than in smaller workgroups. These results illustrate that discrimination and group size represent key factors in determining how a diversity climate is associated with group performance and, thus, have significant implications for research and practice. © 2014 Wiley Periodicals, Inc.     

Chasing assets abroad: Ideas for more effective asset tracing and recovery in cross-border insolvency

Asset tracing and recovery (ATR) has become highly challenging in the digital age, where, with the touch of computer keys, assets can be shifted through multiple jurisdictions within minutes, creating significant challenges for recovering value. While many countries have tools to enable ATR, these tools differ from jurisdiction to jurisdiction and often are not recognized across borders in a manner that keeps pace with the need for rapid ATR, particularly during insolvency. This article takes stock of the myriad ATR tools available in domestic systems to discern parameters of key ATR tools that have common objectives, features, and safeguards, and that can form the basis of more standardized understanding and application of such tools. It also explores the extent to which cross-border ATR is aided by the leading frameworks for global, cross-border insolvency—the UNCITRAL Model Laws on Cross-Border Insolvency, insolvency-related judgments, and enterprise groups—in the process, revealing gaps and uncertainties. Such uncertainties can result in losses to stakeholders affected by insolvencies of different business sizes but can be particularly detrimental in small and medium enterprise (SME) cross-border insolvencies where there are typically more limited resources to chase assets. Against this backdrop, this article proposes ideas for the enhancement of the cross-border insolvency framework, to allow for effective cross-border access to information held abroad, the freezing of assets in cross-border cases, and the cross-border recovery of assets.     

Unravelling the JPMorgan spoofing case using particle physics visualization methods

On 29 September 2020, JPMorgan was ordered to pay a settlement of $920.2 million for spoofing the metals and Treasury futures markets from 2008 to 2016. We examine these cases using a visualization method developed in particle physics (CERN) and the messages that the exchange receives about market activity rather than time-based snapshots. This approach allows to examine multiple indicators related to market manipulation and complement existing research methods, thereby enhancing the identification and understanding of, as well as the motivation for, market manipulation. In the JPMorgan cases, we offer an alternative motivation for spoofing than moving the price.