Does income inequality increase marginal propensity to consume?

This article empirically investigates the effects of income inequality on the marginal propensity to consume (MPC), using panel data of 22 OECD countries over the period 1994–2015. We find that MPC increases dramatically as income inequality increases. In subsample analyses, the MPC of a high inequality group is more than twice that of a low inequality group.     

Nonlinear effects of government debt on private consumption: Evidence from OECD countries

This paper investigates nonlinear effects of government debt on private consumption. The estimated consumption function shows smooth regime switching depending on the debt-to-GDP ratio, and a higher level of government debt crowds out private consumption to a greater extent.     

Parent country nationals or local nationals for executive positions in foreign affiliates: An empirical study of Japanese affiliates in Korea

This study examines how the host country experience of Japanese multinational corporations (MNCs) affects their staffing policies for executive manager positions at foreign affiliates. Hypotheses on executive staffing policies for foreign affiliates are tested using survey data collected from 103 Japanese affiliates in Korea. Findings show that the level of global integration and the degree of centralization of decision-making positively affect an assignment of parent country nationals as executive managers of foreign affiliates. We further find that foreign affiliates’ experience in a host country moderates the effects of both global integration and centralization on staffing decisions for the affiliates.

Impact of the Internet on interorganizational relationships

The Internet brings enormous advantages to organizations in the forms of standardization, power of networks, and inexpensive operations. Past decade has seen an increase in cooperative relationships among organizations. Despite the acknowledgment of the impact of the Internet on interorganizational relationships (IORs), there is a paucity of empirical research in this area, particularly for service firms, with regard to their entire life cycle. Using a field-based survey, in cooperation with the Gallup Organization, this study empirically examines some of the effects of the Internet on different stages of the life cycle of IORs. Based on the data collected from 206 firms (majority small service firms with less than 500 employees), results of our study show that the Internet has effected every stage of IOR life cycle, has increased the frequency and opportunities to find new partners, has affected the selection criteria that they use finding to select new partners, has improved the quality of relationships with existing partners, and increased the partnership performance. These effects though were not the same for different types of partnerships. The research found that the Internet has had the greatest effect for medium-level integration types of partnerships, which include non-equity strategic alliances and networks.     

Why Credit Rating Agencies Exist

Although credit rating agencies exist and are important to the capital markets, there remains a question of why they should exist. Two standard theories are that rating agencies correct a problem of information asymmetry and that they de facto regulate investments. These theories do not fully answer the question. This paper suggests an alternative explanation. While rating agencies produce little new information, they sort information available in the credit market. This sorting function is needed due to the large volume of information in the credit market. Sorting facilitates better credit analysis and investment selection, but bond investors or a cooperative of them cannot easily replicate this function. Outside of their information intermediary and regulatory roles, rating agencies serve a useful market purpose even if credit ratings inherently provide little new information. This alternative explanation has policy implications for the regulation of the industry.     

THE BROKERAGE FIRM EFFECT IN HERDING: EVIDENCE FROM INDONESIA

We examine herding behavior of domestic and foreign investors in the Indonesian stock market. We document that both domestic and foreign investors from a particular brokerage firm tend to herd. The foreign investors exhibit a greater propensity to herd than domestic investors. However, when examining investor trading across brokerage firms, we find only weak evidence of herding by domestic investors and no herding by foreign investors. Our overall findings suggest a strong brokerage firm effect on herding but a weak marketwide effect. Moreover, we find evidence that the strong brokerage effect on herding is likely driven by acting on common information.     

Encroachment Patterns of the “Best Products” from the Last Decade*

Based on the examination of 239 “best products” (all those on Business Week's annual lists from the past decade), this article tests and validates a conceptual framework identifying six ways in which new products open new markets and/or encroach on original products. Three of these six scenarios involve high‐end encroachment (the new product first opens a new high‐end market, or enters at the high end of an existing market, and then diffuses down‐market), and three scenarios involve low‐end encroachment (encroachment starts at the low end, followed by diffusion up‐market). As illustrated in a 2 × 3 matrix, high‐end encroachment ensues when the new product enhances performance with regard to the market's core attribute (low‐end encroachment ensues when this performance is diminished). The three high‐end sub‐types and three low‐end sub‐types are determined by the strength of performance along an ancillary attribute dimension. If the ancillary attribute performance is week, then the encroachment of the new product on the old market is immediate (corresponding to immediate high‐end encroachment and immediate low‐end encroachment, respectively). If the ancillary performance is moderate, then the new product expands the market at the high or low end (corresponding to new‐attribute high‐end encroachment and fringe‐market low‐end encroachment, respectively). If the ancillary performance is strong, then the new product first opens an entirely new market at the high or low end (corresponding to new‐market high‐end encroachment and detached‐market low‐end encroachment, respectively). The reliability and comprehensiveness of the encroachment framework is tested by asking a panel of eight judges to categorize each of the 239 products. Results show inter‐judge reliability of 98%, with all products falling within one of the six encroachment categories. Each of the encroachment types has unique implications on product positioning and pricing, as further discussed in the paper. Thus the model helps firms identify and analyze the various possible strategies that they might choose from when introducing new products.     

Repeated Auctions with Impatient Bidders and Externalities

This article studies collusion in repeated auctions both among patient and among impatient bidders when the outside option of the participation constraint is endogenous due to negative externalities. We find that (i) there are no bidding wars along the equilibrium path both for patient and for impatient bidders; compared to the optimal collusive bidding scheme for patient bidders, that for impatient bidders involves (ii) a lower threshold type above which bidding starts when externalities are small or (iii) more frequent jumps in a bidding scheme when externalities are large. The results carry an empirical implication that we should observe either a higher probability of sales or a higher number of bid levels in auctions that are repeatedly offered in unstable markets than those offered in stable markets.