Geographic poverty traps? A micro model of consumption growth in rural China

How important are neighbourhood endowments of physical and human capital in explaining diverging fortunes over time for otherwise identical households in a developing rural economy? To answer this question we develop an estimable micro model of consumption growth allowing for constraints on factor mobility and externalities, whereby geographic capital can influence the productivity of a household's own capital. Our statistical test has considerable power in detecting geographic effects given that we control for latent heterogeneity in measured consumption growth rates at the micro level. We find robust evidence of geographic poverty traps in farm‐household panel data from post‐reform rural China. Our results strengthen the equity and efficiency case for public investment in lagging poor areas in this setting. Copyright © 2002 John Wiley & Sons, Ltd.     

An experimental study of strategic information transmission

Summary We examine strategic information transmission in an experiment. Senders are privately informed about a state. They send messages to Receivers, who choose actions resulting in payoffs to Senders and Receivers. The payoffs depend on the action and the state. We vary the degree to which the Receivers' and the Senders' preferences diverge. We examine the relationship between the Senders' messages and the true state as well as that between actions and the true state and contrast the ability of different equilibrium message sets to explain the data.When preferences are closely aligned Senders disclose more. We assess two comparative statics: (i) as preferences diverge, state and action are less frequently matched, and (ii) messages tend to become less informative as preferences diverge. The first result is weakly confirmed for adjacent treatments but is considerably stronger when non-adjacent treatments are compared. We find that as preferences diverge messages become less informative. While the ex-ante Pareto-optimal Bayesian Nash Equilibrium does not explain our conditions, the equilibrium message sets supported by the data are similar to the ex-ante Pareto Optimal message sets.We would like to thank seminar participants at the Economic Science Association meetings, the University of Iowa, the University of Minnesota, Northwestern University and the Society for the Advancement of Economic Theory meetings for their comments. We would like to thank Beth Allen, Joyce Berg, Robert Forsythe, Yong-Gwan Kim, Antonio Merlo, Leonard Mirman, In-Uck Park, Charles Plott, Jennifer Reinganum and an anonymous referee for their suggestions. Financial support from the Accounting Research Center at the University of Minnesota is also acknowledge.     

Towards an ethical dimension of decision making in organizations

There is a growing need to increase our understanding of ethical decision making in U.S. based organizations. The authors examine the complexity of creating uniform ethical standards even when the meaning of ethical behavior is being debated. The nature of these controversies are considered, and three important dimensions for ethical decision making are discussed: leaders with integrity and a strong sense of social responsibility, organization cultures that foster dialogue and dissent, and organizations that are willing to reflect on and learn from their actions. Leaders with integrity demonstrate consistency between vision and action that promotes trust, regularly concern themselves with developing moral standards, and are proactive agents of change in an increasingly complex world. Organizational cultures that support dialogue suspend judgments and increase their capacity to think together towards new levels of understanding. Ethical concepts evolve in these organizational cultures, and actions are informed and responsible. Organizations that reflect on their actions engage in double loop learning so that the time taken to reflect on the past and present leads to a more judicious and ethical future. In essence, the authors point to organizational guidelines for ethical decision making that lead to an increase in members' capacity to think and act ethically. Jonathan Z. Gottlieb is a consultant to organizations and a Ph.D. Candidate in Organizational Psychology. His interests include organization redesign, leadership and team development, ethics, and role definition for organization development practitioners. Jyotsna Sanzgiri is Dean of Organizational Psychology Programs at the California School of Professional Psychology — Alameda. She received her Ph.D. in business Administration and her M.B.A. Her interests include organizational theory and core values across cultures, and the historical underpinnings of organization development and behavior.     

Effects of Label on Consumer Preferences: Focus on Hawaiian Avocado Industry

This study examines market challenges facing a local agriculture industry in a small island setting. Examination of the Hawai‘i local avocado industry indicates labeling can address the product information gap between consumers and producers, improve market share, and increase import substitution by local products. Currently, local avocados occupy only 33% of market share, compared with 67% captured by imports. Consumer preferences among local labeled, local unlabeled, and imported avocados were analyzed using multinomial logistic regression. Statistical results showed that labels influence consumers’ decisions to buy local or imported avocados, and their preferences were also influenced by sociodemographic variables, avocado characteristics, and purchasing behavior. Key market segments to target and policy implications are also discussed.     

The Asymptotic Optimality of Residual Income Maximization

Residual income subtracts from operating income an interest charge for invested capital. Residual income can be calculated each period from current accounting information, unlike discounted cash flow (DCF), which requires the knowledge of future cash flows. This paper provides a normative justification for residual-income maximization by showing that if investment decisions are made myopically each period to maximize residual income, the resulting path asymptotically maximizes discounted cash flow. Thus, under the assumptions of the model, residual-income maximization is a heuristic that leads to the long-run DCF-optimum.     

Are Farmers' Market Shoppers Different From Cross-Shoppers? The Case of Hawaiian Avocado Purchasers

Small- and medium-size growers use direct marketing and farmers’ markets to access customers and avoid supply chain intermediaries that increase costs of getting products to consumers. This study examined consumers’ use of agricultural product information sources and their shopping outlet patronage preferences for one type of locally grown produce: avocados.

Two farmers’ market segments were identified: 1) shops only farmers’ markets and 2) cross-shops grocery stores. Product information came from a variety of sources: media, retailers, and organizations. “Buy Local” or “product origin” were considered in produce shopping decisions. One dimension, “Buy Local,” was significant in differentiating farmers’ market segments.     

Relations Between Stock Returns and Fundamental Variables: Evidence from a Segmented Market

This study examines relations between stock returns and potential explanatory factors in Korea, an important and segmented emerging market. Our results show that Korean stock returns in general and returns on stocks listed in Section 1 in particular are significantly positively related to book-to-market, sales-price, and debt-equity ratios, but not significantly related to market value of equity. Returns on stocks listed in Section 2 are, however, negatively related to market value of equity and not significantly related to the other three variables. Among the variables investigated by us, book-to-market ratio has the greatest explanatory power for stock returns and it indicates superior returns for value stocks. Our findings strengthen the international evidence of the role of book-to-market ratio in explaining stock returns by demonstrating its significance even in the segmented Korean market.