Growth promoting policies,distribution, and the balance of payments

This paper studies the consequences of growth promoting policies for income distribution, aggregate savings, and the balance of payments in a small open economy. We focus on the case of a reduction in capital income taxation. Then the traditional OLG model, which emphasizes the inter-generational distribution, predicts that both investment and consumption are boosted. It is obvious then that the trade balance deteriorates. However, we show that this result is no longer robust if one allows for heterogeneity of agents within each generation. Then the intra-generational distribution effect, which implies a negative relationship between the share of capital income and aggregate consumption, may cause consumption to decline, and the trade balance to improve. This effect concurs with the classical, or post-Keynesian view on the relationship between distribution and savings. This post-Keynesian effect is, however, important for the short run only; the long-term result for the trade balance is not essentially changed by allowing for intra-generational heterogeneity.     

Endogeneity in European money demand

European wide monetary aggregates constructed from pre-unification data cannot be used as evidence that money demand in the euro area is stable. To overcome the Lucas critique, we apply the standard foreign exchange rate model. Since the uncoordinated country specific money supply system is abolished, the increased comovement between local monetary aggregates leaves little room for a free ride on the law of large numbers. Current monetary policy decisions must be based on untested relations, and given ‘the long and variable lags’, we conclude that the road towards monetary stability is a non-activist steady money supply policy.     

Heavy tails of OLS

Suppose the tails of the noise distribution in a regression exhibit power law behavior. Then the distribution of the OLS regression estimator inherits this tail behavior. This is relevant for regressions involving financial data. We derive explicit finite sample expressions for the tail probabilities of the distribution of the OLS estimator. These are useful for inference. Simulations for medium sized samples reveal considerable deviations of the coefficient estimates from their true values, in line with our theoretical formulas. The formulas provide a benchmark for judging the observed highly variable cross country estimates of the expectations coefficient in yield curve regressions.     

Goal congruence: fitting international assignment into employee careers

This research investigates how the quality of the relationship between sending supervisors and expatriates is related to turnover and performance. Utilizing goal congruence and leader–member exchange (LMX) theories, it is hypothesized that the quality of the relationship between sending supervisors and expatriates mediates goal congruence and the two outcome variables: performance and turnover intentions. The goal examined is the degree to which the expatriation fits into expatriates' career paths at the firm. Regression analysis is used to test the hypotheses with a sample of 44 matched sending supervisor–expatriate dyads. Findings indicate that LMX mediates the relationship between goal congruence and performance. Furthermore, goal congruence has a direct negative relationship with turnover intentions. These results suggest that sending supervisors significantly influence the success of expatriate assignments.     

An oligopoly model of free banking: Theory and tests

Summary The paper demonstrates that in an environment of free banking where some agents have imperfect information regarding the circulation and debasement rates of alternative money suppliers, the equilibrium supply of money involves mixed strategies. It follows that the circulation and debasement rates are intrinsically stochastic, but that their averages are below the rates set by a monopoly bank. Empirical tests reveal that these predictions are consistent with the free banking era of the United States. The paper is also relevant for the discussion about the future monetary union in the EC. We are grateful to J. Carlson, D. Jansen, R. van der Ploeg and the referees for their stimulating comments, to L.T. Gordon of the Krannert Economics Library for providing the data, and to J.G. Song for his able computational assistance.     

Growth Intentions and Board Composition in High‐Growth Firms

This paper examines the influence of board composition on growth intentions of high‐growth firms. We hypothesize that gender diversity and a high proportion of independent directors on the board will reduce a firm's growth intentions, whereas founder duality will increase a firm's growth intentions. Using survey data from 773 high‐growth Norwegian firms, we find that gender diversity has a negative effect on growth intentions. A high proportion of independent directors do not facilitate further growth in high‐growth firms. Furthermore, our results indicate that the founder's presence in the decision‐making group increases a firm's growth intentions.