The Role of Ethical Standards in the Relationship Between Religious Social Norms and M&A Announcement Returns

Journal of Business Ethics - Prior studies suggest that firms headquartered in areas with strong religious social norms have higher ethical standards. In this study, we examine whether the ethical...     

Real Incentive Effects of Soft Information

Both soft, noncontractible, and hard, contractible, information are informative about managerial ability and future firm performance. If a manager's future compensation depends on expectations of ability or future performance, then the manager has implicit incentives to affect the information. We examine the real incentive effects of soft information in a dynamic agency with limited commitment. When long-term contracts are renegotiated, the rewards for future performance inherent in long-term contracts allow the principal partial control over the implicit incentives. This is because the soft information affects the basis for contract renegotiation. With short-term contracts, the principal has no control over the basis for contract negotiation, and thus long-term contracts generally dominate short-term contracts. With long-term contracts, the principal's control over implicit incentives is characterized in terms of effective contracting on an implicit aggregation of the soft information that arises from predicting (forming expectations of) future performance. We provide sufficient conditions for soft information to have no real incentive effects. In general, implicit incentives not controllable by the principal include fixed effects, such as career concerns driven by labor markets external to the agency. When controllable incentives span the fixed effects of career concerns, the latter have no real effects with regard to total managerial incentives—they would optimally be the same with or without career concerns. Our analysis suggests empirical tests for estimating career concerns that should explicitly incorporate noncontractible information.     

Trade and Tradability: Exports, Imports, and Factor Markets in the Salter-Swan Model

We extend the Salter-Swan model to include both factor markets and semi-traded goods. In our model, changes in relative factor prices depend on changes in world commodity prices, factor endowments, and the trade balance. In contrast, only changes in world commodity prices can affect factor prices in the neoclassical trade model. The inclusion of semi-traded goods weakens the magnification effect in both the Stolper-Samuelson and Rybczynski theorems. When imports and domestic goods are poor substitutes, a characteristic of some commodities in developing countries, the sign of the Stolper-Samuelson theorem is reversed.     

Maximum efforts in contests with asymmetric valuations

Efforts may be reduced when players with different valuations participate in a contest. This paper considers the problem of designing a contest to elicit maximum aggregate effort from players with asymmetric valuations. Optimal designs for different classes of contest technologies are computed and characterized. A value weighted contest is optimal in the concave case. In the unconstrained case, the optimal contest is equivalent to a first price all-pay auction with a reserve price. The optimal design discounts the effort of the high valuation player in order to induce him to compete vigorously.     

Understanding the Economic Factors Influencing Farm Policy Preferences

A survey conducted in Mississippi, Texas, Indiana, and Nebraska elicited producers' preferences for various farm policy changes. This permitted examination of the diversity of preferences that single-state studies have not allowed. Five policy choices, including deficiency payments, loan programs, crop insurance, export programs, and disaster payments were examined. Logit model results predicting producer preferences for each of the five dichotomous policy choices are reported. Explanatory variables based on expected utility theory such as risk aversion, price and yield variability, and price–yield correlation are significant in various models.     

post-war economics' dead end (part 1)

In the first of two articles Sir Alfred Sherman, advisor to Conservative leaders in the 1970s and 1980s and a founder of the Centre for Policy Studies, claims that post-war economics has reached a dead-end.     

Means-Testing the Child Benefit

Improving the distributional impact of transfers may be costly if it reduces labor supply. In this paper we show how effects of changes in the design of the child benefit program can be examined by employing information from behavioral and non-behavioral simulations on micro data. The direct distributional effects are assessed by tax-benefit model calculations, while female labor supply responses to alternative child benefit schemes are simulated under the assumption that choices are discrete. Distributional effects after labor supply responses are also shown. The study confirms that greater targeting of the child benefit is traded against reductions in female labor supply.     

Service Competitiveness – An Anglo-US Study

This article reports on the latest in a series of international comparisons of management practices and performance outcomes of industries in various countries. Here, it is the service industries in the UK and the US which come under the microscope. Among the companies surveyed, there were more world-class performers in the US than the UK, but also more low performers. The concluding part of the article is diagnostic – the authors also suggest measures which could improve performance.