SOLVING LARGE REPLACEMENT PROBLEMS WITH BUDGET CONSTRAINTS

Traditional replacement models assume unlimited capital. In practice, however, firms frequently use budgets to control their expenditures. Budget constraints necessitate that all replacement decisions be considered as a portfolio, creating a difficult combinatorial problem. In previous research, we developed a branch-and-bound algorithm for solving moderately-sized problems optimally. In this paper, we propose a dual heuristic for dealing with large, realistically sized problems. First, we solve the individual replacement problems ignoring the budget constraints. Then, we reduce, or eliminate, if possible, budget violations by solving a Lagrangian dual problem. The computational tests suggest that the effectiveness of the approach increases with problem size.     

Credit Rationing and Financial Disorder

We develop a model of lender behavior in the presence of default risk and moral hazard that determines default premiums and identifies the conditions under which borrowers are rationed. A hypothesis regarding a cognitive bias in the formation of expectations provides a dynamic component to our analysis and allows us to explain how an economy becomes vulnerable to a financial crisis and why vulnerability may increase over time.     

Currency Hedging for International Portfolios

This paper examines the benefits from currency hedging, both for speculative and risk minimization motives, in international bond and equity portfolios. The risk-return performances of globally diversified portfolios are compared with and without forward contracts. Over the period 1974 to 1990, inclusion of forward contracts results in statistically significant improvements in the performance of unconditional portfolios containing bonds. Conditional strategies are also implemented, both in sample and out of sample, and are shown to both significantly improve the risk-return tradeoff of global portfolios and to outperform unconditional hedging strategies.     

The Impact of Human Resource Policies on Union Organizing

Using newly available data from the Conference Board on employer human resource policies, certification election outcomes, and union organization of new company facilities, we find that the logic of "union substitution" efforts by employers is supported: Companies having or encouraging employee communication and participation programs, including nonunion grievance procedures, are more successful in maintaining nonunion status than are companies without such programs. However, certain human resource policies, such as work sharing (as an alternative to layoffs), may actually enhance chances of union success.     

Researchers,Scholars and Ivan

Over the decades, schools of higher education seem to evolve, or at least change. Colleges that in the 1970s had some moderate expectations for faculty research activity changed their names to universities, started doctoral programs, and now require faculty to produce “significant” research publications for tenure or promotions. Other schools moved from expecting minimal evidence of research to requiring publications in “major” journals. Where business faculty used to be professionally qualified by running consulting businesses, they now have to obtain doctorates and publish research work on a regular basis. Unasked is whether the proliferation of researchers and their output is desirable. In some ways, there is a potential value to have faculty doing research that isn't good enough to be published in Journal of Consumer Affairs. But to have that value, the faculty themselves must be wise enough to perceive it.     

CONDITIONING AID ON SOCIAL EXPENDITURES

Aid conditionality forces countries to adopt policies that they would not otherwise choose. We examine how government discretion should be so constrained when the donor cannot fully control public expenditures, but instead can influence a less disaggregated indicator of public policy, namely the allocation of public spending between the social sectors (e.g. education, health, etc.) on the one hand and more traditional public goods (e.g. infrastructure) on the other. We first show how budget allocations will be altered when recipient government preferences are known – i.e. we characterize what policies the donor should "buy"– and how a given aid budget should be allocated between different types of countries. When recipient government preferences are not known by the donor, the permitted policies are distorted due to incentive constraints, and the extent to which aid flows are optimally differentiated between different countries is reduced.     

A Pessimist's Simplistic Historical Perspective on the Fourth Wave of Consumer Protection

The current severe economic downturn, coupled with scandals of business misfeasance and malfeasance, raises expectations for another surge in the U.S. consumer protections. Because it happened three times before, the human temptation to seek historical parallels readily fuels either optimistic hopes or the paranoid ravings of fact-free commentators on a broadcast news network. A simplified historical perspective brings an odd mix of hopeful optimism and reluctant pessimism.