On Welfare Criteria and Optimality in an Endogenous Growth Model

In this paper, we explore the consequences for optimality of a social planner adopting two different welfare criteria. The framework of analysis is an overlapping generations model with physical and human capital. We first show that, when the social welfare function is a discounted sum of individual utilities defined over consumption per unit of natural labor, the precise cardinalization of the individual utility function becomes crucial for both the characterization of the social optimum and the policies that support it. Also, decentralizing the social optimum requires an education subsidy that is definitely positive, but its size depends in a determinant way on the aforementioned cardinalization. In contrast, when the social welfare function is a discounted sum of individual utilities defined over consumption per unit of efficient labor, the precise cardinalization of preferences becomes irrelevant. More strikingly, along the optimal growth path, the education subsidy is negative, i.e., the planner should tax rather than subsidize investments in human capital.     

The Effect of Information on Willingness to Pay for Canned Tuna Fish with Different Corporate Social Responsibility (CSR) Certification: A Pilot Study

The objective of this study was to assess the role of information in consumers' willingness to pay (WTP) for food products with corporate social responsibility (CSR) certification. The item used for the experimental design was canned tuna fish, a product on the market that is already exhibiting various kinds of certification related to social and environmental attributes. Two different kinds of certifications were examined, namely Friend of the Sea, which involves environmental aspects, and SA8000, related to workers' rights and more general social attributes. We implemented experimental auctions, taking into account three information treatments. The initial findings show that the WTP for both CSR labels is higher than the WTP for tuna fish without any CSR certification. Nevertheless, the information provided on CSR certification did not change consumers' WTP among the certification schemes. Our findings could also serve to fine‐tune marketing strategies to consumer preferences and determine which CSR activities are worth undertaking.     

Constraints,Domain Conditions,and Well-Being: Evidence from Poland during the Transformation

The relationships among the recent changes in socioeconomic and demographic characteristics of the household, domain conditions (objective well-being), and the household members' assessment of their situation (subjective well-being) are assessed with data from 600 households in the province of Lublin, Poland. Four domains are included in the measures of recent change, domain conditions, and well-being: housing, household equipment, food consumption, and transportation. As expected, domain conditions are a function of household constraints; well-being is a function of domain conditions and recent change. Rural residents have significantly poorer domain conditions than urban residents, but report significantly higher levels of well-being.     

The Impact of Internal Union Politics on the 1981 UMWA Strike

This paper explicitly addresses the role internal union politics played in the rank-and-file rejection of the United Mine Workers of America (UMWA)-Bituminous Coal Operators Association (BCOA) contract in March 1981. The strike decision is viewed as having both political and economic components and as being rooted in the specific history and traditions of the UMWA. Using a unique data set, a statistically significant relationship between the vote for challenger Richard Trumka and the vote for the strike is found. Miners struck for many reasons in 1981. This study concludes that one of those reasons was to protest the union leadership.     

PROFIT MAXIMISATION—CAN IT BE JUSTIFIED?

IN THE TRADITIONAL theory the firm's raison d'être is represented by just one single goal, viz. profit maximisation as an explanation and, in support of this, exact quantitative models by means of marginal analysis were developed indicating under which conditions profit maximisation was achieved. In fact, the models served "as a wonderful key which opens all doors to the understanding of entrepreneurial behaviour.¹     

High school students' knowledge of telemarketing fraud tactics in the U.S.A.

Telemarketing fraud is a rapidly increasing problem with widespread economic implications for consumers and society. Given the extent of the problem, government agencies and consumer organizations are involved in educational efforts aimed at reducing telemarketing fraud. But does education make a difference? The effects of an educational experience on the knowledge of high school students with regard to telemarketing fraud tactics were explored in a controlled setting, in this study. Analyses of pre- and post-test results for treatment and control groups revealed an increased knowledge of telemarketing fraud tactics from a lesson on legitimate and fraudulent telemarketing practices. Even after controlling for age, gender and rural/urban residence a significant difference in average test scores continued to exist.     

MEASURING POVERTY ACCOUNTING FOR TIME

In this paper we make a methodological proposal to measure poverty accounting for time by proposing a new family of intertemporal poverty indexes that aims at reconciling the way poverty is measured in a static and a dynamic framework. Our index is able to consider the duration of the poverty spell and the social preference for equality in well‐being given that, in contrast with others that have been previously proposed, it is sensitive to the level of inequality between individual complete poverty experiences over time. Moreover, other indices in the literature can be interpreted as special cases of our more general measure. An empirical illustration shows the relevance of considering the distribution of poverty experiences among the population in an international analysis.     

Mutual Fund Performance and the Incentive to Generate Alpha

To rationalize the well‐known underperformance of the average actively managed mutual fund, we exploit the fact that retail funds in different market segments compete for different types of investors. Within the segment of funds marketed directly to retail investors, we show that flows chase risk‐adjusted returns, and that funds respond by investing more in active management. Importantly, within this direct‐sold segment, we find no evidence that actively managed funds underperform index funds. In contrast, we show that actively managed funds sold through brokers face a weaker incentive to generate alpha and significantly underperform index funds.     

Top-Management Compensation and Capital Structure

The interrelationship between top-management compensation and the design and mix of external claims issued by a firm is studied. The optimal managerial compensation structures depend on not only the agency relationship between shareholders and management, but also the conflicts of interests which arise in the other contracting relationships for which the firm serves as a nexus. We analyze in detail the optimal management compensation for the cases when the external claims are (1) equity and risky debt, and (2) equity and convertible debt. In addition to the role of aligning managerial incentives with shareholder interests, managerial compensation in a levered firm also serves as a precommitment device to minimize the agency costs of debt. The optimal management compensation derived has low pay-performance sensitivity. With convertible debt, instead of straight debt, the corresponding optimal managerial compensation has high pay-to-performance sensitivity. A negative relationship between pay-performance sensitivity and leverage is derived. Our results provide a reconciliation of the puzzling evidence of Jensen and Murphy ( 1990 ) with agency theory. Other testable implications include (1) a relationship between the risk premium in corporate bond yields and top-management compensation structures, and (2) the announcement effect of adoption of executive stock option plans on bond prices. The model yields implications for management compensation in banks and Federal Deposit Insurance reform. Our results explain the dynamics of top-management compensation in firms going through financial distress and reorganization.