optimal long term contracting with learning we introduce uncertainty into holmstrom and milgrom 1987 to study optimal long term contracting with learning in a dynamic relationship the agent s shirking not only reduces current performance but also increases the agent s information rent due to the persistent belief manipulation effect we characterize the optimal contract using the dynamic programming technique in which information rent is the unique state variable in the optimal contract the optimal effort is front loaded and stochastically decreases over time furthermore the optimal contract exhibits an option like feature in that incentives increase after good performance implications about managerial incentives and asset management compensations are discussed

dynamic contracting under imperfect public information and asymmetric beliefs abstract we develop a dynamic principal agent model to show how imperfect public information and asymmetric beliefs about payoff relevant parameters agency conflicts and the agent s implicit incentives to influence the principal s posterior beliefs through his unobservable actions interact to affect optimal dynamic contracts we make a methodological contribution to the literature by solving the continuous time contracting problem using a discrete time approximation approach we obtain a simple characterization of optimal renegotiation proof contracts in terms of the solution to a nonlinear ordinary differential equation ode we then exploit the properties of the ode to derive a number of novel implications for the dynamics of long term contracts that alter the intuition gleaned from the previous literature optimism has a first order impact on incentives investment and output that could reconcile the private equity puzzle consistent with empirical evidence the interaction between asymmetric beliefs risk sharing and adverse selection costs could cause the time paths of the agent s incentive intensities to be increasing or decreasing our results also suggest that the incorporation of imperfect public information and asymmetric beliefs could potentially reconcile empirical evidence of an ambiguous relation between risk and incentives and a non monotonic relation between firm value and incentives permanent and transitory components of risk have differing effects on incentives which suggest that empirical investigations of the link between risk and incentives should appropriately account for different components of risk

reputation and impermanent types i consider a version of the chain store game where the incumbent firm s type evolves according to a markov process with two states a tough type who always fights entry and a weak type who prefers to accommodate there exists a minimal level of persistence necessary for the incumbent to be able to sustain any reputation for being tough above that level as the number of markets t increases in equilibrium play alternates between intervals of entry by competitors and intervals of deterrence when t is infinite then regardless of the discount factor there exists a sequential equilibrium in which the incumbent s payoff is bounded below her stackelberg payoff both results are in contrast to the outcome when the incumbent s type is fixed one interpretation is that reputation is not permanent but must be renewed occasionally

the impact of agricultural research in africa aggregate and case study evidence abstract this paper presents case study results and aggregate data to evaluate the impact of research in african agriculture of 32 case studies all but eight report annual returns over 20 and many are far higher with most gains arising in the late 1980s and 1990s spurred by policy reforms and changing incentives these innovations have led to sustained growth in aggregate cereal crop yields since 1985 africa s belated green revolution is based on new varieties often with early maturation for drought escape complemented by new management techniques typically labor intensive efforts to conserve soil moisture and build soil fertility

sustaining growth in agriculture a quantitative review of agricultural research investments abstract growth in agriculture depends on many things but one of the most important is investment in agricultural research decision making in the agricultural research policy area can only be aided by access to better information this article overviews a recent endeavor to move policy dialogue beyond merely qualitative impressions towards a process that is underpinned with new and cogent data the data used have been assembled at isnar in a manner designed to make comparisons both over time and between countries more valid than has been the case in the past the comparisons thus possible reveal considerable diversity both between countries and between broad regional aggregations also illuminated here are issues related to the commodity orientation capital and labor intensity and size and scope of particular national programs

african economic development in a comparative perspective conventional explanations of poor african economic performance generally fail to pay adequate attention to causal mechanisms of growth decline and stagnation many african countries experienced investment booms after independence but in contrast to east asian newly industrialising economies these were not sustained owing to failure to establish a virtuous growth circle involving complementary increases in savings and exports structural adjustment programmes dismantled stat mediated mechanisms of accumulation without putting viable alternatives in place and failed to tackle the structural constraints which impede productivity growth in agriculture a new policy approach drawing on the experience of both post colonial and adjustment periods is necessary copyright 2001 by oxford university press

large firms and within firm occupational reallocation abstract this paper considers the equilibrium interaction between within firm and across firm reallocation in the presence of labor market frictions while a sizable literature has investigated frictional labor markets it has ignored within firm mobility nonetheless every year a sizable fraction of workers switch occupations without changing firms employees in large firms can sample from a larger selection and across firm mobility is replaced by within firm mobility bringing together within and across firm reallocation along with labor market frictions naturally accounts for the observed differences in worker flows and wages across firms of different sizes

private information and intertemporal job assignments this paper studies the assignment of people to projects over time in a model with private information the combination of risk neutrality with incomplete contracts that restrict the ability of an agent to report on interim states is a force for long term assignments more generally however rotating agents can be valuable because it conceals information from agents which mitigates incentive constraints with complete contracts that communicate interim states rotation allows for even more concealment possibilities and better targeted incentives furthermore it allows for the reporting of interim shocks at no cost to the principal properties of the production technology are also shown to matter substitutability of intertemporal effort is a force for long term assignments while coordination with nash equilibrium strategies is a force for job rotation copyright 2006 wiley blackwell

default settlement and signalling lending resumption in a reputational model of sovereign debt this paper develops a simple model of sovereign debt in which defaulting nations are excluded from capital markets and regain access by making partial repayments this implication of the model is consistent with the historical evidence that defaulting countries return to international loan markets soon after a settlement but after varying periods of exclusion copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

task specific human capital since gary becker s 1964 seminal work the theoretical and empirical literature on human capital has focused almost exclusively on general purpose and firm specific human capital in this paper we discuss the implications of a third type of human capital which we call task specific and which we believe is potentially as commonplace and as important as the two classic types by task specific human capital we mean that some of the human capital an individual acquires on the job is specific to the tasks being performed as opposed to being specific to the firm in other words task specific human capital is the simple but plausible idea that much of the human capital accumulated on the job is due to task specific learning by doing the idea of task specific human capital is closely related to occupationand industryspecific human capital in each case human capital is specific to the nature of the work not specific to the firm hence when capital is accumulated multiple firms value the capital so most or even all of the value of the capital will be reflected in the worker s wage the main difference between the idea of task specific human capital and occupationand industryspecific human capital is in how the idea is applied we argue that task specific human capital has much wider applicability than suggested so far by the occupationand industry specific human capital literatures the specific issues we address are cohort effects job design and promotions another argument in the literature closely related to ours is the classic argument of adam smith 1776 in the wealth of nations concerning returns to specialization smith s argument was that due to learning by doing at the level of the task productivity can be enhanced by having each job entail fewer tasks we believe that smith was correct in focusing on learningby doing at the level of the task as an important idea for thinking about organizations the goal of our paper is to describe some of the other implications of this idea for the design and operation of organizations

carving up the commons emergence of a new international regime for germplasm development and transfer no nation has ever fabricated or maintained a prosperous food system based on genetic resources of purely indigenous origin remarkably many countries now seem ready and almost eager to try such an approach we identify four separate components of an emerging regime that are interacting in ways that should worry everyone concerned with the development and transfer of plant genetic materials into the south new provisions on intellectual property increased concentration of new enabling technologies into a few large multinational companies heightened anxieties over transgenic crops and new problems arising from international agreements we argue that the solutions now being discussed in global forums are either infeasible incomplete or are likely to have seriously negative effects we call instead for creative new thinking on building human capacity in developing countries on the legal status of plant genetic resources and on publicprivate partnerships especially those in service of the poor 2002 published by elsevier science ltd

multitask agency problems focus and task clustering abstract this short paper discusses recent insights of multitask agency theory it considers in turn the issues of effort substitution conflicts between tasks and implicit incentives and mission it concludes by addressing the problem of optimal task clustering

the dynamics of learning with team production implications for task assignment we analyze optimal task assignment when a firm needs to learn the abilities of employees when projects require collaboration between juniors and seniors and only team outputs are observable having juniors divide their time between two projects junior sharing is less informative about their abilities but more informative about their senior teammates abilities than having juniors devote all their time to a single project no sharing in an overlapping generations model we show that no sharing is more less attractive than junior sharing if the prior uncertainty about abilities is small large relative to exogenous shocks to team production

an economic approach to influence activities in organizations members of organizations spend considerable time effort and ingenuity attempting to influence decision makers such influence activities may bring benefits to the organization but they also involve real costs this essay offers an economic rationale for such influence activity as representing rational self interested behavior in the presence of informational asymmetries and an analysis of how the design of the organization s structure and policies should respond to the incentives for attempting influence it is posited that information valuable for the organization s decision making is directly available only to members of the organization who have some personal stake in the decisions these individuals may then have an incentive to try to manipulate the information they develop and provide in order to influence the resulting decisions to their benefits this can be costly both in degrading the quality of decision making and in diverting the attention and effort of the organization s members from more productive activities the organization has three different methods it can employ to discourage excessive influence activities and to encourage more directly productive uses of time and effort it can limit access to decision makers and participation in decision making it can alter its decision making criteria to favor those performing well in productive activities and it can provide direct financial incentives to encourage the desired allocation of effort it is shown that an efficiently designed organization will use such financial incentives only as a last resort instead it will always first alter its decision participation policies and decisionmaking criteria

on the incentive effects of job rotation abstract a new employee may work hard to build his reputation this effect is greatest when he starts the longer he is employed at his job the more the firm will already have learned about his ability the incentives for an employee to influence the firm s perceptions of his ability decrease over time if rotating the employee to a different job leads to new uncertainty about his ability this generates a fresh impulse for effort however job rotation also reduces the employee s time horizon thus reducing future rents from reputation this trade off leads to a unique optimum we derive a simple rule of thumb for an optimal rotation time our main results still hold for cases of complete but imperfect information transmission the incentive effects of job rotation also prevail in a setting in which skills are job specific we study several extensions rotations across multiple employees absence of commitment to a rotation time different bargaining positions discounting over time and learning by doing effects

selected policy issues in international agricultural research on striving for international public goods in an era of donor fatigue abstract international agricultural research is a small but critically important part of the global research system its importance derives from the extent of international spillovers the efficiencies of working across national boundaries for many research products and the productivity boosting collegiality and cost reducing benefits thereof of sharing information and materials while fostering the advance of agricultural science generally financial difficulties pervade the international as well as national elements of the global system so it is an appropriate time to examine some of the threats to effective functioning of an international system that is needed for its key contributions to productivity growth suggestions are made for boosting efficiency of the international agricultural research centers and strengthening their support of national research efforts in the developing world

ex ante versus ex post optimal promotion rules the case of internal promotion i introduction the literature on promotion practices within the firm identifies two distinct roles for a firm s promotion policies promotions serve both as a way for the firm to efficiently assign workers to tasks and as a way for the firm to reward prior performance 1 in this article i explore the time inconsistency problem that arises as a result of the dual nature of the promotion decision in particular i show that the common practice of favoring internal candidates for promotion can be understood as a response by firms to the problem of time inconsistency 2 consider a firm in which promotions serve as a reward for prior expenditures of effort and or prior investments in human capital the optimal promotion policy for this firm depends on the time frame from which we view the problem the ex ante optimal promotion rule is the optimal rule when the problem is viewed from a date prior to young workers deciding to work at this firm this rule takes into account both the assignment aspects of the promotion decision and that promotions serve as a reward for prior performance there is a second relevant rule however because at the date of the promotion decision the effects of promotion serving as a reward for prior performance are in the past for example in a world where the possibility of future promotion serves to increase the effort levels of young workers by the time of the promotion decision those effort choices have already been made hence the ex post optimal rule only takes into account the assignment aspects of the promotion decision the time inconsistency problem that arises is now clear total profits are maximized when the firm follows the ex ante optimal promotion rule but in the absence of commitment this is not how the firm behaves at the time of the promotion decision the firm has an incentive to ignore the effects of promotion serving as a reward for prior performance and instead follow the ex post optimal rule in other words the profits of the firm are decreased because at the time of the promotion decision the firm maximizes current profits and the anticipation of this behavior by workers has deleterious effects on behavior in prior periods in this article i explore a specific example of this time inconsistency problem consider a firm s decision concerning whether to fill a managerial position by promotion from within or by hiring an outsider i show that when confronted with this decision the firm faces the exact situation described that is the ex post optimal rule shows no preference for promotion from within over hiring from the outside whereas the ex ante optimal rule exhibits a preference for promoting from within the logic here is that the possibility of receiving the higher managerial wage in the future reduces the wage required to attract young workers into the firm but only the ex ante optimal rule takes this into account the result is that in the absence of commitment the firm hires from the outside too often the conclusion is that the establishment of an internal labor market in which the firm favors promotion from within can be understood as a way that the firm avoids this time inconsistency problem this result extends a finding in malcomson 1984 that article also shows that an internal labor market in which hiring from the outside is restricted can arise in a world where promotion serves as a reward for prior performance in that work however there is no time inconsistency problem the reason is that malcomson assumes workers are homogeneous and thus at the time of the promotion decision it is weakly optimal for the firm to have all promotions be from within in contrast i assume that workers are heterogeneous and find that if the firm maximizes ex post profits it lowers total profits the result is an internal labor market that not only limits hiring from the outside but also constrains the firm to behave in a manner different from that which maximizes profits at the time the promotion decision is made

the economics of career concerns part i comparing information structures many incentives in organizations arise not through explicit formal incentive contracts but rather implicitly through career concerns this paper models career concerns through agents trying to manipulate the market assessment of their future productivity the information flow from current actions to market assessment is therefore crucial in determining the nature of these incentives improved information may either increase or reduce incentives the impact of information provides a major distinction between the explicit and implicit incentives model the paper derives general results on comparisons of information structures which serve as counterparts to the standard results on information structures in the principal agent model sufficient statistic impact of a blackwell garbling comparison of inclusive information structures 1999 the review of economic studies limited

planned obsolescence as an incentive device for unobservable quality stressing the multi dimensional character of quality i propose a new theory of planned obsolescence as an incentive device that benefits consumers i argue that planned obsolescence increases the frequency of repurchases and therefore enables consumers to punish producers faster for a lack of overall quality this strengthens the producers incentives to provide adequate levels of quality the theory implies a trade off between a good s durability and its other unobservable quality attributes this leads to an artificially high degree of obsolescence as compared to the first best where quality is observable

investments in african agricultural research abstract over the past three decades africa s public agricultural research systems have changed in substantive ways the total number of researchers increased fourfold the dependency on expatriate researchers significantly declined while the education levels of national researchers improved initially the growth in research staff was matched by growth in expenditures but since the late 1970s real research spending has stagnated in addition loans and grants from donor agencies now account for a sizeable share of total funding for many african agricultural research systems many of the developments of the past decade in personnel expenditures and sources of support for public sector research and development r d in africa are not sustainable spending per scientist has declined continuously during the past 30 years most dramatically during the 1980s resources are spread increasingly thin over a growing group of researchers which has negative effects on the efficiency and effectiveness of agricultural research in africa

incentives in organizations n 1975 steven kerr published on the folly of rewarding a while hoping for b the argument was simple you get what you pay for kerr distilled this unifying theme from a disparate set of examples involving politicians soldiers doctors orphanage directors professors and students as well as manufacturing and clerical employees and even human resource managers from these examples kerr pp 77980 concluded that two main causes of distorted incentives are fascination with an objective criterion where individuals seek to establish simple quantifiable standards against which to measure and reward performance and overemphasis on highly visible behaviors when some parts of the task are highly visible while others are not it took agency theory 15 years to express kerr s title not to mention to evaluate or extend his conclusions during this period agency theory was obsessed with the tradeoff between incentives and insurance even though clear eyed observations like kerr s about the design and performance of real incentive contracts suggested that several other issues are at least as important fortunately recent work has brought agency theory not only to kerr s position but beyond in this paper i summarize four new strands in agency theory that help me think about incentives in real organizations as a point of departure i begin with a quick sketch of the classic agency model i then discuss static models of objective performance measurement that sharpen kerr s argument repeated game models of subjective performance assessments incentives for skill development rather than simply for effort and incentive contracts between versus within organizations i con

the impact of managerial change on performance the role of team heterogeneity when a key responsibility of a manager is to allocate more or less attractive tasks to subordinates these subordinates have an incentive to work hard and demonstrate their talents as a new manager is less well acquainted with these talents this incentive mechanism is reinvigorated after a management change but only when the team is suciently homogenous otherwise a new manager quickly makes similar choices as the old one did we investigate this hypothesis using a large data set on coach dismissals in the german football league where the selection of players is indeed a key task of the coach indeed we nd substantial evidence that coach replacements enhance team performance only in homogenous teams moreover from a methodological point of view we argue that there is typically a negative selection bias when evaluating succession eects which might reconcile previous ndings of no or even negative eects with the vast number of dismissals

encouraging private sector research for tropical agriculture summary agricultural needs in poor tropical countries differ significantly from those in temperate rich countries yet little agricultural research is performed on products for the tropics private research is particularly concentrated in rich countries this is a result of significant failures in the market for research and development r d in particular the difficulty of preventing the resale of seed in developing countries to encourage private r d in tropical agriculture traditional funding of research may be usefully supplemented by a commitment to reward developers of specific new agricultural technologies rewards tied to adoption may be especially useful in increasing up take an illustration of how a commitment to reward developers of new agricultural technologies might work is provided

can the public sector meet the challenge of private research commentary on falcon and fowler and pingali and traxler abstract the growth of private sector participation in agricultural research has serious implications for pro poor technology development but there are other factors that must be considered new plant varieties are not the only things standing between resource poor farmers and secure livelihoods and institutional strengthening is also necessary in addition the current state of public agricultural research is cause for concern it is not clear how many effective public private partnerships can be formed the public sector needs a much clearer definition of its targets and priorities and funding strategies for national and international agricultural research must be overhauled

measuring the impacts of agricultural research on poverty reduction policymakers are increasingly calling upon agricultural research managers to consider poverty reduction objectives when making resource allocations the authors present a simple method to measure the impact of agricultural research on the poor this method has the advantage that it presents the results in a manner consistent with commonly used measures of poverty this consistency and focus should facilitate and enhance dialogue between policymakers and research managers when deciding on resource allocations and assessing impacts on poverty reduction an illustrative application is presented using data from malawi

two sided learning and the ratchet principle i study a class of continuous time games of learning and imperfect monitoring a long run player and a market share a common prior about the initial value of a gaussian hidden state and learn about its subsequent values by observing a noisy public signal the long run player can nevertheless control the evolution of this signal and thus affect the market s belief the public signal has an additive structure and noise is brownian i derive conditions for an ordinary differential equation to characterize equilibrium behavior in which the long run player s actions depend on the history of the game only through the market s correct belief using these conditions i demonstrate the existence of pure strategy equilibria in markov strategies for settings in which the long run player s flow utility is nonlinear the central finding is a learning driven ratchet principle affecting incentives i illustrate the economic implications of this principle in applications to monetary policy earnings management and career concerns

the existence of self enforcing implicit contracts implicit contracts are nontrivial nash equilibria to the post hiring trading game between a worker and the employer these are supported by intrafirm rather than labor market reputations the existence of an implicit contract that supports efficient trade is proved in a simple model

shale gas analysis of its role in the global energy market shale gas revolution that took place in the united states at the beginning of the 21st century has still been shaping our global fossil fuel market in 2012 the u s has surpassed russia in natural gas production for the first time since 1982 at the same year annual average u s henry hub natural gas spot price decreased to 2 75 per million btu which was 8 69 per million btu in 2005 in 2013 proved shale gas reserves of the world is estimated at nearly 2 7 trillion cubic metres tcm and unproved resources at staggering 203 9 tcm as a result there is a global rush to develop most of this resource as possible however shale gas is no miracle fuel it has been suggested that its effects on the environment could be worse than conventional natural gas fugitive methane emissions groundwater pollution and increased seismicity are amongst the most important potential environmental side effects there is also concern about the accuracy of resource potential estimations due to lack of data and specifically designed shale gas reservoir models nonetheless the analysis in this study clearly showed that without developing global shale gas resources we have to consume 66 of our proved natural gas reserves to supply the demand till 2040 this would make most of the world natural gas importers and rules of economy dictate that limited supply and increasing demand would skyrocket natural gas prices therefore shale gas resource development is not an option but a must for the continuance of our global energy market and economy

managerial incentive problems a dynamic perspective the paper studies how a person s concern for a future career may influence his or her incentives to put in effort or make decisions on the job in the model the person s productive abilities are revealed over time through observations of performance there are no explicit output contingent contracts but since the wage in each period is based on expected output and expected output depends on assessed ability an implicit contract links today s performance to future wages an incentive problem arises from the person s ability and desire to influence the learning process and therefore the wage process by taking unobserved actions that affect today s performance the fundamental incongruity in preferences is between the individual s concern for human capital returns and the firm s concern for financial returns the two need be only weakly related it is shown that career motives can be beneficial as well as detrimental depending on how well the two kinds of capital returns are aligned it is well understood by now that informational externalities may place special demands on the organization of economic exchange simple price mediated markets will frequently fail in the presence of asymmetric information in that case more elaborate contractual arrangements have to be used as substitutes for the price system lately considerable effort has been devoted to the analysis of contracting under incomplete information with the objective to understand the range of economic institutions that emerge in response to the failure of the price system the analysis of moral hazard has played a prominent role in this development moral hazard problems arise when for some reason or another transacting parties cannot contract contingent on the delivery of the good for instance in buying labour services it may be that the amount of labour supplied is not directly observable precluding a simple exchange of wage for labour as a partial remedy to this problem an imperfect mutually observed signal about the supply of labour can be used as a proxy in the contract frequently output is taken as such a proxy the drawback is that output is often influenced by other factors than labour input which induce undesirable risk into the contract one is therefore faced with a tradeoff between allocating risk associated with incomplete observability and providing incentives for a proper supply of labour gaining insight into this tradeoff is important not only for understanding contracting in the small e g managerial incentive schemes but also because it is closely related to the fundamental tension between equity and efficiency in the society as a whole while our understanding of moral hazard has advanced a lot in past years it is clear that much work remains an important question that has received little attention until

implicit contracts incentive compatibility and involuntary unemployment this paper considers the enforceability of employment contracts when employees performance cannot be verified in court so that piece rate contracts are not legally enforceable part i shows that there exists a variety of self enforcing implicit contracts modelled as perfect equilibria in a repeated game and characterizes all the wage and performance outcomes that can be implemented implementation requires a strictly positive surplus from employment the form of the contract depending on how this surplus is divided between firm and employee piece rate contracts and contracts with an informally agreed bonus can be made self enforcing but the use of severance pay and bonding does not extend the set of implementable allocations the resulting contracts resemble actual labor contracts more than do the contracts in standard principal agent models part ii analyses market equilibrium with these contracts also modelled as perfect equilibria in a repeated game and shows that many such equilibria exist unfilled vacancies and unemployed workers can co exist despite the existence of contracts that are potentially mutually beneficial for those jobs that are filled any division of the potential surplus is possible so that the market can have at the same time involuntary unemployment and vacancies that are unfilled despite filled jobs earning positive profits as a criterion for selecting equilibria a notion of renegotiation proofness is applied then either all workers are employed or all jobs filled but any division of the potential surplus is still possible the paper explores what further restrictions on beliefs give rise to a walrasian outcome in which all the potential surplus goes to the short side of the market and to an efficiency wage type outcome in which the potential surplus goes to the long side

managerial task assignment and promotions a two period model of managerial task assignment is developed where the current employer has the advantage of observing the actual performanc e of the manager while outside employers can observe only the assign ments optimal contracts are rigid but the market value of managers is below actual productivity and they are promoted less than is effic ient the author introduces the idea of managers explo iting their information to separate themselves out in the market plac e as a consequence the model has the appealing property of small ab ility based wage differentials within a task as well as large ones b etween tasks copyright 1988 by the econometric society

job transfers and incentives in complex organizations thwarting the ratchet effect many complex organizations such as planned soviet enterprises and the u s military routinely transfer employees between jobs since this sacrifices job specific human capital the practice is puzzling this article shows that regular job transfers may be part of an optimal incentive scheme in organizations plagued by the ratchet effect the ratchet effect arises when an employer is uncertain as to the productivity of the various positions or jobs within an organization workers in highly productive jobs then have an incentive to disguise the productivity of their jobs by expending low effort and producing low output this avoids having the employer construct more demanding remuneration schemes once the high productivity of a job becomes known job transfers break the link between current performance and future incentive schemes and hence remove the incentive stifling implications of the ratchet effect this article examines the tradeoff between providing more effective incentives via job transfers and the accompanying sacrifice of job specific human capital establishes conditions under which job transfers are optimal and develops comparative static results

optimal incentive contracts in the presence of career concerns theory and evidence this paper studies optimal incentive contracts when workers have career concerns concerns about the effects of current performance on future compensation we show that the optimal compensation contract optimizes total incentives the combination of the implicit incentives from career concerns and the explicit incentives from the compensation contract thus the explicit incentives from the optimal compensation contract should be strongest for workers close to retirement because career concerns are weakest for these workers we find empirical support for this prediction in the relation between chief executive compensation and stock market performance

multiskilling technical change and the japanese firm worker cooperation with technical change accounts for much of the success of large japanese firms the authors argue t hat this cooperative attitude is due in large part to multiskilling by training workers in more than one job a firm assures its workers th at they will not be made worse off by labor saving innovations in a simple model the authors show that multiskilling leads to an endoge nous distinction between permanent and temporary workers wages that are attached to the worker rather than the job and comparative advantage in process style innovations there is even a role for the company song copyright 1993 by royal economic society

imperfect monitoring and impermanent reputations we study the long run sustainability of reputations in games with imperfect public monitoring it is impossible to maintain a permanent reputation for playing a strategy that does not play an equilibrium of the game without uncertainty about types thus a player cannot indefinitely sustain a reputation for noncredible behavior in the presence of imperfect monitoring

team production endogenous learning about abilities and career concerns abstract this paper studies career concerns in teams where the support a worker receives depends on fellow team members efforts and abilities in this setting by exerting effort and providing support a worker can influence her own and her teammates project outputs in order to bias the learning process in her favor to manipulate the market s assessment we argue that in equilibrium a worker has incentives to help or even sabotage her colleagues in order to signal that she is of higher ability in a multiperiod stationary framework we show that the stationary level of work effort is above and help effort is below their efficient levels

impacts of food crop improvement research evidence from sub saharan africa abstract the paper reviews and summarizes evidences of impacts of crop improvement research of major food crops in africa it provides evidence of increased availability of improved varieties of major food crops to farmers in africa increased food production in regions where adoption has occurred and positive returns to research investment indicating that agricultural research in africa has had productivity increasing impacts on its agriculture however research impacts vary considerably across countries and regions within a country as a result of agroclimatic factors and policy environment which affects the supply of seeds and other inputs and the continuity and stability of research investments the paper points to a number of important issues both internal and external to the agricultural research system organization that need to be addressed if agricultural research is to provide a stimulus for modernizing african agriculture given the small size of food crop production area in many african countries it is important for research systems to take full advantage of research spill ins from regional and international research organizations there is a great potential to increase the efficiency of research systems by improving the coordination among members of national research systems and continuing improvements in collaborations between narss and regional and international organizations

limited records and reputation bubbles abstract this paper offers a tractable and fully rational model to study the economics of reputation in a dynamic market with limited record keeping i e a market in which new entrants observe only the last few periods of play of the long run player instead of the full history of the market we show that trust is gradually granted to the opportunistic long run player despite the fact that his type is perfectly observed by the short run opponents and the perfectly informed short run players ride and drive up reputation bubbles at the expense of their uninformed successors we characterize equilibrium payoffs uniformly over time which is useful for analyzing ongoing repeated relationships where the starting moments have passed

directed search and job rotation abstract we consider the impact of job rotation in a directed search model in which firm sizes are endogenously determined and match quality is initially unknown a large firm benefits from the opportunity to rotate workers so as to partially overcome the loss of mismatch as a result in the unique symmetric equilibrium large firms have higher labor productivity and lower separation rates in contrast to the standard directed search model with multi vacancy firms this model can generate a positive correlation between firm size and wage without introducing any ex ante productivity differences or imposing any non concave production function assumptions

do new brooms sweep clean when and why dismissing a manager increases the subordinates performance abstract if a manager stays in office for a long time he will have learned much about his subordinates thus competition among them will be weak as the manager has made up his mind who is suited best for which position with a new manager the race for favorable tasks is restarted leading subordinates to exert higher effort but for the firm owner the trade off arises that with a new manager effort is larger but the quality of task allocation is worse since information is lost the optimal dismissal policy will be nonmonotonic in the expected heterogeneity of the subordinates abilities

building african scientific capacity for agricultural development abstract during africa s first two decades of independence from 1960 to 1980 priority was given to increasing the size of national extension services because it was assumed that technology could be imported from industrial countries and the international agricultural research centers over the past decade donors have turned their attention to assisting national agricultural research systems nars but many nars are performing poorly and are faced with a high turnover of scientific staff and inadequate operating budgets moreover the present donor financed project by project and country by country approach to building african scientific capacity is seriously flawed this paper examines africa s agricultural research history over the past six decades and draws lessons for strengthening national and regional agricultural research systems over the coming 30 years

the cyclical behavior of individual production series 1889 1984 this paper uses simple summary statistics to analyze the volatility persistence and comovement of 38 annual individual production series for the period 1889 1984 it seeks to identify the size source and correlation of fluctuations in the production of specific commodities within various sample periods and to analyze possible changes in these characteristics over time the paper also discusses the implications of the behavior of individual production series for the behavior of the aggregate economy within the prewar interwar and postwar eras

the economics of career concerns part ii application to missions and accountability of government agencies the paper uses a simple multitask career concern model in order to analyse the incentives of government agencies officials incentives are impaired by the agency pursuing multiple missions a lack of focus is even more problematic in the case of fuzzy missions that is when outsiders are uncertain about the exact nature of the missions actually pursued by the agency consequently agencies pursuing multiple missions receive less autonomy the paper further shows that professionalization creates a sense of mission for the agency and that the specialization of officials raises their incentives last the paper compares its predictions with the stylized facts on government bureaucracies 1999 the review of economic studies limited

sustainable reputations with rating systems abstract in a product choice game played between a long lived seller and an infinite sequence of buyers we assume that buyers cannot observe past signals to facilitate the analysis of applications such as online auctions e g ebay online shopping search engines e g bizrate com and consumer reports we assume that a central mechanism observes all past signals and makes public announcements every period the set of announcements and the mapping from observed signals to the set of announcements is called a rating system we show that absent reputation effects information censoring cannot improve attainable payoffs however if there is an initial probability that the seller is a commitment type that plays a particular strategy every period then there exists a finite rating system and an equilibrium of the resulting game such that the expected present discounted payoff of the seller is almost his stackelberg payoff after every history this is in contrast to cripps mailath and samuelson 2004 5 where it is shown that reputation effects do not last forever in such games if buyers can observe all past signals we also construct finite rating systems that increase payoffs of almost all buyers while decreasing the seller s payoff

crafting smallholder driven agricultural research systems in southern africa abstract the national agricultural research systems narss in sub saharan africa have made enormous progress over the past four decades in replacing european with african scientists increasing the number of scientists and shifting priorities from export to food crops nevertheless most narss are having difficulty in producing a steady stream of new technologies for small scale farms and in generating adequate financial support from their government zimbabwe and malawi are among the first countries in africa to mount indigenousled reforms of their narss this paper documents the steps taken by the agricultural research council of zimbabwe to generate a consensus among scientists farmers and policy makers to reform the national agricultural research system by increasing the voice of smallholders and other stakeholders in setting research priorities making scientists more accountable to smallholders and generating new sources of financial support from user fees and taxes on commodities malawi is pursuing a commodity approach to revitalizing its narss the experience of both zimbabwe and malawi has shown that there is no blueprint for reforming narss in africa donors can assist the reform process by supporting local initiatives to craft smallholder driven research systems that are staffed with accountable scientists who are adequately financed from local sources

strategic shirking a theoretical analysis of multitasking and specialization we provide a new theory to explain why firms multitask workers instead of specializing them workers overperform in tasks they like and underperform in tasks they dislike to favorably influence future job assignments anticipating this firms may find it optimal to commit to future multitasking to induce workers to appropriately allocate effort early in the employment relationship we show that when the product market is volatile so that future product prices are uncertain the firm s ability to credibly commit to a multitasking strategy diminishes this generates a negative relationship between multitasking and product market volatility consistent with recent empirical evidence

privatization and the roles of public and private institutions in agricultural research in sub saharan africa abstract privatization has become a popular panacea for solving the organizational problems of ldc governments this paper considers the role of the private sector in agricultural research especially in sub saharan africa the first section provides a brief background by stating the main arguments for market failure in the allocation of resources to research followed by the reasoning behind the reaction against public intervention the arguments for intervention are then applied to the different areas of agricultural research activity to show that the level of public intervention should depend on the type of research we suggest that there are several criteria for defining public and private activities and that there are few research activities that can be easily classified as purely public or purely private this implies that the appropriate split between public and private research has several dimensions and that efficient institutional arrangements will be specific to particular activities the evidence suggests that there are sound economic arguments for changing the domains of the public and private sectors which should not be static both economic development and technical innovations such as biotechnology will move the boundary in favour of increased private activity but the public and private contributions should be viewed as complementary investments rather than substitutes

the place of agricultural research in the development of sub saharan africa abstract outside sub saharan africa ssa agricultural research ar yields excellent returns why does ssa get so little from its major ar effort why do its ar scientists cost more yet produce less smallness of countries and research stations dispersion and high turnover make it hard to attain a critical mass of national ar scientists to remedy this they could concentrate on a few problems and crops yet they have neglected many of the most important e g cassava and overstressed export crops in other ways too european biases have distorted african ar socioeconomists moreover have entered research design too little and too late above all current domestic funds have been too scanty and unreliable to adequately support international and capital account ar efforts this lack of steady commitment illustrates ar s need for direction from clearer agricultural policy based on radically improved information and recognizing ssa s dramatic rise in labor land ratios guidelines for such policy are indicated within these a formalized and poverty oriented ar design system is suggested

project assignments when budget padding taints resource allocation this paper shows that rotation programs can be an effective response to concerns of employee budget padding rotation programs naturally create a portfolio of assignments for each manager and the resulting diversification can reduce the downside of resource rationing in particular the production versus rents trade off linked with adverse selection problems can be more efficiently carried out when the firm faces two managers with average information advantages rather than one with a large advantage and one with a small advantage roughly stated rotation of project assignments is a way of smoothing information across managers on the other hand if a firm places a premium on treating different types of projects in distinct ways specialized assignments can be preferred due to the ability to confine project types to individual managers

systems of innovation theory and the changing architecture of agricultural research in africa abstract this paper examines the on going evolution of the organisational architecture of agricultural research in africa once considered a rural backwater populated by agronomists extension agents and farmers agricultural research is now being explicitly placed within global debates about innovation technology institutions and development this is reflected in a growing interest in the use of systems of innovation theory to both understand and reform innovation processes within agriculture the basic argument put forward in the paper is that the conception of a global agricultural research system and associated efforts to create a coordinated multi layered supra national research infrastructure are at odds with both the realities of research at national level and the bio physical and socio economic heterogeneity that characterises rural africa it is suggested that a less directive approach to support for agricultural research is required to allow national characteristics and differences to come to the fore and to give more room for the development of the all important demand side

information acquisition and reputation dynamics we study dynamic incentives and behaviour in markets with costly discovery of past transactions in our model a sequence of short lived customers interact over time with a single long lived firm that privately knows its type good or opportunistic customers must pay to observe the firm s past behaviour we characterize the equilibrium structure that features accumulation consumption and restoration of reputation the opportunistic firm deliberately builds its reputation up to a point where the maximum periods of information acquired by customers do not reveal past opportunistic behaviour and exploits the customers who most trust the firm copyright 2011 oxford university press

public trust and government betrayal abstract this study presents a simple model of government reputation in which government type cannot be directly observed by households with the variation that government type rather than being permanent follows an exogenous markov process this formulation captures three characteristics of bad policy outcomes governments which betray public trust do so erratically public trust is regained only gradually after a betrayal and governments with recent betrayals betray with higher probability than other governments

the benefits of aggregate performance metrics in the presence of career concerns this paper considers the desirability of aggregate performance measures in light of the fact that many individuals performance incentives are driven by a desire to shape external perceptions and thus future pay in contrast to the case of explicit incentive contracts we find that when individuals actions are driven by career incentives an aggregate measure e g group or team output can sometimes alleviate moral hazard concerns and improve efficiency aggregation intermingles performance measures that may be differentially affected by skill and effort of many agents when such entanglement increases the prospect that the external market will attribute an employee s effort driven contribution to transferable skills the employee exerts higher effort as a means of posturing to the market the incentive benefit of aggregation is weighed against the incentive cost because of information loss information loss from aggregation can reduce the market s reliance on the measure and thus diminish agents desire to undertake effort to influence the measure this paper was accepted by stefan reichelstein accounting

what do discounted optima converge to a theory of discount rate asymptotics in economic models abstract this paper considers a sequence of stochastic dynamic problems in which the discount rate goes to zero sufficient conditions are given under which the limit of discounted optimal policies and normalized values are a i long run average optimal and ii catching up optimal policy and value these conditions are shown to be satisfied in many economic models a new decision criterion for the undiscounted problem the strong long run average is introduced this criterion refines the long run average is often equivalent to the catching up and is easier to use than the latter since it has a recursive representation a generalization of fatou s lemma which has wider applicability is also proved

the impact of agricultural research on productivity and poverty in sub saharan africa while it is widely recognized that agricultural research is a key driver of broad based technological change in agriculture that benefits the poor in many different ways little is known about its aggregate impacts on productivity growth and poverty reduction in sub saharan africa ssa using a polynomial distributed lag structure for agricultural research within a simultaneous system of equations framework this paper first demonstrates that agricultural research contributes significantly to productivity growth in ssa productivity growth is again shown to raise per capita incomes with income increases finally having significant poverty reducing effects with an aggregate rate of return of 55 the payoffs to agricultural research are also impressive agricultural research currently reduces the number of poor by 2 3 million or 0 8 annually while the actual impacts are not large enough to more than offset the poverty increasing effects of population growth and environmental degradation the potential impacts of agricultural research are far greater apart from low research investments ssa faces several constraints outside the research system that hinder realization of potential research benefits the results show that doubling research investments in ssa would reduce poverty by 9 annually however this would not be realized without more efficient extension credit and input supply systems

who wants a good reputation we examine a market in which long lived firms face a short term incentive to exert low effort but could earn higher profits if it were possible to commit to high effort there are two types of firms inept firms who can only exert low effort and competent firms who have a choice between high and low effort there is occasional exit and competent and inept potential entrants compete for the right to inherit the departing firm s reputation consumers receive noisy signals of effort choice and so competent firms choose high effort in an attempt to distinguish themselves from inept firms a competent firm is most likely to enter the market by purchasing an average reputation in the hopes of building it into a good reputation than either a very low reputation or a very high reputation inept firms in contrast find it more profitable to either buy high reputations and deplete them or buy low reputations

the regional economic impact of oil and gas extraction in texas abstract this paper empirically investigates the regional economic impact of oil and gas extraction in texas during the recent shale oil boom regressions with county level data over the period 2009 2014 support smaller multiplier effects on local employment and income than corresponding estimates drawn from popular input output based studies economic impacts were larger for extraction from gas wells than oil wells while the drilling phase generated comparable impacts estimates of economic impacts are greater in a dynamic spatial panel model that allows for spillover effects across local economies as well as over time

aggregation and linearity in the provision of intertemporal incentives we consider the problem of providing incentives over time for an agent with constant absolute risk aversion the optimal compensation scheme is found to be a linear function of a vector of n accounts which count the number of times that each of the n kinds of observable events occurs the number n is independent of the number of time periods so the accounts may entail substantial aggregation in a continuous time version of the problem the agent controls the drift rate of a vector of accounts that is subject to frequent small random fluctuations the solution is as if the problem were the static one in which the agent controls only the mean of a multivariate normal distribution and the principal is constrained to use a linear compensation rule if the principal can observe only coarser linear aggregates such as revenues costs or profits the optimal compensation scheme is then a linear function of those aggregates the combination of exponential utility normal distributions and linear compensation schemes makes computations and comparative statics easy to do as we illustrate we interpret our linearity results as deriving in part from the richness of the agent s strategy space which makes it possible for the agent to undermine and exploit complicated nonlinear functions of the accounting aggregates

a continuous time version of the principal agent problem this paper describes a new continuous time principal agent model in which the output is a diffusion process with drift determined by the agent s unobserved effort the risk averse agent receives consumption continuously the optimal contract based on the agent s continuation value as a state variable is computed by a new method using a differential equation during employment the output path stochastically drives the agent s continuation value until it reaches a point that triggers retirement quitting replacement or promotion the paper explores how the dynamics of the agent s wages and effort as well as the optimal mix of short term and long term incentives depend on the contractual environment the understanding of dynamic incentives is central in economics how do companies motivate their workers through piece rates bonuses and promotions how is income inequality connected with productivity investment and economic growth how do financial contracts and capital structure give incentives to the managers of a corporation the methods and results of this paper provide important insights to many such questions this paper introduces a continuous time principal agent model that focuses on the dynamic properties of optimal incentive provision we identify factors that make the agent s wages increase or decrease over time we examine the degree to which current and future outcomes motivate the agent we provide conditions under which the agent eventually reaches retirement in the optimal contract we also investigate how the costs of creating incentives and the dynamic properties of the optimal contract depend on the contractual environment the agent s outside options the difficulty of replacing the agent and the opportunities for promotion our new dynamic insights are possible due to the technical advantages of continuous time methods over the traditional discrete time ones continuous time leads to a much simpler computational procedure to find the optimal contract by solving an ordinary differential equation this equation highlights the factors that determine optimal consumption and effort the dynamics of the agent s career path are naturally described by the drift and volatility of the agent s pay offs the geometry of solutions to the differential equation allows for easy comparisons to see how the agent s wages effort and incentives depend on the contractual environment finally continuous time highlights many essential features of the optimal contract including the agent s eventual retirement in our benchmark model a risk averse agent is tied to a risk neutral principal forever after employment starts the agent influences output by his continuous unobservable effort input the principal sees only the output a brownian motion with a drift that depends on the agent s effort the agent dislikes effort and enjoys consumption we assume that the agent s utility function has the income effect that is as the agent s income increases it becomes costlier to compensate him for the effort also we assume that the agent s utility of consumption is bounded from below

the geopolitical impact of the shale revolution exploring consequences on energy prices and rentier states while the shale revolution was largely a us affair it affects the global energy system in this paper we look at the effects of this spectacular increase in natural gas and oil extraction capacity can have on the mix of primary energy sources on energy prices and through that on internal political stability of rentier states we use two exploratory simulation models to investigate the consequences of the combination of both complexity and uncertainty in relation to the global energy system and state stability our simulations show that shale developments could be seen as part of a long term hog cycle with a short term drop in oil prices if unconventional supply substitutes demand for oil these lower oil prices may lead to instability in rentier states neighbouring the eu especially when dependence on oil and gas income is high youth bulges are present or buffers like sovereign wealth funds are too limited to bridge the negative economic effects of temporary low oil prices

economic impact analysis of natural gas development and the policy implications abstract in the us the shale gas revolution ensured that the development costs of unconventional natural gas plummeted to the levels of 2 3 mcf this success has motivated the development of shale gas in other regions including australia and europe this study focussing primarily on aspects of economic impact analysis estimates the development costs of shale gas extraction in both australia and europe based on both direct and fiscal costs and also suggests policy initiatives the increasing liquefied natural gas lng developments in australia are already straining domestic gas supplies hence the development of more natural gas resources has been given a high priority however a majority of the australian shale resources is non marine in origin and significantly different to the marine type shales in the us in addition the challenges of high development costs and the lack of infrastructure service capacity and effective government policy are inhibiting shale gas development increasing the attractiveness of low risk investment by new local developers is critical for australian shale gas success which will simultaneously increase domestic gas security in the european context unconventional gas development will be challenged by direct rather than fiscal costs high direct costs will translate into average overall gas development costs over 13 mcf which is well over the existing market price

disappearing private reputations in long run relationships for games of public reputation with uncertainty over types and imperfect public monitoring cripps mailath and samuelson 2004 showed that an informed player facing short lived uninformed opponents cannot maintain a permanent reputation for playing a strategy that is not part of an equilibrium of the game without uncertainty over types this paper extends that result to games in which the uninformed player is long lived and has private beliefs so that the informed player s reputation is private journal of economic literature classi cation numbers c70 c78

career concerns matching and optimal disclosure policy raiders may suffer from information disadvantage since the current employer is often better informed about his workers quality when workers have career concerns and matching influences productivity the initial employer can strategically disclose information to influence incentives and matching efficiency long term complete contracts induce full disclosure when raiders are perfectly competitive the optimal short term contract induces full disclosure if raiders are perfectly competitive and the workers are risk neutral and are not liquidity constrained these conditions are not only sufficient but also almost necessary for full disclosure partial disclosure may be optimal if any of these conditions is relaxed

africa s economic performance limitations of the current consensus historical and micro survey evidence as well as the standard data from international organizations support less pessimistic conclusions on africa s development performance than those reached by many social scientists the changes that have benefited women over the last four decades are highlighted a discussion of growth in agricultural production follows however the complexity and the brutality of processes of social and economic change in sub saharan african economies are also stressed the theoretical implications of these complexities have not been adequately analyzed by world bank economists the bank s recent efforts to reassess its policies are therefore unlikely to achieve the results anticipated

using privileged information to manipulate markets insiders gurus and credibility access to private information is shown to generate both the incentives and the ability to manipulate asset markets through strategically distorted announcements the fact that privileged information is noisy interferes with the public s attempts to learn whether such announcements are honest it allows opportunistic individuals to manipulate prices repeatedly without ever being fully found out this leads us to extend sobel s 1985 model of strategic communication to the case of noisy private signals our results show that when truthfulness is not easily verifiable restrictions on trading by insiders may be needed to preserve the integrity of information embodied in prices

the dynamics of corruption with the ratchet effect this paper provides a simple model of corruption dynamics with the ratchet effect as in shleifer and vishny 1993 we consider the sale of government property entry permit by government officials as the prototype of corruption activities in a dynamic version of the shleifer vishny model corrupt officials have ex post the incentive to price discriminate entrepreneurs based on the entry decisions made in an earlier period we show that the inability of government officials to commit to future money demands induces the ratchet effect in that entrepreneurs have incentives to delay entry in order to receive a discount in the permit price later the ex post opportunism erodes the official s extortion power and reduces his revenues from selling permits even though the dynamic setting leaves the corrupt official with less extortion power we cannot rule out the possibility that the official s ability to apply dynamic discrimination decreases the intertemporal aggregate social welfare we also explore the effect of the official s tenure stability on the extent of corruption this allows us to identify circumstances under which the often observed practice of job rotation can help mitigate corruption