A reconsideration of the link between vertical externality and managerial incentives

Previous research revealed that the strategic role of delegation contracts disappears if two quantity‐setting firms outsource input production to a monopolistic supplier. I show that this role is restored if the assumption of a downstream duopoly is relaxed. Thus, delegation contracts allow downstream profit‐maximizing owners to commit their firms to a behavior that differs from their preferences. This behavior varies nonmonotonically with the number of firms in the downstream market. Corresponding deviations from profit maximization are larger if the upstream monopolist makes a price precommitment. But little to no deviation occurs if the number of firms is large.     

Is ex‐ante ex‐post analysis irrelevant to Keynes's theory of employment?

Ex‐ante ex‐post analysis has become a standard tool in macroeconomics. Yet Keynes dismissed it. We argue that Keynes's dismissal of ex‐ante ex‐post analysis is not an oddity but an indication of the originality of his theory of employment compared to standard macroeconomics. First, the principle of effective demand does not amount to a process that determines employment and income at the point of intersection of the traditionally defined ex ante supply and demand functions. Second, the finance motive allowed Keynes to confirm the identity of aggregate supply and demand already asserted in The General Theory. This latter conclusion is puzzling, however, since the principle of effective demand presupposes the possibility of a discrepancy between supply and demand. We suggest that Keynes's theory of employment is linked to a theory of income distribution whereby profits are a redistributed share of factor income which is transferred to firms when prices exceed factor costs. The identity and the equilibrium condition then relate to separate measurements of income and output, factor cost and prices.     

The long-run impact of human capital on innovation and economic development in the regions of Europe

ABSTRACT

Human capital is supposed to be an important factor for innovation and economic development. However, the long-run impact of human capital on current innovation and economic development is still a black box, in particular at the regional level. Therefore, this paper makes the link between the past and the present. Using a large new dataset on regional human capital and other factors in the 19^th and 20^th century, we find that past regional human capital is a key factor explaining current regional disparities in innovation and economic development.     

Cheating,emotions, and rationality: an experiment on tax evasion

The economics-of-crime approach usually ignores the emotional cost and benefit of cheating. In this paper, we investigate the relationships between emotions, deception, and rational decision-making by means of an experiment on tax evasion. Emotions are measured by skin conductance responses and self-reports. We show that the intensity of anticipated and anticipatory emotions before reporting income positively correlates with both the decision to cheat and the proportion of evaded income. The experienced emotional arousal after an audit increases with the monetary sanctions and the arousal is even stronger when the evader’s picture is publicly displayed. We also find that the risk of a public exposure of deception deters evasion whereas the amount of fines encourages evasion. These results suggest that an audit policy that strengthens the emotional dimension of cheating favors compliance.     

Causality Between Corporate Social Performance and Financial Performance: Evidence from Canadian Firms

This study assesses the causal relationship between corporate social performance (CSP) and financial performance (FP). We perform our empirical analyses on a sample of 179 publicly held Canadian firms and use the measures of CSP provided by Canadian Social Investment Database for the years 2004 and 2005. Using the “Granger causality” approach, we find no significant relationship between a composite measure of a firm’s CSP and FP, except for market returns. However, using individual measures of CSP, we find a robust significant negative impact of the environmental dimension of CSP and three measures of FP, namely return on assets, return on equity, and market returns. This latter finding is consistent, at least in the short run, with the trade-off hypothesis and, in part, with the negative synergy hypothesis which states that socially responsible firms experience lower profits and reduced shareholder wealth, which in turn limits the socially responsible investments.     

Two copy testing techniques: The cloze procedure and the cognitive complexity test

The theory behind two copy testing techniques—the cloze procedure and the cognitive complexity text—is reviewed; and three hypotheses are developed for testing. These two techniques work especially well when used together as they provide a way to match message properties with the audience's abilities. In a discriminant analysis setting, support is found for all three hypotheses, and a substantial portion of the variance in the criterion variable—advertising recall—is taken into account. The results of predictions to a validation sample are also encouraging.     

The regulation of audiovisual content: quotas and conflicting objectives

Governments use a range of instruments to influence television content. The paper finds that under plausible conditions, content measures ostensibly designed to increase the production of certain programs may, paradoxically, reduce the size of the audience watching them. As well, quotas seemingly intended to boost the audience of certain programs, may in fact reduce their production and lower the number of viewers of these programs.      

Budgetary governance and accountability in public sector organisations: An institutional and critical realism approach

This paper analyses the impact of the institutionalisation of governance and budgetary policies on the accountability of organisational actors from an institutional and critical realism perspective. The study extends the framework by Burns and Scapens (2000) to critical realism. Findings from field studies conducted in two public hospital districts in Finland show two institutions of budgetary governance: the political and the technical. Accountability practices depend on how the institutionalised policies have reduced or increased the gaps between the real, the actual and the empirical domains of reality of the organisational actors involved and the governance policy that prevails at a given domain of reality. The use of budgetary information as a tool of governance and accountability in the empirical field of the study cannot be taken for granted.     

Incentives and incomplete information

The problem of incentives for correct revelation in a collective decision model is presented as a game with incomplete information. Two approaches to incomplete information are used, a first where the individual beliefs are not introduced and a second where they are. In the first approach it is recalled that the mechanisms for which the solution to the incentive problem is in dominant strategies lead in general to a budgetary problem for the central agency. For these mechanisms a uniqueness property is demonstrated. In the second approach it is shown that if a compatibility condition is imposed on the individual beliefs and if a Bayesian solution is given to the incentive problem, then it is possible to avoid the budgetary problem.     

AN ASSESSMENT OF THE RISK AND RETURN OF FRENCH COMMON STOCKS

In this paper the relationship is examined between the average return and the risk of a sample of 144 French common stocks which traded continuously over the decade 1969–1979. Although it was found that a negative relationship existed between average return and systematic risk, sufficient evidence could not be gathered to reject the hypothesis that the pricing of French common stocks conforms to the Capital Asset Pricing Model. The nature and implications of the observed negative risk-return trade-off are discussed.