on the fixed nature of sharecropping contracts newbery and stiglitz i979 suggest four stylised facts of sharecropping which theories should attempt to explain the first is the persistence of sharecropping and its coexistence with fixed rental and wage markets under a variety of conditions over centuries of time the second is that in modern developed economies there appears to be a decline in share tenancy thirdly share tenancy is often but not alwavs associated with lower productivity than fixed rental land finally in many economies contracts involve shares of around one half for landlord and tenant this does not vary from contract to contract and does not seem to be the object of negotiation smith i776 and many subsequent authors have likened sharecropping to a tax they argue that under this type of contract tenants choose their labour supply to equate their marginal disutility of labour with their proportionate share of the marginal product instead of the full marginal product they therefore regard sharecropping as an inefficient form of land tenure however this view is difficult to reconcile with the first observation given the coexistence of fixed rent and share contracts it is reasonable to expect that if share contracts were relatively inefficient they would quickly die out this does not appear to have happened more recently it has been argued most notably by cheung i969 that if there is certainty and transactions costs are the same for all contracts then provided a share contract specifies the labour supply of the tenant it leads to the same efficient allocation of resources as a fixed rent or wage contract cheung has used this result as the basis of an explanation for coexistence he suggests that the transaction costs for share contracts are higher than for wage and fixed rent contracts however share contracts have the advantage that they allow the risk to be shared between the landlord and tenant whereas with fixed rent contracts the tenant bears all the risk and with wage contracts the landlord does given varying degrees of risk aversion among landlords and tenants it is possible that for some parties the risk sharing advantages outweigh the transaction cost disadvantages so that they will prefer share contracts whereas with others the reverse is true one problem with this argument raised by stiglitz i974 and newbery i977 is that given constant returns to scale the risk sharing properties of share contracts can be attained with mixtures of fixed rent and wage contracts if these do indeed have lower transaction costs share contracts would not then be observed

oil price cycles and wavelets abstract the present paper addresses the question of the oil price macroeconomy relationship using world data and a time scale decomposition based on the theory of wavelets our approach is based on a global indicator the morgan stanley capital international msci index for the world and on the new framework offered by wavelets to analyse the oil price cycles and to investigate the oil price msci relationship this original approach enables us to identify that the cycles which contribute the most to oil price variations are 20 to 40 years cycles which correspond to the size of kuznets infrastructure cycles and probably represent energy investment cycles this wavelet decomposition also provides additional evidence to the reverse causality theory

history dependence in concave economies abstract this paper investigates concave intertemporal optimization problems and derives two mechanisms either growth or control state interactions e g due to endogenous preferences that allow for multiple steady states including an unstable one therefore history dependence is possible in a perfectly governed economy subject to the law of diminishing returns if one of these two mechanisms is present this result complements a large amount of literature that attributes history dependence to convexities as a consequence lock ins into undesired evolutions are possible beyond the familiar case of increasing returns

oil price volatility and stock price fluctuations in an emerging market evidence from south korea abstract how important are oil price fluctuations and oil price volatility on equity market performance what are the policy implications if volatility turns out to be significant we assess this issue in an economics finance nexus for korea using a vec model including interest rates economic activity real stock returns real oil prices and oil price volatility our main aim is to capture the effects of crude oil prices on the korean economy thoroughly covering the period of the asian financial crisis of 1997 which heavily affected the country and the oil price hikes in the early 1990s after the gulf war south korea was the country most hit by the financial crisis together with indonesia and thailand results indicate the dominance of oil price volatility on real stock returns and emphasize how this has increased over time oil price volatility can have profound effect on the time horizon of investment and firms need adjust their risk management procedures accordingly this increase in dependency has been found in other net oil importing emerging equity markets we test the relationship between oil price movements and economic activity by using modern time series techniques in a cointegrating framework we expand the standard error correction model by examining the dynamics of out of sample causality through the generalized variance decomposition and impulse response function techniques the evidence from persistence profiles also gives important guidelines based on how fast the entire system adjusts back to equilibrium in addition we find the cointegrating relationship to be stable and find that the linear error correction model to be more favorable than an asymmetric 2 period markov switching model

limited liability moral hazard and share tenancy abstract this paper contributes to the literature on share tenancy by reexamining a framework developed in basu 1992 it is shown that limited liability and moral hazard in effort provides a richer theory of share contracts when the tenant also has discretion in the choice of projects

the role of consumption credit in agricultural tenancy abstract in traditional agriculture it is common practice for landlords to give consumption loans to their own tenants if the tenant derives all his income from the landlord it is puzzling that the landlors needs another means of expropriating the surplus he could just raise the rent the paper suggests that consumption credit may be a side payment designed to enable the landlord to absorb the tenant s risk due to weather uncertainty without weakening his incentive to work tenancy is modelled as an agency contract designed in terms of information may be available to the landlord

a framework for the analysis of evolving patron client ties in agrarian economies abstract this paper looks systematically at the various factors that can account for the disappearance or the transformation of the institution of patronage that used to structure labor and other relationships in many agrarian societies of the past it is an attempt to offer a unifying framework capable of guiding one s attention to the relevant variables and to the way they interact in this process the rather simplistic view according to which there is a unique linear path through which patronage evolves is called into question and a number of different scenarios are instead presented these alternatives are illustrated with reference to asia

has the averch johnson effect been theoretically justified abstract in this paper we show that the averch johnson effect of overcapitalization by a regulated monopoly does not obtain when the firm operates in the decreasing cost range of output we develop a dynamic adjustment cost model of the firm and apply a recent result by brock and dechert for non concave hamiltonians to solve for the optimal investment policy for the firm with a phase diagram analysis we are able to make sharp comparisons between the regulated and unregulated cases in particular we show that investment by a regulated firm is lower than that of an unregulated firm even when the rate of return constraint is not binding

interlinkage limited liability and strategic interaction abstract the literature on interlinkage is inconclusive regarding the strict superiority of this arrangement we analyze a landlord and a moneylender as two players making non cooperative decisions regarding the terms of their respective contracts with a tenant in the sequential game where the landlord moves first and the tenant has limited liability we demonstrate that there exist circumstances in which interlinkage is superior even with nonlinear loan contracts a result that carries over when there is moral hazard the incorporation of risk aversion yields strict superiority in general the main result is unaffected by changes in the seniority of claims but is sensitive to changes in the order of moves limited liability ceases to ensure the strict superiority of interlinked contracts if the principal who provides the variable factor of production moves first even if he has junior claims to the output

money and the dispersion of relative prices a price dispersion equation is tested with data from the german hyperinflation the equation is derived from a version of lucas s and barro s partial information localized market models in this extension different excess demand elasticities across commodities imply a testable dispersion equation in which the explanatory variable is the magnitude of the unperceived money growth in order to test this hypothesis a price dispersion series is constructed and a measure of the unperceived part of money growth is estimated the model receives support from the empirical analysis although it is evident that unincluded variables have important effects on price dispersion

relative price variability inflation and the allocative efficiency of the price system abstract this paper develops a theory of the relationship between aggregate and relative price variability based on the inability of people even in a rational world to identify permanent changes in relative demands whether caused by real or by monetary variability and relative productivities as soon as they occur the theory implies that the variance of the rate of inflation and the variance of relative price change are positively related although expectations are rational and markets always clear production decisions respond sluggishly to changes in relative prices temporary shocks to relative demands cause prolonged changes in the structure of production available information is used so as to maximize the efficiency of the price system however this efficiency decreases when any of the underlying variances increases this decrease is more pronounced when the production lag is longer

the relationship between relative prices and the general price level it is very nearly a truismi amaong neoclassical economists that the public is wont to confuse changes in the general price level with relative price changes correspondingl y one might speak of the independence between the two as one of the central postulates of the neoclassical tradition william stanley jevons was aml ong the first to identify this basic dichotomin economic life as well as to attempt to explain the ordinary citizen s seenming incapacity to understand it

a theory of sharecropping the role of price behavior and imperfect competition this paper proposes a theory of sharecropping on the basis of price behavior in agriculture and imperfectly competitive nature of rural product markets we consider a contractual setting between one landlord and one tenant with seasonal variation of price where the tenant receives a low price for his output while the landlord can sell his output at a higher price by incurring a cost of storage we consider two different classes of contracts i tenancy contracts and ii crop buying contracts it is shown that sharecropping is the optimal form within tenancy contracts and it also dominates crop buying contracts provided the price variation is not too large then we consider interlinked contracts that have both tenancy and crop buying elements and show that there are multiple optimal interlinked contracts finally proposing an equilibrium refinement that incorporates imperfect competition in the rural product market it is shown that the unique contract that is robust to this refinement results in sharecropping

limited liability and the existence of share tenancy abstract the paper considers the problem confronting an absentee landlord who can lease out his land on a fixed rent contract share rent contract or a mixture of the two it is argued that in poor areas it is natural to have each contract underwritten by an implicit limited liability clause which allows a person to forego paying rent under extreme crop failures in the presence of such an implicit clause a certain tension appears between a tenant and a landlord with the former preferring risky projects and the latter preferring safe ones it is shown that in such a case share tenancy turns out to be the dominant system from among the class mentioned above because it minimises the tension between the landlord and the tenant the result is then used to discuss conditions under which share tenancy will tend to wither away

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

optimal investment policy of the regulated firm abstract the main purpose of this paper is to investigate the optimal investment behaviour of a regulated firm and to show that the averch johnson effect of overcapitalization does not necessarily occur in a dynamic model under the assumption of concave revenue function there may be three cases of undercapitalization overcapitalization and neutralization as the result whether the averch johnson effect appears or not is crucially dependent on the regulated rate of return and the firm s planning horizon

capital requirements screening and interlinked sharecropping and credit contracts this paper provides one more rationale for interlinking credit and tenancy contracts in the context of production loans in an environment characterized by a heterogeneous labor pool and imperfect information landlords will have an incentive to avail themselves of screening devices by linking tenancy and credit contracts a screening device can be implemented the equilibrium set of contracts is characterized by a variety of interest rates some of which might be below the market interest rate the interest rate principal schedule is downward sloping with higher ability tenants choosing larger principals at lower interest rates

share tenancy as strategic delegation abstract the paper develops a new explanation of sharecropping based on the idea of an incentive equilibrium it considers a set up in which a few landlords in a village confront the choice of cultivating their farms by adopting different tenurial arrangements ranging from owner operation through the fixed rental system to sharecropping these landlords are the only sources of employment in the village and compete in the wages they pay to their workers in such an environment sharecropping is explained as a form of strategic delegation where a landlord gets extra benefit by having a share tenant and giving him suitable incentives

moral hazard and peer monitoring in a laboratory microfinance experiment abstract this paper reports the results from a laboratory microfinance experiment of group lending in the presence of moral hazard and costly peer monitoring we compare peer monitoring treatments in which credit is provided to members of the group to individual lending treatments with lender monitoring we find that if the cost of peer monitoring is lower than the cost of lender monitoring peer monitoring results in higher loan frequencies higher monitoring and higher repayment rates compared to lender monitoring in the absence of monitoring cost differences however lending monitoring and repayment behavior is mostly similar across group and individual lending schemes within group lending contrary to theoretical predictions simultaneous and sequential lending rules provide equivalent empirical performance

endogenous matching and the empirical determinants of contract form empirical work on contracts typically regresses contract choice on observed principal and agent characteristics if i some of these characteristics are unobserved or partially observed and ii there are incentives whereby particular types of agents end up contracting with particular types of principals estimated coefficients on the observed characteristics may be misleading we address this endogenous matching problem using a data set on agricultural contracts between landlords and tenants in early renaissance tuscany controlling for endogenous matching has an impact on parameters of interest and tenants risk aversion appears to have influenced contract choice

dynamic behavior of the firm with adjustment costs under regulatory constraint abstract this paper investigates the optimal investment behavior of the regulated profit maximizing firm in a dynamic context the modern adjustment cost approach to investment is incorporated into the theory of a regulated firm which has typically been discussed in a static framework this paper thus generalizes the well known averch johnson thesis which is proved in the static context the paper investigates both the finite and infinite horizon cases

relationships between oil price shocks and stock market an empirical analysis from china this paper investigates the interactive relationships between oil price shocks and chinese stock market using multivariate vector auto regression oil price shocks do not show statistically significant impact on the real stock returns of most chinese stock market indices except for manufacturing index and some oil companies some important oil price shocks depress oil company stock prices increase in oil volatility may increase the speculations in mining index and petrochemicals index which raise their stock returns both the world oil price shocks and china oil price shocks can explain much more than interest rates for manufacturing index

does the source of oil price shocks matter for south african stock returns a structural var approach abstract in this paper we investigate the dynamic relationship between different oil price shocks and the south african stock market using a sign restriction structural var approach for the period 1973 01 to 2011 07 the results show that for an oil importing country like south africa stock returns only increase with oil prices when global economic activity improves in response to oil supply shocks and speculative demand shocks stock returns and the real price of oil move in opposite directions the analysis of the variance decomposition shows that the oil supply shock contributes more to the variability in real stock prices the main conclusion is that different oil price shocks affect stock returns differently and policy makers and investors should always consider the source of the shock before implementing a policy and making investment decisions

intertemporal discounting and tenurial contracts a simple two period model without uncertainty and strategic complementarity in the labor market or asymmetric information of any kind is employed to study the nature of contracts signed between a landlord and a tenant in a rural economy the paper provides conditions under which different types of contracts may prevail q 2001 elsevier science b v all rights reserved

behavior of the firm under regulatory constraint a recent article by akira takayama discusses an earlier paper by harvey averch and leland l johnson on fair rate of return regulation of public utilities although takayama p 255 agrees with averch and johnson s general conclusions that a firm will tend to increase its investment with the introduction of an active constraint on its rate of return he criticizes the a j argument as being confusing ambiguous and in error takayama then attempts a clarification and presents a new formulation which leads to the a j result quoted above this comment will discuss several of takayama s criticisms in addition to showing that the so called a j effect cannot be derived from the basic assumptions made by both averch and johnson and takayama 1 we will show that the very assumptions used to prove the a j effect by defining the region of x require an assumption that the a j effect exists in the first place

impacts of tenancy arrangements on investment and efficiency evidence from pakistan in this article we use farm level data from the punjab province in pakistan to analyze the impact of three tenancy contracts on investment in soil improving and productivity enhancing measures and farm productivity a multivariate tobit model that accounts for potential substitutability and complementarity of investment options as well as endogeneity of tenure arrangements was employed in the empirical analysis our empirical results indicate that land tenure arrangements influence farmers decisions to invest in soil improving and productivity enhancing measures in particular owner cultivators with secured tenancy arrangements were found to be more likely to invest in soil improving and productivity enhancing measures compared to those on leased contracts we also find that output per hectare was highest on land cultivated by owners and lowest on land under sharecropping tenancy lending support to the marshallian inefficiency hypothesis

monetary regimes and the relation between stock returns and inflationary expectations this paper analyzes the impact of changes in monetary policy regimes on the relation between stock returns and changes in expected inflation post war evidence from four countries reveals a direct link between these relations and the central banks operating targets i e money supply or interest rates specifically the post war negative relations between stock returns and changes in expected inflation are significantly stronger during interest rate regimes

contract duration and investment incentives evidence from land tenancy agreements this paper analyzes the empirical determinants of contract length a key and yet neglected dimension of contractual structure i estimate contract length and contract type jointly using original data on tenancy agreements signed between 1870 and 1880 in the district of siracusa italy the findings indicate that the choice of contract length is driven by the need to provide incentives for nonobservable investment taking into account transaction costs and imperfections in the credit markets that make incentive provision costly the results also illustrate that because both length and the compensation scheme are used to provide incentives within the same contract joint analysis is important for a correct interpretation of the evidence jel d82 o12 q15

inflation and real stock returns revisited i introduction this article empirically reinvestigates the relationship between real stock returns and inflation according to fisher 1930 1 in an efficient market real stock returns should reflect expectations only about real factors such as growth in output and time preference of savers such that real stock returns and inflation should vary independently in other words on average investors are fully compensated for erosions in purchasing power over time however this so called generalized fisher hypothesis has received little empirical support while kaul 1990 boudoukh and richardson 1993 solnik and solnik 1997 madsen 2005 and ryan 2006 find positive or weakly positive correlation between stock returns and inflation most empirical studies including nelson 1976 fama 1981 1983 geske and roll 1983 gultekin 1983 kaul 1987 and solnik 1983 uncover a negative effect of inflation anticipated and or unanticipated on real or nominal stock returns these apparent inconsistencies between the data and the predictions of economic theory have been termed as the stock return inflation puzzle and cited as evidence of monetary nonsuperneutrality or irrationality and market inefficiency 2 to reconcile the seemingly conflicting contributions danthine and donaldson 1986 provide a rational expectations equilibrium model in which a negative relation between stock returns and inflation arises from non monetary sources e g a real output shock and a positive relation is driven by purely monetary sources stulz 1986 marshall 1992 and bakshi and chen 1996 also assert that stock returns may be negatively correlated with inflation especially when the source of inflation is related to nonmonetary factors evidently hess and lee 1999 khil and lee 2000 and lee 2003 find that while monetary shocks drive a positive correlation real fiscal or real output shocks result in a negative correlation between stock returns and inflation from a different perspective kaul 1987 1990 argues that the relation between these two variables depends on both the money demand and the money supply specifically while the combination of money demand effects with a countercyclical monetary response accentuates a negative correlation money demand shocks along with a procyclical monetary response lead to a neutral or positive correlation between real stock returns and inflation similar arguments can be found in day 1984 kaul and seyhun 1990 boudoukh richardson and whitelaw 1994 and gallagher and taylor 2002 and are supported by compelling empirical evidence see e g kim 2003 lee 1992 as an alternative this article models the real stock return inflation relationship as intrinsically dynamic explicitly distinguishing between the short run and the long run such a distinction is crucial because imperfect information rigidity and or contractual obligations are more prevalent in the short run than in the long run in that sense the response of real stock returns to inflation could differ in the short run versus long run moreover we assess the long and short run impacts of inflation uncertainty on real stock returns as argued the real costs of inflation are associated with its uncertainty greater inflation uncertainty resulting from higher inflation may lead to economic inefficiency lower real investment and unemployment thereby reducing economic growth thus it is interesting to see if there are independent effects of inflation uncertainty on real stock returns both in the short run and in the long run in so doing this article uses an innovative econometric technique to explore the long and short run relationships between real stock returns and inflation both anticipated and unanticipated and the relationships with inflation uncertainty it departs from earlier work and complements recent evidence in at least three aspects

optimal dynamic investment policies under concave convex adjustment costs the paper considers a dynamic investment model of a monopolistic firm facing adjustment costs that are concave convex in the rate of gross investment the firm wishes to maximize the discounted stream of dividends over a finite planning horizon plus the terminal value of the stock of equity the problem of finding an optimal investment path is solved by combining results from a nonstandard model with concave adjustment costs with results from the standard model with convex adjustment costs the results are presented in phase diagrams and are economically interpreted the solution involves the use of a chattering control and we discuss various approaches to avoid the occurrence of such a control policy

a wavelet analysis of mean and volatility spillovers between oil and brics stock markets this paper investigates the spillover effects of volatility and shocks between oil prices and the brics stock markets using multivariate approach and wavelet analysis at different time horizons hence we combine a multivariate arma garch model and wavelet multiresolution analysis to study this phenomenon a bivariate arma 1 1 garch 1 1 cdcc student t model was joined with modwt filter to capture a broad range of possible spillover effects in mean and variances of level prices at various time horizons generally empirical results provide strong evidence of time varying volatility in all markets under study however our proposed approach shows that oil price and stock market prices are directly affected by their own news and volatilities and indirectly affected by the volatilities of other prices and wavelet scale the results show also that mean and volatility spillover effects was decomposed into many sub spillovers on different time scales according to heterogeneous investors and market participants the practical implications of this study are critical innovative and useful for the local and international investors and also for the portfolio managers they can utilize this study to formulate the optimal oil bricks stock portfolios as well as lead to more accurate predictions of volatility spillovers patterns also in developing their hedging strategies

does sharecropping affect long term investment evidence from west bengal s tenancy reforms in india land reform has been high on the political agenda since independence in 1947 and early efforts at abolishing intermediaries are widely credited with having brought about significant social benefits the most prominent type is tenancy reform as it does not extinguish landlords ownership rights tenants who may have benefited from rent ceilings and cannot be evicted still have to pay annual share rent this weakness of rights may fail to create the incentives for effort supply and long term investment that have underpinned the success of land reforms elsewhere effectively adding a dynamic inefficiency to the disincentives created by the marshallian inefficiency of sharecropping this could imply that despite the high political price of implementing land reform in india the schemes so far have failed to reach their productivity and poverty reduction potential

behavior of the firm under regulatory constraint a recent article in this review by averch and johnson 3 on the fair rate of return regulation in public utilities industries or more generally regulated industries attracted the attention of many economists in essence averch johnson argues that the introduction of an active constraint of a fair rate of return type would induce the firm to invest more than the original profit maximizing value of capital and this would create an inefficient allocation of inputs in addition to frequent citations in verbal arguments it has invited some thieoretical extensions by economists such as wvestfield 8 and klevorick 5 all of the writers seem to accept the basic theoretical foundations set by averch and johnson for example klevorick 5 recently proposed that the fair rate of return should be inversely related to the size of the capital of a firm the intuitive basis for this is apparent for it in effect creates a penalty as the amount of capital used by the firm increases however it seems to me that averchjohnson s original arguments are sketchy and contain somewhat ambiguous logic at several important points although their conclusion for which they tried to find empirical support that a firm will tend to increase its investment with the introduction of an active constraint seems to be correct it does not follow from their arguments in particular there seems to be a serious error which arises from confusing movements along a curve and shifts of a curve in section ii we clarify those ambiguities and if necessary correct the mistakes in the third section of this paper we shall provide a new formulation of the problem we shall find that the new formulation will give the same answer as averchjohnson namely that a firm will tend to invest more with the iiltroductioin of an active constraint it should be noted however that while the conclusion happens to be the same this was not the necessity for we needed a completely new formulation to obtain the old conclusion

contract choice in agriculture with joint moral hazard in effort and risk we analyze optimal contract choice in agriculture when there is joint moral hazard on the part of the farmer in the supply of effort and the riskiness of the technique of cultivation in the presence of limited liability high powered incentive contracts such as fixed rental contracts will induce the farmer to adopt techniques of cultivation that are too risky from the point of view of the landlord on the other hand low powered incentive contracts such as fixed wage contracts will induce the farmer to supply too little effort we show that sharecropping contracts emerge as a natural solution to balance these two conflicting considerations

information aggregation inflation and the pricing of indexed bonds using daily prices of indexed bonds between 1970 and 1979 we test whether announcements of the israeli cpi contain information that is not already reflected in bond prices the results indicate that bond prices reflect about 85 percent of the new information about inflation as it occurs i e when the central bureau of statistics samples prices the announcement of the cpi 15 days after the end of the sampling period causes the remaining 15 percent adjustment in bond prices this evidence raises questions about the empirical importance of misperceptions about inflation as a source of nonneutrality in monetary policy

the adjustment of stock prices to information about inflation this paper analyzes the reaction of stock prices to the new information about inflation based on daily returns to the standard and poor s composite portfolio from 1953 78 it seems that the stock market reacts negatively to the announcement of unexpected inflation in the consumer price index c p i although the magnitude of the reaction is small it is interesting to note that the stock market seems to react at the time of announcement of the c p i approximately one month after the price data are collected by the bureau of labor statistics

relative price variability real shocks and the stock market in this paper we investigate the effects of relative price variability on output and the stock market and gauge the extent to which inflation proxies for relative price variability in stock return inflation regressions the evidence shows that the negative stock returninflation relations proxy for the adverse effects of relative price variability on economic activity particularly during the seventies when the u s experienced oil supply shocks hence it appears that inflation spuriously affects the stock market in two ways the aggregate output link of fama 1981 and the supply shocks reflected in relative price variability a number of papers have attempted to explain the anomalous negative relations between stock returns and inflation witnessed in the post war period one hypothesis that has held up well in light of empirical evidence suggests that the negative relation between stock returns and unexpected inflation simply reflects the more fundamental positive relation between stock returns and future real variables see e g fama 1981 geske and roll 1983 and kaul 1987 1989 in this paper we investigate the effects of relative price variability on output and the stock market and gauge the extent to which inflation proxies for relative price variability in stock return inflation regressions first relative price variability can have detrimental effects on output and employment see e g friedman 1977 and barro 1976 second absolute relative price confusion models of the lucas 1973 type suggest that monetary shocks can induce a positive relation between inflation and relative price variability see e g cukierman 1983 hence the negative stock return inflation relations could simply be a reflection of the negative effects of relative price variability on the stock market we use data for the 1947 1985 period to test the various links of our hypothesis the results indicate that relative price variability is positively related to both expected and unexpected inflation measures relative price variability also has a significant negative effect on output and the stock market more importantly

increasing returns to scale and the reverse flexible accelerator abstract we show that the flexible accelerator principle characterizes optimal investment behavior only when the firm s technology exhibits decreasing returns to scale throughout when there are increasing returns we show that there is a range in which investment increases as the capital stock increases towards its long run equilibrium level

inflation s negative effects on real stock prices new evidence and a test of the proxy effect hypothesis the present study examines the effects of inflation on real stock prices using an error correction model of the s p 500 inflation is shown to have a negative and significant impact in a variety of model specifications the study also investigates whether the observed negative relation arises because inflation proxies for more fundamental relations between stock prices and either future output relative price uncertainty or inflation uncertainty the evidence reveals that inflation does not merely proxy for those other factors and thus the proxy effect hypothesis in its various forms is rejected

efficient share tenancy contracts under risk the case of two rice growing villages in thailand abstract two categories of thai sharecroppers are observed to be efficient those under high poverty and high risk and those in a long term relation of gift exchange with their landlord econometric estimates show that use of variable factors by these sharecroppers is insignificantly different from that by owner operators and significantly higher than that by generic sharecroppers interpretations for this behavior are provided by models of sharecropping under safety first and of repeated contracts with gift exchange

limited liability wealth differences and tenancy contracts in agrarian economies abstract an explanation is provided for two observations concerning variations in the choice of tenants and their welfare differences in tenants wealth imply corresponding differences in liability when default is possible on fixed rental commitments in this context the inability of landlords to specify their tenants effort lead to effort choices that vary with the type of contract offered the selection of tenants and the contract terms they receive thus depend on wealth with wealthier tenants being preferred and receiving fixed rent contracts these results also predict that wealthier tenants earn higher profits on their leased plots

union power in the long run reconsidered considering an economy with only one wage setting union which has an infinite planning horizon and a constant rate of time preference kemp and long 1987 examined the following problem how does the pursuit of union objectives affect the path of economic development in particular does a union ridden economy move towards a nontrivial steady state and if so is the steady state characterized by unemployment their own answer was as follows the existence of a nontrivial steady state depends on the union s rate of time preference if this is strong enough the union will be content to see capital stock run down to zero if and only if there is a nontrivial steady state will the union eventually after finite time find it advantageous to refrain from using its market power that is in the long run the union is effectively impotent kemp and long s paper constituted a contribution in posing the problem correctly it relied however on the solow swan growth model with the following basic assumptions a fixed saving income ratio a fixed rate of population growth and constant returns to scale in production now let us consider this framework more closely the first two assumptions were needed to enable the existence of a nontrivial steady state in fact if kemp and long had used a saving function which compelled consumption equal to income in the steady state where there is no net investment they would very likely have obtained the same results even without population growth such a saving function can be well based on the permanent income hypothesis the diminishing marginal utility of consumption creates an incentive to even out planned consumption across future periods in the solow swan framework the crucial point is the assumption of constant returns to scale and we prefer to abolish it we then have to ignore population growth as both technically inconvenient and irrelevant to

the impact of economic regulation on attempts to curb expense preference behavior a micro data analysis of ceo compensation schemes for electric utilities this study uses a large micro data set to present evidence which suggests that owners of regulated electric utilities have little incentive to structure ceo compensation packages in an effort to curb potential expense preference behavior because such potential behavior occurs or would occur at no cost to the firm or the firm s owners little incentive exists to structure compensation schemes in a way that would curb such behavior e g by compensating them with incentive bonus plans and stock options the results presented here augment those which examine other industries e g banking in an effort to point out the relationships between ownership organization political involvement and expense preference behavior

limited liability contractual choice and the tenancy ladder abstract we re examine the connection between limited liability contractual form and the agricultural tenancy ladder in a model with only labor moral hazard we show that ex post limited liability does not explain sharecropping in this model but that ex ante limited liability can do so we characterize the nature of the tenancy ladder in either case

uncertainty entrepreneurship and sharecropping in india this study attempts to explain the coexistence of different farm lease arrangements in terms of the varying significance of entrepreneurial functions in india crop sharing arrangements are common in areas of relative economic certainty with very little scope for decision making for example for product and factor substitution and where the entrepreneurial profit is low fixed cash rents are common in situations of high uncertainty where the scope for decision making is significant or where the crops are highly profitable efficiency considerations predominate in areas of sharecropping favoring a smaller farm size whereas under high uncertainty large size is favored for reducing risk

an inquiry into quasi credit contracts the role of reciprocal credit and interlinked deals in small scale fishing communities in agrarian village societies beset with many hazards and uncertainties people evolve various means of coping with risk what is perhaps less known is that credit transactions can sometimes serve the function of reducing risk in such societies this article is concerned with examining several insurance motivated credit arrangements in small scale fishing communities a hunger insurance mechanism of reciprocal credit and a system of interlinked contracts aimed at insuring against risks in the spheres of labour and marketing relations will be extensively dealt with moreover the concept of triadic relationships will be shown to have special relevance in the case of traditional insurance arrangements aiming at controlling problems of moral hazard

money and price dispersion in the united states this paper reports an empirical test of a price dispersion equation using data on the u s after world war ii the equation derived elsewhere from a version of the partial informationlocalized market models relates price dispersion to the magnitude of the aggregate shocks in order to test the model a price dispersion series is computed using annual wholesale price indexes and weights for the period 1948 76 the data on money shocks are the unanticipated money growth series estimated by barro the tests also include a measure of aggregate real disturbances from the theoretical point of view the results are negative they do not detect an effect of money shocks on price dispersion but support the predicted effect of real shocks

individual firm and market dynamics of csr activities this paper investigates how firms should plan corporate social responsibility short csr this dynamic analysis starts with a firm s intertemporal optimization problem and proceeds to analyze interactions with other firms which are crucial if csr is profitable for firm a then it is most likely also profitable for competitors b and c and these simultaneous decisions affect the gain each would achieve from trying to advance its own position we find that multiple equilibria exist irrespective of whether interactions with other firms are taken into account interactions can eliminate or create additional steady states and can lead to a situation in which history is insufficient to determine the long run outcome among multiple steady states so that coordination is beneficial

short term interest rates as predictors of inflation on testing the hypothesis that the real rate of interest is constant in an innovative and provocative paper in this review eugene fama presents evidence which appears to be consistent with the joint hypothesis that the real rate of interest ignoring taxes is a constant and that the market for u s treasury bills is efficient in the sense of embodying rational expectations those findings are strikingly at variance with a long list of previous studies which seemed to support the view that the real rate of interest varies over time and can be related to economic variables such as real output monetary policy and so forth 2 the methodologies which lead to these contradictory conclusions are quite different previous studies had followed the lead of irving fisher by relating nominal interest rates to distributed lags on past rates of inflation 3 these distributed lags are generally interpreted as approximations to the market s expected rate of inflation and thus any remaining variation is attributed to variation in the real rate 4 fama s methodology on the other hand draws on the fact that the difference between the market interest rate and the subsequently observed rate of inflation the ex post real interest rate consists by definition of the ex ante real interest rate plus a pure forecasting error 5 the hypothesis of market efficiency implies that these forecasting errors must be serially random thus observing ex post real rates is equivalent to observing ex ante real rates with random measurement error these errors of course confound the problem of identifying variation in the ex ante real rate in this paper we will argue that the relative magnitude of these measurement errors is such that the tests carried out by fama were not powerful enough to reject the joint hypothesis that the ex ante real rate is a constant and expectations are rational more powerful tests which are presented in this paper using the same data do lead to rejection of that hypothesis of course rejection

renegotiation proof tenurial contracts as screening mechanisms abstract this paper is motivated by the hypothesis that the nature of the tenurial contract is sensitive to the tenant s privately known level of farming skill in particular tenants with low skill levels work for wage contracts those with high skill levels work for rent contracts and tenants whose skill levels lie in between these extremes work for share contracts we study a principal agent type model both with and without the assumption that the parties can commit not to renegotiate the terms of the initially binding accepted contract if the parties can make such a commitment then our results do support this hypothesis on the other hand if the parties cannot make such a commitment then with some positive probability tenants of all skill levels work for the same wage or share contract however with the complement positive probability the hypothesis is vindicated in the no commitment case as well