regulatory multiplicity and conflict towards a combined code on corporate governance in nigeria given the multiplicity of codes designed to regulate different stakeholders in terms of promoting good corporate governance this paper examines areas of conflicts among the various codes and the associated implications for corporate governance practices and regulatory compliances by public listed nigerian firms using the conflict signalling theory for developing the conceptual framework this study examines the proliferation of codes in nigeria through a mixed method approach to provide an exploratory account of the implications of corporate governance regulatory multiplicity evidence suggests the presence of conflict among the various codes which contributes to reduced compliance by firms and ineffective enforceability by regulatory agencies which both impede good corporate governance in nigeria the findings advance conflict signalling theory as an important framework for understanding the implications of the conflicts arising from the multiplicity of codes

migration trends and earnings of free agents in major league baseball 1976 1979 this paper is an empirical investigation of the effect of team characteristics on the migration pattern of free agents in major league baseball during the period 1976 1979 the results indicate that high quality free agents tend to leave winning teams and move to teams in cities with large or rapidly growing populations the compensation paid to free agents is shown to depend on these team characteristics as well as the players personal characteristics and market conditions

do cigarette producers price discriminate by state an empirical analysis of local cigarette pricing and taxation abstract this study analyzes the interactive effects of oligopoly pricing state taxation and anti smoking regulations on retail cigarette prices by state using panel data for the 50 us states between 1960 and 1990 the results indicate that cigarette producers do price discriminate by state though the effect is not large relative to the final retail price there are two further results 1 state taxes are more than passed on a 1 cent state tax increase results in a price increase of 1 11 cents and 2 sellers offset state and local anti smoking laws with lower prices thereby blunting effects of the regulations

asymmetric information signaling and optimal corporate financial decisions as is shown in the financial literature the assumption of perfect and costless information often leads to the conclusion that corporate financial decisions are inconsequential to the value of the firm e g stiglitz 20 and fama 6 this conclusion seems to be in direct contradiction with the observed behavior of corporations that allocate real resources to implement financial policies the gap between theory and observed behavior is bridged by introducing various frictions and market imperfections a growing number of studies examine the optiraality of financial decisions when the assumption of perfect and costless information is replaced by allowing for informational asymmetry the asymmetry is assumed to exist between corporate insiders who possess superior information about the firm s future earnings prospects and outside investors the emphasis in this literature is on the ability of financial instruments to serve as signaling devices through which the true value of the firm can be revealed to the market without moral hazard or disclosure of confidential information although the signaling process is typically considered to be costly it is advocated that firms may be better off if they employ this mechanism rather than reveal reliable but confidential information or not disclose at all

do higher tobacco taxes reduce adult smoking new evidence of the effect of recent cigarette tax increases on adult smoking there is a general consensus among policymakers that raising tobacco taxes reduces cigarette consumption however evidence that tobacco taxes reduce adult smoking is relatively sparse in this paper we extend the literature in two ways using data from the current population survey tobacco use supplements we focus on recent large tax changes which provide the best opportunity to empirically observe a response in cigarette consumption and employ a novel paired difference in differences technique to estimate the association between tax increases and cigarette consumption estimates indicate that for adults the association between cigarette taxes and either smoking participation or smoking intensity is negative small and not usually statistically significant our evidence suggests that increases in cigarette taxes are associated with small decreases in cigarette consumption and that it will take sizable tax increases on the order of 100 to decrease smoking by as much as 5 jel i18 i12

estimating dynamic demand for cigarettes using panel data the effects of bootlegging taxation and advertising reconsidered abstracct a dynamic demand for cigarette consumption is estimated using pooled data of 46 states over the period 1963 to 1980 a price elasticity of 0 2 and an insignificant income elasticity is found using pooled estimation techniques the bootlegging effect is modeled explicitly using neighboring price the effect is found to be significant two major policy issues are analyzed in light of these new estimates 1 cigarette taxation is found to be an effective tool for generating revenues even though there may be spillover effects to neighboring states where bootlegging is significant 2 the effects of the fairness doctrine act and the advertising ban on cigarette consumption are re examined we find mild support for the effectiveness of subsidized anti smoking messages in reducing cigarette consumption and no support for the thesis that the ban on advertising helps to increase per capita consumption

the effects of price and smoking risk information on the demand for tobacco in taiwan an empirical study this study evaluates the effects of a cigarette price increase and smoking risk information on tobacco consumption in taiwan tobacco price expenditure and an index of smoking risk information for taiwan were introduced into a central bureau of statistics cbs demand model to estimate several cigarette demand elasticity coefficients according to this model increasing the cigarette price is a more effective means of reducing cigarette consumption than disseminating more risk information in addition we found that a price rise of nt 5 per cigarette pack would cause a reduction in the consumption of domestic and imported cigarettes of 3 23 and 4 86 packs per capita respectively total per capita consumption of cigarettes would be reduced annually by 8 09 packs 7 56 despite this reduction in cigarette consumption the increase in cigarette price would at the same time lead to a significant net increase in tax revenue to the taiwan government

advertising and the us market demand for beer the us per capita market demand for beer is empirically estimated to determine the effect of advertising on the demand for beer the empirical results indicate that the most important determinants of demand are the price of beer the price of substitutes demographic factors and a light beer dummy variable the positive effects of income and lagged consumption appear to be small although many have argued that advertising promotes beer consumption the empirical results of this study do not support this hypothesis

a pack a day for 20 years smoking and cigarette pack sizes this study focuses on the determinants of cigarette consumption in particular the impact of cigarette pack sizes on the typical daily consumption of smokers is investigated results are presented from a new multi modal count data model which allows for pack effects in daily consumption levels our results suggest that smokers regulate their consumption in accordance with the variety of pack sizes that are available to them

the potential for using excise taxes to reduce smoking we examine the potential for reducing cigarette smoking through increases in cigarette excise taxes by estimating the price elasticity of demand for cigarettes using information on individual smoking behavior from the 1976 health interview survey we estimate the adult price elasticity of demand for cigarettes to be 0 42 we find that price has its greatest effect on the smoking behavior of young males and that it operates primarily on the decision to smoke rather than via adjustments in the quantity of cigarettes smoked an excise tax increase would discourage smoking by successive cohorts of young adults and those reduced smoking levels would be reflected in aggregate smoking as these cohorts mature

signalling by direct disclosure under asymmetric information abstract in this paper an informational asymmetry exists between investors and the issuer of an initial public offering about the value of the security to avoid market failure a solution is proposed in which the issuer makes a disclosure about firm value that is verified by an investment banker the investment banker enters into a contingent contract with investors which imposes a penalty if the ex post observable cash flow indicates fraudulent disclosure a bivariate signalling model is formulated and solved and testable implications are derived from comparative statics analysis

winning in professional team sports historical moments our aims in this paper are to 1 examine the higher moments of the distribution of winning percentages and 2 discover economic implications of such an examination the results prove useful to both current sports league policy questions and future research we speculate that the institutional differences between north american pro leagues and european soccer leagues will prove fruitful areas for future research on the determination of competitive balance jel c1 l83 z20

the effectiveness of anti smoking legislation a review abstract this survey focuses on government efforts to curb the use of undesirable goods notably tobacco products we synthesize the economics literature and examine the effectiveness of government curbs on tobacco consumption through non price controls such as bans on cigarette advertising health warnings and workplace smoking bans and price measures or higher prices through higher taxes this literature review is unique in that we do not merely aim to provide a summary of the literature rather our main focus is to draw conclusions from the literature regarding the effectiveness of alternate policy measures across countries in checking smoking and to provide directions suggestions for extending the scope of government intervention to other tobacco products

ownership of property rights and the allocation of talents under the reserve clause system that assigns the property rights on the major league baseball players services to teams player transfers are negotiated between teams without the involvement of players in contrast under the current free agency system players with free agent status negotiate directly with potential suitors thus the system assigns the property rights to players using data extracted from the baseball archive http baseball1 com this article examines the effect of the change in the property rights assignment on the allocation of talents across teams we find that the change increased large market teams shares of veteran all star players and the concentration of senior players

the effect of cigarette excise taxes on smoking before during and after pregnancy recent analyses suggest that cigarette excise taxes lower prenatal smoking it is unclear however whether the association between taxes and prenatal smoking represents a decline among women of reproductive age or a particular response by pregnant women we address this question directly with an analysis of quit and relapse behavior during and after pregnancy we find that the price elasticity of prenatal quitting and postpartum relapse is close to one in absolute value we conclude that direct financial incentives to stop smoking during and after pregnancy should be considered

is smoking inferior evidence from variation in the earned income tax credit in this paper we estimate the causal income elasticity of smoking participation cessation and cigarette demand conditional upon participation using an instrumental variables iv estimation strategy we find that smoking appears to be a normal good among low income adults higher instrumented income is associated with an increase in the number of cigarettes consumed and a decrease in smoking cessation the magnitude and direction of the changes in the income coefficients from our ols to iv estimates are consistent with the hypothesis that correlational estimates between income and smoking related outcomes are biased by unobservable characteristics that differentiate higher income smokers from lower income smokers

taxing and regulating vices we study the optimal taxation and regulation of sin goods goods that are enjoyable to consume but also create future negative health consequences within a setting in which individuals are time inconsistent and thus consume too much regulation makes the consumption of sin goods less pleasurable and taxation involves administrative and compliance costs in contrast to previous literature we find that regulation can be beneficial even when corrective taxes are available and individuals are homogeneous moreover despite the inefficiencies associated with the use of both instruments the consumption of the sin good might fall short of the first best the results are robust to consumers heterogeneity

information shocks and cigarette addiction views from dynamic panels with common structural changes in this article we attempt to evaluate the impact of various information shocks on cigarette consumption in contrast to the existing studies we do not impose any break points a priori we use recently developed techniques for sample splitting in the data on us cigarette demand and find that using a time index as a transition variable can cluster cigarette demand into four distinct regimes in the past four decades a myopic to rational switch in cigarette consumption behaviour was observed in response to various anti smoking information events in particular we find strong evidence in support of the rational addiction model in the 1980s and 1990s moreover in line with the theoretical prediction our estimate of the long run elasticity is twice as large as the short run elasticity our empirical framework should improve policy makers understanding of the dynamics of cigarette consumption in response to various anti smoking campaigns and stress the role of sound policy making in improving smoking con

the price elasticity of opium in taiwan 1914 1942 abstract between 1895 and 1945 the japanese colonial government virtually eliminated opium use in taiwan by licensing and treating existing users prohibiting sales to others and raising the price we evaluate these policies using a two part model to describe the fraction of the population using opium and consumption among users and the rational addiction model by becker et al 1991 we confirm that opium is addictive and find no evidence supporting the rational addiction hypothesis demand is price elastic with estimated short and long run demand elasticities of 0 48 and 1 38 these results have implications for control of other addictive substances

the public demand for smoking bans smoking bans are gaining widespread support in the united states and other countries while supporters argue that bans are necessary to resolve market failures associated with negative externalities the coase theorem predicts that under various conditions private markets internalize negative externalities we examine the smoking issue within the framework of the coase theorem and hypothesize that smoking bans misallocate air space resources shared by smokers and nonsmokers because smoking bans shift ownership of scarce resources they are also hypothesized to transfer income from one party smokers to another party nonsmokers supporting evidence for these hypotheses is provided by an examination of a comprehensive smoking ban imposed in san luis obispo ca

taxes cigarette consumption and smoking intensity comment previous studies have consistently found that increases in cigarette prices and taxes lead to lower consumption of cigarettes as measured by both i the per centage of smokers and ii the number of cigarettes per day consumed by smok ers 1 from a public health perspective the effectiveness of higher excise taxes on cigarettes also depends upon the extent to which smokers exhibit compensatory behavior that may partially or fully offset the lower quantity of cigarettes being smoked for instance evans and farrelly 1998 and farrelly et al 2004 find that cigarette tax increases cause individuals to purchase cigarettes that contain more tar and nicotine in a recent contribution to this journal adda and cornaglia 2006 ac hereafter find that tax increases are associated with lower cigarette consump tion but consistent with the notion of compensatory behavior find no such associa tion with nicotine intake a novel aspect of the ac study is the use of data on salivary cotinine a biomarker for nicotine which is commonly used in medical studies but had not previously been considered in the economics literature based upon data from the third wave of the national health and nutrition examination survey nhanes iii 1988 1994 ac find that cotinine level seems to be unaffected by higher cigarette taxes despite a negative elasticity of smoking with respect to cigarette taxes 2 with this empirical evidence ac question the usefulness of excise taxes as a tool to regulate smoking intake adda and cornaglia 2006 p 1025 this comment examines the robustness of the empirical findings in ac we rep licate the original ac tax elasticity regressions but we provide statistical inference that uses appropriate clustered standard errors at the state level and accounts for the small number of states just 13 in the ac data in addition we repeat the analy sis using a larger sample from nhanes iii that covers the same years as the ac data but includes more states 26 in total use of appropriate inference causes most of the original ac point estimates to become less precise for the expanded sample we find no statistically significant elasticities of cigarette consumption cotinine

the ethical and economic implications of smoking in enclosed public facilities a resolution of conflicting rights smokers and nonsmokers possess equal rights but those rights conflict with each other in the use of shared facilities medical research has established that smoking harms not only those who use the product but also those who are passively exposed to it laws and private regulation of smoking in shared facilities have resulted in the segregation of smokers from nonsmokers to an outright ban of tobacco use such controls have provided unsatisfactory results to both groups an acceptable ethical solution based on reduction of harm and compensation can be derived by applying moral audit principles supported by economic analysis which does not unduly curtail the rights of both parties as to the use of tobacco products

taxation or regulation looking for a good anti smoking policy abstract this paper investigates the relative ability of two anti smoking policies taxes and regulation in inducing reductions in cigarette consumption and in providing incentives to stop smoking or not to start to our results based on canadian data show that cigarette demand responds to taxes elasticity of 0 28 but not to regulation while the converse is true for the proportion of smokers in the population

tax harmonisation and the reduction of european smoking rates abstract amidst growing optimism that smoking in europe can be greatly reduced by the year 2000 this paper simulates the possible impacts of european tax harmonisation in the context of rising incomes a range of price and income elasticities are chosen from econometric studies which use micro information this is justified by the aggregation problems associated with studies in the smoking literature which use aggregate data using micro elasticities the simulations reported in this paper show that the aims of fiscal harmonisation are at variance with the aims of health promotion

putting out fires an examination of the determinants of state clean indoor air laws 1 introductionfew products have generated as much public scrutiny as tobacco in light of the health consequences associated with smoking the federal government took several steps in the 1960s such as published health warnings and restrictions on cigarette advertising to reduce the incidence of smoking beginning in the 1970s state governments began to play an increasing role in the anti smoking campaign by adopting clean indoor air laws which restricted smoking in particular locations such as restaurants bars and work sites 1various studies including wasserman et al 1991 chaloupka 1992 chaloupka and saffer 1992 and yurekli and zhang 2000 generally confirmed that clean indoor air laws are effective at reducing cigarette demand however the nature of the smoking restriction appears to matter in particular chaloupka 1992 and chaloupka and saffer 1992 found that restrictions on smoking in public places reduced cigarette demand whereas restrictions at private work sites do not significantly reduce demand 2due to variations in antismoking laws across states only a few studies have addressed the demand for clean indoor air laws in a survey of individuals from san luis obispo california for example boyes and marlow 1996 found nonsmokers and women to be more supportive of a smoking ban in restaurants and bars alternatively chaloupka and saffer 1992 used state level data and found that differences in smoking restrictions in public places and at private work sites depend on several factors including cigarette prices income tobacco production religious affiliation and political activity more recently hersch del rossi and viscusi 2004 found that voting preferences of state residents and the political affiliation of lawmakers were the main factors that affect whether or not a restriction is adopted at a specific location for example restaurants bars malls enclosed arenas and hospitals however smoking habits could have an effect on voting preferences therefore these results could show the indirect effect of tobacco consumption on smoking restrictions there are several limitations of the existing literature that lead to a need for further analysis first studies have ignored the potential role of cigarette taxation as a determinant of smoking bans for example if states adopt a general antismoking position taxes could be used in conjunction with smoking bans to reduce tobacco consumption thus depending on the argument states may view taxation as a policy substitute or a policy complement to clean indoor air laws second the potential endogeneity of right hand side variables has not been addressed for example tobacco consumption is often included as a determinant of smoking bans however tobacco consumption may potentially be endogenous in general studies have found that restrictions on smoking in public places reduce cigarette demand which implies that cigarette consumption is potentially endogenous in the reverse regression of smoking on restrictions it is unfortunate that the literature has not addressed this possibility in a systematic manner 3 third except for hersch del rossi and viscusi 2004 studies have failed to account for differences in the demand for clean indoor air laws across different restricted locations this study addresses these limitations by estimating the demand for clean indoor air laws using a panel of state level data by using a panel data set we were able to control for state specific effects that made it more or less likely that a given state had a smoking ban in a particular area specifically we accounted for the potential endogeneity of cigarette consumption and taxation within a random effects probit model of the adoption of smoking restrictions across six locations public places government buildings private work sites schools health care facilities and restaurants

competition with hidden knowledge in markets where product quality is diffuse and verification by buyers is sufficiently costly high quality sellers have an incentive to signal to buyers by investing in some activity that is more costly for low quality sellers unfortunately with competition among buyers over the price paid for each level of the signal there is in general no nash equilibrium however it is sufficient for equilibrium that i low quality sellers would under symmetric information choose not to enter the market and ii the rate at which the marginal cost of signaling declines across types is sufficiently large

new estimates of the optimal tax on alcohol in this paper i use a new data set to estimate the optimal alcohol tax rate as a benchmark the empirical results imply that the optimal tax rate is over 100 percent of the net of tax price however alcohol taxation is a second best solution to the problems associated with alcohol abuse i conclude that the optimal alcohol tax rate would be much lower if punishment for drunk driving were more certain and severe government provision of information about the health consequences of heavy drinking would also remove part of the efficiency rationale for alcohol taxes

cigarette smoking and self control this paper empirically studies time inconsistent preferences in the context of cigarette smoking behavior with hyperbolic discounting an individual has time inconsistent preferences which give rise to a lack of self control i e she may perpetually postpone the execution of a plan this implies that a smoker who wants to quit has a demand for control devices e g a smoking ban in public areas or a hike in cigarette excise taxes this paper empirically tests this implication using a sample that is based on survey data from taiwan the estimation results indicate that a smoker s intention to quit has a positive effect on the smoker s support for smoking bans and a cigarette excise tax increase these results lend support to the validity of the time inconsistent preferences in the context of cigarette smoking behavior this casts doubt on the validity of the assumption that individuals have time consistent preferences in becker and murphy s becker g s murphy k m 1988 a theory of rational addiction journal of political economy 96 4 675 700 rational addiction model

the coase theorem free agency and major league baseball a panel study of pitcher mobility from 1961 to 1992 a great deal of conceptual and empirical work in the economic analysis of the law and property rights has been directed towards resolving a controversy surrounding the coase theorem many economists and legal scholars interpret the theorem as containing two propositions the first is that in the absence of transactions costs and wealth effects parties will bargain to an efficient outcome the second holds that the same outcome will be achieved regardless of the distribution of property rights the latter is known as the invariance thesis and it has been a source of dispute among scholars and between economic theorists and owners of economic enterprises e g owners of professional sports teams 5 11 16 23 24 25 26 28 29 this paper provides an econometric test of the invariance proposition major league baseball presents a natural experiment consisting of an industry in which there has been an explicit change in the assignment of property rights beginning in 1879 the reserve clause gave monopsony power to team owners a player could negotiate salary only with the team that owned his contract and the team could trade or sell the player as management saw fit in 1976 this system was replaced by the institution of free agency whereby a player with at least six years of major league experience acquired

cigarette tax avoidance and evasion variation in state cigarette taxes provides incentives for tax avoidance through smuggling legal border crossing to low tax jurisdictions or internet purchasing when taxes rise tax paid sales of cigarettes will decline both because consumption will decrease and because tax avoidance will increase the key innovation of this paper is to compare cigarette sales data to cigarette consumption data from the behavioral risk factor surveillance system brfss i show that after subtracting percent changes in consumption residual percent changes in sales are associated with state cigarette tax changes implying the existence of tax avoidance i estimate that the tax avoidance response to tax changes is at least twice the consumption response and that tax avoidance accounted for up to 9 6 of sales between 1985 and 2001 because of the increase in tax avoidance tax paid sales data understate the level of smoking and overstate the drop in smoking i also find that the level of legal border crossing was very low relative to other forms of tax avoidance if states have strong preferences for smoking control they must pair high cigarette taxes with effective policies to curb smuggling and other forms of tax avoidance or employ alternative policies such as counter advertising and smoking restrictions

can higher cigarette taxes improve birth outcomes abstract this study examines whether higher state cigarette taxes can be used to improve birth outcomes data on the outcomes of interest are taken from the 1989 1992 natality detail files generating a sample of roughly 10 5 million births the results suggest that smoking participation among pregnant women declines and average birth weights rise when excise taxes are increased these results can be used to form an instrumental variables estimate of the impact of smoking on birth weight this estimate is remarkably close to numbers from a random assignment clinical trial the smoking participation price elasticity is estimated to be 0 5

an econometric analysis of smoking prevalence among lone mothers this paper uses panel data to examine the determinants of smoking among lone mothers over the period 1991 1996 consideration is given to the initial conditions problem encountered when modelling dynamic panel probit models and a recently suggested approach is applied to address this problem

horizontal and vertical indirect tax competition theory and some evidence from the usa this paper provides a simple theoretical framework for analysing simultaneous vertical and horizontal competition in excise taxes and estimates equations informed by the theory on a panel of us state and federal excise taxes on cigarettes and gasoline we also examine the role played by smuggling the results are generally consistent with the theory when the characteristics of the markets for the goods are taken into account for neither good do federal excise taxes affect state taxes taxes in neighbouring states have a significant and large effect in the case of cigarettes and a much weaker effect in the case of gasoline we also find that in the setting of cigarette taxes concerns about cross border shopping play a more important role than concerns about smuggling

signaling and the valuation of unseasoned new issues a comment in the march 1982 issue of this journal david downes and robert heinkel 1 present an empirical examination of the role of signaling in the valuation of initial public offerings of common stock for a large sample of unseasoned new issues they examine the leland pyle 2 signaling hypothesis that firm value should be positively related to the fraction of equity retained by the original shareholders downes and heinkel conclude that the data are consistent with the leland pyle signaling hypothesis in this comment i present a more complete test of the leland pyle signaling model i also present two alternative explanations for the positive empirical relation between firm value and insider holdings which i label the agency hypothesis and the wealth effect hypothesis i find that the testable implications of the agency hypothesis are supported while the evidence is ambiguous with respect to the testable implications of the wealth effect and signaling hypotheses

new issues on the u k unlisted securities market the ability of entrepreneurs to signal firm value the present paper investigates whether small firm entrepreneurs are able to signal the value of their firms to potential investors when seeking a listing on the u k unlisted securities market usm the signals considered are the percentage of equity retained by the original entrepreneurs the net proceeds raised by an issue the choice of advising agents to an issue the disclosure of an earnings forecast and the level of underpricing of the new issue in addition the possible interactions between the individual signals are considered and included in the analysis the results of the empirical analysis suggest that firm value is positively and significantly related to the percentage of retained equity and the net proceeds raised thus suggesting therefore that stock markets will invest at higher values ceteris paribus if entrepreneurs indicate confidence in their enterprises via levels of equity retention and the funds they intend to invest in future projects

cigarettes and addiction information simulating the demand effects of the tobacco industry s conspiracy of silence although cigarette manufacturers were aware of the addictive properties of nicotine as early as 1962 the information did not become available to the us public until 1979 when the surgeon general disclosed it us department of health education and welfare 1979 this study simulates the impact this information would have had on the demand for cigarettes had it been released in 1962 the simulations build on past work by fenn et al 2001 who found evidence that the release of addiction information resulted in a structural shift in demand in 1979 in the present study the econometric results from fenn et al 2001 are used to compute simulated time paths for state level per capita consumption under the hypothetical scenario involving the earlier release of the addiction information using these simulated consumption paths the projected reductions in cigarette sales revenue are calculated these dollar figures provide a benchmark against which to judge the compensation amounts that the industry must

rising cigarette prices and rising obesity coincidence or unintended consequence economists have begun to debate if the rise in cigarette prices in the u s in recent decades has contributed to the nation s rise in obesity reaching conclusions that are surprisingly sensitive to specification i show that allowing for the effect to occur gradually over several years leads to the conclusion that a rise in cigarette prices is actually associated with a long run reduction in body mass index and obesity this result is robust to the different methodologies used in the literature i also provide evidence that indirect effects on exercise and food consumption may explain the counterintuitive result

the economic design of sporting contests what is the optimal number of entrants in a race or the optimal number of teams in a baseball league what is the optimal structure of prizes for a golf tournament or degree of revenue sharing for a football championship how evenly balanced should the competing teams be in the nascar or formula one championships what is the maximum number of entrants per nation to the olympic games that should be permitted what quota of qualifying teams to the soccer world cup should be allocated to the developing nations

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

taxation regulation and addiction a demand function for cigarettes based on time series evidence this work analyzes the effects of prices taxes income and anti smoking regulations on the consumption of cigarettes in california a 25 cent per pack state tax increase in 1989 enhances the usefulness of this exercise analysis is based on monthly time series data for 1980 through 1990 results show a price elasticity of demand for cigarettes in the short run of 0 3 to 0 5 at mean data values and 0 5 to 0 6 in the long run we find at least some support for two further hypotheses that antismoking regulations reduce cigarette consumption and that consumers behave consistently with the model of rational addiction

effect of generic cigarettes on us cigarette demand and smuggling abstract this paper examines the effects of generic cigarettes on overall cigarette demand and smuggling and studies influences of casual and organized smuggling for the united states generic cigarettes lower the price elasticity and diminish the effect of formal smuggling

what causes the ipo underpricing new evidence from china s sme market we study 10 year ipo initial returns in china s small and medium sized enterprise sme board between 2006 and 2016 including 755 ipo samples at the same time we test how policy changes of ipo p

the cost per life saved cutoff for safety enhancing regulations this article develops a model of the conditions under which risk regulations that are too expensive have net adverse health effects two principal components of this relationship are the implicit value of life and the income elasticity of risky behaviors using new empirical estimates for the income elasticity of many of the most consequential risk related behaviors our results imply that a 15 million decrease in income is associated with the loss of an additional statistical life regulations that cost more than 15 million per expected life saved will have counterproductive effects on individual mortality jel lsi 112 j17

empirical assessment of the impact of auditor quality on the valuation of new issues abstract this paper reports empirical tests of an hypothesized positive relation between audit quality and firm specific risk that is predicted by datar feltham and hughes 1991 theoretical analysis of auditor choice when firms go public three types of proxies for ex ante firm specific risk are used to test this relation regression coefficients that theory relates to the firm specific risk ex ante proxies available from prospecti and ex post variances in returns results from the first are moderately consistent with our hypothesis while those from the latter two are either mixed or contrary

signalling and the valuation of unseasoned new issues revisited this paper provides further empirical evidence on the relation between entrepreneurial ownership retention and the initial value of unseasoned common shares a canadian data set is employed to estimate the various empirical specifications used in previous studies and to examine additional variables suggested by recent developments in the theoretical literature the estimation is carried out using a more general procedure to correct for heteroskedasticity in contrast to previous findings the entrepreneurial ownership reten tion signal does not possess statistical significance in any ofthe models examined

managers earnings forecasts and intra industry information transfers abstract the effect that voluntarily disclosed managers earnings forecasts have on the security prices of the announcing firms and other firms in the same industry is examined the results are consistent with information content in managers forecasts and with information transfer between forecast firms and other firms in the industry these inferences are drawn from firms abnormal returns computed from single and two index pricing models where the latter includes market and industry indexes interestingly while a positive information transfer is evident with market model residuals once industry cross sectional covariation in firms returns is removed no directional relation is apparent

excise tax avoidance the case of state cigarette taxes we conduct an applied welfare economics analysis of cigarette tax avoidance we develop an extension of the standard formula for the optimal pigouvian corrective tax to incorporate the possibility that consumers avoid the tax by making purchases in nearby lower tax jurisdictions to provide a key parameter for our formula we estimate a structural endogenous switching regression model of border crossing and cigarette prices in illustrative calculations we find that for many states after taking into account tax avoidance the optimal tax is at least 20 smaller than the standard pigouvian tax that simply internalizes external costs our empirical estimate that tax avoidance strongly responds to the price differential is the main reason for this result we also use our results to examine the benefits of replacing avoidable state excise taxes with a harder to avoid federal excise tax on cigarettes

an embarrassment of riches confronting omitted variable bias and multiscale capitalization in hedonic price models abstract many researchers have addressed concerns of omitted variable bias in hedonic price models through the use of spatial fixed effects we argue that this approach does not consider the biases introduced by effects that overlap the zone of capitalization for nonmarket goods we show this bias can dominate the usual omitted variable bias using data on developer provided open space we control for multiscale capitalization and omitted variables simultaneously by extending the hausman taylor estimator where the panel component of the estimator is defined over repeated transactions within neighborhoods rather than the traditional definition following a unique cross sectional unit through time

a nearly global look at the dynamics of youth smoking initiation and cessation the role of cigarette prices this study investigates the role of cigarette prices on smoking initiation and cessation among youth in a sample of eight primarily non western low middle and high income countries with a particular focus on a subsample of 40 low and middle income countries lmics using split population duration models on longitudinally transformed individual data from the global youth tobacco survey gyts the average impact of cigarette prices in the presence of unobserved country heterogeneity and shifting cultural norms within countries is identified by the variation of cigarette prices within countries over time price increases are found to effectively reduce initiation in early youth and girls are considerably more responsive than boys the price elasticity of initiation in lmics is 0 82 for the combined gender analysis 0 46 for boys only and 1 5 for girls only there is some indication that youths in developing countries may be slightly less responsive to price changes than in high income countries no

efficient excise taxation the evidence from cigarettes we develop a model in which optimizing policy makers in adjacent government jurisdictions levy excise taxes on a commodity that has a unique point of production from which all shipments emanate from this model we derive an unusually specific predicted geographical pattern of those excise taxes in which these taxes rise at a decreasing rate as one moves outward from the point of production we compare these predictions to the observed pattern of cigarette taxes imposed by state governments in the united states and find the data to be fully consistent with our model among these predictions is the existence of a ripple effect which reduces taxes in many other jurisdictions due to low taxes at the point of production we estimate that these induced tax reductions in other states save cigarette producers and consumers a minimum of 110 million per year

the governmental composition of the insurance costs of smoking abstract the estimated health risks from smoking have significant external financial consequences for society studies at the national level indicate that cigarettes are self financing since external costs such as those due to illnesses are offset by cost savings associated with premature death chiefly pension costs this paper extends this analysis to all 50 states and considers the costs considered in the state attorneys general suits against the cigarette industry cigarettes are always self financing from the standpoint of costs to each state the extent of the cost savings is less than at the federal level however smokers higher medical costs are outweighed by reduced nursing home expenditures lower pension costs and excise taxes where each of these factors alone usually exceeds the medical cost effect

testing for deliberate underpricing in the ipo premarket a stochastic frontier approach we re evaluate the ipo underpricing phenomenon using the stochastic frontier methodology the advantage of the stochastic frontier is that it can be used to measure the level of deliberate underpricing in the premarket without using after market information this is accomplished through the estimation of a systematic one sided error term that measures inefficiency or the difference between the maximum predicted offer price and the actual offer price data for the analysis are comprised of 1 035 ipos of common stock issued by firm commitment between 1975 and 1984 ipos appear to be deliberately underpriced in the premarket in both hot market and nonhot market periods moreover the determinants of the maximum ipo price have different effects in the two time periods article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the effects of excise taxes and regulations on cigarette smoking abstract we estimate a generalized linear model to examine adult and teenage cigarette demand our analysis focuses on the extent to which exice taxes and regulations restricting smoking in public places affect cigarette consumption the adult results indicate that the price elasticity of demand is unstable over time ranging from 0 06 in 1970 to 0 23 in 1985 these estimates are lower than most found in previous studies the teenage price elasticity does not differ statistically from the estimates for adults additionally regulations restricting smoking in public places have a significant effect on both adult and teenage cigarette demand

cutting through the smoke separating the effect of price on smoking initiation relapse and cessation i employ a large national representative dataset current population survey tobacco use supplements to investigate how cigarette prices affect smoking decisions a standard econometric approach is to estimate the relationship between cigarette prices and smoking participation at a point in time i extend this approach to model past year decisions to start resume or quit smoking considering reverse causality i apply an instrumental variable excise taxes for cigarette prices i include an index of state level anti smoking sentiment to control for omitted variable bias after estimating separate models for smoking initiation relapse and cessation and for different age groups i find no evidence that increasing taxes on cigarettes can prevent the onset of youth smoking neither does it effectively induce young smokers to quit however cigarette prices do play an important role to prevent relapse and encourage quitting at older ages

a theory of environmental risk disclosure abstract the regulation of environmental risks increasingly emphasizes the awareness and empowerment of stakeholders the success of this approach however seems to depend crucially on the quality of environmental disclosures in this paper we investigate the amount and quality of the information that would be voluntarily delivered to some stakeholder by a potential polluter we find that information may be hazier when the stakeholder is confident or naive a priori the cost of analyzing the received reports increases little with their complexity or a polluter s net expected payoff from undertaking an industrial activity that would turn out to be unsafe is small a worried stakeholder and a low cost of producing more accurate figures on the other hand favor disclosure of high quality information by delivering information of very good quality safe firms can set themselves apart more easily from dangerous ones the higher the relative ex post payoff from their current industrial activity implications of this framework for the scope and design of public programs of environmental disclosure are briefly examined

cigarette taxes and smoking restrictions impacts and policy implications the effects of recently proposed increases in cigarette excise taxes and smoking restrictions on tobacco prices and quantities quota lease rates and revenues to tobacco producing areas are analyzed the price elasticity of demand for u s cigarette exports is estimated proportionally similar increases in smoking restrictions or cigarette taxes are shown to have effects of similar magnitude on cigarette consumption a policy of reducing price instead of the quantity produced is found to minimize the impact of increased taxes and smoking restrictions on revenues to tobacco producing areas

taxation smuggling and demand for cigarettes in canada evidence from time series data abstract this study analyzes canadian cigarette consumption and taxation between 1980 and 1994 a period in which there have been large price rises and declines and a dramatic increase in the consumption of contraband tobacco products we examine elasticities of legal cigarette sales and total sales including contraband with respect to the price of legal cigarettes and various other factors the growth of the contraband market since 1987 appears to have created two classes of cigarette taxed and untaxed with responses to changes in the legal price that are respectively higher and lower than was previously the case the sensitivity of total cigarette sales to the taxation instrument is much lower than it would appear from sales of taxed cigarettes alone

kalman filter and the demand for cigarettes kalman filter estimates of price income and advertising elasticities are presented an analysis of structural change in the demand for cigarettes in the us for the period 1929 86 is made estimated price and income elasticities are generally smaller and the advertising elasticity larger than estimates previously found cigarette demand is inelastic with respect to price and income and advertising elasticity is statistically insignificant for the most part furthermore both income and price elasticities decline over time while advertising elasticity tends to rise four time periods where structural change has occurred are identified the health scare reports and the fairness doctrine act have a significant impact on per capita cigarette consumption

scarcity without leviathan the violent effects of cocaine supply shortages in the mexican drug war abstract this paper asks whether scarcity increases violence in markets that lack a centralized authority we construct a model in which by raising prices scarcity fosters violence guided by our

firm behavior in a market with addiction the case of cigarettes abstract this paper investigates firm behavior when demand is linked over time among other things the theoretical section shows that if firms are forward looking anticipated future events can affect current consumption of an addictive good even when consumers are completely myopic the empirical part of the paper reports a simulation of the 1983 federal cigarette excise tax increase both myopic and rational models of consumer demand give roughly the same predictions for per capita consumption but neither model does very well predicting actual consumption the problem appears to lie in the prediction of price suggesting that supply considerations are important

smoke free air laws cigarette prices and adult cigarette demand i introduction according to the centers for disease control and prevention cdc 2002a cigarette smoking is responsible for more than 430 000 premature deaths each year in the united states as such it represents the single largest cause of preventable deaths in the united states the cdc 2002b estimates that more than 46 million adults in the united states were current smokers in 2000 representing nearly one quarter of the total u s adult population a goal of a major health initiative healthy people 2010 is to reduce smoking prevalence among adults to 12 by 2010 if that goal is to be met a better understanding of the impact public policy plays on adult cigarette demand is needed adult per capita consumption of cigarettes in the united states reached a peak of 4 345 in 1963 and began declining in 1964 the year in which the first surgeon general s report on the health consequences of cigarette smoking was published u s department of health and human services dhhs 1991 at the same time substantial progress was made in reducing the prevalence of adult smoking in the united states according to the national health interview surveys the prevalence of current smoking declined from 42 4 in 1964 to 23 5 in 1999 however the decline in prevalence was much more modest in the 1990s than it was in the previous two and a half decades between 1990 and 1999 the prevalence of cigarette smoking among adults declined by only 2 percentage points much of the progress in curtailing cigarette smoking in the united states can be attributed to the campaign to reduce tobacco use u s dhhs 1991 the public health campaign to reduce tobacco related death and disease in the united states began in the mid 1960s following the release of the first surgeon general s report which causally linked cigarette smoking to lung cancer and a host of other detrimental diseases although consumer education and information dissemination where the mainstay early in the campaign against tobacco the arena shifted to public policy interventions by the 1980s both state and federal governments began increasing cigarette excise taxes and imposing restrictions on smoking in public places and other worksites the implementation of higher excise taxes and stronger smoke free air restrictions continues at all levels of government into the mid 2000s since january 1 2002 37 states and the district of columbia have implemented or passed higher cigarette excise tax rates as of march 18 2005 state excise tax rates on cigarettes ranged from a low of 0 03 per pack in the state of kentucky to 2 46 in rhode island in addition since 1998 when california became the first state to ban smoking in all restaurants and bars numerous other states have followed suit new york massachusetts delaware and rhode island have banned smoking in workplaces restaurants and bars whereas connecticut and maine have banned smoking in all bars and restaurants this article examines the impact of enacting stronger smoke free air restrictions and increasing cigarette prices which will occur as a consequence of cigarette excise tax increases on adult smoking propensity and intensity in the united states unlike previous studies however this article employs a modified two part model of demand in which a generalized linear model glm is employed to yield unbiased elasticity estimates for conditional cigarette demand while controlling for the possibility that smoking sentiment at the state level influences both antismoking policy enactment and changes in smoking behavior as such it provides among the most accurate estimates of the impact of cigarette prices and smoke free air laws on the demand for cigarettes among adults in the united states ii brief review of previous studies numerous econometric studies on the determinants of adult cigarette demand have been published over the past three decades

cigarette taxes and illicit trade in europe cigarettes are highly taxed in europe but at higher prices some consumers substitute more toward illicit cigarettes the illicit retail trade in cigarettes irtc includes counterfeit untaxed and smuggled cigarettes some existing literature includes claims that taxes are not an important determinant of irtc using data from the european union we find the opposite raising prices leads to substantial increases in irtc a 1 increase in tax pack is expected to increase illicit market share by 5 to 12 percentage points and increase illicit cigarette sales by 29 to 95 the results are robust to alternative specifications and data jel i18 h26 k42

the duration of the smoking habit i introduction most smokers smoke out of habit once the habit is ended many of smoking s most harmful effects decline rather quickly preventing and ending cigarette addiction is therefore the straightest path toward preventing the health damage done by cigarette smoking consequently the related questions of why people start smoking and why they quit are central to formulating and evaluating effective antismoking policies duration or hazard models are designed to measure the probability of transition between states and are thus ideal for investigating the structural determinants of the transition between addiction and non addiction nevertheless most previous work in the economics literature uses the aggregate smoking participation rate defined as the percentage of people who currently smoke or an individual s probability of participation rather than a hazard rate to measure the attractiveness of habitual smoking this paper models the hazard rates of both starting and quitting the cigarette smoking habit the starting hazard rate is the probability that an individual will start smoking in a given time period conditional on being a nonsmoker until then the quitting hazard rate is the probability of quitting smoking in a given time period conditional on being a smoker since the starting date both of these rates should rise and fall in response to changes in the attractiveness of smoking the two rates will respond differently to different stimuli since the starting hazard reflects the point of view of nonsmokers and the quitting hazard reflects the point of view of smokers hazard or duration models possess several advantages over smoking participation models most obviously smoking participation rates cannot directly distinguish between increased starting rates and decreased quitting rates but the hazard models can also in a participation rate model it is difficult to control for the effect of the duration of the habit whereas duration models are designed specifically to allow for and measure the dependence of the hazard rate on duration another advantage is that the participation rate at any one time will oversample the number of long term smokers relative to those who had a short term habit whereas a duration model is designed to avoid this source of bias one drawback however is that because of their inherent panel nature the data requirements of duration models are somewhat more difficult to satisfy as shall be seen the only previous work in the economics literature that estimates the hazard rate of starting smoking is douglas and hariharan 1994 my paper improves upon douglas and hariharan in at least three important ways first it estimates the hazard rate of quitting smoking as well as that of starting second it takes into account variation in state level regulation third its time varying covariate model allows hazard rates to respond dynamically to changes in cigarette price regulation and information variables the use of time varying covariates is important because it brings the empirical model into much closer accord with theory the decision whether or not to start or quit smoking is an ongoing decision made one day at a time on the basis of current information the hazard of starting is greatest when the cost of the habit appears lowest and its benefit appears highest this comparison of cost and benefit changes through time as price information income and life cycle variables change while douglas and hariharan 1994 used price information from the potential smoker s most vulnerable age on the theory that its marginal effect is greatest at that time the model used in this paper allows each individual s hazard rate to respond to changes in price and public information as they occur the leading theoretical model of the decision to smoke is the rational addiction model of becker and murphy 1988 which assumes that consumers of addictive goods begin smoking only after fully weighing the costs and benefits of the habit

demand for cigarettes in the united states effects of prices in bordering states and contiguity with mexico and canada based on a cross section of us states for 2004 this article estimates a demand function for cigarettes after including a proxy for prices in the bordering states and simple proxies for contiguity with mexico and canada and for being a major tobacco producer one major point seems to be that the negative elasticity for within state price is similar in magnitude to the positive elasticity for the lowest price in bordering states several additional points also seem noteworthy first having a border with mexico lowers sales in the state sizably second the share of hispanic latino population in the state also lowers sales significantly third contiguity with canada appears to have no significant effect fourth partial impact of the state being a major tobacco producer appears minor even though consumption in these states is considerably higher fifth education shows the expected negative association with cigarette consumption but its statistical significance is low last income carries a weak negat

the demand for cocaine by young adults a rational addiction approach abstract this paper applies the rational addiction model to the demand for cocaine by young adults in the monitoring the future panel the price of cocaine is added to this survey from the drug enforcement administration s system to retrieve information from drug evidence results suggest that annual participation and frequency of use given participation are negatively related to the price of cocaine in addition current participation frequency is positively related to past and future participation frequency the long run price elasticity of total consumption participation multiplied by frequency given participation of 1 35 is substantial

testing coase theorem the case of free agency in nba this study seeks to test the applicability of the coase theorem to the allocation of players within according to the coase theorem a player s final allocation would be the same no matter who has ownership of his playing rights if there are no transaction costs what ownership affects is just the allocation of wealth using data from the national basketball association nba this article argues that player mobility is likely to be affected by player ownership due to transaction cost imposed by the institution it is also concluded that performance indicators used for value estimation vary by position and that this also affects player transfer

how health insurance affects health care demand a structural analysis of behavioral moral hazard and adverse selection individuals with health insurance use more health care one reason is that health care is cheaper for the insured additionally having insurance can encourage unhealthy behavior via moral hazard previous work studying the efiect of health insurance on medical utilization has mostly ignored behavioral changes due to having health insurance and how that in turn afiects medical utilization this paper investigates the structural causal relationships among health insurance status health behavior and medical utilization theoretically and empirically and separates price efiects from behavioral moral hazard efiects also distinguished are the extensive vs intensive margins of insurance efiects on behavior

impact of domestic content requirement on the us tobacco and cigarette industries abstract using a log linear equilibrium displacement model we quantify the impact of the recent domestic tobacco content requirement on us cigarette manufacturing we investigate effects on us growers and manufacturers and competing tobacco imports the policy increased domestic use of us grown tobacco but induced a small negative output effect tobacco imports decreased substantially the paper also discusses the political economic incentives for us manufacturers to comply with such policies the political cooperation between us growers and manufacturers decreases the opposition of the latter to protectionist policies championed by the former

the response by adults to increases in cigarette prices by sociodemographic characteristics cigarette excise taxes are widely viewed by health economists as an effective tool to reduce cigarette consumption however those opposed to increasing cigarette excise taxes often state that the taxes unfairly target certain segments of the population notably the poor and minorities some of this opposition may have been fueled by a lack of understanding of how the tax will affect the health and welfare of various demographic groups of interest this article provides guidance to policy makers by estimating price elasticities among adults by gender income age and race or ethnicity women adults with income at or below the median income young adults african americans and hispanics are most responsive to cigarette price increases for example adults with income at or below the median are more than four times as price responsive as those with income above the median

comparing specific and ad valorem pigouvian taxes and output quotas when the production or use of a good creates an external cost an unregulated market produces a socially inefficient quantity of output one remedy for this inefficiency is to impose a pigouvian tax equal to the marginal external damage associated with the good in many circumstances privately optimizing agents facing a pigouvian tax make decisions that are consistent with the maximization of social welfare

rule changes and competitive balance in japanese professional baseball i introduction since rottenberg s 1956 classic analysis of baseball s reserve clause economists have been interested in whether the rules for initially allocating players among major league baseball mlb teams affect their final allocation el hodiri and quirk 1971 formalized rottenberg s analysis of player allocation rules for a sports league in which each team independently maximizes its profits within the league s institutional constraints 1 consider the effect of a player draft regime and an open bidding regime on the allocation of new players often called rookies if a player draft allows team a to claim initially a particular new player and that player would generate a higher marginal product with team b then the two teams have incentives to make an exchange and send the player to team b alternatively under an open bidding regime the new player signs with the team presenting the highest offer i e team b with which he generates the highest marginal product assuming that transaction costs of exchanging players are zero el hodiri and quirk showed that the final allocation of players across teams will be the same in both regimes this result that the final allocation of players does not depend on the rules governing the initial allocation of players is baseball s version of the coase theorem following coase s 1960 analysis this invariance result vanishes if there are obstacles to exchanging players after the initial allocation in an open bidding regime players are initially allocated to the team with which they have the highest marginal product thereby eliminating the need for player exchanges since the best players are likely to generate the highest marginal product with teams in cities that have a high demand for winning games in an open bidding regime these teams are likely to have higher winning percentages and win more championships than other teams 2 by contrast in a draft regime the best players are often initially allocated to a team located in a city with a low demand for winning games if there are obstacles to player exchange then players will be allocated more evenly across teams under a draft regime and competitive balance should improve both within a given season and over time 3 empirical studies have used performance data from north american mlb to analyze whether changes in the rules for allocating rookies among teams affect competitive balance fort and quirk s 1995 recent study found that mlb s change in 1965 from an open bidding to a draft regime for allocating new players increased competitive balance in the american league and had little effect on competitive balance in the national league the power of statistical tests conducted with the mlb data is however severely limited due to the small number of observations from the draft regime period this article uses a larger data set from japanese baseball to examine the same rule change that economists have analyzed for mlb remarkable as it may seem the japanese professional baseball league jpbl adopted the same rule change from an open bidding to a draft regime for rookies in the same year 1965 as major league baseball our goal is to examine how the rule change in the jpbl affected competitive balance in its two leagues and to compare the outcomes of these two remarkably similar experiments set in two very different cultures ii studies of north american mlb and japanese jpbl daly and moore 1981 compared player allocation in the two regimes for allocating rookies by examining mlb s 1965 switch from an open bidding to a draft regime they used pre and post 1965 performance data from the american and national leagues to examine several measures of competitive balance in the post 1965 draft regime they found substantially more competitive balance in the american league and somewhat more competitive balance in the national league using different tests for competitive balance fort and quirk 1995 1 282 86 also found evidence for more competitive balance in the american league but found no change in competitive balance in the national league

structural change in mlb competitive balance the depression team location and integration no detectable break points in within season competitive balance 1901 99 occur after 1937 in the national league or after 1962 in the american league despite expansion free agency and the growth of local tv revenue disparity since then instead a continual improvement in competitive balance has occurred since those years associated with break points prior to these years 1 the al emerged from the depression much more unbalanced than the nl 2 team movement and league expansion alter balance in well known ways and 3 discriminatory preferences were stronger in larger revenue markets than in smaller revenue markets in both leagues jel c32 l83

free agency competitive balance and diminishing returns to pennant contention e woodrow eckard this article argues that the 1976 introduction of free agency increased competitive balance in major league baseball the evidence is based on a new empirical measure that captures the key dynamic element of balance year to year fluctuations in team performance my hypothesis is that diminishing returns to each additional year s production of a pennant contending team reduces the incentive to bid continually for top players free agency allows talent to be reallocated more readily to potential new contenders given that player sales had been restricted prior to 1976 the hypothesis is supported by evidence of declining attendance during contending streaks jel l83 i introduction since the inception of free agency in major league baseball mlb over 20 years ago its effect on competitive balance has been controversial for almost a century the reserve system had assigned de facto property rights in players services to mlb teams this changed after 1976 when veteran players were allowed to unilaterally sell their services to the highest bidder team owners predicted a consequent decline in competitive balance arguing that large market clubs would outbid others for talent and come to dominate this claim is still made today as the basis for major restructuring proposals such as new restrictions on player salaries and mobility team payroll caps and various cross subsidization schemes 1 economists have examined the issue from both theoretical and empirical angles theorists such as el hodiri and quirk 1971 implicitly agree with the owners that the best players concentrate where their marginal revenue products mrps are the highest that is in high demand cities that also may be the most populous debate has revolved instead around rottenberg s 1956 invariance proposition which states that the distribution of playing talent will be the same under both systems if player sales are unrestricted teams where mrps are the highest purchase the services of the best players whether from other low mrp clubs or directly from the players themselves free agency therefore should not affect competitive balance critics such as daly 1992 argue that before 1976 first line players seldom were sold so the invariance proposition does not apply several studies examine empirically the effect of free agency on competitive balance taken together the results are consistent with the invariance proposition namely balance did not change this article argues that these studies use balance measures that ignore a critical aspect of competition namely year to year changes in a team s position in league standings using empirical measures that capture this dynamic i report new evidence that balance improved after free agency i then extend the existing theory of sports leagues to explain why free agency might cause such an outcome and provide an independent test of the theory specifically there are diminishing marginal returns to each additional year s production of a pennant contending team reducing the incentive to bid continually for top players this allows also rans to obtain the talent necessary to improve their performance and become contenders i also provide evidence that quality players were seldom sold under the old reserve system ren dering the invariance proposition moot the article is organized as follows the next section reviews the relevant theoretical and empirical literature section iii describes my measures of competitive balance and section iv presents empirical results comparing balance in mlb before and after free agency section v provides evidence that sales of first line players were sufficiently rare as to nullify the invariance proposition section vi presents the theoretical argument linking free agency to an improvement in balance followed by a supporting empirical test in section vii section viii summarizes and concludes the article

excise gap and price in the italian cigarette industry we provide evidence that tax shifts in the italian cigarette industry are not homogeneous across price categories and are associated with differences in the excise structure we take the gap betwee