Spreading the Word: Transaction Cost Economics in the Conversation of Economics

Transaction cost economics is a key topic in many conversations in business and economics related disciplines, much as a result of Oliver Williamson's intellectual crusade. By claiming a “distinct worldview,” he develops arguments of association and differentiation to established worldviews, like traditional microeconomics, earlier institutionalism, Austrian and radical economics, and also within the new institutional economics itself, in order to advance his theory. His resourcefulness defies straight argumentative decisions, catering to different audiences whilst trying to break new ground. Surely Williamson has not pleased everyone, but his discourse is greatly responsible for placing TCE in the everyday parlance of economics.     

Linear contracts as incentives: a puzzle

This paper reexamines the linear schedule of compensation as a tool for providing incentives to managers when contractible output is a function of costly effort and a random shock. Two puzzling situations compatible with linear schemes of compensation are presented. First, if the model parameters are such that the optimal participation on output is below 50%, the variable compensation turns out to have a negative effect on manager’s utility. Second, if it is below 25%, linear incentives allow situations in which larger utilities are reached by means of smaller rewards.      

Health care utilization and self-assessed health: specification of bivariate models using copulas

The discernment of relevant factors driving health care utilization constitutes one important research topic in health economics. This issue is frequently addressed through specification of regression models for health care use (y—often measured by number of doctor visits) including, among other covariates, a measure of self-assessed health (sah). However, the exogeneity of sah within those models has been questioned, due to the possible presence of unobservables influencing both y and sah, and because individuals’ health assessments may depend on the quantity of medical care received. This article addresses the possible simultaneity of (sah, y) by adopting a full information approach, through specification of the bivariate probability function (p.f.) of these discrete variables, conditional on a set of exogenous covariates (x). The approach is implemented with copula functions, which afford separate consideration of each variable margin and their dependence structure. The specification of the joint p.f. of (sah, y) enables estimation of several quantities of potential economic interest, namely features of the conditional p.f. of y given sah and x. The adopted models are estimated through maximum likelihood, with cross-sectional data from the Portuguese National Health Survey of 1998–1999. Estimates of the margins’ parameters do not vary much among different copula models, while, in accordance with theoretical expectations, the dependence parameter is estimated to be negative across the various joint models.     

Connected Stocks

We connect stocks through their common active mutual fund owners. We show that the degree of shared ownership forecasts cross‐sectional variation in return correlation, controlling for exposure to systematic return factors, style and sector similarity, and many other pair characteristics. We argue that shared ownership causes this excess comovement based on evidence from a natural experiment—the 2003 mutual fund trading scandal. These results motivate a novel cross‐stock‐reversal trading strategy exploiting information contained in ownership connections. We show that long‐short hedge fund index returns covary negatively with this strategy, suggesting these funds may exacerbate this excess comovement.     

Bosnia's Third Space? Nationalist Separatism and International Supervision in Bosnia's Brčko District

This article analyses how the strategic Bosnian locality of Br?ko emerged as a distinctive geopolitical space during the post-war period. This resulted from the struggle between separatist nationalisms and the international community over the status of displaced persons in Bosnia, but this struggle played out differently in the municipality of Br?ko as its status was unresolved at Dayton and for years afterward. Post-war nationalist rivalry to determine Br?ko's status through the manipulation of displaced persons provoked the creation of the Br?ko District as a territorial condominium nominally shared by Bosnia's two entities but under direct international supervision. Drawing upon fieldwork in Bosnia, we develop a critical geopolitical account of Br?ko from wartime through the post-war period to the present. The article concludes by considering whether Br?ko as a third geopolitical space holds potential to offer Bosnia a third space, overcoming the oppositional binaries of the war.     

Inter- and intracountry effects of the Covid-19 pandemic on wages and economic growth

This paper aims to investigate the impact of the Covid-19 pandemic on technological knowledge, wage inequality, and economic growth, by proposing a Direct-Technical-Change model with two economies, an Innovative and other Follower. Six hypotheses are considered: (i) decrease in the unskilled-labor supply, (ii) decrease in the absolute advantage of unskilled labor, (iii) decrease in the intensity of the unskilled sector, (iv) hypothesis (i) combined with a lower decrease in the skilled-labor supply, (v) hypothesis (ii) combined with a lower decrease in the absolute advantage of skilled labor, (vi) all the variations previously considered. By comparing the steady states before and after the shock, we find an increase in the technological-knowledge bias that favors the skill-intensive sector, which positively affects the skill premium. However, in hypotheses (i) and (iv), the decrease in the relative supply of unskilled labor dominates the effect on the skill premium, which thus decreases. The economic growth rate is always penalized except for hypothesis (iii). Hypotheses (ii) and (iv) are undesirable because they increase wage inequality and penalize economic growth. Governments should support innovative activity, the engine of technological-knowledge progress, and thus economic growth, but with caution not to exacerbate the skill premium.     

The vulnerability of destinations to climate change: A comparative analysis of contextual socio-political factors

Climate change affects tourism and tourism affects climate change. Thus, both adaptation and mitigation strategies are needed to guarantee the sustainability of destinations. As well as the direct impacts of climate change, the effectiveness of these strategies determines the vulnerability of destinations. This paper compares the Riviera Maya (Mexican Caribbean) and Alt Maresme (Spanish Mediterranean) to identify the contextual socio-political factors that influence the vulnerability of destinations to climate change. Thirty-six semi-structured interviews were conducted with key stakeholders from tourism and the environment, public organizations, NGOs, and different levels of the public administration at both destinations. This research focuses on the perception of risk and agenda setting, the stakeholders’ involvement and the limitations of public action. The results show that awareness is greater, climate change is more important to the tourism agenda and private organizations are more involved in the Riviera Maya than in Alt Maresme. Five socio-political aspects are identified and discussed to explain the results: the destination’s evolution; the characteristics and evolution of tourism policy; extreme meteorological events as breaking points for policies; the socioeconomic context and the dependence on tourism; and the characteristics of the tourism offer, such as the dependence on natural resources and seasonality.     

Spatial ability learning through educational robotics

Several authors insist on the importance of students’ acquisition of spatial abilities and visualization in order to have academic success in areas such as science, technology or engineering. This paper proposes to discuss and analyse the use of educational robotics to develop spatial abilities in 12 year old students. First of all, a course to introduce robotics to 6th grade primary school students was designed. The key intention was to prepare practical and motivating sessions in order to foster the students’ involvement in hands-on learning. Hence, during the sessions of the course, challenges were provided for the students, in order to develop their capabilities as proficient problem solvers. The teacher assisted and guided the students, and the students were encouraged to solve the problems by themselves, working in 3-members teams. The main goal of this paper is to discuss and analyse the potential usefulness of educational robotics to develop spatial abilities. To carry out the analysis, students were randomly divided into an experimental group (EG), which participated in the robotics course, and a control group (CG), which did not take part in the robotics course. The extensive existing literature for spatial ability evaluation was analysed and reviewed and a pre-test and a post-test were prepared for use in the research study. Initially, the spatial ability of both EG and CG students was assessed with the pre-test. Then, after finishing the robotics course, the same sets of students were tested with the post-test. An extensive analysis of the results is provided in the paper. Results show that the positive change in spatial ability of the participants in the robotics course (EG) was greater than change evident in the students who did not join the course (CG). The improvement was statistically significant. The results also show that the overall performance of the students depends on the instruments used to evaluate their spatial abilities. Hence, this study manifests clearly the importance of the selection of those instruments.     

Implications of Keeping‐Up‐with‐the‐Joneses Behavior for the Equilibrium Cross Section of Stock Returns: International Evidence

This paper tests the cross‐sectional implications of “keeping‐up‐with‐the‐Joneses” (KUJ) preferences in an international setting. When agents have KUJ preferences, in the presence of undiversifiable nonfinancial wealth, both world and domestic risk (the idiosyncratic component of domestic wealth) are priced, and the equilibrium price of risk of the domestic factor is negative. We use labor income as a proxy for domestic wealth and find empirical support for these predictions. In terms of explaining the cross‐section of stock returns and the size of the pricing errors, the model performs better than alternative international asset pricing models.