Bidder CEO and Other Executive Compensation in UK M&As

This paper investigates the impact of M&As on bidder (CEO and other) executive compensation employing a unique sample of 100 completed bids in the UK over the 1998–2001 period. Our findings indicate that less independent and larger boards award CEOs significantly higher bonuses and salary following M&A completion both for the full sample and for the UK and US sub‐samples. UK CEOs and executives are rewarded more for the effort exerted in accomplishing intra ‐ industry or large mergers than for diversifying or small mergers and their cash pay is unaffected by other measures of their managerial skill or performance. US bidders are rewarded at higher levels than their UK counterparts and their remuneration is related only to measures of CEO dominance over the board of directors. Overall our findings offer support for the managerial power rather than the agency theory perspective on managerial compensation.     

Asymmetric information, strategic behavior, and discrimination in the labor market

Summary  The neoclassical model of labor market discrimination assumes the presence of either prejudiced preferences, biased assessments of worker productivity, or monopsony power. We show that when market agents control asymmetric information, strategic behavior can induce discriminatory hiring practices even when these market features are absent. Moreover, strategic interaction many distort public policies to the point of harming the segments of the work force they were designed to support. Received: January 3, 1996 revised version April 29, 1996     

Waking Up from the American Dream: On the Experience of Young Americans during the Housing Boom of the 2000s

We exploit regional variations in house price fluctuations in the United States during the early to mid‐2000s to study the impact of the housing boom on young Americans' choices related to home ownership, household formation, and fertility. We also introduce a novel instrument for changes in house prices based on the predetermined industrial structure of the local economy. We find that in regions that experienced large increases in house prices between 2001 and 2006, the youngest households were substantially less likely to purchase residential property, to be married, and to have a child, both in 2006 and in 2011.     

Managerial gaming of stock and option grants

In this paper, we examine managerial gaming of different types of equity grants, both at the initial award of the equity grants (front‐end gaming) and the unwinding of the equity holdings in the future (back‐end gaming). We find that the potential gains from stock price manipulation vary substantially across different types of equity grants. While traditional stock option grants are less vulnerable to front‐end gaming, they are more vulnerable to back‐end gaming than other types of equity grants (e.g., restricted stock grants). To prevent or discourage managerial gaming, firms should preset all terms of the equity grant in advance and link its future payoff to average stock prices (e.g., by granting Asian stock options).     

If I Leave Here Tomorrow: An Option View of Migration When Labor Market Quality Declines

In this article, we provide a framework for determining when it is optimal to move when labor market opportunities are declining. We model the decision to migrate as akin to owning a financial option in which the exercise price is the fixed cost of moving. We show that a higher fixed cost associated with moving and a higher standard deviation of the quality of the labor market reduce the incentive to migrate. We then empirically examine whether the standard deviation of indicators of labor market quality reduce the likelihood of migration. Our findings strongly support this hypothesis, and imply that for the relatively mobile population of high-skilled workers the counterfactual outmigration rates that would obtain if future labor-market quality were known with certainty are more than twice observed rates.     

Effort, trade, and unemployment

Abstract.  This paper incorporates equilibrium unemployment caused by efficiency wages into a monopolistic competition model of trade. Worker effort is treated as an endogenous variable that depends on the optimizing behaviour of firms and workers. Opening up trade induces firms to demand greater worker effort and to cut the size of their workforce. This counteracts the positive employment effect due to entry of firms. Circumstances are indicated in which the two effects just balance, leaving aggregate employment unchanged. Trade unambiguously increases worker effort, thereby enhancing within-firm productivity.     

Why is child labor illegal?

We present a theory of the emergence of laws restricting child labor or imposing mandatory education that is consistent with the fact that poor parents tend to oppose such laws. We find that if altruistic parents are unable to commit to educating their children, child-labor laws can increase the welfare of higher-income parents in an ex ante sense. On the basis of an empirical analysis of Latin-American household surveys, we demonstrate that per capita income in the country of residence has the predicted effect on child labor supply, even after controlling for other household characteristics.     

Geography,health, and the pace of demo-economic development

This paper investigates the impact of subsistence consumption and extrinsic and intrinsic causes of child mortality on fertility and child expenditure. It offers a theory for why mankind multiplies at higher rates at geographically unfavorable, tropical locations. Placed into a macroeconomic framework this behavior creates an indirect channel through which geography shapes economic performance. It is explained why it are countries of low absolute latitude where we observe exceedingly slow (if not stalled) economic development and demographic transition.     

How does female labor force participation impact on housing values?

Female labor force participation (FLFP) and household wealth are two main topics of interests to economists for long time. The objective of this study is to investigate the response of housing values, household wealth, to female labor force participation using panel level data in the U.S. states. We develop static and dynamic estimation models using state-level data in the U.S. from 2005 to 2013. The results show the FLFP rate and per capita income have a strong positive effect on housing values, while the number of units per capita has a negative effect on housing values in the state. We find that a 10% increase in FLFP will result in an increase of about 12.5% on housing values. Additionally, increasing per capita income by 10% on average will cause housing values to rise by 9%, however, a 10% rise in the number of units per capita will decrease housing values by 30%. The results assist economists and policy makers in assessing policies to optimize decisions in labor market and housing market.