Utility of wealth and relative risk aversion: Operationalization and estimation

Next to expectations, preferences play an important part in explaining individual investment decision making. In contrast with the case of expectations, most financial models do not presuppose homogeneity with respect to preferences, but leave room for variation between individuals. In this article we employ the social filter theory to model the concept of utility. The investor group on which we focus consists of a sample drawn from the members of the Dutch Central Union of Investment Study Clubs. By means of verbal choice behavior we operationalize and determine empirically the utility function of wealth as a function of club-specific characteristics, and we analyze the implications for the corresponding relative risk aversion.We express our gratitude to Jelle Koolstra, who created the dataset with the help of the Dutch Central Union of Investment Study Clubs (NCVB). Programming support by Rob Flik is gratefully acknowledged. We like to thank Gerrit Antonides and Winfried Hallerbach for stimulating discussions on the subject. Responsability for remaining errors is that of the author.     

Bemessungsgrundlage kontra Fünf-Stufen-Tarif

Die Komplexit?t des deutschen Steuersystems hat in den vergangenen Jahren immer wieder Kritik hervorgerufen und zu verschiedenen Verbesserungsvorschl?gen geführt, von denen jedoch bislang noch keiner ungesetzt wurde. Denn um eine breite politische Akzeptanz zu erlangen, müssen Reformvorschl?ge zum Steuersystem neben Transparenz und Einfachheit gleichzeitig sicherstellen, dass die Einkommensungleichheit nicht versch?rft, das Steueraufkommen insgesamt nicht zu gering wird und die Erwerbsanreize nicht gef?hrdet sind. Durch Steuervereinfachung alleine werden diese Ziele nicht per se erreicht.     

Analytical analysis of a generic assembly system

The assembly of components is a key element in manufacturing facilities. Nevertheless, literature analyzing the dynamic behavior remains scarce. The paper narrows this gap by studying a generic first-come first-serve assembly system, consisting of two generally distributed component input streams. The field of probability theory serves as a means to derive good approximations for the waiting time of the components to form a kit and the inter-arrival time of the kits at the assembly station. Apart from providing insight in generally accepted managerial principles, this analysis also constitutes a required step in obtaining the performance of an open queuing network including assemblies.     

Does off-farm employment contribute to agriculture-based environmental pollution? New insights from a village-level analysis in Jiangxi Province, China

This study examines the conventional wisdom that off-farm employment contributes to environmental pollution by increasing the use of agro-chemicals. In order to analyse the role of household decision making and village factor markets in more detail, we run simulations with a hybrid farm household/village computable general equilibrium model that is applied to a village in Northeast Jiangxi Province. We find that the negative lost-labour effect of off-farm employment on agricultural incomes is much stronger than the (small) positive income effect. As a result of reduced labour resources and increased leisure consumption, farm households reduce the intensity of rice cultivation as well as the production of (especially) cash crops. The shift in production activities is stronger for migration than for off-farm employment, because migrants cannot combine off-farm work with onfarm work, and because migration reduces the village market price of oxen services. The shift towards less intensive rice production means that off-farm employment (and migration in particular) reduces the levels of chemical inputs and manure used in agricultural production. The decline in fertilizer input is much larger than the decline in manure use, because manure is a nontradable commodity and is applied only once per year. We therefore conclude that migration and, to a lesser extent, local off-farm employment lead to lower incomes from agricultural production, but have benign effects on environmental quality.     

Business Cycle Synchronisation: Disentangling Trade and Financial Linkages

Drawing on a large cross-section of countries, this paper explores whether closer economic ties between countries foster business cycle synchronisation and disentangles the role of the various channels, including trade and financial linkages as well as the similarity in sectoral specialisation. Our results confirm that output comovement is higher for country pairs with closer trade linkages and similar patterns of sectoral specialisation. By contrast, it remains difficult to find a direct relationship between bilateral financial linkages and output correlation. However, our results suggest that financial integration spurs business cycle synchronisation indirectly by raising the similarity in sectoral specialisation. Notably, the main findings hold regardless of whether financial linkages are captured in terms of FDI or portfolio holdings.     

What Drives CEOs to Take on More Risk? Some Evidence from the Laboratory of REITs

Many have pointed to excessive risk‐taking by the CEOs of financial firms as a contributor to the recent worldwide economic crisis. The same observers often blame questionable corporate governance structures and compensation practices for that risk‐taking. But is this perception correct? And what is the relationship between CEO incentives and risk‐taking outside of the financial industry, where the government guarantees provided by deposit insurance could have distorted incentives? In an attempt to answer these questions, the authors analyze the relationship between CEO incentives and corporate risk‐taking by 101 U.S. REITs during the period 2003 to 2007. Their main finding is that corporate risk‐taking, as measured by the growth rate in corporate debt (the only measure of risk that is completely under the control of the CEO), is inversely related to CEO stock ownership—that is, the larger the CEO's equity ownership stake, the slower the growth in debt financing and financial risk‐taking. At the same time, the authors find that financial risk‐taking is positively related to large cash bonuses for the CEOs and to situations in which the CEO is also chairman of the board of directors. Finally, the authors also report that CEOs who are relatively new to the job grow more slowly and borrow less, suggesting that boards of directors can temporarily contain risky expansion plans by the CEO. These results provide support for those corporate governance reformers who wish to cut cash bonus payments for CEOs in favor of long‐term stock ownership.     

China＇s New Rural Income Support Policy： Impacts on Grain Production and Rural Income Inequality

I. Introduction Since the beginning of 2004, the Chinese Government has replaced its centuries-old policy of taxing agriculture by a new policy aimed at subsidizing agriculture and stimulating rural incomes. To this end, agricultural taxes – standing at around 8 percent of agricultural incomes – were drastically reduced. By now they are abolished in most provinces. Inaddition, farmers growing grain receive a direct income subsidy, new seed varieties and mechanization are subsidized, and la…