Inflation dynamics in Kazakhstan1

In January 1992, Kazakhstan initiated a reform programme to move towards market-determined prices. The price liberalization process was characterized by large relative price shifts and an increase in the overall price level towards those observed in market economies. The paper shows how the piecemeal manner in which prices were liberalized resulted in strong relative price variability over a prolonged period of time, against a background of high inflation. Convergence towards international relative and absolute price levels has progressed but is not complete, with prices for energy and services in particular still below market economy levels.     

Ethics in Information Technology and Software Use

The emerging concern about software piracy and illegal or unauthorized use of information technology and software has been evident in the media and open literature for the last few years. In the course of conducting their academic assignments, the authors began to compare observations from classroom experiences related to ethics in the use of software and information technology and systems. Qualitatively and anecdotally, it appeared that many if not most, students had misconceptions about what represented ethical and unethical behaviors in these realms. Clearly, one can argue that if college students are uncertain about what constitutes appropriate and inappropriate behavior then this uncertainty will be carried forward into their workplaces upon graduation. Furthermore, if their workplaces don't provide ethics training as a component of a new employee orientation program, one can project a potential for unintentional violations and infringements of copyrights and law in the field. This study was conducted among graduate and undergraduate students to gain insight into their attitudes, perceptions and understanding of some of the relevant ethics issues. A questionnaire of 11 statements was employed that described ubiquitous but most likely unethical (or surely dubious) behaviors in the prevailing business and academic environments. Each respondent was asked to evaluate each statement twice (once for “self” and once for “colleague”) on a five-option highly ethical (5) to neutral (3) to highly unethical (1) scale. The statements were worded such that lower instrument score was associated with higher ethical responses. The questionnaire's two-part structure was designed to solicit honest answers. The encouraging learning from this study was that the overall sample and its various sub-samples did not consider any of the eleven behaviors to be “ethical” or “highly ethical.” It was also encouraging to note that the overall sample and all sub-samples considered “highly unethical” those behaviors associated with personal privacy or property or outright theft. This indicated that moral judgment and probity prevail. The discouraging learning was that behaviors associated with the use of enterprise property were viewed as “neutral” i.e., neither “ethical” nor “unethical.” These findings suggested confusion and lack of clarity and definition around workplace deportment as it regards ethics in software and information technology use. The current study suggests that additional research needs to be conducted to define and clarify the issues, which in turn can form the basis for programs to rectify or at least ameliorate the situation.     

QUADRATIC TERM STRUCTURE MODELS FOR RISK-FREE AND DEFAULTABLE RATES

In this paper, quadratic term structure models (QTSMs) are analyzed and characterized in a general Markovian setting. The primary motivation for this work is to find a useful extension of the traditional QTSM, which is based on an Ornstein–Uhlenbeck (OU) state process, while maintaining the analytical tractability of the model. To accomplish this, the class of quadratic processes, consisting of those Markov state processes that yield QTSM, is introduced. The main result states that OU processes are the only conservative quadratic processes. In general, however, a quadratic potential can be added to allow QTSMs to model default risk. It is further shown that the exponent functions that are inherent in the definition of the quadratic property can be determined by a system of Riccati equations with a unique admissible parameter set. The implications of these results for modeling the term structure of risk-free and defaultable rates are discussed.     

The Effect of Earnings–Announcement Timing on Earnings Management

This paper examines whether firms which delay earnings announcements engage in earnings management. The cross–sectional version of the modified Jones 1995 model is used to estimate 'normal' accruals. Prior research has documented that, on average, delayed earnings announcements are associated with negative earnings surprises. Our evidence suggests that the market anticipates unfavorable earnings news when it observes reporting delays. As a consequence, late reporters appear to make the most of a bad situation by employing income–decreasing accruals in big–bath–type earnings management and in contractual renegotiations. We find that the magnitude of income–reducing abnormal accruals is related to the reporting lag.     

Beyond Flying Geese: The Expansion of East Asia's Electronics Trade

The flying geese (FG) hypothesis, which asserts the sequential catching‐up processes of the latecomers, holds well in the past. Yet a simultaneous boom within the electronics industry across East Asia casts doubt on the applicability of the hypothesis. By using the RCA and NET indices, the paper finds that the FG pattern shows in the electronics industry as a whole, but not always so at the disaggregated level. This suggests that the FG formation may not appear in other industries, if they are involved in international production fragmentation or have differentiated products, and if certain latecomers have become new leaders.     

Mergers,takeovers, and a property ethic

The recent takeover and merger trend cries out for ethical evaluation. This essay proposes a model for evaluating them in terms of their impact on a firm's immediate stakeholders: investors, owners, management and employees. Since mergers and takeovers are Transfers of Ownership of Firms (TOFs) they entail a property ethic of ownership, control, securing stakeholder interests, and defining which stakeholders should exercise these rights. I use the model to evaluate two fictional cases, a friendly merger and a hostile takeover. The results show that neither TOF serves all interests equitably. Since the control structure of the private firm is legitimized by its interest structure, I reason that both should be reformed. Both rest on a broader economic rationale; but it is controverted. Accordingly, the economic and ethical evaluation of TOFs, I conclude, both entail the democratic reform of the control structure of the firm.A corporation represents far more than its current stock price; it embodies obligations to employees, customers, suppliers and communities.Robert S. Saul, Peers Merchant BankVincent di Norcia is Associate Professor of Philosophy at the University of Sudbury. He is the author of Ethics in Management and Beyond the Red Tory.     

A step beside the maximin path: Can we sustain the economy by following Hartwick's investment rule?

If sustainability is interpreted as the requirement to sustain consumption or utility at an optimal level, a maximin objective appears to be relevant. The sustained economy is characterized by an optimal investment following Hartwick's investment rule. This paper examines how the sustainability of a production-consumption economy with a non-renewable resource is modified in the neighborhood of the maximin path, i.e. when the consumption and the resource price are not optimal. A Sustainable Consumption Indicator is introduced in order to characterize the sustainability of constant consumption paths, defined as deviations from the maximin path. We describe how an over-consumption jeopardizes future sustainability.     

Efficiency wages and union-firm bargaining with private information

We consider efficiency wage effects in a union-firm bargaining model with private information. We show that an increase in the efficiency wage effects does not necessarily increase the wage level at equilibrium, even when the wage bargaining with private information is close to one with complete information. However, if it is commonly known that the firm is stronger than the union and the demand is sufficiently elastic, then an increase in the efficiency wage effects increases for sure the wage at equilibrium.JEL Classification: J41, J50, J52We thank Juan Dolado and two anonymous referees for valuable comments. Vincent Vannetelbosch is Chercheur Qualifié at the Fonds National de la Recherche Scientifique. The research of Ana Mauleon has been made possible by a fellowship of the Fonds Européen du Développement Economique Régional (FEDER). Financial support from the Belgian French Communitys program Action de Recherches Concertée 99/04-235 (IRES, Université catholique de Louvain) is gratefully acknowledged.     

Multidimensional mechanism design: Revenue maximization and the multiple-good monopoly

The seller of N distinct objects is uncertain about the buyer's valuation for those objects. The seller's problem, to maximize expected revenue, consists of maximizing a linear functional over a convex set of mechanisms. A solution to the seller's problem can always be found in an extreme point of the feasible set. We identify the relevant extreme points and faces of the feasible set. We provide a simple algebraic procedure to determine whether a mechanism is an extreme point. We characterize the mechanisms that maximize revenue for some well-behaved distribution of buyer's valuations.