Non-rating revenue and conflicts of interest

Rating agencies produce ratings used by investors, but obtain most of their revenue from issuers, leading to a conflict of interest. We employ a unique data set on the use of non-rating services, and the associated payments, in India, to test if this conflict affects ratings quality. Agencies rate issuers that pay them for non-rating services higher (than agencies not hired for such services). Such issuers also have higher default rates. Both effects are increasing in the amount paid. These results suggest that issuers which hire agencies for non-rating services receive higher ratings despite having higher default risk.     

Minimum and preferred entry qualifications and training provision for North Australian workers

This paper reports on the outcomes of a replication study of a survey of British employers that requested information on the qualifications sought when recruiting employees and on subsequent training and development. While the British survey was interested in the uptake and use of the British National Vocational Qualifications, the study reported in this article is primarily focused on the uptake and use of the Australian Qualifications Framework qualifications by North Australian employers. This study was prompted by the skills shortages and recruitment difficulties being experienced by organizations throughout rural and regional Australia. Previous studies have found that vocational qualifications were not valued by UK employers and few employers were encouraging employees to undertake vocational awards. If this is also the case in Australia, it may in part explain problems in recruiting skilled workers. This research clearly demonstrates that employees in regional and rural Australia are seeking to improve their knowledge and skills through vocational training and higher education qualifications. Also, employers are providing access to training and are supporting managerial and professional employees to gain higher educational qualifications. When recruiting all types of worker other than unskilled labourers, the majority of organizations prefer to recruit workers with qualifications. In rural and regional centres, however, a more pragmatic stance of recruiting unqualified employees in some areas is observed. Clearly, employers will attempt to minimize training costs by recruiting skilled employees, but in the end they will have to provide access to training and education to ensure that they have a skilled workforce that can deliver essential services and products.     

Introducing Time‐to‐Educate in a Job‐Search Model

Transition patterns from school to work differ considerably across OECD countries. Some countries exhibit high youth unemployment rates, which can be considered an indicator of the difficulty facing young people trying to integrate into the labour market. At the same time, education is a time‐consuming process, and enrolment and dropout decisions depend on expected duration of studies as well as on job prospects with and without completed degrees. One way to model entry into the labour market is by means of job‐search models, where the job arrival hazard is a key parameter in capturing the ease or difficulty in finding a job. Standard models of job search and education assume that skills can be upgraded instantaneously (and mostly in the form of on‐the‐job training) at a fixed cost. This paper models education as a time‐consuming process, a concept which we call time‐to‐educate, during which an individual faces the trade‐off between continuing education and taking up a job.     

MOTIVATING RECYCLING: A MARGINAL COST ANALYSIS

Areas considering alternative house-to-house recycling programs as a means of diverting material from landfills can determine the most efficient choice by comparing programs' marginal costs with diversion's marginal benefits. This paper describes a controlled field experiment that observed individual household recycling habits over a six-month period. The experiment monitored the quantity of material that households recycled under increasingly more convenient (and increasingly more costly) programs. The analysis here uses a Tobit model to determine how the quantity of material diverted varies as a function of convenience factors and demographic characteristics. The analysis compares the value of the expected marginal increase in diversion to the marginal cost of increasing recycling convenience to determine the efficient level of convenience for an area's recycling program.     

Schumpeter 1911: Farsighted Visions on Economic Development

This paper presents to the English-speaking reader a sample of material contained only in Schumpeter's first German edition (1911) of Theorie der wirtschaftlichen Entwicklung , material subsequently omitted from later German editions and from the English translation. The newly-translated material, presented here for the first time in English, comprises a substantial part of the second chapter, only available in a completely rewritten version, and fully half of the famous seventh chapter, which has not been previously available at all in English. This material merits attention today because it contains remarkable and farsighted visions on economic theory that may inspire current efforts to devise models of economic and social evolution. In order to better appreciate the original text, we briefly introduce the "background" to Theorie and its revisions, briefly describing the social and intellectual environment of the time. We then discuss how the entrepreneur evolved over the three editions of Theorie (from 1911 to 1934) in view of the shift in Schumpeter's personal and intellectual life and outline the most important implications raised by the first German edition of 1911. Finally, we use Schumpeter's own statements to settle the obstinate confusion on the publication year of Theorie in favour of the year 1911.     

Rules versus discretion - A disinflation case

This paper compares a strict inflation target regime to a conservative central bank regime to determine the monetary regime appropriate for a disinflation process. The analysis shows that in a two-period model, in which policymakers face given first-period inflationary expectations, a strict inflation target could be preferred to the appointment of a conservative central banker who has discretion. The result differs from that of Rogoff (1985), who assumed rational expectations and concluded that a conservative central banker is always preferable. The disadvantage of the conservative central banker derives from his tendency to accelerate disinflation relative to rate that maximizes social welfare.JEL Classification: E52, E58The authors are grateful to Alex Cukierman, Nissan Liviatan, Allan Drazen, Amit Friedman and Yoav Friedmann for their useful suggestions. We also thank the anonymous referees for helpful comments. Earlier versions of this paper were presented at the Tel Aviv University macroeconomic workshop, at the Research Department seminar, Bank of Israel, and at the Bank of Israels conference on Macroeconomic Policy, October 2002.     

Endogenous private information structures

We formally incorporate the option to gather information into a game and thus endogenize the information structure. We ask whether models with exogenous information structures are robust with respect to this endogenization. Any Nash equilibrium of the game with information acquisition induces a Nash equilibrium in the corresponding game with an exogenous structure. We provide sufficient conditions on the structure of the game for which this remains true when ‘Nash’ is replaced by ‘sequential’. We characterize the (sequential) Nash equilibria of games with exogenous information structures that can arise as a (sequential) Nash equilibrium of games with endogenous information acquisition.