on the value relevance of asymmetric financial reporting policies this paper considers an overlapping generations model where investors trade in a firm s stock investment risk is partly determined by the volatility of the stock price at which current investors can sell their shares to the next generation of investors it is shown that asymmetric reporting of good and bad news is value relevant as it affects the allocation of risk among future generations of shareholders

intertemporal cost allocation and managerial investment incentives a theory explaining the use of economic value added as a performance measure this paper provides a formal analysis of how managerial investment incentives are affected by alternative allocation rules when managerial compensation is based on accounting measures of income that include allocations for investment expenditures the main result is that there exists a unique allocation rule that always induces the manager to choose the efficient investment level the income measure created by this allocation rule is usually referred to as residual income or economic value added

contracting theory and accounting abstract this paper reviews agency theory and its application to accounting issues i discuss the formulation of models of incentive problems caused by moral hazard and adverse selection problems i review theoretical research on the role of performance measures in compensation contracts and i compare how information is aggregated for compensation purposes versus valuation purposes i also review the literature on communication including models where the revelation principle does not apply so that nontruthful reporting and earnings management can take place the paper also discusses capital allocation within firms including transfer pricing and cost allocation problems

market exit through divestment the effect of accounting bias on competition we analyze the effect of accounting bias on the competition and market structure of an industry in our model firms interim accounting reports on investment projects may contain bias introduced by the mandatory accounting system we find that this bias strictly decreases firms profits when investors do not have an abandonment option but different results emerge when we allow the investors to divest in the interim specifically a conservative accounting regime may increase the likelihood of projects being discontinued inducing some firms to exit from the product market and leaving rivals to capture their market share a conservative regime can thus soften market competition and result in ex ante higher investment payoff higher consumer surplus and higher total social welfare since industries often have common reporting standards we also identify the degrees of industry wide accounting bias that maximize the expected investor payoffs finally we allow for investors to coordinate their divestment

accounting conservatism and managerial incentives there are two sources of agency costs under moral hazard 1 distortions in incentive contracts and 2 implementation of suboptimal decisions in the accounting literature the relation between conservative accounting and agency costs of type 1 has received considerable attention cf watts 2002 however little appears to be known about the effects of accounting conservatism on agency costs of type 2 or trade offs between agency costs of types 1 and 2 the purpose of this study is to examine this void in a principal agent setting in which the principal motivates the agent to expend effort using accounting earnings this study shows that accounting earnings become more useful for reducing agency costs of type 2 when measured conservatively than when measured aggressively combined with the result in kwon et al 2001 that agency costs of type 1 decrease with accounting conservatism this analysis suggests that conservative accounting enhances the incentive value of accounting signals with

feed in or certificates competition or complementarity combining a static efficiency and a dynamic innovation perspective on the greening of the energy industry abstract european policy on the greening of the energy industry has been characterised by a debate between proponents of two apparent polar opposites feed in tariffs and certificate markets different european countries have chosen both mechanisms and as a consequence the european union has maintained a fairly pluralist position abstaining from stricter harmonisation taking a dynamic innovation perspective on european energy industry we argue that feed in tariffs and certificate markets should not be seen as competing alternatives but rather as complementary regulatory instruments targeting subsequent steps in the product cycle on the way from early technology conceptualisation and development towards competitive positioning in mature energy markets we see both policy instruments as necessary to achieve the extensive transformation towards sustainable development that is judged as important tools in the context of the global climate challenge

spatial variations in the unemployment rate a case study of north west england taylor j and bradley s 1983 spatial variations in the unemployment rate a case study of north west england reg studies 17 113 124 this paper extends earlier work on the categorization of unemployment by exploring the reasons for spatial variations in cyclical unemployment and non cyclical unemployment regression analysis is used to divide total unemployment into a cyclical category and a non cyclical category in twenty eight travel to work areas in north west england during 1969 80 the spatial patterns of these two categories of unemployment are examined and an attemptis made to explain them the main conclusions are that spatial variations in the unemployment rate have been severely exacerbated by national recessions that the spatial patterns of cyclical unemployment and non cyclical unemployment are not random and that there is considerable scope for public policy in rectifying the persistent structural weaknesses in certain groups of travel to work areas in the nw region

financing and investment efficiency information quality and accounting biases in this paper we investigate the effect of accounting biases on firms financing decisions and the role of accounting biases in endogenous information quality we show that in industries with generally low profit prospects a downward biased accounting system performs better than a neutral accounting system and a more downward bias helps mitigate both investment and financing inefficiency whereas for industries with generally high profit prospects an upward biased accounting system is better than a neutral accounting system and a more upward bias helps improve financing efficiency in addition we find that a more downward biased accounting system motivates good firms to exert more effort to improve the information quality which improves overall efficiency this paper was accepted by mary barth accounting

keynes lucas and scientific progress in one of those marvelous coincidences of intellectual history robert lucas was born the year after the publication of keynes general theory for the first thirty five years of their mutual lives the two apparently coexisted in harmony but their relationship has been tumultuous ever since lucas has frequently criticized keynesian economics as poor science and it is precisely in that spirit that i want to address the debate today we all know the old joke about the professor who uses the same exam questions year after year but changes the answers that joke encapsulates all too well what has happened to macroeconomics these last fifteen years and seems to reflect poorly on economics as a science or does it on second thought the best answers to scientific questions do change as new observations are made as new experiments are run and as better theories are developed the issue is whether the answers to important questions in macroeconomics have changed for good scientific reasons or for other reasons the joke provides the framework for my talk i will pose eight exam questions and for each one i will summarize the answers given by keynes by lucas and his followers and by modern keynesians i pick only questions that are answered differently by keynesians and lucasians and that are central to contemporary macroeconomic debates the focus is on whether the keynesian or new classical answers have greater claim to being scientific each student must answer every question i are expectations rational

basic concepts for designing renewable electricity support aiming at a full scale transition by 2050 abstract renewable electricity supply is a crucial factor in the realization of a low carbon energy economy the understanding is growing that a full turn over of the electricity sectors by 2050 is an elementary condition for avoiding global average temperature increase beyond 2 c this article adopts such full transition as europe s target when designing renewable energy policy an immediate corollary is that phasing in unprecedented energy efficiency and renewable generation must be paralleled by phasing out non sustainable fossil fuel and nuclear power technologies the double phasing programme assigns novel meaning to nearby target settings for renewable power as share of total power consumption it requires organizing in the medium term eu wide markets for green power a highly demanding task in the present context of poorly functional markets in brown power the eu commission s 2007 2008 proposals of expanding tradable certificates markets were not based on solid analysis of past experiences and future necessities the keystone of sound policies on renewable electricity development is a detailed scientific differentiation and qualification of renewable electricity sources and technologies for measuring the huge diversity in the field we provide but structuring concepts about such qualification because implementation requires extensive research resources support for renewable electricity development is organized via feed in prices or premiums and via quota obligations connected to tradable green certificates green certificates are dependent on physical generated renewable power but separable and no joint products contrary to conventional wisdom we argue their separation in cost analysis but firm linking during trade a few graphs illustrate the importance of assigning qualities to different renewable power sources technologies feed in systems based on an acceptable qualification perform generally better than certificate markets imposing uniform approaches on a very diverse reality for a similar reason uniform and undifferentiated taxation of non sustainable energy sources cannot replace renewable energy support schemes capable of differentiation

a measurement approach to conservatism and earnings management this paper formalizes a two step representation of accounting measurement and uses it to formalize a general rationale for conservatism as a measurement principle a transaction s economic substance manifests itself in characteristics of the transaction and an accounting rule is a mapping from transaction characteristics to an accounting report managers who have stakes in the accounting report are able to influence transaction characteristics such earnings management is ex post rational for managers but ex ante inefficient to safeguard against such ex post opportunism the optimal ex ante accounting rule is conservative in the sense that it requires more verification of the transaction characteristics favorable to managers thus this rationale for conservatism is as general as the managers ability and incentive to inflate transaction characteristics by opening the black box of accounting measurement the two step representation also formalizes some classic accounting concepts such as relevance reliability verifiability verification and accounting motivated transactions

can premium tariffs for micro generation and small scale renewable heat help the fuel poor and if so how case studies of innovative finance for community energy schemes in the uk abstract in the uk the introduction of micro generation feed in tariffs fits and a proposed renewable heat incentive rhi for domestic and small scale schemes have re energised the market for investment in domestic scale renewable energy these incentives may provide financial opportunities for those with capital to spend but for the record numbers with low incomes in fuel poverty these benefits may seem out of reach this paper shows that with appropriate financial intermediaries it is possible for renewable energy incentives to be used to alleviate fuel poverty simple financial analysis demonstrates the theoretical potential of fits to help those in fuel poverty two case studies of renewable energy projects in low income areas investigate how the incentives may be used in practice what barriers exist and what success factors are evident the analysis shows that local energy organisations leos are key if the poor are to access benefits from premium tariff schemes low interest finance mechanisms good information sharing and community involvement are found as key success factors

determinants of geographic unemployment rates a selectively pooled simultaneous model using a procedure that allows selective pooling of certain subsamples of the data this study examines the determinants of state unemployment rates in the united states by selectively pooling the data more reliable parameter estimates result than could otherwise be obtained were the data disaggregated to the state level and the specification error inherent in a complete pooling of the data is avoided the models are estimated using two stage least squares and the empirical results indicate considerable heterogeneity across areas in the ways in which unemployment rates are determined

the causes of unemployment in finland 1970 82 some empirical evidence in most western countries the rate of unemployment has shown a rising trend over the last decades one of the standard explanations for this is that the natural rate of unemployment has risen in order to investigate this hypothesis a simple demand supply model of the finnish labour market was constructed and estimated it is proposed that if the development of the unemployment rates can be explained is such a traditional model framework this would suggest that changes in the natural rate are not after all the crucial reason for the increasing unemployment rates according to the results the simple model was able to account for the changes in the unemployment rate very well furthermore they seem to support a traditional keynesian view of the problem emphasizing output level and labour productivity as the main explanatory variables indirectly it can be concluded that there seem to be no clear signs of a rising natural rate of unemployment

nonconventional renewable energy governance in brazil lessons to learn from the german experience abstract this paper presents a comparative analysis of energy governance regarding nonconventional renewable energy sources ncres in brazil and germany brazil is a world leader in the use of conventional renewable energy sources such as hydro power while germany has been achieving outstanding results in fostering ncres the focus is on two critical issues the legal and regulatory framework and the institutions created to support the ncres market development the comparison shows that despite the very different energy situations and policy drivers valuables lessons can be extracted from the german experience the main lesson for brazil is to think ncres as a strategic opportunity to rely less on fossil fuel and large hydroelectric power plants to decentralize the electric power sector to use the huge solar biomass and wind power potential available in the country and to create a environment friendly ncres industry to this end three critical points were identified 1 the legal and regulatory framework should be improved 2 long term energy planning taking into account social economic and climate issues and 3 the current institutions supporting ncres in brazil should be upgraded and or new ones such as more specific energy agencies should be created

sectoral shifts and cyclical unemployment a substantial fraction of cyclical unemployment is better characterized as fluctuations of the frictional or natural rate than as deviations from some relatively stable natural rate shifts of employment demand between sectors of the economy necessitate continuous labor reallocation since it takes time for workers to find new jobs some unemployment is unavoidable this paper presents evidence that most of the unemployment fluctuations of the seventies unlike those in the sixties were induced by unusual structural shifts within the u s economy simple time series models of layoffs and unemployment are constructed that include a measure of structural shifts within the labor market these models are estimated and a derived natural rate series is constructed

two views of the geographic distribution of unemployment this paper investigates the extent to which equilibrium and disequilibrium explanations can account for unemployment rate differentials between cities it shows that shocks that disturb the steady state relationship among the unemployment rates of metropolitan areas tend to be eliminated by mobility within a single year it also shows that high unemployment areas tend to be those with attractive climates and amenities high wages and high unemployment insurance it argues that the main effect of government programs that create jobs in high unemployment areas will be to lure additional job seekers to those areas

review of barriers to the dissemination of decentralized renewable energy systems abstract this paper reviews the available literature dealing with the barriers to the dissemination of decentralized renewable energy systems decentralized renewable energy systems may face a range of technical economic institutional socio cultural and environmental barrier to their dissemination in the paper barriers impeding the dissemination of decentralized renewable energy systems have been identified and assessed in addition appropriate remedial measures and corresponding responsibility centers as reported in the literature have also been discussed inappropriateness of technology unavailability of skilled manpower for maintenance unavailability of spare parts high cost lack of access to credit poor purchasing power and other spending priorities unfair energy pricing lack of information or awareness and lack of adequate training on operation and maintenance of decentralized renewable energy systems are found to be the most critical barriers long term conducive policies appropriate regulatory framework financial incentives capital subsidies and soft loans to users technology and skill development internalization of externalities in the cost of energy withdrawal of subsidies presently being given to fossil fuels development of specialized institutions cooperation with international agencies participation of local community and awareness generation have been recommended for increased dissemination of decentralized renewable energy systems

conservative accounting and equity valuation abstract this paper examines how conservative accounting affects the relation between accounting data and firm value the analysis shows that conservative accounting can be characterized equivalently in terms of book value earnings or book rate of return furthermore capitalized earnings generally provide a less biased estimate of equity value than book value does in addition firm growth affects the way earnings and book value are combined in valuation a weighted average of book value and capitalized earnings with the weight on earnings being an increasing and convex function of growth yields an asymptotically unbiased estimate of equity value when growth is positive the weight on book value is negative

wage inflation expectations and indexation abstract the study uses a direct measure of inflation expectations in testing the expectations augmented phillips curve with finnish data the impact of actual changes in prices is also analyzed in particular before and after the abolishment of idexation of wages in 1968 the results suggest that actual price changes dominated the wage formation prior to 1968 whereas after the abolishment of indexation the rate of unemployment and inflation expectations determined changes in money wages it seems that the expectations augmented phillips curve with unit coefficient for inflation expectations may be a good description of wage formation for the period after 1968

some problems in estimating the natural rate of unemployment from the expectations augmented phillips curve now nearly twenty years after its introduction in friedman 1968 the concept of the natural rate of unemployment is standard in macroeconomics theoretically it is fairly easy to grasp the natural rate of unemployment prevails when there is equilibrium on the labor market in the sense that price expectations are fulfilled in the same way as demand and supply the level of employment is determined by real variables only provided that price developments are fully anticipated in a competitive labor market this implies that demand equals supply consequently the only reason for unemployment in a situation with no excess supply of labor will be structural misfits on the market however an equilibrium rate of unemployment may also be the product of a nonclearing market where wages are determined by e g trade unions see greenhalgh layard oswald 1983 p ii alternatively the concept of nairu non accelerating inflation rate of unemployment is often cited this term seems to be somewhat broader than the natural rate implying a rate of unemployment compatible with a stable rate of inflation according to thirlwall 1983 there is no empirical difference between the concepts since both are estimated in the same way regardless of which term is used the equilibrium natural rate of unemployment is difficult to identify empirically nevertheless the need for such estimates is obvious most market economies have exhi

domestic micro generation economic regulatory and policy issues for the uk abstract micro generation in individual homes has been the subject of increasing policy and industry attention in recent years whilst it has been estimated that micro generation could meet 30 40 of uk electricity demand by 2050 deployment to date has been slow in its micro generation strategy the uk government has started to outline how deployment could be increased various technical economic behavioural and institutional changes are needed to establish a uk market for micro generation this article discusses how different deployment models for domestic micro generation might attract investments in these technologies it considers not only investments by individual households but also by energy companies starting from an economic analysis of payback times for three different technologies micro chp micro wind and solar pv it identifies policy and regulatory recommendations it argues for technology specific support policies in the short term it also suggests that a level playing field for micro generation technologies as a result of fiscal and market reforms could considerably increase the attractiveness of micro generation technologies

the economics of distributed energy generation a literature review the uk electricity system is likely to face dramatic technical and institutional changes in the near future current uk energy policy focuses on the need for a clean affordable and secure energy supply decentralisation of the electricity system is recognised as one means of achieving efficient and renewable energy provision as well as addressing concerns over ageing electricity infrastructure and capacity constraints in this paper we provide a critical literature review of the economics of increased penetration of distributed energy generation we find that there exists a large volume of research considering the financial viability of individual distributed generation technologies and we are necessarily selective in our review of these studies given the wide variety of technologies that the definition of distributed generation encompasses however there are few studies that focus on the pure economics of individual or groups of distributed energy generators and even fewer still based on the economy wide aspects of distributed generation in view of this gap in the literature we provide suggestions for future research which are likely to be necessary in order adequately to inform public policy on distributed generation and its role in the future of uk energy supply

hysteresis and instability in the natural rate of unemployment in this paper it is pointed out that the long run phillips curve genus contains upward and downward sloping species as well as the vertical species two models are used in one the rate of inflation helps determine the natural rate of unemployment as proposed by friedman in the other the process of moving from one inflation rate to another helps shape the natural rate according to the hysteresis effect proposed by phelps in both cases the resulting models are unstable implying that a vertical long run phillips curve will not be regained if disturbed

conservative accounting choices managers have sufficient discretion under generally accepted accounting principles gaap to adopt more or less conservative financial reporting policies in this paper we develop a signaling model to provide insight into managers decisions to be conservative in their accounting we provide conditions under which the market can use the manager s exercise of discretion to infer her private information about the future prospects of the firm and thus firm value under these conditions we also show that there are meaningful differences between earnings response coefficients for firms whose managers choose a conservative reporting policy and those whose managers do not finally we use our theoretical model to provide intuition for some established empirical results on earnings response coefficients

structural dynamics of innovation networks funded by the european union in the context of systemic innovation of the renewable energy sector innovation in the renewable energy re sector relies on the concept of systemic innovation which requires interaction between two innovation aspects technology exploration and market exploitation the european union eu has introduced political instruments for systemic re innovation by integrating resources from different thematic and geographic areas however using these instruments to establish an ecosystem for systemic innovation remains unexplored this study develops a framework for evaluating the systemic innovation performance of networks through a time series analysis of network structural properties overall eu funded innovation networks have not evolved in a systemic direction first the network exhibits densely connected local clusters for technology exploration and market exploitation of re innovation which are disconnected from each other over time the gap between the two phases has weakened with increasing connectivity but the local clusters supporting either explorative or exploitative activities have diminished the existing networking linkages among organizations are considered ineffective because their positions in the network tend to display a mismatch with their innovation patterns this research presents policy suggestions for optimizing the exploration and exploitation activities in the eu s funding program and their complementarities to establish a systemic innovation environment in the re sector

the causes of unemployment in finland 1970 82 some further empirical evidence this study presents an aggregate labour market model of the finnish economy the model is consistent with the finnish institutional features wage determination by collective negotiations and the division of the economy into a supply oriented open sector and a demand oriented closed sector estimated labour market model suggests that the rise in the steady state unemployment rate can be accounted for by the following factors the rise in employer s tax rate the rise in the availability of benefits while out of work increased union strength increased labour force participation and import price shocks

managerial optimism and earnings smoothing abstract this paper empirically examines how ceo optimism affects earnings smoothing and earnings surprises the main finding is that optimistic managers smooth earnings more than rational managers and are associated with smaller in absolute value earnings surprises a possible theoretical explanation is offered for these results based on a combination of the torpedo effect the innate behavior of optimists and the risk of litigation prosecution for over reporting earnings

a temporal analysis of earnings surprises profits versus losses i show that median earnings surprise has shifted rightward from small negative miss analyst estimates by a small amount to zero meet analyst estimates exactly to small positive beat analyst estimates by a small amount during the 16 years 1984 to 1999 i show that a rightward temporal shift in median surprise from negative to positive describes earnings but neither profits nor losses median profit surprise shifts within the positive quadrant from zero to one cent per share median loss surprise shifts within the negative quadrant from extreme negative about 33 cents per share to zero i show that the median surprise for profits exceeds that for losses in every year i document significant positive temporal trends in both meet and beat analyst estimates for both profits and losses but i find a greater frequency of profits that either meet or beat analyst estimates in every year i find a significant positive temporal trend in positive profits that are a little bit of good news and a significant negative temporal trend in managers who report losses that are an extreme amount of bad news my results are robust to the four internal validity threats i consider namely temporal changes in 1 analyst forecast accuracy 2 the mix of earnings of one sign preceded by earnings of another sign four quarters ago 3 the timeliness of the most recent analyst forecast and 4 the i b e s definition of actual earnings i find that managers of growth firms are relatively more likely than managers of value firms to report good news profits i show that when they do report positive profit surprises managers of growth firms are more likely to report a little bit of good news in every year

the deployment of decentralised energy systems as part of the housing growth programme in the uk abstract the housing growth programme could offer an opportunity for accelerating the deployment of decentralised renewable energy systems dres in the uk the government hopes to leverage private sector investment into dres as part of new housing projects the aim of this paper is to assess whether current regulatory and funding frameworks are sufficient to achieve this the question is explored by drawing on the experience of developers local authorities energy utilities and service companies operating in the largest housing growth region in the uk thames gateway their experience suggests that the current low intervention approach will be insufficient to generate the shift required in both industries in order to be more successful economic and regulatory instruments should focus on producers house builders and energy providers rather than consumers households tighter regulation is needed to ensure that producers have a responsibility to install dres as part of new developments to enable connection to the grid to ensure a sustained financial return from investment and revenue is spent on the expansion of new renewable energy infrastructure this regulatory framework must be under pinned by substantial funds focused on producers greater intervention is needed if dres is to be included in new housing development

unemployment labor relations and unit labor costs in his seminal 1943 paper on the political business cycle michal kalecki 1971 argued that industrial leaders feared full employment because the economic insecurity created by unemployment was necessary to keep wages low and maintain work intensity and discipline on the shop floor on the basis of this reasoning kalecki concluded that governments would not use demand management policies to achieve permanent full employment in terms of current macroeconomic debates kalecki had sketched the outlines of a theory of the neutral or natural rate of unemployment based on the importance of disciplinary unemployment as a regulator of unit labor costs kalecki s pessimism about the prospects for full employment was premised in part on a view of firms in which the threat of dismissal was the central motivational device used by employers and employees had only a tenuous connection to employers this assumption may have been appropriate when analyzing labor markets in the united states during the 1930 s since that time however the spread of unions implicit employment contracts and large bureaucratically organized enterprises has resulted in a modern u s labor market in which many workers enjoy long job tenure and in which many firms do not appear to rely on dismissal threats as their primary motivational strategy see david gordon richard edwards and michael reich 1982 sanford jacoby 1983 and my forthcoming paper from this perspective it is reasonable to ask whether the presence of long term employment relations alters the regulatory role played by unemployment this paper examines the effect that unemployment and long term employment relations exert on the determination of unit labor costs the central empirical findings can be briefly summarized first as suggested by kalecki movements towards full employment increase the rate of growth of wages and reduce the rate of growth of labor productivity second where long term employment relations are prevalent the effect of unemployment on both wage and labor productivity growth is diminished

why women work closer to home this paper analyzes the extent to which differences in labor force status in household composition and in household roles account for sex differences in workplace residence separation modelling work trip length as the outcome of the choice of household residential and individual job locations equilibrium work trip length is estimated empirically as a function of labor market housing and household characteristics for male and female employees in seven different household categories data from the 1976 panel survey of income dynamics are used the study concludes that while sex differences in job tenure work hours and wages are in themselves sufficient to fully account for observed sex differences in workplace residence separation sex differences in household roles i e responses to spouses characteristics are of even greater importance in influencing women to work closer to home

the negative impacts of the global economic downturn on funding decentralised energy in the uk abstract over the years a number of governmental policies have been developed in the uk that offer grants for the installation of distributed energy technologies or financial rewards per unit of electricity heat generated from renewable and sustainable sources the current economic climate however has meant that budget cuts have affected almost all government departments consequently such policies have been adversely impacted the alterations modifications to many schemes have resulted in either a reduction in the funding available through these changes to the eligibility of certain technologies or scales of generation or policy cancellations the programmes affected include the feed in tariff scheme renewable heat incentive and low carbon buildings programme among others the adjustments for these are detailed herein followed by the impacts these have had on the deployment rates of decentralised energy especially microgeneration since costs are often one of the most significant factors constraining deployment of these technologies reductions in funding opportunities have made these less financially viable whilst there are still applications for funding under the available schemes there has been considerably reduced levels of requests for financial support thus future deployment rates will most likely be negatively affected the prospects of these technologies in this context are then considered