Fiscal and environmental policy under monopolistic competition

Summary Keynesian demand management offsets some of the distortions caused by monopolistic competition and thus induces multiplier effects on national income and environmental damages. The cost of public funds rises with the virtual environmental tax and the degree of competition in the product market. The virtual environmental tax rises with abatement and falls with the cost of public funds. Consequently, greener preferences induce a rise in the virtual environmental tax, the cost of public funds and public abatement, and a fall in the provision of traditional public goods. A greater preference for traditional public goods harms environmental quality, since both abatement and output fall. Protecting cartels lowers the cost of public funds and may raise the provision of both traditional public goods and abatement. Environmental quality may thus rise, but other components of social welfare will fall. The paper also analyses the effects of private abatement, pollution taxes, fiscal consolidation and the progressivity of the tax system on government policy, employment, environmental quality and welfare.This paper was prepared for the OCFEB workshop Quantitative Economics for Environmental Policy held at the Tinbergen Institute Rotterdam, March 22 1994. We thank Casper van Ewijk and Jenny E. Ligthart for useful comments.     

The individual investor in securities markets: An ethical analysis

In this paper we consider whether one type of individual investor, which we call at risk investors, should be denied access to securities markets to prevent them from suffering serious financial harm. We consider one kind of paternalistic justification for prohibiting at risk investors from participating in securities markets, and argue that it is not successful. We then argue that restricting access to markets is justified in some circumstances to protect the rights of at risk investors. We conclude with some suggestions about how this might be done.Robert E. Frederick is Assistant Professor of Philosophy at Bentley College and Assistant Director of the Center for Business Ethics. Before coming to Bentley College he worked at a large financial institution for nine years, where he was Vice President for Administrative Services. Dr. Frederick has authored or co-authored over fifteen articles and has co-edited four books. He has consulted on business ethics for several major corporations. W. Michael Hoffman is the founding Director of the Center for Business Ethics, and Professor and Chair of the Department of Philosophy at Bentley College, Waltham, MA. He was President of the Society for Business Ethics in 1989. He has authored or edited ten books, including Business Ethics: Readings and Cases in Corporate Morality (McGraw-Hill, 1984; 1990) and published over thirty articles. He has consulted on business ethics for many major corporations and institutions of higher learning, and he serves on the board of several journals.     

Corporate Philanthropy,Research Networks,and Collaborative Innovation

Using a unique data set of corporate philanthropic activities, we find that direct giving activities are positively associated both with higher levels of innovation and innovation that is more influential, collaborative, and original. Our results suggest that much of what is ostensibly promoted as philanthropy actually reflects research‐related networking activities. The effect of direct giving on innovation is more pronounced in more opaque firms and more innovative and competitive industries. These findings provide evidence of the distinct motives by which firms choose between direct giving and foundation giving. Our study suggests that firms can use direct philanthropy to expand firm‐boundaries by developing innovation with research partners.     

Index

Some writers have called for an investigation of whether the seven sins and seven virtues are portrayed in advertising. This seven/seven model was used for a content analysis of print advertisements appearing in general readership magazines published in the 1980s. First, definitions for each of the sins and virtues were developed. Then trained coders searched for explicitly stated sins and virtues in a sample of advertisements. The majority of the advertisements did indeed contain a sin or virtue. Over three-quarters of the advertisements portray a virtue: relatively few advertisements presented a sin.     

The development status of women in South Africa: Patterns and progress in the provinces

The development status of women in South Africa declined between 1996 and 2001. This study examined whether the decline was pervasive throughout the nine provinces, and whether any development patterns were apparent among the provinces. The findings revealed that women had lost ground across the board, both in absolute terms and relative to men. They also showed that certain ranking patterns prevailed among the nine provinces and, notably, that women in provinces with pre-existing poor development statuses may also be predisposed to a poor development status relative to men. This double burden may translate into a perpetuation of poverty for women who find themselves in these provinces.     

Why do many resource-rich countries have negative genuine saving?: Anticipation of better times or rapacious rent seeking

We investigate the Hartwick rule for saving of a nation necessary to sustain a constant level of private consumption for a small open economy with an exhaustible stock of natural resources. The amount by which a country saves and invests less than the marginal resource rents equals the expected capital gains on reserves of natural resources plus the expected increase in interest income on net foreign assets plus the expected fall in the cost of resource extraction due to expected improvements in extraction technology. Effectively, depletion is then postponed until better times. This suggests that it is not necessarily sub-optimal for resource-rich countries to have negative genuine saving. However, in countries with different groups with imperfectly defined property rights on natural resources, political distortions induce faster resource depletion than suggested by the Hotelling rule. Fractionalised societies with imperfect property rights build up more foreign assets than their marginal resource rents, but in the long run accumulate less foreign assets than homogenous societies. Hence, such societies end up with lower sustainable consumption and are worse off, especially if seepage is strong, the number of rival groups is large and the country does not enjoy much monopoly power on the resource market. Genuine saving is zero in such societies. However, World Bank genuine saving figures based on market rather than accounting prices will be negative, albeit less so in more fractionalised societies with less secure property rights.     

Collaborative collective bargaining: Toward an ethically defensible approach to labor negotiations

In this paper I explain the present adversarial collective bargaining process (ACB) and then critique it on legal and ethical grounds. A new methodology, that I describe as the collaborative collective bargaining process (CCB), will then be explained and similarly critiqued. I argue that replacing the present ACB model with the CCB model will result in better long-term results for all parties concerned. This is because the ACB model is comparable, in many respects, to the adversarial process used in court litigation. It is a combat model based on power. ACB makes the battle lines clear, and it grants victory to the more convincing display of power, but it leaves casualties. Indeed it cannot operate except upon the casualties of the opposing party, and those casualties are the basis for ever-renewed combat. Tactics employed in ACB to achieve victory include deception, lying and the abandonment of truth as a moral value. I argue that, in sharp contrast, CCB can foster an environment which encourages candor and truthfulness. By following the CCB model, the parties can avoid the negative and self-defeating elements of ACB and can work together toward mutually beneficial goals by the use of an ethically defensible approach to labor negotiations. Frederick R. Post, J.D., M.B.A., is Assistant Professor of Business Law and Management at The University of Toledo. His research interests include business ethics and labor management relations. Professor Post teaches labor policy courses. Previously, he spent twelve years as a labor lawyer and has represented employers as chief negotiator in adversarial collective bargaining with many private sector international unions. He is the author of A Management Perspective on Collective Bargaining (1985) and Unionization Under the National Labor Relations Act: Organizing Through Collective Bargaining (1979).     

Underwriter Reputation, Initial Returns, and the Long-Run Performance of IPO Stocks

We find that the underperformance of IPO stocks relative to the market over a three-year holding period is less severe for IPOs handled by more prestigious underwriters. Consistent with prior studies, we also find that IPOs managed by more reputable underwriters are associated with less short-run underpricing. Among the various existing proxies for underwriter reputation, the Carter–Manaster measure is the most significant in the context of initial returns and also in the context of the three-year performance of IPOs. The study also provides an updated list of the Carter–Manaster measure for various underwriters.     

Mergers, Method of Payment and Returns to Manager- and Owner-Controlled Firms

Previous work provides evidence of disparate consequences for acquiring firms initiating stock and cash merger exchanges. These studies show that the choice of payment method and the subsequent consequences may be a result of dissimilar motivations. This paper addresses the role of corporate control by examining the consequences of stock, cash and mixed exchanges to manager- and owner-controlled firms. Particular attention is paid to mixed exchanges as a test of the total consequences of acquisition activity. The results indicate that the market valuation of the acquiring firm's stock is related to both the method of payment and the acquiring firm control structure.