psychological factors and stock option exercise we investigate stock option exercise decisions by over 50 000 employees at seven corporations controlling for economic factors psychological factors influence exercise consistent with psychological models of beliefs employees exercise in response to stock price trends exercise is positively related to stock returns during the preceding month and negatively related to returns over longer horizons consistent with psychological models of values that include reference points employee exercise activity roughly doubles when the stock price exceeds the maximum price attained during the previous year

real and monetary determinants of real exchange rate behavior theory and evidence from developing countries abstract this paper develops a dynamic model of real exchange rate rer behavior in developing countries a three goods economy exportables importables and non tradables is considered residents of this country hold domestic and foreign assets and there is a dual exchange rate regime there is a government that consumes importables and non tradables a distinction is made between equilibrium and disequilibrium movements of the rer the determinants of real exchange rate misalignment are studied with emphasis placed on the role of devaluations and balance of payments crises the implications of the model are tested using data for 12 developing countries the results obtained are generally favorable for the model the issue of rer stationarity is also analyzed

product market competition and the cost of bank loans evidence from state antitakeover laws abstract the extant literature documents a positive relationship between a firm s takeover vulnerability and its agency cost of debt using state antitakeover laws as an exogenous measure of variation in takeover vulnerability i investigate whether product market competition has a disciplinary effect that can lower a firm s cost of bank loans after taking into account the industry composition of borrowers i find that banks charge higher spreads to borrowers that are vulnerable to takeovers but only in concentrated industries in the absence of disciplinary competitive pressure the effect of takeover vulnerability on the cost of bank loans is mitigated for larger firms firms followed by analysts firms with existing credit ratings non family firms and for borrowers with shorter maturity loans or loans with covenants and collateral in place taken together the results suggest that the effect of governance on the cost of financing is not homogenous across all industries and that concentrated industry firms may need to use supplementary governance mechanisms to mitigate debt holder agency problems

state intervention in the market for corporate control abstract this study investigates the impact of pennsylvania senate bill 1310 on the share prices of pennsylvania corporations considered the most severe of the second generation antitakeover laws the statute limits the ability of shareholders to challenge management through the proxy process and eliminates the traditional fiduciary obligation of directors to promote shareholders interests we find that pa sb1310 significantly decreased share values and estimate the loss to shareholders of pennsylvania firms at 4 billion however firms with antitakeover charter amendments already in place were less affected and firms that exempted themselves from pa sb1310 recovered a portion of shareholders wealth

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

wealth seeking reconsidered abstract if individuals are interested in their relative wealth position they engage in contests for wealth this leads to a steady state with overaccumulation in a simple growth model it is shown that if some individuals are engaged in wealth seeking activity but others are not the latter might benefit however wealth seeking is not welfare enhancing under usual assumptions concerning production technology the steady state equilibrium is characterized by a marginal productivity of capital that is below the steady state rate of time preference and by emergence of a class structure

exchange rate fiscal and agricultural policies in africa does adjustment hurt the poor abstract trade exchange rate fiscal and agricultural sector policy reforms are the pillars of structural adjustment programs in africa results indicate that trade and exchange rate reforms are associated with a large decline in economic rents and a shift in relative prices that favor the rural and urban poor fiscal reforms have not brought about draconian belt tightening measures although the incidence of public spending particularly in the social sectors and in terms of public sector employment remains far from progressive reduction of export crop taxation contributes to higher incomes for the poor and domestic food crop liberalization has not led to increases in purchase prices of staple commodities for most low income households

impacts of monetary and macroeconomic factors on food prices in eastern and southern africa eastern and southern africa has been experiencing relatively large increases in real food prices since the early 1980s real food prices in some african countries grew as much as 11 per year during the 1980 1996 period the huge volatility in food prices coincided with the implementation of structural adjustment programmes in several african countries this study examines the impacts of monetary and macroeconomic factors on real food prices in eastern and southern africa using the technique of cointegration and error correction modelling to test the long run relationship between real food prices and the factors that influence their behaviour in selected african countries demand elasticities for food are estimated for selected countries the empirical results show that changes in domestic food production coupled with income trade exchange rate and monetary policies have significant impacts on real food prices with wide implications for food availability and food security in the region

the other side of the trade off the impact of risk on executive compensation the principal agent model of executive compensation is of central importance to the modern theory of the firm and corporate governance yet the exiting empirical evidence supporting it is quite wea

the tenuous trade off between risk and incentives empirical work testing for a negative trade off between risk and incentives has not had much success the data suggest a positive relationship between measures of uncertainty and incentives rather than the posited negative trade off i argue that the existing literature fails to account for an important effect of uncertainty on incentives through the allocation of responsibility to employees when workers operate in certain settings firms are content to assign tasks to workers and monitor their inputs by contrast when the situation is more uncertain they delegate responsibility to workers but to constrain their discretion base compensation on observed output

managerial ownership of voting rights abstract managers of firms with dual classes of common stock can choose different quantities of votes for a given cash flow interest by choosing different quantities of the two securities we study managerial stock holdings in 45 dual class firms and find that vote ownership per se is an important motivation for these holdings in that corporate officers and their families hold a median 56 9 of the votes and 24 0 of the common stock cash flows we also find significant family involvement in many sample firms and document four case studies in which explicit acquisition premiums were paid for superior voting shares

oil price and usd naira exchange rate crash can economic diversification save the naira abstract naira lost half of its foreign exchange value in less than two years following 2014 oil price crash and has not recovered despite numerous government s attempts this study thus evaluated the potential of economic diversification proxied by non oil export performance in saving the naira by analysing a nexus between oil price exchange rate and nonoil export estimation of a rearranged current account equation within autoregressive distributed lag ardl and vector autoregressive var models using monthly data from january 2008 to december 2015 yielded the following results there is a direct relationship between oil price and exchange rate and this affirms that sharp decline in the former induced the latter s deterioration increase in non oil exports led to appreciation of usd naira exchange rate both in the short run and the long run import on the other hand induced depreciation of the exchange rate in the long run diversification by increasing export revenue and reducing import bills therefore has a great potential to improve the value of naira

piece rate contracts for other regarding workers when workers are paid with piece rates inequality arises naturally we consider workers who care about income comparisons and are either status seeking or inequality averse we identify circumstances under which inequality attitudes lead workers to exert more effort than they would otherwise and also circumstances under which workers inequality attitudes lead firms to set lower piece rates than they would otherwise the key behavioral assumption for both of these results to hold when workers are identical is behindness aversion the property that changes in inequality matter more to the worker when he is behind than when he is ahead jel d01 j33 m52

bilateral trade flows the linder hypothesis and exchange risk bilateral trade flows are used to examine the linder hypothesis and the effect of exchange rate variability in a gra vity type trade model derived from an underlying demand and supply mo del a behavioral model is used to justify examining these issues joi ntly the model performs well empirically using a sample of seventeen countries for the period 1974 82 the authors find overwhelming supp ort for the linder hypothesis and this version of the gravity model moreover they find strong support for the hypothesis that increased exchange rate variability affects bilateral trade flows copyright 1987 by mit press

if homo economicus could choose his own utility function would he want one with a conscience reply in my model of the evolution of honesty 1 i assumed the existence of a signal a blush perhaps extreme values of which served to identify some individuals as being honest with certainty joseph harrington notes that without this assumption honest individuals have difficulty invading a population initially dominated by defectors for readers who do not wish to work through the algebra in his comment the argument is easily summarized in nontechnical terms suppose two honest mutants a and b arrive in an uncountably large population consisting entirely of dishonest persons and suppose that the probability that an honest person exhibits an intense blush is say 0 999 while the corresponding probability for everyone else is only 0 001 when a sees an intense blush on the face of b what will then be his estimate of the probability that b is honest assuming that a knows the laws of elementary probability and corrects for the base rate of honest persons in the population it will be zero when virtually everyone in the population is dishonest even a person with an intense blush will be pegged as dishonest provided that even the smallest fraction of dishonest persons also shows an intense blush with

the importance of relative performance feedback information evidence from a natural experiment using high school students we study the effect of providing relative performance feedback information on performance under piece rate incentives a natural experiment that took place in a high school offers an unusual opportunity to test this effect in a real effort setting for one year only students received information that allowed them to know whether they were above below the class average as well as the distance from this average we exploit a rich panel data set and find that the provision of this information led to an increase of 5 in students grades moreover the effect was significant for the whole distribution however once the information was removed the effect disappeared to rule out the concern that the effect may be driven by teachers within the school we verify our results using national level exams externally graded for the same students and the effect remains

relative versus absolute income joy of winning and gender brain imaging evidence in this paper we study the role of absolute versus relative income using functional magnetic resonance imaging fmri while being scanned in two adjacent mri scanners pairs of subjects had to simultaneously perform a simple estimation task that entailed monetary rewards for correct answers we show that a variation in the comparison subject s payment affects blood oxygenation level dependent bold responses in the ventral striatum this brain region is engaged in the prediction and registration of primary rewards such as food delivery as well as more abstract forms of rewards like money in particular we show that activation in the ventral striatum increases in absolute income and for a given level of absolute income decreases in lower relative income using a male and a female sample allows us to study whether the perception of relative and absolute incomes is gender specific we find that the effects of absolute and relative incomes are strong and relatively similar for both genders finally we analyze the importance of joy of winning i e the impact of outperforming another subject our results suggest that the mere fact of outperforming the other subject positively affects reward related brain areas

egalitarianism and the returns to education during the great transformation of american education secondary school education greatly expanded in the united states from 1910 to 1940 setting its schooling attainment apart from that of all other countries barely 10 percent of youth were high school graduates in 1910 but by the mid 1930s the median youth had a high school diploma in some regions by the 1930s enrollment and graduation rates rose to levels that were as high as they would be two decades later the issue addressed here concerns the economic impact of the large increase in the supply of educated labor evidence is presented concerning the sharp decline in the wage premium to ordinary white collar workers with the expansion of the high school large numbers of americans competed for positions in the coveted white collar sector although the return to a year of high school remained considerable on the eve of world war ii egalitarianism had evened the playing field for a substantial segment of americans

corporate control and the choice of investment financing the case of corporate acquisitions we test the proposition that corporate control considerations motivate the means of investment financing cash and debt or stock corporate insiders who value control will prefer financing investments by cash or debt rather than by issuing new stock which dilutes their holdings and increases the risk of losing control our empirical results support this hypothesis in corporate acquisitions the larger the managerial ownership fraction of the acquiring firm the more likely the use of cash financing also the previously observed negative bidders abnormal returns associated with stock financing are mainly in acquisitions made by firms with low managerial ownership do firms have systematic preferences for the means of financing investments in modigliani and miller s 1958 m m s perfect market no tax world the means by which investments are financed are irrelevant for the total value of the firm miller 1977 extended this irrelevance proposition to a case where taxes exist however casual observation suggests that firms are not indifferent to the means of financing for example many firms prefer to finance investments from internal sources or by debt rather than by issuing new equity an explanation for such systematic financing preferences and the consequent capital structure of firms is therefore called for indeed a number of such explanations have been advanced for example deangelo and masulis 1980 showed that in miller s 1977 framework the means of financing is not irrelevant if firms have different expected marginal effective tax rates due to differences in fixed charges it has also been argued that financing preferences may result from agency costs associated with debt e g barnea haugen and senbet 1981 or from asymmetry of information between managers and outside investors myers and majluf 1984 recently harris and raviv 1988 and stulz 1988 advanced a new argument for the existence of financing preferences that centers around managers incentive to maintain control over the corporation specifically by increasing debt and using the proceeds to retire equity held by the public owners managers increase the probability of maintaining control and reaping the benefits associated with it since the substitution of debt for outsiders equity decreases the fraction of

corporate financial policy and corporate control abstract this paper presents evidence that stockholder wealth declines on average when managers respond to attempted hostile takeovers with defensive changes in asset and ownership structure the data also indicate that these corporate restructurings are typically quite large and that many are attempts by managers to create barriers specific to the hostile bidder and or to consolidate a block of voting securities in the hands of management allies the evidence suggests that defensive motives whether beneficial or harmful influence corporate asset and ownership structure

wheat policy and economy wide reform in brazil abstract in recent years the wheat sector in brazil has moved from governmental protection and public intervention to a free market and privatization in this study those changes are analyzed through measures of governmental intervention on nominal rates of protection and on welfare of producers and consumers elasticities of demand and supply of wheat are estimated and the effects of changes in policies are analyzed under official and shadow exchange rates welfare measures indicate that almost us 8 billion were spent from 1970 until 1989 with policies to subsidize producers and consumers the policy induced stimulus to consumer demand exceeded the stimulus to domestic production and self sufficiency in wheat declined the reduction in wheat subsidies since 1989 was more than an isolated sector specific policy it was part of macroeconomic anti inflation policy and it coincided with other economy wide changes such as real appreciation and a decline in international commodity prices

employment horizon and the choice of performance measures empirical evidence from annual bonus plans of loss making entities we examine the extent to which employment horizon concerns affect the relative emphasis on financial versus nonfinancial performance measures in annual bonus plans we argue that managers of loss making firms are likely to voluntarily or forcibly depart in the near future and consequently have a shorter employment horizon loss making firms then need to increase the emphasis on forward looking nonfinancial performance measures to motivate long term effort of their managers thus we hypothesize that the emphasis on nonfinancial performance measures is greater in loss making than in profitable firms even after controlling for the informativeness of earnings we find consistent support for our hypothesis using different archival survey and field data sources and various proxies for short employment horizon and the emphasis on nonfinancial performance measures

wage transparency and performance a real effort experiment abstract without transparency about peer wages in a real effort experiment a change of wages does not affect performance with transparency however higher paid workers tend to work more accurately and lower paid workers shirk more under piece rates

import compression and export performance in developing countries the debt crisis that began in 1982 forced a number of developing countries that had relied on external financing into rapid adjustment of their current account positions in many of these countries external adjustment mainly took the form of import reduction or what has been termed import compression to generate trade balance surpluses necessary to service the existing stock of foreign debt while the effects of import compression on consumption and growth have been discussed in the literature there has been little concern expressed with regard to the direct effects such a policy can have on export performance this paper develops a model that takes explicit account of the feedbacks between imports and exports that arise through the effects of imported inputs on exports and the availability of foreign exchange on imports empirical tests of this model for 34 developing countries tend to confirm both these hypotheses these results point clearly for additional foreign financing to reduce the need for import compression and its attendant negative effects on the supply of exports

economic fluctuations and growth in sub saharan africa the importance of import instability the traditional thesis that export instability xi is deleterious to economic growth in developing economies has received mixed empirical results for african countries recent research suggests that the effect of xi is weak but that capital investment instability ki adversely influences economic growth the current study argues that in many of these nations imports are likely to be critical to the growth process while exports represent only one of the various sources of investment resources hence import instability mi may pose a more serious problem than xi in hindering economic growth employing 1968 1986 world bank data for 33 sub saharan african countries xi ki and mi variables are calculated for each country as the standard errors around the respective best fitted trends over the sample period these instability measures and additional world bank data are then used to estimate an augmented production function that controls for the effects of labour capital and exports the study fin

does china really lose from rmb revaluation evidence from some export industries this study attempts to examine the impacts of real exchange rate rer misalignment on china s export performance using the sur methodology coupled with disaggregate panel export data it shows that china s export sector may not necessarily lose from the central government s decision to revalue its rmb against the us dollar because the negative impact of the rer appreciation on chinese exports may be diluted by the positive impacts attributing to a reduction in the rer misalignment

status and incentives this article introduces status as reflecting an agent s claim to recognition in her work this is a scarce resource increasing an agent s status requires that another agent s status be decreased higher status agents are more willing to exert effort in exchange for money better paid agents would exert higher effort in exchange for improved status the results are consistent with actual management practices i egalitarianism is desirable in a static context ii in a long term work relationship juniors compensation is delayed and iii past performance is rewarded by pay increases along with improved status within the organization s hierarchy

is there discretion in wage setting a test using takeover legislation anecdotal evidence suggests that uncontrolled managers let wages rise above competitive levels testing this popular perception has proven difficult however because independent variation in the extent of managerial discretion is needed in this paper we use states passage of anti takeover legislation as a source of such independent variation passed in the 1980s these laws seriously limited takeovers of firms incorporated in legislating states since many view hostile takeovers as an important disciplining device these laws potentially raised managerial discretion in affected firms if uncontrolled managers pay higher wages we expect wages to rise following these laws using firm level data we find that relative to a control group annual wages for firms incorporated in states passing laws did indeed rise by 1 to 2 or about 500 per year the findings are robust to a battery of specification checks and do not appear to be contaminated by the political economy of the laws or other sources of bias our results suggest that discretion significantly affects wages they challenge standard theories of wage determination which ignore the role of managerial preferences

the value of the voting right a study of the milan stock exchange experience i study the large premium 82 percent attributed to voting shares on the milan stock exchange the premium varies according to the ownership structare and the concentration of the voting rights and it can be rationalized in the presence of enormous private benefits of control a case study seems to indicate that in italy private benefits of control can easily be worth more than 60 percent of the value of nonvoting equity a tentative explanation for these findings is provided traditional finance theory disregards the value of voting rights in pricing common stock in most cases this omission does not seem harmful many studies of differential voting stocks in different countries have indicated that voting rights are generally worth between 10 percent and 20 percent of the value of common stock the italian evidence i present differs sharply from this view in italy voting shares that have inferior dividend rights trade at an average premium

a case for taxing charitable donations abstract we develop a model that allows for public goods and status signaling through charitable contributions we use this setup to re examine the conventional practice of rendering a favorable tax treatment to charitable contributions

what determines the value of corporate votes this paper studies the determinants of the value of voting rights in u s corporations results support the hypothesis that the price of a vote is determined by the expected additional payment vote holders will receive for their votes in case of a control contest the size of this differential payment is a function of the probability that a vote is pivotal in a control contest and the magnitude of the private benefits obtainable by controlling the company simple proxies for these two factors explain up to 30 percent of the variation of the voting premium across companies and through time my findings also suggest that the value of managerial perquisites are at least partially reflected in the price of votes

takeover threats and managerial myopia this paper examines the familiar argument that takeover pressure can be damaging because it leads managers to sacrifice long term interests in order to boost current profits if stockholders are imperfectly informed temporarily low earnings may cause the stock to become undervalued increasing the likelihood of a takeover at an unfavorable price hence the managerial concern with current bottom line the magnitude of the problem depends on a variety of factors including the attitudes and beliefs of shareholders the extent to which corporate raiders have inside information and the degree to which managers are concerned with retaining control of their firms

capital flows real exchange rate misalignment and ppp tests in emerging market countries the economic performance of emerging markets has significant impacts on economic growth and volatility of macroeconomic indicators in various countries emerging markets accounted for 20 43 of global exports during the period 1970 2005 and held 70 of global foreign reserves in recent years more than 50 of the exports from the euro area japan and the united states go to emerging markets and other developing countries the globalization of capital flows is facilitated by technological innovations and excellent information networks coupled with sharp increases in savings that are directed into financial instruments across borders the use of purchasing power parity ppp as a benchmark in exchange rate policy reforms assumes the existence of a stable relationship between the exchange rate and the ratio of price levels in two countries this article investigates whether or not long run ppp holds in emerging markets johansen s cointegration technique is used with annual data in analysing the relationsh

economic growth in africa abstract this paper draws on the recent endogenous growth methodology to study the factors behind differences in per capita growth rates across africa the results indicate that various economic factors including initial conditions investment population growth trade orientation inflation financial development and the growth of the government sector contribute significantly to economic growth in addition to economic variables we find the degree of political freedom to be a significant contributor to economic growth finally we find some evidence that economic growth by the members of the cfa franc zone has not fared well in comparison to other african countries

oil dependency and exchange rate regimes in arab oil economies time to rethink the paradigm this study examines implications of the current exchange rate regimes on the macroeconomic and growth performance of five arab oil producing countries saudi arabia the uae sudan algeria and yemen the study evaluates alternative exchange rate regime policy options towards exploring an optimal exit strategy to ensure successful transition to more sustainable exchange rate regime especially in the fixed regime economies of saudi arabia and the uae this study proposes the adoption of a transparent broad basket band and crawl bbc regime by the arab oil economies in order to provide a better alternative to the existing fixed pegs or dirty floats however it is imperative to note that the timing of the exit from the current regime and the extent of institutional development and market sophistications are very critical to successful transition to more sustainable regime that would provide a larger scope for counter cyclical policies and diversification in these economies

natural resources national income and economic growth in africa abstract because standard measures of aggregate income such as gross domestic product gdp do not account for natural resource depletion their use as gauges of economic performance tends to exaggerate the benefits of resource extraction accounting for natural resource depletion in 18 african countries indicates different patterns of growth than those suggested by gdp figures use of the revised measures in analyses of the link between exports and growth suggests that export expansion may generate increases in measured gdp without stimulating increased production in contrast real exchange rate alignment is correlated with growth in both conventional gdp and the revised accounts

sources of stagnation in sub saharan africa abstract this paper investigates the sources of economic stagnation in sub saharan africa during the 1970s several policy variables are considered as well as a set of environmental variables which include climate violence export prices and other exogenous factors the paper uses statistical analysis in an attempt to identify the relative importance of the policy variables and the environmental variables taken as groups it also seeks to identify particular policy variables which seem to have been most significant in determining growth outcomes the technique employed for investigation is reduced form econometric estimation in a preliminary analysis the impact of the international trade environment on average economic performance in africa during the period since independence is investigated the results suggest an extremely close relationship between movements in export prices and average performance throughout the 20 year period a second econometric exercise investigates the joint impacts of environmental and policy variables on growth in a cross section of african states since 1970 the spirit of the approach is exploratory and a relatively large number of variables are constructed and tested through multivariate analysis a primary finding is that the environmental variables seem to have had more impact on growth as a group than the policy variables this finding must be qualified however by the continuing lack of some important policy variables agricultural price data have not yet become available in sufficient quantity for cross section analysis nor have several important human resource variables and indices of the use of resources in the public domain among the policy variables which have been used for the analysis those identified with retrenchment during periods of declining commodity prices seem most significant primary among these are the real effective exchange rate and some measures of effectiveness in foreign exchange reallocation during periods when imports must contract severely in the final section of the paper the cross section results are used for a counterfactual analysis of the growth experiences of individual african states measures of growth opportunity cost are constructed which suggest the degree to which errors in management and uncontrollable circumstances have held states below their potential growth paths the results suggest that some success stories may owe much to good luck while some failures may well be due less to bad management than to adverse circumstances

management ownership and market valuation an empirical analysis we investigate the relationship between management ownership and market valuation of the firm as measured by tobin s q in a 1980 cross section of 371 fortune 500 firms we find evidence of a significant nonmonotonic relationship tobin s q first increases then declines and finally rises slightly as ownership by the board of directors rises for older firms there is evidence that q is lower when the firm is run by a member of the founding family than when it is run by an officer unrelated to the founder

money and rank in the labor market abstract we analyze the gains losses in wage and in rank position for workers switching firm voluntary movers enjoy a wage premium relative to stayers but that premium declines with rank inside the new firm indicating that movers are trading off money and rank

games of status and discriminatory contracts following recent empirical evidence which indicates the importance of rank for the determination of workers wellbeing this paper introduces status seeking preferences in the form of rank dependent utility functions into a moral hazard framework with one firm and multiple workers but no correlation in production we show that workers concern for the rank of their wage in the firm s wage distribution induces the firm to offer discriminatory wage contracts when its aim is to induce all workers to expend effort

interdependent preferences and the competitive wage structure this article shows by example that when workers care about relative income and are free to choose their coworkers the equilibrium distribution of wages within firms must be less dispersed than the corresponding distribution of marginal products an implicit market for within firm status is shown to produce welfare gains by sorting workers among firms in accordance with how much they are willing to pay for high rank the resulting equilibrium pareto dominates allocations in which each worker is paid his marginal product

social welfare effects of removing multiple exchange rates evidence from the rice trade in iran in order to encourage the involvement of the private sector in importing rice the iranian government plans to relax the system of multiple foreign exchange rates applied to importers wishing to supply the domestic market in this article the welfare effects of removing the current controls on the rice trade and a domestic rice coupon program are evaluated by applying a partial equilibrium analysis to 1961 1999 data the results show that as far as foreign exchange is concerned liberalization of the rice market causes an increase in rice imports mainly due to a decrease in domestic supply in welfare terms the loss in producer surplus from rice market liberalization is relatively high but most rice consumers and the iranian taxpayer would gain overall gains to consumers and taxpayers are estimated to be higher than the losses incurred by domestic suppliers and therefore net social welfare at national level can be improved by rice market liberalization in iran issues for further discussion include residual food security roles for the state and supply side adjustments in terms of resource use and higher quality production

institutional and legal context in natural experiments the case of state antitakeover laws we argue and demonstrate empirically that a firm s institutional and legal context has first order effects in tests that use state antitakeover laws for identification a priori the size and direction of a law s effect on a firm s takeover protection depends on i other state antitakeover laws ii preexisting firm level takeover defenses and iii the legal regime as reflected by important court decisions in addition iv state antitakeover laws are not exogenous for many easily identifiable firms we show that the inferences from nine prior studies related to nine different outcome variables change substantially when we include controls for these considerations

exchange rate misalignment and growth old and new econometric evidence several studies have tried to identify the relationship between growth and misaligned or overvalued currencies many works easterly 2001 and fajnzylber et alii 2002 find negative correlations between exchange rate misalignment and growth for a long list of developing countries since the seventies the more overvalued the currency the smaller the per capita growth rates even after controlling the regressions for several types of variables the studies cannot reject the statistical significance of overvalued exchange rates in explaining growth this paper presents new econometric evidence for the exchange rate levels and growth relation based on a panel data study for 58 developing countries from 1960 until 1999 using ppp deviation measures our main contribution here is to estimate growth regressions with a real exchange rate index that deals with changes in real gdp per capita levels we use a new overvaluation index that takes into account variations in real per capita incomes adjusting thus our exchange rate estimates for the so called balassa samuelson effect by correcting traditional real exchange rate annual estimates for gdp per capita increases we intend to control our whole series for appreciations due to productivity increases as many authors do for some specific years

adjustment policies and economic development the principal objective of the international monetary fund imf as defined by its articles of agreement is the correction of balance of payments disequilibrium in member countries the policies the imf recommends to reduce the degree and duration of external and internal imbalances that give rise to balance of payments difficulties must however be set within the context of achieving and maintaining price stability and satisfactory rates of economic growth in analyzing imf policies designed to achieve these multiple objectives it is useful first to consider the circumstances in which the imf is

social network structure and status competition in status competition studies the utility of heterogeneous individuals typically depends on an economy wide average indicator of status in our model emulative and jealous agents are embedded in an exogenous network where agent specific reference group is determined by the direct link emanating from the agent similarly to ghiglino and goyal 2010 but in a somewhat different framework we show that individual consumption is proportional to the agent s outbound katz bonacich network centrality measure and equilibrium is generally inefficient more important the negative externality associated with each agent depends on her inbound centrality measure the conspicuousness index a tax based on this index combined with a uniform lump sum transfer attains efficiency

macroeconomic stability investment and growth in developing countries abstract it is widely hypothesised that sound macroeconomic policies promote growth by providing a more secure environment for private sector investment decisions this proposition is tested for a cross section of developing countries over the period 1980 1990 using a variety of measures of the quality of macroeconomic management the evidence suggests that good macroeconomic management is associated with faster growth for a given rate of investment it is less clear that the volume of investment is significantly affected there is little evidence of non linearities the results are robust to an extension of the data period back to 1972

foreign debt instability an analysis of national saving and domestic investment responses to foreign debt accumulation in 28 developing countries abstract i specify and estimate a foreign debt model that exploits the balance of payments identity current account national saving domestic investment foreign debt can affect both saving and investment behavior in this model if an increase in foreigndebt reduces investment by more than it reduces saving or raises investment by less than it raises saving the current account will eventually be brought into a steady state equilibrium with a sustainable ratio of foreign debt to gnp in such case the debt crisis is more illusory than real for the country sample analyzed here however the buildup of government and government guaranteed foreign debt appears to have produced perverse private sector responses an increase in this type of foreign debt reduces saving by more than it reduces investment hence the current account deficit worsens over time as such foreign debt accumulates dynamic simulations identify only government policy that it raises national saving as an effective way of improving the current account the consequent real depreciation in the exchange rate may increase exporrts and reduce imports sufficiently to cause a current account surplus surprisingly export promotion policies alone seem unlikely to produce any substantial improvement in the current account

balance of power and the propensity of conflict we study the role of an imbalance in fighting strengths when players bargain in the shadow of conflict our experimental results suggest in a simple bargaining game with an exogenous mediation proposal the likelihood of conflict is independent of the balance of power if bargaining involves endogenous demand choices however the likelihood of conflict is higher if power is more imbalanced even though endogenous bargaining outcomes reflect the players unequal fighting strengths strategic uncertainty causes outcomes to be most efficient when power is balanced in turn the importance of exogenous mediation proposals depends on the balance of power

employee stock option exercises an empirical analysis this paper describes the exercise behavior of over 50 000 employees who hold longterm options on employer stock at eight corporations employees typically exercise options years before expiration commonly sacrificing half of the black scholes value exercise is strongly associated with recent stock price movements the market to strike ratio proximity to vesting dates time to maturity volatility and the employee s level within the company these findings have implications for compensation planners the fasb as it develops a new accounting standard for options and financial statement users and preparers who apply and interpret the new fasb standard

social interactions and habit formation in a model of female labour supply this paper investigates the influence of habit formation and preference interdependence on labour supply behaviour of married females a novelty of the paper is that we incorporate direct survey information on reference groups of individuals in a neoclassical labour supply model for that purpose we first estimate a latent variables model relating the direct information to the true but unobserved reference groups one of the most interesting features of the model is that the presence of young children becomes an insignificant factor in the hours equation while it remains a significant factor in the participation decision in addition the labour supply curve is much flatter in a model with habit formation and preference interdependence than in a model without it both habit formation and preference interdependence contribute significantly to the explanation of female labour supply 1998 elsevier science s a all rights reserved

explaining african economic performance africa has had slow growth and a massive exodus of capital in many respects it has been the most capital hostile region we review and interpret the aggregate level and microeconomic literatures to identify the key explanations for this performance there is a reasonable correspondence of the two sets of evidence pointing to four factors as being important these are a lack of openness to international trade a high risk environment a low level of social capital and poor infrastructure these problems are to a substantial extent attributable to government behaviour and the paper includes a review of the political economy literature which addresses that behaviour

aid real exchange rate misalignment and economic growth in sub saharan africa generating sustained growth in sub saharan africa is one of the most pressing challenges in global development as the region needs foreign assistance to jump start its development foreign aid becomes crucial however aid booms can also lead to exchange rate overvaluation curtailing exports and growth this paper provides new evidence on the impact of aid and overvaluation on growth and exports using a sample of 83 countries from 1970 to 2004 we find that aid fosters growth with decreasing returns but induces overvaluation overvaluation reduces growth but the effect is ameliorated by financial development finally we find new evidence on the negative impact of overvaluation on export diversification and sophistication

signalling inequality and the social structure this paper proposes a theory of endogenous transmission of social status through signalling in the labour market a signalling game is analysed in which education acting as a signalling good determines one s position in society the economy s degree of inequality is shown to be a determinant of whether a society is aristocratic where high income is the source of social standing or meritocratic bestowing status on high ability each social structure shows a different balance between production efficiency and social factors such as equality or mobility

a signaling explanation for charity this article examines a novel but plausible motive for charitable giving charitable donations which are observable can signal wealth or income the signaling equilibrium of charitable donations has attractive properties donations increase proportionally with population size governmental funding for public goods affects private charity only through an income effect crowding out need not be complete income redistribution is generically nonneutral increasing the spread between the poorest and richest person in a community tends to increase private donations our theory are based on the assumption that people are willing to make charitable donations even if they will not increase provision of the public good the data on charitable giving support the hypothesis that donors donate at least partly for signaling purposes rather than only to aid the recipient or to obtain satisfactions unrelated to status though charitable organizations usually report donations within categories thus not allowing perfect revelation for analytical tractability we shall consider an equilibrium with perfect revelation and a continuum of types as characterized in george j mailath 1987 and norman j ireland 1994

staggered boards corporate opacity and firm value abstract we explore the effect of corporate opacity on the relation between staggered boards and firm value we find that through mitigating takeover pressure staggered boards become increasingly beneficial to firm value as opacity increases in addition we document that staggered boards reduce value only in transparent firms additional tests indicate that as opacity increases staggered boards bear an increasingly positive relation to research and development and ceo pay performance sensitivity taken together these results suggest that corporate opacity affects the value impact of takeover protection

incentive policies and export performance in sub saharan africa abstract the paper presents the results of an econometric investigation which shows that exports in general and agricultural exports in particular are responsive to price incentives in sub saharan africa it is further shown that within sub saharan africa market oriented countries generally gained and interventionist countries lost export market shares the differences in export performance are even greater if comparisons are made between private market economies and etatist countries in a three fold classification scheme that puts some countries in an intermediate category

individual well being in a dynamic perspective this paper explores the determinants of individual well being as measured by self reported levels of satisfaction with income making full use of the panel data nature of the german socio economic panel we provide empirical evidence for well being depending on absolute and on relative levels of income in a dynamic framework this finding holds after controlling for other influential factors in a multivariate setting the main novelty of the paper is the consideration of dynamic aspects individual s own history as well as the relative income performance with respect to the others living in the society under analysis do play a major role in the assessment of well being

relative wage positions and quit behavior evidence from linked employer employee data the authors analyze the importance of relative wage positions within firms in western germany in the context of individual quit decisions as an inverse measure of job satisfaction using a linked employer employee data set liab for the years 1996 2005 whose sample consists of full time male prime age workers in western germany without college degrees they ascertain whether workers find status or signal effects stronger motivators for quit decisions they find that workers with higher relative wage positions within their firms are on average more likely to quit their jobs than those with lower relative wage positions and that workers who experience a loss in their relative wage positions are also more likely to accept a wage cut associated with their job transition overall results suggest that a signal effect is on average stronger than a status effect

currency misalignments and growth a new look using nonlinear panel data methods the aim of this article is to investigate the link between currency misalignments and economic growth relying on panel cointegration techniques we calculate real exchange rate rer misalignments as deviations of actual rers from their equilibrium values for a set of advanced and emerging economies estimating panel smooth transition regression pstr models we show that rer misalignments have a differentiated impact on economic growth depending on their sign whereas overvaluations negatively affect economic growth rer undervaluations significantly enhance it this result indicates that undervaluations may drive the exchange rate to a level that encourages exports and promotes growth

on the economic architecture of the workplace repercussions of social comparisons among heterogeneous workers we analyze the impact on a firm s profits and optimal wage rates and on the distribution of workers earnings when workers compare their earnings with those of coworkers we consider a low productivity worker who receives lower wage earnings than a high productivity worker when the low productivity worker derives dis utility not only from his own effort but also from comparing his earnings with those of the high productivity worker his response to the sensing of relative deprivation is to increase the optimal level of effort consequently the firm s profits are higher its wage rates remain unchanged and the distribution of earnings is compressed

organizational structure redistribution and the endogeneity of cost cooperatives investor owned firms and the cost of procurement abstract as an organizational type cooperatives are in general not the dominant form of enterprise nevertheless cooperatives and cooperative like organizations do play important roles in a number of sectors suggesting that in some circumstances they are more efficient than other business forms this paper explores the importance of membership goals on the relative efficiency of the cooperative form of organization the cooperative cost and hence production efficiency advantage is directly linked to the goal alignment between the cooperative and its members and is influenced by the extent of income redistribution between members and the degree of rent seeking that takes place in the organization when there is no aversion to income inequality the members produce at their first best levels however as aversion to inequality rises the production profile of the members converges to the production profile generated when the members face an iof regarding rent seeking if the more less efficient members are able to get their profits valued more total output is increased decreased as a consequence consumers may benefit from the lobbying that occurs inside a cooperative where the powerful members are the most efficient agents

are workers paid their marginal products status is like coase s social costs a reciprocal phenomenon given that one person s gain in status can occur only at the expense of a loss in status for others and that workers are free to choose their coworkers it follows that the competitive wage structure within a firm must be one in which individual wage differences understate individual differences in marginal products the purpose of this paper is to examine a variety of empirical evidence that relates to this proposition about the firm s internal wage structure the paper is organized as follows section i briefly summarizes the theoretical considerations that govern competitive wage determination when status matters to people and firms are viewed as voluntary associations of workers section ii then confronts the predictions of section i by examining pay and productivity schedules for a group of sales occupations for which these schedules are relatively easily observed section ii also examines the relationship between wages and productivity for a sample of university professors an occupation in which individual productivity differences are for a variety of obvious reasons relatively more difficult to measure all of the evidence examined is consistent with the hypothesis that within firms wage rates vary substantially less than do individual productivity values section iii discusses additional observations and evidence that bear on this same hypothesis it suggests that the implicit market for status may strongly influence the ways in which firms are organized to carry out the tasks they perform section iv concludes by considering the claim that egalitarian internal wage structures arise because of equity considerations it argues that the concept of equity appears very closely linked to the concept of status and suggests a strategy for assigning monetaty value to the equity considerations that so often dominate public policy decisions

the impact of terms of trade and real exchange rate volatility on investment and growth in sub saharan africa abstract specialization in primary product exports reduces growth but why adverse trends in and the high variance of primary product prices are possible explanations the impact on investment and growth of the level and volatility of the terms of trade and the real effective exchange rate is estimated for a panel of 14 sub saharan african countries over 1980 1995 growth is negatively affected by terms of trade instability and investment by real exchange rate instability both growth and investment increase when the terms of trade improve and real exchange rate overvaluation is eliminated

the effects of exchange rate volatility on exports some new estimates investigations of the impact of exchange rate volatility on exports have not allowed for the integrated non stationary of the variables employed in estimation the results reported in this note are suggestive that in the context of an error correction framework real exchange rate volatility has a significant impact on exports

negotiated block trades and corporate control we identify negotiated trades of large percentage blocks of stock as corporate control transactions when a block trades and the firm is not fully acquired cumulative abnormal returns average 5 6 and 33 of the chief executives are replaced within a year stock price increases are larger when control passes to the new blockholder when management does not resist the blockholder s effort to influence corporate policy and when the block purchaser eventually fully acquires the firm these findings suggest that the specific skills and expertise of blockholders and not just the concentration of ownership are important determinants of firm value we examine 106 negotiated trades of at least 5 of the common stock of new york stock exchange nyse and american stock exchange amex listed corporations our primary objective is to assess the impact of these transactions on the firms whose shares are traded we also investigate the importance of active block investor s specific managerial expertise and incentives for firm value the emerging literature on concentrated ownership focuses on how the level of ownership affects a blockholder s incentives to undertake a variety of corporate decisions although it has been recognized that a blockholder s identity also can be important less attention has been paid to this issue several recent studies however provide evidence that blockholders incentives and expertise are not homogeneous for example holderness and sheehan 1985 find that the stock market reacts more favorably to initial block accumulations by six controversial investors who are often portrayed in the press as raiders than to initial accumulations by a random sample of investors morck shleifer and vishny 1988 find that firm value tends to be lower when the firm is run by a member of the founder s family than when it is run by an officer unrelated to the founder brickley lease and smith 1988 document that institutional blockholders are less willing to vote against management on antitakeover amendments when they are likely to have business dealings with the firm when a block trades the concentration of ownership typically does not change but the blockholder s identity does

the short run relation between growth and inflation in latin america reply sebastian edwards uses a new unexpected money variable based on the addition of the contemporaneous fiscal deficit to my autoregressive money growth equations to argue that 1 in brazil and chile there is no significant relationship between unexpected money growth and output growth 2 unexpected money growth has different estimated effects on output in colombia peru and mexico and these effects substantially exceed those estimated in brazil and chile and 3 thus my 10 percent rule for the effect of unexpected money growth on output growth does not hold in addition edwards incorporates the terms of trade in his output equations and finds they are important in the case of chile and mexico finally edwards takes issue with my use of lagged inflation to explain output edwards and i use somewhat different data not only in terms of sources but also edwards often uses m2 rather than ml in reporting his best results however edwards and my basic results are broadly similar compare his table 1 and my original tables 1 and 4 this is encouraging and in general makes it seem not worth quibbling over the differences in data however there is one difference which affects the results that i will discuss later the inclusion of the fiscal deficit in the money growth equation is a key difference in our work as i pointed out in my earlier article fiscal and monetary policy often are closely related in latin america thus it is not surprising that edwards finds the deficit divided by lagged money is a significant factor in explaining money growth however the point is not to explain money growth but to estimate a relationship which the public could have been using to predict how much money and thus nominal aggregate demand has grown since the last observation on the money stock 2 it strains credulity to assume that in latin america the budget deficit could be used by the public to estimate money growth contemporaneously data on the cash deficit usually are available publicly only with a long lag moreover many alternative versions of a deficit involving creative accounting methods are reported for example for many years in colombia the reported deficit which is available with about a one quarter lag treated both the unspent portion of the budget and the accounting profits from the revaluation of the local currency value of exchange reserves as income procedures which caused great confusion inside as well as outside the government despite such problems the cash deficit still might be useful as a monetary growth predictor for example it may be correlated with some other easily available contemporaneous indicator of money growth however its usefulness can best be judged from a comparison of the results when the deficit is used only as the money growth predictor to determine unexpected money a constrained equation with those obtained when it is used as an additional independent variable an unconstrained equation a test robert barro has suggested in another context world bank the views and interpretations expressed in this article are my own and should not be attributed to the world bank its affiliated organizations or to any individual acting in their behalf edwards also uses the seemingly unrelated regression technique to take into account possible interrelationships in the error terms across countries judging from the reported t statistics this procedure did not improve the fits greatly 2surprisingly the deficit is not significant in explaining domestic credit in mexico this result and the estimated negative relationship between edwards domestic credit series and output suggest a problem in the domestic credit variable

growth and exchange rate volatility a panel data analysis the aim of this article is to assess the role of real exchange rate rer volatility on long run economic growth for a set of 82 advanced and emerging economies using a panel data set ranging from 1970 to 2009 with an accurate measure for exchange rate volatility the results for the two step system generalized method of moments gmm panel growth models show that a more less volatile rer has a significant negative positive impact on economic growth the results are also robust for different model specifications

relative standing comparisons risk taking and safety regulations abstract we study the question of how relative standing comparisons or status seeking influence risk taking when utility is separable in consumption and status the following results apply with non systematic risks more concern for status leads to more less risk taking when in a sense made precise in the paper the utility function is less more concave in status than in pure consumption with systematic risk risk taking always increases with the concern for status however status seeking always implies socially excessive risk taking thus suggesting a role for public regulation of risky choices

the real exchange rate and macroeconomic performance in sub saharan africa abstract pooled time series and cross section data for 33 countries in sub saharan africa ssa confirm the negative relationship between the real exchange rate rer misalignment and economic performance economic growth imports exports saving and investment macroeconomic instability also slows growth and other indicators of performance higher levels of misalignment are accompanied by higher levels of macroeconomic instability both lower levels of rer misalignment and instability lead to better economic performance the edwards model of rer determination performs well for the region black market premia tend to show a greater degree of misalignment in rer than alternative measures

the effect of poison pill securities on shareholder wealth abstract this paper examines empirical evidence about the effect of poison pill takeover defenses on shareholder wealth i find evidence that announcements of the most restrictive forms of the pill defense are associated with stock price declines also the most restrictive forms of the pill defense are associated with abnormally high rates of defeat of unsolicited tender offers although this evidence is consistent with managerial entrenchment the evidence implies that on average poison pill defenses have seemingly had only a modest effect on firm valuation

on the accuracy of economic observations do sub saharan trade statistics mean anything matching exporters freight on board fob trade statistics with the corresponding importers cost inventory and freight cif data this paper studies the quality of official information on trade between 36 african countries the author found the disparities in data so great as to make the official trade statistics almost useless for most empirical and policy studies he concluded that a statistics on matching exports and imports vary so much that the data cannot be used to assess the level of trade between african countries b the data are probably equally useless for assessing the direction of trade since the countries that exporters report as the destination of trade often fail to report corresponding imports c the data are inadequate for determining the composition of trade because countries report on different levels of detail and d large persistent apparent differences in trends in intra african trade may simply reflect different degrees of accuracy in country trade data finally the fact that reported fob exports often exceed the corresponding reported imports suggests either that smuggling is widespread or that importers are intentionally underinvoicing because of high african tariffs or quotas

identifying control motives in managerial ownership evidence from antitakeover legislation this study uses the introduction of second generation antitakeover legislation as a natural experimental setting to infer the value that managers place on the control rights conferred by stock ownership we conjecture that managers will reduce their stockholdings in the post legislation period because they can ensure their prior level of control while holding fewer risky shares using a variety of specifications we find robust evidence consistent with this revealed preference hypothesis further demonstrating the key role played by control considerations in managers stockholding decisions the reductions in ownership are concentrated in management teams with higher levels of initial ownership and in firms without poison pills

structural determinants of real exchange rates and national price levels some empirical evidence contrary to the long held notion of purchasing power parity ppp economists have found systematic evidence that the general level of prices across countries at a point in time varies dramatically irving b kravis alan w heston and robert summers 1982 for example report that some countries national price levels are no more than one third the u s price level extensions of this work show that such departures from ppp have persisted for decades recently efforts have been made to explain systematically these persistent or structural departures from ppp pioneering work by kravis and robert e lipsey 1983 1987 1988 has demonstrated that a positive correlation between the price level and real per capita gross domestic product is robust across numerous cross sectional specifications for instance using data from kravis et al 1982 table 6 12 87 percent of the variation in national price levels pl of 21 countries in 1975 is explained by per capita gdp y and a constant

real exchange rate behavior and economic performance in ldcs in recent years policy discussions have included increasing references to real exchange rate rer stability and correct exchange rate alignment as crucial conditions to improve economic performance in less developed countries ldcs 1 evidence from latin american asian and african countries is often quoted to support the view that the link between rer behavior and economic performance is strong it is argued that while unstable rers inhibited export growth in some of latin america their stability was fundamental in promoting east asian expansion in many african countries on the other hand persistently misaligned local currencies harmed the development of agriculture reducing domestic food supply 2 but in spite of its importance no empirical work has been attempted either to test the relationship between rer behavior and performance indicators at a broad multicountry level or to investigate the sources of rer variability and misalignment in ldcs the theoretical literature on rer determinants has been recently surveyed by sebastian edwards 3 he distinguishes between equilibrium and disequilibrium rers and between external and domestic rer determinants although domestic policies are often said to account for significant rer variations empirical work has only concentrated on the effect of nominal devaluations4 or speculative crises arising from expansionary monetary policies in a system of fixed ex

assessing the economic vulnerability of small island developing states and the least developed countries macro vulnerability of the small island developing states sids as well as of least developed countries ldcs has been an increasing concern for the international community this has led to the design of an economic vulnerability index evi to assess the structural economic vulnerability resulting from natural or external shocks we first explain how vulnerability affects growth development and poverty reduction particularly in small developing countries we then examine how the evi has been designed and how it can be used to compare sids and ldcs we argue that evi is a relevant tool not only for identification of ldcs but also for geographical aid allocation to favour vulnerable countries including ldcs and sids even though not all sids qualify as ldcs

social preferences and strategic uncertainty an experiment on markets and contracts this paper reports experimental evidence on a stylized labor market the experiment is designed as a sequence of three phases in the first two phases p1 and p2 agents face simple games which we use to estimate subjects social and reciprocity concerns together with their beliefs in the last phase p3 four principals who face four teams of two agents compete by offering agents a contract from a fixed menu then each agent selects one of the available contracts i e he chooses to work for a principal production is determined by the outcome of a simple effort game induced by the chosen contract we find that heterogeneous social preferences are significant determinants of choices in all phases of the experiment since the available contracts display a trade off between fairness and strategic uncertainty we observe that the latter is a much stronger determinant of choices for both principals and agents finally we also see that social preferences explain to a large extent matching between principals and agents since agents display a marked propensity to work for principals with similar social preferences

enjoying the quiet life corporate governance and managerial preferences much of our understanding of corporations builds on the idea that managers when they are not closely monitored will pursue goals that are not in shareholders interests but what goals would managers pursue this paper uses variation in corporate governance generated by state adoption of antitakeover laws to empirically map out managerial preferences we use plant level data and exploit a unique feature of corporate law that allows us to deal with possible biases associated with the timing of the laws we find that when managers are insulated from takeovers worker wages especially those of white collar workers rise the destruction of old plants falls but the creation of new plants also falls finally overall productivity and profitability decline in response to these laws our results suggest that active empire building may not be the norm and that managers may instead prefer to enjoy the quiet life

labor market signaling and self confidence wage compression and the gender pay gap i extend spence s signaling model by assuming that some workers are overconfident they underestimate their marginal cost of acquiring education and some are underconfident firms cannot observe workers productive abilities and beliefs but know the fractions of high ability overconfident and underconfident workers i find that biased beliefs lower the wage spread and compress the wages of unbiased workers i show that gender differences in self confidence can contribute to the gender pay gap if education raises productivity men are overconfident and women underconfident then women will on average earn less than men finally i show that biased beliefs can improve welfare