The ultimate resource after 40: A special issue against the grain

The Review of Austrian Economics - This introduction to the special issue in honor of the 40th anniversary of Julian Simon’s book The Ultimate Resource relays the significance of the...     

On preferences and taxation mechanisms in strategic bilateral exchange

Review of Economic Design - In this paper we investigate the effectiveness and the welfare implications of various fiscal policies in strategic bilateral trade. To this end, we reconsider the class...     

Social Thinking about Collective Risk: How Do Risk‐related Practice and Personal Involvement Impact Its Social Representations?

The study investigates the effects of personal involvement in a collective risk on the structure of its social representation, and how those effects depend on risk‐related experience. The paper reports an empirical study conducted within the structural approach to the Social Representations Theory. We tested the effects of risk‐related practice (earthquake experience) and of personal involvement in risk on the structure of its social representation. The results showed that the social representation was normative in nature, but became more practically oriented in the group who experienced earthquake. A normative representation is useful in judging risk's attributes; instead, a more functional, or a more practically oriented representation is expected to enable the use of more diversified risk‐related information especially for practical purposes (risk mitigation behaviour). Similarly, the social representation of participants who were highly involved in seismic risk was more structured and more practically oriented. However, this was true only if they possessed risk‐related experience, either through collective (risk culture) or live earthquake experience. Based on these results, a suggestion is made on how to increase the efficiency of prevention campaigns that aim at encouraging collective risk‐mitigation conduct.     

Exploring Proactiveness as a Moderator in the Process of Perceiving Industrial Munificence: A Field Study of SMEs in Four Countries

Utilizing information processing theory, we investigated the role that proactiveness plays in the organizational process of perceiving objective industrial munificence. Specifically, we examined the moderating effect of proactiveness in the munificence perception process, as well as the mediating impact of perceived munificence on the relationship between objective munificence and firm performance. Data collected from 227 companies in four countries and seven manufacturing industries support both hypotheses. The implications of these findings for managerial practice and future research are discussed.     

Is the Term Premium a Risk Premium?

This paper explores whether excess holding period returns on long vis-a-vis short-term securities behave in a manner that is consistent with (1) market efficiency, (2) the time-varying-term-premium variant of the expectations hypothesis, and (3) theories of the term premium that view it as a reward for risk bearing. Both traditional and modern theories of the term premium imply that it should evolve fairly slowly over time as attitudes toward risk and/or perceived covariances with wealth or consumption change. This implies that this period's term premium should have some predictive ability for next period's. However, we find that this quarter's ex-post term premium has zero predictive ability. For monthly rates and returns, the evidence is less clear cut, but again the implied term premia do not behave in a manner consistent with existing theories.     

The resources crisis

This article utilizes a new concept of supply and demand for raw materials. It emphasizes the need for the use of long run economics rather than short run analysis in the determination of a fair price for raw commodities.     

Spin-offs in an Environment of Bank Debt

Abstract:  An assessment of the wealth impact of spin-offs involving UK firms is of interest, as they tend to access debt through banks rather than capital markets. Banks will have a different relationship with shareholders, so the distribution of returns may differ from that previously observed. The short and long-term impact on both parent and spin-off shareholders is investigated. Possible reasons for a positive returns response, including an anticipated acquisition premium, and management focus related gains, are considered. Annual financial ratios offer a further evaluation of operating performance and assess the impact on levels of leverage in parents and spin-offs.     

Multi-Factor Cox-Ingersoll-Ross Models of the Term Structure: Estimates and Tests from a Kalman Filter Model

This paper presents a method for estimating multi-factor versions of the Cox-Ingersoll-Ross (1985b) model of the term structure of interest rates. The fixed parameters in one, two, and three factor models are estimated by applying an approximate maximum likelihood estimator in a state-space model using data for the U.S. treasury market. A nonlinear Kalman filter is used to estimate the unobservable factors. Multi-factor models are necessary to characterize the changing shape of the yield curve over time, and the statistical tests support the case for two and three factor models. A three factor model would be able to incorporate random variation in short term interest rates, long term rates, and interest rate volatility.     

Optimal insurance contracts when establishing the amount of losses is costly

The problem of establishing the amount of losses covered by public and private insurance is often characterized by asymmetric information, in which the claimant already knows the extent of a loss but this can be demonstrated to the insurer only at a cost. It is shown that a simple arrangement, which provides greater coverage whenever individuals demonstrate high losses, gives claimants an excessive incentive to establish the amount of their losses. This paper determines what insurance claims process, consistent with the form typically employed in existing insurance arrangements, is optimal.     

Estimating the sensitivity of state tax revenue to cyclical and wealth effects

In this study, we estimate the elasticities of alternative sources of state tax revenue relative to the economy, as measured by GSP, and to wealth, as measured by the S&P500. Next, efficient tax frontiers are estimated for each state by minimizing the standard deviation, given the current average growth rate of revenues. It is shown how states could attain the same expected growth rate of tax revenues with less volatility by modifying the composition of their existing tax structures. In most cases, corporate income taxes are found to reduce efficiency due to their high volatility without a correspondingly high growth rate.