On recalls, layoffs, variable hours, and labor adjustment costs

The paper analyzes the employment policy of a firm that can vary both hours and the level of employment. The analysis differs from previous work in the adjustment cost literature in that the firm is able to change its employment not only through hires, layoffs, and quits, but also by recalls of employees who were previously laid off. Thus, we introduce the possibility of the firm inventorying the labor input. It is shown that this labor inventory potential is necessary if the firm is to ever lay off workers. Further, it is demonstrated that linear rather than strictly convex adjustment costs are then required if the firm is to always recall employees who were previously laid off prior to hiring new workers.     

The contracting value of tainted reports in cost reduction settings

While cost accounting is a well-developed discipline with a rich institutional past, it is criticized for being manipulable. This criticism is due, in part, to the existence of multiple, yet equally accepted cost allocation procedures or cost estimation techniques. Employing a principal-agent model, cost accounting is modeled as a menu of alternative methods which, conditional on agent effort, produce noisy, unbiased and independently distributed (i.e., equally defensible) measures from which a single realization is selected ex post as the report used to contract with the agent. Assuming that the report does not indicate which method produced it, the report modeled is “tainted” in that the lowest (most favorable to the agent) outcome is reported, where the “amount” of tainting corresponds to the menu's size. The paper identifies bright-line conditions where the principal's expected net payoff is independent of the amount of tainting, demonstrating that tainting does not necessarily affect the report's incentive value.     

Modeling Distribution Services and Assessing Their Welfare Effects in a General Equilibrium Framework

Most international trade models fail to account for the fact that almost all goods must pass through the distribution sector. The authors compare different approaches to modeling distribution within an Applied General Equilibrium framework and find that such modeling may significantly affect trade opening simulations. They also predict large potential gains from streamlining distribution. For instance, a 10% reduction in Japan's final goods distribution margins would benefit it as much as worldwide free trade would. They also find that, compared to trade opening, reducing margins leads to smaller inter‐sectoral production shifts and thus may engender less political opposition.     

Jointness in production and farmers' willingness to supply non-marketed ecosystem services

This paper highlights how farmers' willingness to supply non-marketed ecosystem services (ES) is influenced by whether or not the non-marketed ES are produced jointly with agricultural products. When marketed products and non-marketed ES share some production inputs the production relationships between the two may be complementary, competitive or substitutive. Using a cost minimization framework, it is shown how complementary relationships lead to costless voluntary provision of non-marketed ES (typically the case for ES that are supportive of provisioning ES for marketed farm products). It is also shown how competitive production relationships lead to provision of non-marketed ES at lower cost than when non-marketed ES are direct substitutes for farm products or are produced outside of agriculture. The paper closes by showing how the minimum willingness to accept (WTA) payment for ES that are complementary/competitive is less than or equal to the minimum WTA for the same ES produced in substitute or independent production relationships.     

Disagreement over the emergence of private property rights: alternative meanings, alternative explanations

This paper is an exercise in the history of thought, which compares Austrian and neoclassical theories of the emergence of private property rights, and examines, in part, the extent to which Austrians can be said to offer a commonly-agreed upon explanation that parallels Carl Menger's exemplary story of the emergence of money. We address the sources of disagreement (and apparent conflict) among emergence theorists in both schools. We try to show that some of the disagreement hinges on an unclear meaning of the term “emergence,” which is resolvable, while other sources of disagreement are fundamental at the methodological level. JEL Code B25, E40, E53     

Estimating exchange rate dynamics with diffusion processes: an application to Greek EMU data

Recently various exchange rate models capturing the dynamics during the transition from an exchange rate arrangement of floating rates into a currency union have been derived. Technically, these stochastic equilibrium models are diffusion processes which have to be estimated by discretely sampled observations. Using daily exchange rate data prior to the Greek EMU-entrance on 1 January 2001, we develop a rigorous estimation procedure. Our estimates point to an increasing interventionist economic policy in the run-up to the Greek EMU entrance. A comparison of this econometric indication with policy information provided (ex-post) by the Bank of Greece (BoG) in its Annual Report 2000 reveals that the BoG indeed pursued such an active policy stance (so-called institutional frontloading strategies).      

Developing holistic leaders: Four domains for leadership development and practice

Leadership development and practice have traditionally been quite narrow, with a decided focus on the analytical realm of leadership. However, the contemporary climate of corporate scandal and resultant loss of societal confidence, coupled with the evolving demands, needs, and expectations of employees, point to the potential need for a more holistic approach to leadership. Thus, this article proposes how management education and leadership development programs can develop holistic leaders that are adept at operating in the analytical, conceptual, emotional, and spiritual domains of leadership practice. An integrated model for holistic leadership development and practice that addresses all four of these domains is proposed, and grounded in both established and emerging leadership development theory. Additionally, a leadership development classification scheme is proposed based on classroom, job, and organizational contexts.     

WORLD OUTLOOK

After six years of steadily rising OECD output, fears of a significant rise in world inflation are now increasing. In the last year there has been a slight pick-up in inflation with producer prices up nearly d per cent. But prompt action by the Federal Reserve to raise interest rates before the presidential election appears to have damped inflationary expectations in the US and has given Japan and Germany an opportunity to tighten monetary policy without causing major currency fluctuations. It is also apparent that the other possible source of world inflation, commodity prices, is not a problem. OPEC over-production has ensured that the oil price remains weak and other commodity prices appear to have stopped rising after a brief acceleration at the beginning of the year. Nevertheless the major imbalances in world trade are declining only slowly and without a change in fiscal policy in the major economies it is difficult to believe that minor changes in monetary policy will be sufficient if the process of adjustment begins to falter. Despite these risks, we take a sanguine view of world prospects. Tighter monetary policy should effect a slowdown in world growth next year (already indicated by recent developments, particularly in the US) and this should be sufficient to control inflation which we expect to peak at just under 5 per cent at the beginning of next year. From 1990 onwards we see steady growth accompanied by low inflation.