Intertemporal consumption choices,transaction costs and limited participation in financial markets: reconciling data and theory

This paper builds a unifying framework based on the theory of intertemporal consumption choices that brings together the limited participation‐based explanation of the Consumption Capital Asset Pricing Model's poor empirical performance and the transaction costs‐based explanation of incomplete portfolios. Using the implications of the consumption model and observed household consumption and portfolio choices, we identify the preference parameters of interest and a lower bound for the costs rationalizing non‐participation in financial markets. Using the US Consumer Expenditure Survey and assuming isoelastic preferences, we estimate the coefficient of relative risk aversion at 1.7 and a cost bound of 0.4% of non‐durable consumption. Our estimate of the preference parameter is theoretically plausible and the bound sufficiently small to be likely to be exceeded by the actual total (observable and unobservable) costs of participating in financial markets. Copyright © 2010 John Wiley & Sons, Ltd.     

The effect of latency variables on repeated measures inference applied to the measurement of risk-taking as a function of psychopathy

In numerous psychology studies, subjects are asked to perform some task a number of times, T. The effect of the choice of T on the associated inference, however, is usually not assessed. We investigate the appropriate choice of T empirically by using data collected in a study on the relationship between psychopathy and risk-taking in 90 inner city drug users enrolled in a residential treatment program. We show that, when studying this relationship, the latency variable usually discarded from the analysis behaves exponentially allowing a natural division of the study period 1, . . . , T into two distinct subperiods. These subperiods yield significantly different results—in the early period only (which we call “reactive”), subjects with high psychopathy scores exhibit lower sensitivity to reward and punishment in our risk taking experiment. The later period (which we call “stable”) shows no relationship between sensitivity to reward and punishment and psychopathic tendencies.     

Marshallian labour market pooling: Evidence from Italy

This paper employs a unique Italian data source to take a comprehensive approach to labour market pooling. It jointly considers many different aspects of the agglomeration — labour market relationship, including turnover, learning, matching, and hold up. It also considers labour market pooling from the perspective of both workers and firms and across a range of industries. Overall, the paper finds some support for theories of labour market pooling, but the support is weak. Specifically, there is a general positive relationship of turnover to local population density, which is consistent with theories of agglomeration and uncertainty. There is also evidence of on-the-job learning that is consistent with theories of labour pooling, labour poaching, and hold up. In addition, the paper provides evidence consistent with agglomeration improving job matches. However, the labour market pooling gains that we measure are small in magnitude and seem unlikely to account for a substantial share of the agglomeration benefits accruing to Italian workers and firms.     

The effect of rankings on honesty in budget reporting

We conduct an experiment to investigate the effect of rankings, which are pervasive in practice, on the honesty of managers’ budget reports, which is important for sound decision making in organizations. Participants in our experiment are ranked in one of four ways: (1) firm profit, (2) own compensation, (3) both firm profit and own compensation, and (4) randomly, which serves as our baseline condition. None of the rankings affect participants’ remuneration. Compared to our baseline (random rankings) setting, where participants indeed exhibit honesty concerns, we find that rankings based on firm profit significantly increase honesty and that rankings based on own compensation significantly decrease honesty. Participants who received both rankings were significantly more honest than participants in the own compensation rankings condition. We did not, however, find significant differences in honesty between the both rankings and firm profit rankings conditions. As such, participants in the both rankings condition seemed to focus more on the firm profit metric than on the financially congruent own compensation metric. We also find that our results are stable across periods, suggesting that the effects of rankings neither increased nor dissipated over time. We discuss the contributions of our study and concomitant findings to accounting research and practice.     

Young adults’ consideration of their food choices a propos consequences for their future health

Many researchers have devoted much time and effort to explain the undesirable health outcomes associated with an excessive intake of certain types of fast foods. Particularly vulnerable, are young adults who move out of their parents' homes to live on their own, and then begin to rely on the multitude of so‐called “food away from home” options which are convenient, available and even desirable in their social circles. This study investigated young adults' consideration of the consequences of their consumption of food eaten away from home due to concern about unacceptable habitual behaviour that might negatively affect their future households. The survey involved 395 young adults up to 25 years of age who completed a structured questionnaire which relied on an established Consideration of Future Consequences scale. Data analysis involved exploratory factor analysis, t‐tests and Anova. Findings revealed some concern about the immediate consequences of respondents' fast food consumption, but concern about the future consequences seemed rather distant in their minds. Although significant differences were confirmed within gender and among population groups with regard to immediate concern about their fast food consumption, the means were nevertheless low throughout indicating that much needs to be done to sensitize young people about every day food consumption that might have dire consequences for their future health.