The economic contribution of information technology: Towards comparative and user studies

By what process does technical change in information technology (IT) increase economic welfare? How does this process result in increases in welfare at different rates in different countries and regions? This paper considers existing literature on measuring the economic benefits from information technology, emphasizing comparative issues and user studies. Following Bresnahan and Trajtenberg (1995), we call the invention associated with customizing the technological frontier to the unique needs of users in particular regions “co-invention”, placing emphasis on understanding how its determinants vary across users in different regions. We develop a framework for understanding the processes behind value-creation, demand-side heterogeneity and co-inventive activity. Then we discuss why these processes make measuring the welfare benefits from advances in information technology particularly difficult. We highlight the metrics currently available for measuring the economic pay-out of the IT revolution and identify which of these vary meaningfully in a comparative regional context. Finally, we finish with observations about further areas of research.     

The Effect of Incentive regulation on Infrastructure Modernization: Local Exchange Companies' Deployment of Digital Technology

This study examines the investment patterns of all large local exchange telephone companies in the United States over time. It identifies how different regulatoy environments have influenced the recent historical pattern of investment in modern infrastructure equipment. It focuses exclusively on the postdivestiture experience of local telephone exchange companies (LECs). It examines the growth of fiber-optic deployment and of complementary equipment associated with the modernization of today's information infrastructure. The study estimates the influence of different regulatory structures on infrastructure deployment by LECs. The study is unique in that if relates individual LEC investment patterns to LEC-specific regulatory, demographic, and economic characteristics. Thus, it isolates the contribution of state regulatory policies from that of other demographic and economic factors in the determination of infrastructure deployment at the state LEC rather than at the corporate level. Its main findings are as follows: First, price regulation (and, in particular, price caps) is a more potent regulatory mechanism than the standard earnings sharing scheme. Second, when associated with an earnings sharing scheme, price regulation is less effective in triggering infrastructure deployment than when it is implemented by itself. These results raise questions about the effectiveness of a popular regulatory instrument-earnings sharing schemes-and highlight the effectiveness of generic price-cap regulation. These results have implications for the design of regulatory policy at both the state and federal levels. In particular, given the importance currently being placed on the development of the information superhighway, regulatory emphasis should be focused more on price regulation than on regulating profits.     

Economic and ecosystem impacts of illegal,unregulated and unreported (IUU) fishing in Northern Australia*

Illegal foreign fishing for sharks in Northern Australia has increased substantially over the last two decades. This has likely resulted in declines of shark species abundance, with potentially far‐reaching impacts on the ecosystem. This, in turn, could also have indirectly affected the legal prawn, shark, and other fisheries in the region through changed predation patterns and direct removal of targets. The prawn fishery in Northern Australia is currently one of Australia's most valuable fisheries. Sharks themselves are also a major target species by many Queensland and Northern Territory fishers. In this article, an ecosystem model developed in the Ecopath with Ecosim framework is used to estimate the impacts of illegal shark fishing on the remaining system, and the potential economic impacts on commercial fisheries in the region.     

Do Economists Recognize an Opportunity Cost When They See One? A Dismal Performance or an Arbitrary Concept?

2005 asked 199 professional economists a multiple‐choice question about opportunity cost. Given that only 21.6% answered “correctly,” they conclude that professional understanding of the concept is “dismal.” We challenge this critique of the profession. Specifically, we allow for alternative opportunity cost accounting methodologies—one of which is derived from the term's definition as found in Ferraro and Taylor— and rely on the conventional relationship between willingness to pay and substitute goods to demonstrate that every answer to the multiple‐choice question is defensible. The Ferraro and Taylor survey question suggests difficulties in framing an opportunity cost accounting question, as well as a lack of coordination in opportunity cost accounting methodology. In scope and logic, we conclude that the survey question does not, however, succeed in measuring professional understanding of opportunity cost. A discussion follows as to the concept's appropriate role in the classroom.     

为什么鼓励更多人创业是一项拙劣的公共政策？

政策制定者们常常认为，创建更多新公司将改变经济萧条的地区，促进创新，创造就业。这种看法令人质疑，因为新建公司不具创新能力，创造不了多少就业机会，也生产不了多少财富。通过创业获得经济增长和创造就业机会不是一种数字游戏，它是要鼓励高品质、高增长公司的形成。政策制定者应停止资助典型新公司的创建，把重点放在有增长潜力的公司上。虽然政府官员不能“挑选赢家”，他们还是能够甄别出无力创造就业和拉动经济增长的新建公司。通过减少对这些低能力公司的创建激励，政策制定者们能够改善新生企业的平均绩效。     

The information environment and the ability of logit-based financial statement analysis to predict abnormal returns

Holthausen and Larcker (1992) show that logit-based financial statement analysis can predict abnormal returns on investments in equity securities. We argue that if this success of financial statement analysis is due to market inefficiency, then the procedure should work better for small firms than larger firms, where firm-size proxies for the amount of information processing in the firm's information environment. We do not find greater predictable hedge portfolio returns associated with the analysis of small-firm financial statements. Thus, our results conflict with the market inefficiency explanation. Our results are more consistent with financial statement analysis providing summary information about expected returns not subsumed by other risk proxies and not accounted for in the researcher's definition of abnormal returns.     

Environmental Tax Reform and Government Expenditure

In a simple model of production with an imported polluting resource and involuntary unemployment we consider the effects of energy taxes, holding the real wage constant, under differing levels of government expenditure and externalities. Simulations reveal conflict between the goals of net welfare, employment and profitability over much of the relevant parameter range, thus extending the usual discussion of multiple dividends. However, potential net welfare and employment gains are substantial for plausible parameters. The optimal energy tax declines as government expenditure rises and is less than the Pigovian tax for plausible externalities.     

The Link Between Management Behavior and Ethical Philosophy in the Wake of the Enron Convictions

The current linkages between ethical theory and management behavior are investigated in the wake of the much-publicized convictions of Enron executives. The vignettes used in this investigation represent ethical dilemmas in the areas of coercion and control, conflict of interest, physical environment, and personal integrity. Since 2003, and after the successful prosecution of Enron executives, the link between ethical philosophy and management behavior has shifted somewhat dramatically. There has been a significant change in the rational basis for managerial decision making. In 2003, even after the Enron scandal was publicized, practitioners still relied heavily on both act and rule utilitarian ethical philosophies when making business decisions. Currently, the majority of respondents are likely to select ethically appropriate actions based on either rule utilitarian or rights rationales. It appears that ethical behavior is now more in line with ethical rhetoric, which may positively impact the ethical climate of business decision making. Apparently, business scandals of the past did not really impact actual ethical behavior much, but the high-profile prosecutions, convictions, and jail sentences may have impressed on managers that now is the time to incorporate ethics into business decisions.     

A Two-Factor Model for Low Interest Rate Regimes

This paper derives a two-factor model for the term structure of interest rates that segments the yield curve in a natural way. The first factor involves modelling a non-negative short rate process that primarily determines the early part of the yield curve and is obtained as a truncated Gaussian short rate. The second factor mainly influences the later part of the yield curve via the market index. The market index proxies the growth optimal portfolio (GOP) and is modelled as a squared Bessel process of dimension four. Although this setup can be applied to any interest rate environment, this study focuses on the difficult but important case where the short rate stays close to zero for a prolonged period of time. For the proposed model, an equivalent risk neutral martingale measure is neither possible nor required. Hence we use the benchmark approach where the GOP is chosen as numeraire. Fair derivative prices are then calculated via conditional expectations under the real world probability measure. Using this methodology we derive pricing functions for zero coupon bonds and options on zero coupon bonds. The proposed model naturally generates yield curve shapes commonly observed in the market. More importantly, the model replicates the key features of the interest rate cap market for economies with low interest rate regimes. In particular, the implied volatility term structure displays a consistent downward slope from extremely high levels of volatility together with a distinct negative skew. 1991 Mathematics Subject Classification: primary 90A12; secondary 60G30; 62P20 JEL Classification: G10, G13