Wage contingencies,the pattern of negotiation and aggregate implications of alternative contract structures

A model of long-term contracts is developed in which the choice of the negotiation pattern is endogenized. When disturbances to the economy derive primarily from relative shocks, staggered negotiation is optimal because adjustments made by negotiating agents transmit desirable employment effects into sectors that are looked into previously negotiated contracts. The price level acts as the transmission mechanism. Indexation of wages to the price level enhances the benefits of staggered negotiation because the sector-specific information revealed by the price level acts as a substitute for explicit inclusion in the contract of sector-specific information. The degree of persistence and the level of variation in aggregate output and employment, measures which are commonly used in comparing the merits of synchronized versus staggered regimes, are shown to be inappropriate criteria upon which to judge the optimality of the negotiation pattern.     

Why do countries matter so much for corporate governance?

This paper develops and tests a model of how country characteristics, such as legal protections for minority investors and the level of economic and financial development, influence firms’ costs and benefits in implementing measures to improve their own governance and transparency. We find that country characteristics explain much more of the variance in governance ratings (ranging from 39% to 73%) than observable firm characteristics (ranging from 4% to 22%). Further, we show that firm characteristics explain almost none of the variation in governance ratings in less-developed countries and that access to global capital markets sharpens firms’ incentives for better governance.     

Strategic human resource management and firm effectiveness in industries experiencing decline

Unstable economic conditions, in conjunction with other external and internal influences, have prompted attempts to understand the nature of organizational decline. While a number of issues have been carefully considered in recent theory and research, little effort has been made to consider the implications of human resource management practices for firms in declining industries. The present study examined human resource practices in three industries that experienced decline, and investigated the relationship of organizational performance with effective human resource management.     

All change? Prospects for the UK economy under “New” Labour

The opinion polls suggest Labour will win the General Election and form the next government. In this article, Andrew Sentance discusses how the UK economy might fare under "New" Labour. He argues that there is likely to be a considerable degree of continuity in macroeconomic policy, but more change in approach to supply-side issues. He highlights four key policy challenges which Labour would face at an early stage if elected and which will give an indication of how policies developed in opposition will be applied in practice.     

Art of the Deal: The Merger Settlement Process at the Federal Trade Commission

This paper models the modern merger review process in which an enforcement agency, here the Federal Trade Commission (FTC), interacts with the acquiring firm to determine the outcome of antitrust regulation. Our empirical implementation of a game theoretic analysis tests whether decisions are driven by the costs and benefits of the proposed enforcement initiative as well as whether firms' responses are colored by competitive and institutional considerations. With respect to firms, the results suggest that mergers are driven by the opportunity to capture efficiencies, In contrast, the structural (anticompetitive) characteristics of mergers do not seem to impact firms' litigation decisions. Firms, however, are deterred from fighting the FTC by the potential negative impact on their reputations. In addition, “hostage effects” associated with the size of the noncontroversial portion of acquisitions held up by the FTC's competitive concerns also affect firm decisions.