external market condition and tournaments theory and evidence abstract this paper adds in a new assumption product price into the tournament model and shows the convexity of pay structure should become stronger when the produce price increases empirical results from a taiwanese textile company are consistent with the implication

crude oil price differentials product heterogeneity and institutional arrangements abstract we adopt time series and cross section methods to analyse long term relationships between pairs of crude oil prices and assess how physical and institutional factors affect their speed of reaction to exogenous shocks using a methodological approach which does not require identifying specific crudes as benchmarks we show that the overwhelming majority of prices have stable long term relationships we also find that crudes with physical similarity converge quickly after a shock while prices for oil produced in opec countries are relatively slow to revert to equilibrium after a shock

career concerns incentives and endogenous learning in labour markets models of career concerns provide a framework for analyzing the actions that may be taken by a manager in an attempt to influence performance signals that the market uses to update its beliefs on her productivity and the incentive problem that arises if such actions do not coincide with those that maximize the financial return to a firm s owner this survey provides a formal introduction to the main types of models of career concerns hidden action and hidden information and discusses some extensions of these models applications of the career concerns framework to explain aspects of managerial behavior and the form of labor market institutions are emphasized copyright 1992 by blackwell publishers ltd

one security many markets determining the contributions to price discovery when homogeneous or closely linked securities trade in multiple markets it is often of interest to determine where price discovery the incorporation of new information occurs this article suggests an econometric approach based on an implicit unobservable efficient price common to all markets the information share associated with a particular market is defined as the proportional contribution of that market s innovations to the innovation in the common efficient price applied to quotes for the thirty dow stocks the technique suggests that the preponderance of the price discovery takes place at the new york stock exchange nyse a median 92 7 percent information share although most of the classic paradigms in market microstructure concern a security that trades in a single centralized market such situations are becoming increasingly rare in practice fragmentation the dispersal of trading in a security to multiple sites has emerged as a dominant institutional trend this process is of concern to financial economists and regulators because price information and price discovery the impounding of new information into the security price arguably the most important products of a security market have many attributes of public goods as the process of fragmentation accelerates it may be important to determine where the price information and price discovery are being produced 1 this paper suggests a practical econometric approach to this problem the technique is illustrated with an application to u s equity markets many stocks listed on the new york stock exchange nyse trade concurrently on the regional exchanges and the national association of securities dealers national market system nasd nms since a share of ibm stock is the same security whether purchased on the midwest or pacific exchange this is a particularly clear instance of multiple markets nevertheless the expres

self selection and the efficiency of tournaments when exogenously imposed rank order tournaments have incentive properties but their overall efficiency is reduced by a high variance in performance bull schotter and weigelt 1987 however since the efficiency of performance related pay is attributable both to its incentive effect and to its selection effect among employees lazear 2000 it is important to investigate the ex ante sorting effect of tournaments this paper reports results from an experiment analyzing whether allowing subjects to self select into different payment schemes helps in reducing the variability of performance in tournaments we show that when the subjects choose to enter a tournament the average effort is higher and the between subject variance is substantially lower than when the same payment scheme is imposed sorting is efficiency enhancing since it increases the homogeneity of the contestants we suggest that the flexibility of the labor market is an important condition for a higher efficiency of relative performance pay

testing persistence of wti and brent long run relationship after the shale oil supply shock abstract in the paper we study the long run relationship in the wti brent oil time series taking into account the occurrence of two relevant events the rise of shale oil production in early 2011 and the widening and closing of the wti brent price spread from 2011 to 2014 monthly data of wti and brent crude oil prices as well as us shale oil quantities from january 2000 to december 2017 is used for the analyses the empirical results of the cointegration tests with structural breaks show that two structural break occurs in february 2011 and in october 2014 we then estimate a vector error correction model vecm considering the structural break suggested by the cointegration test results the timing of the rise in shale oil production and the dynamics of the wti brent price spread our analysis reveals that wti and brent crude oil prices have had a long run relationship up to 2011 no cointegration existed during the period of widening of the spread again a new long run relationship arises after the closing of the gap which includes the shale oil production in the last period the cross price elasticity of brent on wti slightly reduces compared to the pre 2011 era whilst the shale oil production increases its importance in explaining the long run relationship between wti and brent fivefold using the generalized impulse response functions girfs we finally study the impact of exogenous shocks on the variables showing that in the first period with limited shale oil production oil prices reacted to shale oil and not vice versa after october 2014 the opposite becomes true and shale oil production follows changes in both wti and brent prices

effects of nymex trading on ipe brent crude futures markets a duration analysis abstract recent developments in the energy markets and the surge and dip in crude oil prices over the last few years have renewed the interest in the workings of the two main price setting markets london s international petroleum exchange ipe and new york s mercantile exchange nymex the interaction of these two markets when both of them are open synchronous trading and when only london is open asynchronous trading is important in view of the fact that most participants take positions in both markets this paper looks at how london is affected by new york by analysing the transaction duration of the ipe brent futures contract both when the nymex wti futures contract is being traded and when nymex is closed using tick by tick data obtained from ipe transaction durations are found to form two distinctive and inverted u shaped patterns autoregressive conditional duration acd model first introduced by engle and russell is applied to the data parameters of ipe morning and afternoon are significantly different from each other underlining the dominant effects of nymex on ipe trading the results from the current analysis reinforce previous results by the authors which indicate that nymex is a leading price setter in crude oil futures prices and has a dominant effect on the ipe traded contracts

does opec influence crude oil prices testing for co movements and causality between regional crude oil prices using high frequency data the co movements among crude oil prices are analysed in order to address the question of regionalization of the world crude oil market time series econometrics in the form of error correction modelling is applied for daily crude oil price data covering the time period 1988 to 2004 and in this framework topics like weak and strong exogeneity among three major oil prices represented by brent opec and texas wti are addressed the empirical results are that causality is most likely bi directional among these crude oil prices and hence rejecting a regionalization hypothesis of the global oil market and also an influence from the opec oil price towards bent and wti which are usually claimed to have a benchmark role

gender differences in a market with relative performance feedback professional tennis players abstract recent studies have found that females are less competitive than men these studies have all relied on a similar framework where individuals have little information about their relative abilities compared to other potential competitors it has also been found that performance feedback leads to more efficient choices for students and in experimental settings professional athletes competing in individual sports typically have access to performance feedback and good information about the quality of their potential competitors when choosing to enter competitive tournaments in this paper i use data from the international tennis federation itf on tournament entry decisions by professional players to study gender differences in tournament entry and preferences in this competitive labor market i find that even among this highly competitive population gender differences exist in performance and tournament entry in terms of performance i find that men exhibit a hot hand effect that can last for multiple periods while females are affected by only their performance in their last tournament this effect is obvious in tournament entry where both men and women are more likely to enter tournaments after doing well but women are affected by their last tournament while men s previous performance can affect entry beyond the next tournament the gender difference from feedback is more striking when taking into account whether individuals actually played in a tournament in that case higher ability females respond positively to performance from their last tournament while males do not but both genders see similar effects from previous performance in the short term and the effects are larger for worse ranked individuals thus in very competitive settings of same sex tournaments females and males respond differently to performance feedback information suggesting that information has very different gender specific effects for competitions and may be largely dependent on the length of time that has elapsed from the competition that the feedback is coming from

the incentive effects of levelling the playing field an empirical analysis of amateur golf tournaments levelling the playing field is an important policy instrument to guarantee an equitable competition among heterogeneous individuals however the incentive effects of those policies are usually not explicitly addressed in empirical studies in this article the performance in amateur golf tournaments is analysed to gain insights into the incentive effects of those types of policies the empirical analysis takes advantage of the fact that tournaments in amateur golf are of two distinctive types that apply different scoring rules while one scoring rule is based on gross scores i e the total number of strokes of a player the second scoring rule is based on net scores where the total number of strokes is normalized with respect to the respective player s handicap performance comparisons of players who participated in both types of tournaments suggest that levelling the playing field as in tournaments based on net score has positive and significant performance effects

forward curves scarcity and price volatility in oil and natural gas markets the role of inventory in explaining the shape of the forward curve and spot price volatility in commodity markets is central in the theory of storage developed by kaldor kaldor n 1939 speculation and economic stability the review of economic studies 7 1 27 and working working h 1949 the theory of the price of storage american economic review 39 1254 1262 and has since been documented in a vast body of financial literature including the reference paper by fama and french fama e f and k r french 1987 commodity futures prices some evidence on forecast power premiums and the theory of storage journal of business 60 55 73 on metals the goal of this paper is twofold i validate in the case of oil and natural gas the use of the slope of the forward curve as a proxy for inventory the slope being defined in a way that filters out seasonality ii analyze directly for these two major commodities the relationship between inventory and price volatility in agreement with the theory of storage we find that i the negative correlation between price volatility and inventory is globally significant for crude oil ii this negative correlation prevails only during those periods of scarcity when the inventory is below the historical average and increases importantly during the winter periods for natural gas our results are illustrated by the analysis of a 15 year database of us oil and natural gas prices and inventory

incentives for helping on the job theory and evidence recent advances in incentive theory stress the multidimensional nature of agent effort and specifically cases where workers affect one anothers performance through helping efforts this article models helping efforts as determined by the compensation package and task allocation the model is tested with australian evidence on reported helping efforts within work groups the evidence consistently supports the hypothesis that helping efforts are reduced while individual efforts are increased when promotion incentives are strong piece rates and profit sharing appear to have little effect on helping efforts while task variety and helping efforts are positively correlated

do tournaments have incentive effects much attention has been devoted to studying models of tournaments or situations in which an individual s payment depends only on his or her output or rank relative to that of other competitors academic interest derives from the fact that under certain sets of assumptions tournaments have desirable normative properties because of the incentive structures they provide our paper uses nonexperimental data to test whether tournaments actually elicit effort responses we focus on professional golf tournaments because information on the incentive structure prize distribution and measures of individual output players scores are both available we find strong support for the proposition that the level and structure of prizes in pga tournaments influence players performance

economic contests comparative reward schemes contests are situations in which an individual s reward depends on his performance relative to others students are graded on a curve the candidate with the most votes gets the political office the underling who performs best is promoted to the executive position contests are useful in dealing with indivisible rewards reducing monitoring costs and minimizing risks from common uncertainties they are employed to sort potential participants and once they have entered to induce appropriate effort from them with monitoring precision and prize spreads as potential choice variables optimal contest structures are derived for fair and unfair contests among equal and unequal participants the converse problems of climbing low ability individuals enter the contest designed for high ability candidates and slumming are shown to be manageable

contest functions theoretical foundations and issues in estimation contest functions alternatively contest success functions determine probabilities of winning and losing as a function of contestants e ort they are used widely in many areas of economics that employ contest games from tournaments and rent seeking to conflict and sports we first examine the theoretical foundations of contest functions and classify them into four types of derivation stochastic axiomatic optimally derived and microfounded the additive form which includes the ratio or tullock functional form can be derived in all four di erent ways we also explore issues in the econometric estimation of contest functions including concerns with data endogeneity and model comparison

information transmission and market interactions across the atlantic an empirical study on the natural gas market abstract this paper studies the international information transmission and market interactions in the u s and u k natural gas markets three well documented approaches are used to measure the relative importance on the process of price discovery under a quadvariate system after adjusting the effects of nonsynchronous trading prices robust results indicate our system that includes spot and futures prices within the two countries are driven by one common factor information disseminates efficiently among the four markets concerned the u s futures market dominates as the center for price discovery the u k futures market comes as the second the spot markets in the u s and u k are less efficient than their corresponding futures market where the u k spot market contributes the least and almost zero to the price discovery process asymmetric volatility spillovers are found in three of the four markets volatility in the u s futures market increases with positive returns which illustrates the inverse leverage effect in most of the commodity market volatilities in the spot markets are negatively related to returns which is analogous to the traditional leverage effect prevailing in most of the equity stock markets

a new look at incentive effects and golf tournaments abstract this paper uses data from the 1992 professional golf association tour to analyze the incentive effects offered by tournaments the results suggest that the level of the total prize money has an insignificant effect on the total score output of the players workers this conclusion contradicts the findings of an earlier paper by ehrenberg and bognanno journal of political economy 1990 98 1307 1324

the dynamics of a nonlinear relationship between crude oil spot and futures prices a multivariate threshold regression approach abstract this paper segments daily data from january of 1986 to april of 2007 into three periods based on certain important events both periods i and ii indicate that the spot prices in general are higher than futures prices as was well known in the literature only period iii 2001 9 11 2007 4 30 displays a reverse phenomenon futures prices in general exceed spot prices when the absolute value of a basis futures spot is greater than the threshold value in the arbitrage area regime 1 and 3 at least one of the error correction coefficients representing adjustment towards equilibrium is statistically significant that is there exists a tendency in the oil market in which prices move toward equilibrium with respect to the short run dynamic interaction between spot price change st and futures price change ft our results indicate that when the spot price is higher than futures price and the basis is less than certain threshold value regime 3 there exists at least one causal relationship between st and ft conversely when the futures price is higher than spot price and the basis is higher than certain threshold value regime 1 there exists at least one causal relationship between st and ft finally we use the method suggested by diebold and mariano diebold francis x mariano roberto s 1995 comparing predictive accuracy journal of business and economic statistics 13 3 253 263 to compare the predictive power between the linear and nonlinear models our empirical results indicate that the in sample prediction of the nonlinear model is clearly superior to that of the linear model

testing the theory of tournaments an empirical analysis of broiler production broiler chickens are raised by contract growers whose rewards depend explicitly upon relative performance we use data on the performance of broiler producers facing both tournament and linear performance evaluation compensation structures to test three predictions from the theory of tournaments that changes in the level of prizes that leave prize differentials unchanged will not affect performance that in mixed tournaments more able players will choose less risky strategies and that tournament organizers will attempt to handicap players of unequal ability or reduce mixing to avoid the disincentive effects of mixed tournaments our evidence is consistent with each prediction

quitters never win the adverse incentive effects of competing with superstars internal competition may motivate worker effort yet the benefits of competition may depend critically on workers relative abilities large skill differences may reduce efforts i use panel data from professional golf tournaments and find that the presence of a superstar is associated with lower performance on average golfers first round scores are approximately 0 2 strokes worse when tiger woods participates relative to when woods is absent the overall tournament effect is 0 8 strokes the adverse superstar effect varies with the quality of woods s play there is no evidence that reduced performance is attributable to media attention intensity or risky strategy adoption

price discovery in crude oil futures this study examines price discovery among the two most prominent price benchmarks in the market for crude oil wti sweet crude and brent sweet crude using data on the most active futures contracts measured at the one second frequency we nd that wti maintains a dominant role in price discovery relative to brent with an estimated information share in excess of 80 over a sample from 2007 through 2012 our analysis is robust

the incentive effects of tournaments revisited evidence from the european pga tour this analysis of data from the 1987 european men s professional golf association pga tour strongly supports the hypothesis that the level and structure of prizes in pga tournaments influence players performance specifically players performance appears to vary positively with both the total money prizes awarded in a tournament and the marginal return to effort in the final round of play a value that varies among players largely depending on how the prize money is allocated among finishers of different ranks the authors suggest that these results together with the similar results of their earlier study of the 1984 u s men s pga tour may have implications for the design of compensation systems for certain groups of workers such as corporate executives college professors and salespeople

increasing regional disparities in the 1990s the finnish experience kangasharju a and pekkala s 2004 increasing regional disparities in the 1990s the finnish experience reg studies38 255 267 this paper investigates why regional disparities in finland started to grow in the early 1990s after a decades long period of convergence the analysis focuses on per capita gdp and its subcomponents particularly labour productivity jobs and population the results show first that the evolution of labour productivity and the number of jobs account for the regional divergence of per capita gdp second even though interregional migration and fertility tend to have a convergent effect on regional per capita gdp its effect was not strong enough the divergence of productivity and jobs dominated third among divergent factors productivity and jobs primary production contributed the most to the divergence of per capita gdp during the recession of the 1990s and private services during the subsequent recovery one reason for divergence of the primary production sector may

asymmetric tournaments equal opportunity laws and affirmative action some experimental results this paper assesses whether affirmative action programs and equal opportunity laws affect the output of economic agents more precisely we find that equal opportunity laws and affirmative action programs always benefit disadvantaged groups equal opportunity laws also increase the effort levels of all subjects and hence the profits of the tournament administrator usually the firm the effects of affirmative action programs depend on the severity of a group s cost disadvantage when the cost disadvantage is severe these programs significantly increase effort levels and hence profits the opposite is true when the disadvantage is slight

piece rates fixed wages and incentives evidence from a field experiment data from a field experiment are used to estimate the gain in productivity that is realized when workers are paid piece rates rather than fixed wages the experiment was conducted within a tree planting firm and provides daily observations on individual worker productivity under both compensation systems unrestricted statistical methods estimate the productivity gain to be 20 since planting conditions potentially affect incentives structural econometric methods are used to generalize the experimental results to out of sample conditions the structural results suggest that the average productivity gain outside of the experimental conditions would be at least 21 7

how many winners are good to have on tournaments with sabotage abstract from an employer s perspective a tournament should induce agents to exert productive activities but refrain from destructive ones we experimentally test the predictive power of a tournament model which suggests that within a reasonable framework productive and destructive activities are influenced neither by the number of agents taking part in the tournament nor by the fraction of the winner prizes our results clearly confirm that sabotage in tournaments indeed occurs while tournament size has virtually no effect on behavior a balanced fraction of winner and loser prizes appears to enhance productive activities

tournament incentives and match outcomes in women s professional tennis our research examines the effect of prize money differentials in women s professional tennis tournaments on the probability that the favoured player wins the match this study adds to the existing literature on tournament theory through its focus on rosen s 1986 elimination style match play tournament model we estimate a standard probit model using a unique data set containing detailed information on prize money player specific characteristics and match play outcomes for all tournaments played during the 2004 tour sponsored by the women s tennis association wta our results support predictions by rosen s tournament model larger prize money differentials have a positive statistically significant effect on the favoured player s probability of winning the match in addition the number of stages remaining has a significant negative effect on winning consistent with tournament theory predictions associated with the number of contestants in a tournament

price discovery in oil markets a time varying analysis of the 1990 1991 gulf conflict abstract this study examines the behaviour of crude oil spot and futures markets in the uk and usa during the 1990 1991 gulf conflict the objective is to investigate the relative ability of spot and futures markets to impound information this is achieved with the use of a generalized model of price discovery which represents a synthesis of the two most commonly used methodologies in its field emphasis is placed on the time varying nature of price discovery relationships results indicate that such relationships are strongly temporal these findings offer new insights into the nature of relationships between spot and futures markets

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

pay equality and industrial politics personnel managers often argue that equitable pay treatment manifested as wage compression is useful because it reduces disharmony among workers but it is far from obvious that a compressed salary structure is morale improving since better workers may feel disenchanted by this scheme however when workers rewards are based on relative comparisons salary compression reduces uncooperative behavior that is detrimental to the firm relative comparisons imply that some reference group must be selected the major result is that within the relevant groups some wage compression is efficient

classic promotion tournaments versus market based tournaments as initially formulated in the seminal analysis of lazear and rosen 1981 an important perspective for understanding the role of promotions in firms is the tournament perspective that is a promotion and in particular the wage increase associated with a promotion is a prize that serves as an incentive for workers to exert effort and take other actions beneficial to the firm such as the accumulation of human capital in this paper i consider whether the best way to model promotion tournaments is by having firms commit to prizes ex ante as in lazear and rosen s initial formulation or whether promotion prizes should be modeled as arising from the signaling role of promotions and the competition between firms for promoted workers

losing to win tournament incentives in the national basketball association the focus of tournament models has been rank order compensation schemes whereby participants receive higher payments for higher relative performance either incrementally or winner takes all our research focuses on a unique tournament that offers rewards for both winning and losing specifically the national basketball association s regularly scheduled season of games we examine three nba seasons to determine whether team performance responded to changes in the underlying tournament incentives provided by the nba s introduction and restructuring of the lottery system to determine draft order our results yield strong evidence that nba teams are more likely to lose when incentives to lose are present

the provision of incentives in firms i ncentives are the essence of economics despite many wide ranging claims about their supposed importance there has been little empirical assessment of incentive provision for workers the purpose of this paper is to critically overview existing work on the provision of incentives since the interests of workers and their employers are not always aligned a large theoretical literature has emphasized how firms design compensation contracts to induce employees to operate in the firm s interest this literature has reached into many areas of compensation and has pointed to a multitude of different mechanisms that can be used to induce workers to act in the interests of their employers these include piece rates options discretionary bonuses promotions profit sharing efficiency wages deferred compensation and so on my objective here is to evaluate this literature in the light of a growing empirical literature on compensation where possible i will address the literature from two perspectives first an underlying assumption of this literature is that individuals respond to contracts that reward performance accordingly i consider whether agents behave in this way and whether these responses are always in the firm s interest second i address whether firms write contracts with these responses in mind in other words do contracts look like the predictions of the theory incentives are provided to workers

price discount inventories and the distortion of wti benchmark abstract applying a rolling estimation to the hasbrouck information share model this study investigates the changing status of wti benchmark over time results show the ability of wti in reflecting market conditions decreases sharply and wti s efficiency in processing information has been surpassed by brent s since the second half of 2004 in the short run the wti distortion is related to its price discount problem but the distortion cannot be indicated by contangos in the long run wti s price discount problem coexists with a positive forward curve and both have harmed the price discovery role of wti the rising inventories in cushing significantly deteriorate wti s ability in serving as a world benchmark

work incentives hierarchy and internal labor markets this paper argues that contracts with payment based on a ranking of employee performance can provide performance incentives even under asymmetric information that prevents payment based on individual performance only being enforceable such contracts also fit with five features of labor markets that have aroused considerable interest 1 hierarchical wage structures 2 internal promotion 3 wage rates that rise with seniority and experience more than productivity 4 the variance of earnings increasing with experience and 5 wage rates attached to jobs rather than individuals with differentials set by administrative procedures rather than by reference to external market wages

a pair wise analysis of the law of one price evidence from the crude oil market abstract this paper applies a pairwise approach to investigate the validity of the law of one price in the crude oil markets price differentials appear smaller between crude oil pairs with similar physical chemical characteristics and also for pairs within opec

the internal economics of the firm evidence from personnel data we analyze twenty years of personnel data from one firm the hierarchical structure is quite simple and stable career movements suggest that the employee s rate of learning and the firm s learning about ability are important there are promotion fast tracks exit rates vary little with tenure or salary the firm has personnel policies like those described in the internal labor markets literature although several theoretical preconditions for ilms such as ports of entry and exit are lacking job levels are important to compensation but there is also substantial individual variation in pay within levels our companion paper in this issue explores the wage policy of this firm

are the crude oil markets becoming weakly efficient over time a test for time varying long range dependence in prices and volatility this paper analyzes the efficiency of crude oil markets brent and west texas intermediate by means of estimating the fractal structure of these time series we test for time varying degrees of long range dependence using the rescaled range hurst analysis and find evidence that this market has become more efficient over time these results are robust for controlling for short term autocorrelation by means of a shuffling procedure

mobility housing and labour markets in times of economic crises this special issue addresses the effects of the most recent financial and economic crisis starting in 2007 on mobility housing and labour markets in order to learn some lessons for the future t

the sports business as a labor market laboratory with superior data on compensation and productivity as well as the occurrence of abrupt dramatic market structure and player allocation rules changes sports labor markets offer an excellent setting in which to test economic hypotheses this paper reviews evidence from sports in four areas employer monopsony discrimination the coase theorem and incentive contracts supervision and performance there is considerable evidence of monopsony as well as for the existence of some forms of discrimination against minority athletes incentive contracts have strong effects on player performance and behavior and there is mixed evidence on the predictions of the coase theorem

incentives performance and choking in darts this paper examines how within match variation in incentives affects the performance of darts players the game of darts offers an attractive naturally occurring research setting because performance can be observed at the individual level and without obscuring effects of risk considerations and behavior of others we analyze four data sets covering a total of 29 381 darts matches of professional amateur and youth players we find that amateur and youth players display a sizable performance decrease at decisive moments professional players appear less susceptible of such choking under pressure our results speak to a growing literature on the limits of increasing incentives as a recipe for better performance

the effort effects of prizes in the second half of tournaments abstract the theory of tournaments predicts that a worker s effort depends on the difference between the winning and losing prizes as well as the degree that increases in effort affect the probability of winning this paper tests these predictions using a data set from arabian horse racing jockeys increase their efforts lower their times in the second half of races when the amount of prize money lost by dropping a place is greater and when there is less distance between them and their closest competitors these findings are consistent with the theory

testing the determinants of income distribution in major league baseball i introduction income of professional athletes is a frequent topic of discussion of fans sportscasters and the general public economists have also increasingly been attracted to this topic because the distribution of income of these players has both policy and business implications as a consequence the report of major league baseball s mlb blue ribbon panel formed in 1998 by mlb commissioner bud selig received quite a lot of attention this panel was charged with describing and explaining the economic condition of mlb comprised of such dignitaries as former federal reserve chairman paul volker senator george mitchell yale university president richard levin and columnist george will this panel reported that team payrolls have become increasingly disparate the gap between rich and poor teams is not only wide but is growing levin et al 2000 a case in point is the fact that the salary of the highest paid player in the 2000 season los angeles kevin brown at 15 7 million was 95 of the entire payroll of the poorest team the minnesota twins the effect according to the panel s report is a dramatic decline in parity and competitiveness of mlb since 1994 a team in the top payroll quartile has won every world series game in 1999 the teams with the five largest payrolls had an average winning percentage of 0 557 whereas the five poorest teams had a comparable figure of 0 444 the report discusses various recommendations that may narrow this gap leading to what one might call convergence in team payrolls this article examines the distribution of income in mlb for 1985 to 2000 we revive and extend a technique first suggested by thurow 1970 and show how it can be used to test for time trends versus cross sectional demographic and economic aspects influencing income distribution thurow 1970 discusses the impact of various measures on median income in the present case by calculating the gini coefficient we can discuss the impact that the explanatory variables have on income inequality in the context of mlb we attempt to shed light on the reasons why teams have greater or lesser payroll disparity we leave the question of the effect of between team payroll inequality on team wins and team revenues for future research the issue of whether to use an inequality measure that is based on a particular distribution or one that is distribution free has been widely discussed in the income distribution literature silber 1999 ryu and slottje 1999 in advocating the use of parametric distributions point to several benefits of estimating the lorenz curve in this manner these benefits include the ability to summarize thousands of observation points with a few parameters the ability to estimate the density function at any point an enhanced ability to construct inequality measures and the ability to formulate possible laws that would otherwise not be possible to detect however there are problems associated with the use of a parametric lorenz curve such as the choice of a suitable distribution the problem is compounded by the fact that income data are often grouped and have an open ended highest income category making it difficult to obtain accurate estimates one advantage of using professional sports data is the fact that the salary is available per individual and is not grouped consequently an actual number is available for the highest income this study analyzes payroll inequality in a professional sport by team that is for each year we calculate a measure of inequality for each mlb team and consider the characteristic differences in within team payroll distributions our study is not however the first to consider income inequality within professional team sports depken 2000 and jewell and molina 2004 find that mlb teams with greater wage disparity have fewer wins furthermore sommers 1998 finds a negative relationship between team success and within team payroll inequality using national hockey league data

oil prices speculation and fundamentals interpreting causal relations among spot and futures prices abstract a consensus that the world oil market is unified begs the question where do innovations in oil prices enter the market here we investigate where changes in the price of crude oil originate and how they spread by examining causal relationships among prices for crude oils from north america europe africa and the middle east on both spot and futures markets results indicate that innovations first appear in spot prices for dubai fateh and spread to other spot and futures prices while other innovations first appear in the far month contract for west texas intermediate and spread to other exchanges and contracts links between spot and futures markets are relatively weak and this may have allowed the long run relationship between spot and future prices to change after september 2004 together these results suggest that market fundamentals initiated a long term increase in oil prices that was exacerbated by speculators who recognized an increase in the probability that oil prices would rise over time

executive compensation and tournament theory empirical tests on danish data this article adds to the empirical literature on tournament theory as a theory of executive compensation i test several propositions of tournament models on a rich data set containing information about 2 600 executives in 210 danish firms during a 4 year period i ask are pay differentials between job levels consistent with relative compensation is pay dispersion between levels higher in noisy environments is the dispersion affected by the number of tournament participants is average pay lower in firms with more compressed pay structures does wider pay dispersion enhance firm performance most of the predictions gain support in the data

agglomeration effects on regional economic disparities a comparison between the uk and japan in this study the reason and cause of regional economic disparities in terms of per capita value added are investigated by comparing the uk and japanese regions special attention is paid to agglomeration effects on the differences of regional productivities the gini coefficients of per capita values added exhibit relatively higher levels for the uk regions than for japanese regions over the period 1995 2003 the cause of this difference is found to be in labour productivities rather than employment rates or labour per population furthermore a decomposition of labour productivity into main industries clarifies agglomeration effects on manufacturing and service related industry between both countries based on these findings the production functions are estimated by main industries and differences in agglomeration effects on industries between the two countries are examined taking a dynamic view of the changing disparities across regions an increase in regional disparities is associated with the cum

spillover effects in energy futures markets price discovery in crude oil and refined oil products has been extensively undertaken in organised futures markets for over a decade now there are two dominant such markets today the first one in the new york mercantile exchange and the second in london s international petroleum exchange with the demise of opec as the leading price setter for crude and products nymex light sweet crude and brent crude have usurped the role of benchmark grades for price setting to date considerable work has been done to scrutinise the degree to which these two markets price efficiently but little with regard to the way the two markets interact participants in these markets move with relative ease from one market to the other and usually take positions in both of them it is of interest therefore to investigate the information transmission mechanism by looking at spillover effects and perhaps identify which market is the true price leader this paper is a first attempt to look at such a problem in the energy market although similar studies have been done on stock market indices it is found that substantial spillover effects do exist when both markets are trading simultaneously although ipe morning prices seem to be considerably affected by the close of the previous day on nymex q 2001 elsevier science b v all rights reserved

assessing european stock markets co integration abstract this paper examines long run comovements in the uk french and german stock markets using cointegration techniques after fixing the power of the cointegration test no evidence is found of an increasing number of cointegrating vectors an alternative approach to measure increasing integration based on the speed of adjustment coefficients is proposed

performance responses to competition across skill levels in rank order tournaments field evidence and implications for tournament design tournaments are widely used in the economy to organize production and innovation we study individual data on 2775 contestants in 755 software algorithm development contests with random assignment the performance response to added contestants varies nonmonotonically across contestants of different abilities precisely conforming to theoretical predictions most participants respond negatively whereas the highest skilled contestants respond positively in counterfactual simulations we interpret a number of tournament design policies number of competitors prize allocation and structure number of divisions open entry and assess their effectiveness in shaping optimal tournament outcomes for a designer

sabotage in tournaments evidence from a laboratory experiment although relative performance schemes are pervasive in organizations reliable empirical data on induced sabotage behavior are almost nonexistent we study sabotage in repeated tournaments in a controlled laboratory experiment and observe that effort and sabotage are higher for higher wage spreads additionally we find that also in the presence of tournament incentives agents react reciprocally to higher wages by exerting higher effort destructive activities are reduced by explicitly calling them by their name sabotage communication among principal and agents can curb sabotage when they agree on flat prize structures and increased output if sabotage is not possible the principals choose tournament incentives more often this paper was accepted by peter wakker decision analysis

men women and competition an experimental test of behavior this study reports a series of experiments that examine outcomes when agents are able to choose between a payment scheme that rewards based on absolute performance i e piece rate and a scheme that rewards based on relative performance i e a tournament we test for the presence and persistence of gender differences in performance and the rate of entry into the tournament option and whether these differences are sensitive to the structure of the tournament rewards in the winner take all wta condition only the best performer in the tournament for each round received a payment 4 50 in the graduated tournament condition the same payment 4 50 was divided among the first second and third finishers in the tournament in the wta condition men showed significantly lower forecast errors than women in addition a clear sorting effect occurs in the wta condition in early rounds of the wta condition male entrants into the tournament show significantly lower forecast errors than female tournament entrants however the difference disappears over time after controlling for forecasting skill gender did not predict entry into the tournament for the wta condition however lower forecasting skill reduced the probability of entry in the graduated tournament the situation was reversed men entered the tournament at significantly higher rates even after controlling for skill forecasting skill had no impact on the decision to enter the tournament while the average male entrant to the tournament had lower forecast errors than the average female entrant the men entered at much higher rates as a consequence men were much more likely than women to enter the tournament too frequently

external recruitment and intrafirm mobility i introduction competition for promotion has a very strong effect on employees work incentive in the stereotypic internal labor market described in doeringer and piore 1985 there are only a limited number of ports of entry into a hierarchical firm or organization so that existing employees are insulated to a large extent from external competition in their climb up the corporate ladder however lazear 1992 and baker et al 1994a 1994b find extensive external recruitments at almost all grade levels in their studies of different u s corporations if the boundary between internal and external labor markets is not impervious then the choice between external recruitment and internal promotion in filling openings becomes an important personnel decision with interesting implications on incentives opening up the competition to external applicants discourages collusion among candidates as well as offers a quick channel for absorbing external talents however it also reduces the probability of promotion for existing workers and thus their incentive to exert with adverse effect on the firm s profit in chan 1996 i suggest that work incentive for the internal promotion candidates can be maintained if external competitors are handicapped in the contest such favoritism for existing employees implies that senior positions tend to be filled internally more often than not and that a worker is recruited from the outside only if he or she demonstrates a significant margin of superiority over the internal candidates this is consistent with the observations that external recruits account for only about 15 to 20 of all appointments to top management positions see denis and denis 1995 warner et al 1988 and that roughly the same percentage of chief executive officers ceos of large u s firms are outsiders see agrawal et al 2002 chan 1996 parrino 1997 the handicapping hypothesis of promotion suggests a dilemma in personnel decisions although handicapping external applicants provides incentive for existing employees it also increases the chance of inferior internal contestants being promoted to senior positions where sorting of workers by ability into different particularly senior positions is important efficiency within the organization is compromised this tension between sorting and maintaining work incentive is explored in tsoulouhas et al 2001 unfortunately the gain in realism with the incorporation of sorting is offset by ambiguity in most of the results the ability of the firm to precommit to future compensation the relative abilities of the internal and external contestants the cost of work effort and commonality within the firm and within the industry all have a role in determining the direction and magnitude of the handicap with different combinations of these factors resulting in very different outcomes whether one starts with the chan model or the tsoulouhas model empirical evidence is important to establish the significance of the competitive handicap against external candidates there has been no shortage of empirical investigations of the incentive effects of tournaments most follow one of two different analytic approaches one approach uses cross sectional or nonpanel data such as data on executive salary across firms gibbons and murphy 1990 leonard 1990 main et al 1993 or data from professional sports tournaments see for example ehrenberg 1990 few of these studies address the distinction between internal or external contestants agrawal et al 2002 is an exception it tests implications of the handicapping hypothesis derived in tsoulouhas et al 2001 by analyzing more than 1 000 ceo successions in large u s firms from 1974 to 1995 even though some of the results are also consistent with a traditional human capital interpretation and the key hypothesis can be derived from the tsoulouhas model only under certain conditions they offer some support for the existence and relevance of the competitive handicap against external contestants

human resource management policies and productivity new evidence from an econometric case study first we distinguish various approaches used by economists to assess the impact of human resource management practices on productivity and then we briefly review and illustrate studies that represent different approaches in the main part of the paper we illustrate the econometric case study method by using new data to analyse a case from retail trade and by emulating an approach used in an earlier study consistent with theory we find that when employees have opportunities to participate to receive appropriate information and pertinent rewards a one standard deviation increase of the first principal component score would increase productivity by 1 our findings imply that there are benefits to innovative work practices even in settings where employees do simple tasks and employees are relatively low skilled since our findings are similar to those contained in a previous study our results also indicate the value of replication studies

incentives versus sorting in tournaments evidence from a field experiment existing field evidence on rank order tournaments typically does not allow disentangling incentive and sorting effects we conduct a field experiment illustrating the confounding effect students in an introductory microeconomics course selected themselves into tournaments with low medium or high prizes for the best score at the final exam nonexperimental analysis of the results would suggest that higher rewards induce higher productivity but a comparison between treatment and control groups reveals that there is no such effect this stresses the importance of nonrandom sorting into tournaments

unemployment volatility and regional specialization in the european union ezcurra r unemployment volatility and regional specialization in the european union regional studies this paper examines the link between unemployment volatility and the sectoral composition of economic activity in the regions of the european union over the period 1980 2004 to that end different spatial econometric techniques are used that allow the investigation of the role played in this context by spatial effects and geographical spillovers the results show that unemployment volatility is positively related to regional specialization in the european union this finding does not depend on the use in the analysis of absolute or relative specialization measures ezcurra r l instabilite du chomage et la specialisaiton regionale dans l union europeenne regional studies cet article cherche a examiner le lien entre l instabilite du chomage et la structure sectorielle de l activite economique dans les regions de l union europeenne entre 1980 et 2004 dans ce but on emploie diverses techniques econome

the agent agents problem payment by relative output this paper begins an investigation into the incentive problems at a firm when the effort of the employer and the employees combines to determine final output the major conclusion is that optimal reward functions in this circumstance will in general value the performance of a worker relative to that of his peers the paper thus joins a growing literature associated with the work of lazear and rosen on rank order tournaments

measuring effort incentives in a tournament with many participants theory and application i introduction a tournament competition in which rewards are determined by the relative rank rather than the absolute performance typically arises when there is competition for limited spaces this kind of competition is ubiquitous there is competition for promotion to a limited space in any kind of hierarchical organization including firms grants or scholarships have a limited amount of funds to be distributed and universities have a limited number of enrollment slots and as such students have to compete to obtain a space it is of great interest how effort incentives change in response to a change in a tournament structure the designer of a tournament is free for one reason or another to choose the size of prizes or the proportion of winners for example given a total amount of prizes rewards may be concentrated at the top ranking or spread out down to middle rankings we can give the top prizes to a very limited portion of participants or spread throughout among a relatively larger portion these changes will generally affect the participants effort incentives and it would be useful to know the effects although theories can provide some evaluations the predictions are not generally definite incentive effects of a tournament have been quite widely studied green and stokey 1983 lazear and rosen 1981 o keefe viscusi and zeckhauser 1984 among others there also have been some theoretical endeavors to design the optimal contest structure to induce maximal possible efforts from the participants moldovanu and sela 2001 2006 however the evaluation quite often depends on parameter values which can vary in different environments and empirical judgment is still warranted this article is an attempt to empirically evaluate incentive effects of an arbitrary change in a tournament structure based on a theoretical modeling we model a tournament competition with many participants possibly with different abilities we obtain an empirically measurable term from participants optimization conditions of effort choices and show that effort incentives under various competition structures can be ranked by comparing the values of these measurable terms the term employed is related to the empirical densities of the performance distribution at cutoffs when an empirical performance distribution emerges we can find cutoff performances that are borderlines between adjacent prizes for a random participant a density is an ex ante probability that his or her performance will be at this borderline for a participant whose performance is near a cutoff a bit more effort will tip his or her performance into a higher prize area the effort incentive is dependent on these densities along with reward differences therefore the empirical performance distribution contains all the necessary information for the effort incentive as it emerges as a mixture of the ability distribution and the noise of performances we can compare effort incentives with any two arbitrary competition structures as long as they are competitions with many participants as the competition structure changes the performance distribution and the relevant cutoffs will change however they are still observable with information on rewards which can also be changed we can calculate and compare the terms we need the method of this article is different from that of the existing empirical literature in that the current article provides a measure of effort incentives directly from the theoretical model existing literature attempts to measure a change in effort incentives either by directly observing effort levels in an experimental setting or by comparing performances indirectly representing effort levels for example harbring and irlenbusch 2003 report directly observed efforts in different experimental settings to demonstrate the incentive effects of different tournament designs

the dynamics of crude oil price differentials abstract crude oil price differentials are modelled as a two regime threshold autoregressive tar process using the method proposed by caner and hansen caner m hansen b e threshold autoregression with a unit root econometrica 2001 69 1555 1596 while standard unit root tests suggest that the prices of crude oil of different varieties move closely together such that their price differential is stationary the tar results indicate strong evidence of threshold effects in the adjustment process to the long run equilibrium these findings suggest that crude oil prices are linked and thus at the very general level the oil market is one great pool adelman m a international oil agreements the energy journal 1984 5 1 9 however differences in the dynamics of adjustment suggest that within this one pool oil markets are not necessarily integrated in every time period and hence the dynamics of crude oil price differentials may not follow a stationary process at all times although the development of a liquid futures market around the crude oil benchmarks has helped make some distant markets more unified arbitrage is not costless or risk free and temporary breakdowns in the benchmarks can lead to decoupling of crude oil prices