Investment behavior and the biased perception of limited loss deduction in income taxation

We use a laboratory experiment to study the extent to which investors’ choices are affected by limited loss deduction in income taxation. We first compare investment behavior in the no tax baseline to a tax control setting, in which the income from investments is taxed. We find that investors significantly reduce their risk-taking as predicted by theory. Next we compare the baseline investment choices to choices under three different types of income taxation. We observe that risk-taking is significantly increased with partial and with capped loss deduction, but is unaffected by a tax system that allows no loss deduction. Since in all these treatments the after tax outcomes of the prospects were identical, we conjecture that investors have a positively biased perception of partial and capped loss deduction that promotes their willingness to take risks.     

Rational expectations equilibrium with conditioning on past prices: A mean-variance example

The paper uses an intertemporal mean-variance model of the market for a dividend-paying risky asset to analyse rational expectations equilibria when all agents condition their expectations on past rather than current prices. The main result shows that if the time span between successive market periods is short, the market will approximate full informational efficiency arbitrarily closely, yet the returns to being informed are bounded away from zero. This contrasts with the Grossman-Stiglitz proposition that markets cannot come close to informational efficiency if the acquisition of information is costly.     

The relationship between capital and liquidity prudential instruments

Journal of Regulatory Economics - Basel III introduced unweighted capital standard and new regulatory liquidity standards to complement the revised risk-weighted capital requirements. This change...     

Comparative effectiveness of standard endotracheal tubes vs. endotracheal tubes with continuous subglottic suctioning on ventilator-associated pneumonia rates

Ventilator-associated pneumonia (VAP) accounts for the majority of nosocomial pneumonias, which may increase intensive care and prolonged hospital stays. Endotracheal tubes allowing continuous subglottic suctioning may reduce VAP; however, they are more expensive than standard endotracheal tubes not allowing continuous suctioning. he objective of this study was to measure the comparative costs associated with continuous subglottic suctioning endotracheal tubes (CSS-ETT) versus standard endotracheal tubes (S-ETT) among intubated patients and whether cost differential is offset by the occurrence of VAP in patients receiving either type of intubation. A retrospective chart review was conducted for 154 intubated adult patients (77 = S-ETT; 77 = CSS-ETT). The S-ETT group had one case of VAP; the CSS-ETT group had none. The mean total hospital charges were higher for the S-ETT group ($103,600; CSS-ETT= $88,500) (p = 0.3). Although the average number of intubation days and ICU days were greater for the CSS-ETT group, there were no cases of VAP compared to the S-ETT group. ased upon the one S-ETT VAP case and the VAP attributable costs, it is cost effective to use the CSS-ETT.     

Technology Management in a Mature Firm: Structuration Theory and the Innovation Process

Most innovation studies focus on the activities or characteristics of individuals (agency) or on organizational attributes such as size and formalization (structure). In attempting to reconcile this agency-structure dichotomy we draw on structuration theory to examine the innovation process in detail. Structural properties (signification, domination and legitimation) are constantly reproduced from social interaction (communication, power and sanctions) by means of the modalities (interpretative schemes, facilities and norms) drawn on by knowledgeable, reflexive actors. This framework is utilized to examine the case of a mature manufacturing company in which managers and engineers were attempting to access new technologies. The data were acquired by means of a 6-year, on-going study which began in 1992 and which we suggest is essential for a thorough understanding of the innovation process.     

The role of boundary solutions in principal-agent problems of the Holmström-Milgrom type

The paper extends the Holmström-Milgrom [B. Holmström, P. Milgrom, Aggregation and linearity in the provision of intertemporal incentives, Econometrica 55 (1987) 303-328] analysis of intertemporal incentive provision to allow for the implementation of actions on the boundary of the feasible set. Boundary actions provide the principal with some freedom in choosing incentive schemes. This can be used to reduce premia. The paper characterizes optimal incentive schemes for the continuous-time Brownian-motion model and its discrete-time approximations. Linearity of incentive schemes in “accounts” is confirmed. However, for models with effort costs depending only on mean returns, the availability of boundary actions destroys the linearity of optimal incentive schemes in profits.     

On Rothschild–Stiglitz as Competitive Pooling

Dubey and Geanakoplos (Q J Econ 117:1529–1570, 2002) have developed a theory of competitive pooling, which incorporates adverse selection and signaling into general equilibrium. By recasting the Rothschild–Stiglitz model of insurance in this framework, they find that a separating equilibrium always exists and is unique. We prove that their uniqueness result is not a consequence of the framework, but rather of their definition of refined equilibria. When other types of perturbations are used, the model allows for many pooling allocations to be supported as such: in particular, this is the case for pooling allocations that Pareto dominate the separating equilibrium.     

Portfolio Choice in the Presence of Non-Tradable Income: An Experimental Analysis

Abstract. This paper reports the results of an experiment on portfolio choice in the presence of non-tradable income. The non-tradable income part could either be riskless or risky (background risk). In many cases, we observe behavior that is qualitatively consistent with the predictions of normative theory. However, correlations between financial and non-tradable wealth are neglected. The computation of aggregated risk profiles helps subjects to partly overcome the deviations from normative theory due to neglect of correlations.     

An empirical investigation of interregional production relations and comparative advantage in US manufacturing, 1960–70

Hypothesized differences in mean changes in shares of European Community (EC) import markets over the period 1976-84 are tested for each of 36 less-developed countries. Means are calculated for cases in which MFN tariffs are re-established and for cases in which duty-free treatment is restored under the EC generalized system of preferences. They are compared with means for cases in which tariffs remained constant. We attempt to control for both product-specific and cyclical influences on imports. In contrast to some previous results, our findings suggest that denial (restoration) of preferential treatment, i.e. a tariff increase (decrease), has its expected negative (positive) effect.