ROLE OF VOLUNTARY PROGRAMS IN AGRICULTURAL NONPOINT POLLUTION POLICY

Voluntary programs' effectiveness in reducing agricultural pollution is under debate in the professional literature, within government regulatory agencies, and among legislators. In general, non-farm business owners bear little or none of the costs of environmental degradation that their business activities cause. However, farmers who reside on the farm may bear some of the costs associated with using chemicals. As a result, voluntary programs encouraging adoption of management practices that simultaneously improve on farm and off-farm environmental quality may not require subsidizing farmers for their full loss in profits. However, farmers likely will not adopt regulatory agencies' recommended management practices that do not positively affect on farm environmental quality unless subsidies exceed full adoption costs .     

Trading Patterns and Prices in the Interbank Foreign Exchange Market

The behavior of quote arrivals and bid-ask spreads is examined for continuously recorded deutsche mark-dollar exchange rate data over time, across locations, and by market participants. A pattern in the intraday spread and intensity of market activity over time is uncovered and related to theories of trading patterns. Models for the conditional mean and variance of returns and bid-ask spreads indicate volatility clustering at high frequencies. The proposition that trading intensity has an independent effect on returns volatility is rejected, but holds for spread volatility. Conditional returns volatility is increasing in the size of the spread.     

Tails,Fears, and Risk Premia

We show that the compensation for rare events accounts for a large fraction of the average equity and variance risk premia. Exploiting the special structure of the jump tails and the pricing thereof, we identify and estimate a new Investor Fears index. The index reveals large time‐varying compensation for fears of disasters. Our empirical investigations involve new extreme value theory approximations and high‐frequency intraday data for estimating the expected jump tails under the statistical probability measure, and short maturity out‐of‐the‐money options and new model‐free implied variation measures for estimating the corresponding risk‐neutral expectations.     

Why Don't U.S. Issuers Demand European Fees for IPOs?

We compare fees charged by investment banks for conducting IPOs in the United States and Europe. In recent years, the “7% solution,” as documented by Chen and Ritter (2000) , has become even more prevalent in the United States, and is now the norm for IPOs raising up to $250 million. The same banks dominate both markets, but European IPO fees are roughly three percentage points lower, are much more variable, and have been falling. We review explanations for the gap in spreads and find the evidence consistent with strategic pricing. U.S. issuers could have saved over $1 billion a year by paying European fees.     

Crisis? What Crisis? The Normality of the Current Food Crisis

The 2005–8 food crisis was a shock to political elites, but in some respects the situation was normal. Food policies are failing to respond adequately to the squeeze on land, people, health and environment. Strong evidence of systems failure and stress, termed here New Fundamentals, ought to reframe twenty‐first century food politics and effort. Yet so far, international discourse is too often narrow and technical. The paper suggests that 2005–8 reinforced how the dominant twentieth century productionist policy paradigm is running out of steam. This assumed that producing more food would resolve social problems. Yet distortions in markets, access and culture remain. At national and international levels of governance, despite realization of the enormity of the challenge ahead, there is still a belief in slow incremental change.     

Financial Constraints, Competition, and Hedging in Industry Equilibrium

We analyze the hedging decisions of firms, within an equilibrium setting that allows us to examine how a firm's hedging choice depends on the hedging choices of its competitors. Within this equilibrium some firms hedge while others do not, even though all firms are ex ante identical. The fraction of firms that hedge depends on industry characteristics, such as the number of firms in the industry, the elasticity of demand, and the convexity of production costs. Consistent with prior empirical findings, the model predicts that there is more heterogeneity in the decision to hedge in the most competitive industries.     

Global City Frontiers: Singapore's Hinterland and the Contested Socio‐political Geographies of Bintan,Indonesia

During the 1980s, Singapore's policy‐makers perceived that the continued expansion of the Singapore economy required more spaces and workers beyond the 680‐square‐kilometre territorial limits of the city‐state. While planning to extend these limits through further land reclamation, Singapore also began to foster economic cooperation with regional neighbours, most famously in the form of a so‐called Growth Triangle incorporating proximate areas of Malaysia and Indonesia. The empirical focus of this article is on the tourist enclave developed on the Indonesian island of Bintan, a 45‐minute ferry ride from Singapore. This enclave embodies complex re‐territorializations. We specify how, despite a decade of re‐fashioning zones of Bintan into quasi‐enclaves and the literal and metaphorical cultivation of a tourist haven, other claims on these transfrontier zones resurfaced in the form of resistances and struggles over the terms of access to land and resources. It is argued that the trajectory of Bintan is symptomatic of wider transformations and epitomizes new configurations of sovereignty, urbanity and ‘gated globalism’.     

Report of the Managing Editor

Overall, 2003 was a fair year for the Journal. Importantly, the target of a four‐month average turnaround for submissions has been achieved and further steps have been set in train to reduce lags on papers in the tail of the distribution. Although the JAE slipped in to second place behind the AJAE in 2002 on the Institute of Scientific Information's ranking, the JAE's impact factor was higher than the average for recent years. An initial assessment of the JAE on‐line usage is positive with nearly 9,000 hits being recorded since the service was introduced in July 2002. This activity translates to over 500 hits per month, of which around 12% are downloads of full papers. Future growth of online usage is expected.     

External and Internal Pricing in Multidivisional Firms

Multidivisional firms frequently rely on external market prices in order to value internal transactions across profit centers. This paper examines market‐based transfer pricing when an upstream division has monopoly power in selling a proprietary component both to a downstream division within the same firm and to external customers. When internal transfers are valued at the prevailing market price, the resulting transactions are distorted by double marginalization. The imposition of intracompany discounts will always improve overall firm profits provided the supplying division is capacity constrained. Under certain conditions it is then possible to design discount rules so that the resulting prices and sales quantities are efficient from the corporate perspective. In contrast, the impact of intracompany discounts remains ambiguous when the capacity of the selling division is essentially unlimited. It is then generally impossible to achieve fully efficient outcomes by means of market‐based transfer pricing unless the external market for the component is sufficiently large relative to the internal market.     

The Determinants of Leveraged Buyout Activity: Free Cash Flow vs. Financial Distress Costs

This paper investigates the determinants of leveraged buyout (LBO) activity by comparing firms that have implemented LBOs to those that have not. Consistent with the free cash flow theory, we find that firms that initiate LBOs can be characterized as having a combination of unfavorable investment opportunities (low Tobin's q) and relatively high cash flow. LBO firms also tend to be more diversified than firms which do not undertake LBOs. In addition, firms with high expected costs of financial distress (e.g., those with high research and development expenditures) are less likely to do LBOs.