Well-intended policies

Market failures provide a rationale for policy intervention. But policies are often hard to alter once in place. We argue that this inertia can result in well-intended policies having sizable negative long-run effects on aggregate output and productivity. In our theory, financial frictions provide a rationale for providing subsidized credit to productive entrepreneurs to alleviate the credit constraints they face. In the short run, such targeted subsidies have the intended effect and raise aggregate output and productivity. In the long run, however, individual productivities mean-revert while individual-specific subsidies remain fixed. As a result, entry into entrepreneurship is distorted: The subsidies prop up entrepreneurs that were formerly productive but are now unproductive, while impeding the entry of newly productive individuals. Therefore aggregate output and productivity are depressed. Our theory provides an explanation for two empirical observations on developing countries: idiosyncratic distortions that disproportionately affect productive establishments, and temporary growth miracles followed by growth failures.     

How do future business leaders view globalization?

Recent antiglobalization protests reveal a wide divide between the elites and the public in terms of how they view globalization. Therefore, it seems important to know the attitude toward globalization held by future business leaders, who are being educated currently and who will shape the global economy in the future. We find that college students, albeit at a young age, hold a substantially more positive view toward globalization when compared with the general public. Business majors and students with white‐collar parents are especially likely to have such a positive attitude. The implications of these findings for managers and management educators are discussed. © 2008 Wiley Periodicals, Inc.     

Circular domains

I introduce the notion of circular domains and prove that on any circular domain there is no strategy-proof and nondictatorial social choice function. Moreover, I show that on any proper subset of a minimal circular domain, there exists a group strategy-proof and essential social choice function. These results together detect the minimal size of the domains over which the incompatibility arises with respect to pairs of democratic-incentive requirements (nondictatorial, strategy-proof) and (essential, group strategy-proof).     

The impact of incentive regulation on productivity in the US telecommunications industry: A stochastic frontier approach

This paper investigates whether the substitution of price cap regulation (PCR) and other forms of incentive regulation for traditional rate of return regulation (RRR) has had a measurable effect on productivity growth in the US telecommunications industry. A stochastic frontier approach is employed to compute the efficiency change, technological progress, and productivity growth for 25 LECs over the 1988-1998 time periods. By examining the relationship between the change in productivity growth and regulatory regime variables and other control variables, we find that PCR has a significant and positive effect, both in contemporaneous and lagged specifications.     

Heterogeneous effects of different factors on global ICT adoption

Numerous studies focus on the analysis of the effects of different factors on global information and communication technology (ICT) adoption. Due to the limitations of the least squares method in showing the impact of the estimated coefficients on the mean, this study applies quantile regression to examine the heterogeneous effects of various factors on global ICT adoption. This study finds that the impacts on the tail quantiles can be very different from the impacts on the conditional means. The empirical results show that the effects at different quantile levels are very different from those at their counterpart conditional means. We also provide relevant explanations for the effects.     

Voluntary Quality Disclosure under Price‐Signaling Competition

We analyze an oligopolistic competition with differentiated products and qualities. The quality of a product is not known to consumers. Each firm can make an imperfect disclosure of its product quality before engaging in price‐signaling competition. There are two regimes for separating equilibrium in our model depending on the parameters. Our analysis reveals that, in one of the separating regimes, price signaling leads to intense price competition between the firms under which not only the high‐quality firm but also the low‐quality firm chooses to disclose its product quality to soften the price competition. Copyright © 2011 John Wiley & Sons, Ltd.     

Interconnection among academic journal websites: multilateral versus bilateral interconnection

Electronic academic journal websites provide text and data mining (and linking) services. Fully realizing the benefit of these services requires interconnection among websites. We perform a comparison between multilateral interconnection through an open platform and bilateral interconnection, and find that publishers are fully interconnected in the former regime whereas they are often partially interconnected in the latter regime for exclusion or differentiation motives. If partial interconnection arises for differentiation motives, exclusion of a small publisher(s) occurs more often in the former than in the latter. In the case of multilateral interconnection, an open platform generates lower welfare than a for‐profit platform.     

Contracts under Wage Compression: A Case of Beneficial Collusion

This paper considers a principal-agent model with adverse selection and limited wage discrimination. Under wage compression, an agent may have an incentive to free ride on other agents by manipulating his private information. When collusion among the agents is not possible, the principal distorts the output schedule to reduce information rent associated with the free-riding opportunity. Under collusion, however, the principal can reduce the information rent by inducing side contracts among the agents, thus partly removing the distortion in the output schedule. We show that side contracts among the agents take place in equilibrium and that the prospect of collusion is beneficial.     

Hedge funds,fund attributes and risk adjusted returns

We use proprietary data to examine factors that lead hedge fund managers to offer hurdle rates and investigate relative hedge fund performance based on risk-adjusted returns. Using data from 3,571 hedge funds over a 15 year period, we find that funds that do not offer a hurdle rate outperform those that do. Funds offering a high watermark charge substantially higher performance fees. Further, emerging market, fixed income, and funds of funds are significantly more likely to offer a hurdle rate than other types of funds. Performance fees have a positive impact on the likelihood of offering a hurdle rate. Fund leverage and management fees are negatively associated with hurdle rates. The cross-sectional regressions show that funds, which offer a hurdle rate, underperform those that do not. Funds that charge a high performance fee appear to outperform those that charge a relatively low fee. The results are consistent with the view that those managers who wish to improve risk-adjusted returns should not focus on hurdle rates.     

Empirical prediction intervals revisited

Empirical prediction intervals are constructed based on the distribution of previous out-of-sample forecast errors. Given historical data, a sample of such forecast errors is generated by successively applying a chosen point forecasting model to a sequence of fixed windows of past observations and recording the associated deviations of the model predictions from the actual observations out-of-sample. The suitable quantiles of the distribution of these forecast errors are then used along with the point forecast made by the selected model to construct an empirical prediction interval. This paper re-examines the properties of the empirical prediction interval. Specifically, we provide conditions for its asymptotic validity, evaluate its small sample performance and discuss its limitations.