measuring and improving the performance of customs valuation controls an illustration with gabon modern customs administrations aim to both facilitate legal trade and combat fraud to meet this dual objective many customs administrations in developing countries must give risk management a highly prominent role in this context of modernisation this paper first provides stylised facts on the performance of the customs controls carried out at the gabon border then we compare gabon s granular import customs data with international trade statistics based on this comparison we identify undetected fraud and present a methodology to target ex post audits finally we define indicators to monitor the performance of customs valuation controls

the thrill of victory measuring the incentive to win there is ample evidence that incentive pay structures such as tournaments result in increased performance is this due to selection or increased individual effort and is any increased individual effort caused by pecuniary incentives or merely thirst for the thrill of victory tov prior literature has not separated the different effects we look at performance in horse and dog racing and find that only horses controlled by jockeys during the race exhibit performance corresponding to pecuniary incentives while both respond to selection and tov the results show that pay structures do matter

energy inflation and house price corrections we analyze empirically the role played by energy inflation as a determinant of downward corrections in house prices using a dataset for 18 oecd economies spanning the last four decades we identify periods of downward house price adjustment and estimate conditional logit models to measure the effect of energy inflation on the probability of these house price corrections after controlling for other relevant macroeconomic variables our results give strong evidence that increases in energy price inflation raise the probability of such corrective periods taking place this phenomenon could be explained by various channels through the adverse effects of energy prices on economic activity and income reducing the demand for housing through the particular impact on construction and operation costs and their effects on the supply and demand of housing through the reaction of monetary policy on inflation withdrawing liquidity and further reducing demand through improving attractiveness of commodity versus housing investment on asset markets or through a lagging impact of common factors on both variables such as economic growth our results contribute to the understanding of the pass through of oil price shocks to financial markets and imply that energy price inflation should serve as a leading indicator for the analysis of macro financial risks

tariff evasion and rules of origin violations under the canada u s free trade agreement using product level data on trade between canada and the u s this paper presents evidence of tariff evasion and violation of the rules of origin occurring under the canada u s free trade agreement cusfta it shows that more imports go unreported at the destination country when tariffs are higher consistent with the tariff evasion hypothesis this result implies that the trade creation effect of a free trade agreement may in fact be due to less underreporting further this paper shows that the larger canadian tariff preference margin for the u s is associated with more goods originating in third countries being transshipped through the u s territory for re export the preference margin is also positively correlated with the value of excess imports from the u s which qualify for preferential treatment both results suggest the presence of persistent violations of cusfta s rules of origin a l aide de donnees au niveau des produits sur les flux de commerce entre le canada et les etats unis on montre qu il y a evitement de tarif et violation des regles d origine dans les operations de l accord de libre echange canada etats unis on montre que davantage d importations ne sont pas declarees au point de destination quand les tarifs sont eleves dans l esprit meme de l hypothese d evitement de tarif ce resultat implique que l effet de creation de commerce d un accord de libre echange peut en fait etre attribuable a moins de sous declaration de plus le texte montre que les plus grandes marges preferentielles des tarifs avec les etats unis sont associees a davantage de biens en provenance de tiers pays et convoyes a travers le territoire americain pour re exportation la marge preferentielle est aussi positivement co reliee avec la valeur des importations excedentaires en provenance des etats unis qui se qualifient pour un traitement preferentiel ces deux ensembles de resultats suggerent la presence persistante de violations des regles d origine de l accord de libre echange canada etats unis

intertemporal substitution of effort some empirical evidence the labour economics literature refers often to effort but there is little empirical evidence as to how productivity and effort respond to wage rate variations an unusual natural experiment in which wage rates suffered an exogenous change of two weeks duration gives some insight into the magnitude of this effect for a group of workers in victorian county durham the effort response measured as the impact of a temporary wage rate change on output per shift dominates the response of attendance comparison of the estimates presented here with those in treble journal of economic history 61 414 38 2001 suggests that the effects are short lived

incentives and transactions costs within the firm estimating an agency model using payroll records we estimate an agency model using the payroll records of a copper mine that paid a production bonus to teams of workers we estimate the cost of incomplete information due to insurance and incentives considerations and the inefficiency caused by the simple form of the incentive contract itself at the estimated parameters the cost of worker risk aversion insurance is of similar magnitude to moral hazard incentives overall incomplete information accounted for one half of the bonus system s inefficiency relative to potential full information profits the other half is attributed to the bonus system s inefficient generation of incentives and insurance relative to the optimal incentive contract

quota hopping in bond diversion we show that the u s in bond system of imports may be used by firms to illegally avoid trade barriers a practice known as in bond diversion the illicit scheme involves declaring chinese exports bound for mexico but diverting them to the u s market while in transit thus creating a gap between chinese and mexican reports using the phaseout and removal of u s quotas at the end of the multifiber agreement as a policy experiment as well as variation in quota bindingness across products we show that quota bound products were associated with larger trade gaps which shrunk following the quota removals jel f13 o17 o19

non stationarities in financial time series the long range dependence and the igarch effects we give the theoretical basis of a possible explanation for two stylized facts observed in long log return series the long range dependence lrd in volatility and the integrated garch igarch both these effects can be explained theoretically if one assumes that the data are nonstationary

the boundaries of loss aversion abstract in this article the authors propose some psychological principles to describe the boundaries of loss aversion a key idea is that exchange goods that are given up as intended do not exhibit loss aversion for example the authors propose that money given up in purchases is not generally subject to loss aversion the results of several experiments provide preliminary support for the hypotheses the authors find that consistent with prospect theory loss aversion provides a complete account of risk aversion for risks with equal probability to win or lose the authors propose boundaries for this result and suggest further tests of the model

financialization in commodity markets a passing trend or the new normal abstract in this paper we show that large inflows into commodity investments a recent phenomenon known as financialization has changed the behavior and dependence structure between commodities and the general stock market the common perception is that the increase in comovements is the result of distressed investors selling both assets during the 2007 2009 financial crisis we show that financial distress alone cannot explain the size and persistence of comovements instead we argue that commodities have become an investment style for institutional investors given that institutional investors continue to target funds into commodities we predict spillovers between commodities and the stock market to remain high in the future

the effect of wage subsidies on piece rate workers evidence from the penny per pound program in florida abstract this paper studies a fair trade program in which consumers provide a wage subsidy bonus to piece rate tomato pickers the total subsidy determined by sales to participating buyers is divided among workers based on their relative output a worker who produces more gets a larger share of the bonus although seemingly mimicking the existing piece rate pay scheme the mechanism associated with the bonus payment is really a relative performance evaluation as the size of total bonus is exogenous and invariant to workers effort therefore for a given sized subsidy the combined total or per worker average utility gains would become the largest if the workers keep their efforts at the pre program level empirical analysis shows that worker effort and hence productivity increases substantially in response to the program suggesting that currently workers combined gains per dollar of subsidy are not being maximized

a probabilistic choice model for market segmentation and elasticity structure marketing scholars commonly characterize market structure by studying the patterns of substitution implied by brand switching though the approach is useful it typically ignores the destabilizing

the response of worker effort to piece rates we measure the elasticity of worker effort with respect to changes in the piece rate using panel data collected from the payroll records of a british columbia tree planting firm our data contain information on daily worker productivity and the piece rate received over a five month period using a structural model to control for the endogeneity of the piece rate we estimate this elasticity to be approximately 2 14 we also calculate a nonstructural lower bound to this elasticity equal to 0 77 structural estimation also allows us to perform policy experiments and to compare firm profits under alternative compensation systems our results suggest that profits would increase by at least 17 percent were the firm to implement the optimal static contract as predicted by principal agent theory this increase in profits would be due to capturing worker rents after the revelation of private information over ability yet only a negligible proportion of these rents could be captured while inducing workers to reveal ability truthfully suggesting that dynamic considerations were important in determining the firm s actual choice of contract

the behavioralist visits the factory increasing productivity using simple framing manipulations recent discoveries in behavioral economics have led to important new insights concerning what can happen in markets such gains in knowledge have come primarily via laboratory experiments a missing piece of the puzzle in many cases is parallel evidence drawn from naturally occurring field counterparts we provide a small movement in this direction by taking advantage of a unique opportunity to work with a chinese high tech manufacturing facility our study revolves around using insights gained from one of the most influential lines of behavioral research framing manipulations in an attempt to increase worker productivity in the facility using a natural field experiment we report several insights for example conditional incentives framed as both losses and gains increase productivity for both individuals and teams in addition teams more acutely respond to bonuses posed as losses than as comparable bonuses posed as gains the magnitude of this framing effect is roughly 1 that is total team productivity is enhanced by 1 purely due to the framing manipulation importantly we find that neither the framing nor the incentive effect lose their significance over time rather the effects are observed over the entire sample period moreover we learn that repeated interaction with workers and conditionality of the bonus contract are substitutes for sustenance of incentive effects in the long run this paper was accepted by gerard p cachon decision analysis

compensation policy and worker performance identifying incentive effects from field experiments the role of field experiments in evaluating the effect of compensation policies on worker productivity is considered particular attention is paid to the ability of a field experiment to identify the effect of a permanent change in firm policy while field experiments solve endogeneity problems through randomization they do so within a specific and at times artificial environment that may not be replicated by a permanent policy change as such rather than providing a basis for the unrestricted identification of incentive effects experiments are better thought of as providing exogenous variation with which to identify structural parameters these parameters can in turn be used to predict the effects of policy changes jel j3 l2 c9

how many pears would a pear packer pack if a pear packer could pack pears at quasi exogenously varying piece rates abstract we examine labor supply using a unique dataset collected from a large pear packing factory pear packers face both expected and unexpected shocks to their wages and we use this to evaluate different models of inter temporal labor supply we find strong evidence for reference dependent preferences but only mixed support for models of rational expectations based targets

the economic significance of national border effects to address the economic significance of national border effects this paper provides evidence on two fundamental questions 1 do large border effects arise because of high perceived price wedges between foreign and domestic products or because imports and domestic goods are very close substitutes and 2 if price wedges are important do they reflect distortionary barriers to trade or do they arise from nondistortionary factors such as differences in transactions costs or product characteristics i conclude that while border effects may imply barriers welfare costs and a role for policy distortions are probably not as substantial as initial border results suggested jel f1

corruption trade costs and gains from tariff liberalization evidence from southern africa this paper exploits quasi experimental variation in tariffs in southern africa to estimate trade elasticities traded quantities respond only weakly to a 30 percent reduction in the average nominal tariff rate trade flow data combined with primary data on firm behavior and bribe payments suggest that corruption is a potential explanation for the observed low elasticities in contexts of pervasive corruption even small bribes can significantly reduce tariffs making tariff liberalization schemes less likely to affect the extensive and the intensive margins of firms import behavior the tariff liberalization scheme is however still associated with improved incentives to accurately report quantities of imported goods and with a significant reduction in bribe transfers from importers to public officials

high yield bond and energy markets abstract high yield bonds hold a particularly unique space in the debt market from many aspects literature suggests these assets to behave more like stocks than bonds given the significant similarities between the high yield bond and stock markets it is expected for these markets to be similarly affected by certain outside factors some shocks including the ones from energy markets are known to impact the entire stock market and not just related company shares since high yield bond portfolios include some amount of energy company debt the recent volatility in energy prices has been particularly concerning to market participants however the question of whether price and volatility shocks only impact energy company bonds or the entire high yield bond market as they do with the stock market still remains unanswered this study attempts to address that question by exploring the dynamic relationships between the high yield bond and energy markets price transmission tests which account for gradual structural shifts suggest oil and ethanol markets significantly impacting the high yield bond market furthermore volatility tests find uni directional volatility transmitting from energy markets to the high yield bond market

do competitive workplaces deter female workers a large scale natural field experiment on job entry decisions an important line of research using laboratory experiments has provided a new potential reason for gender imbalances in labour markets men are more competitively inclined than women whether and to what extent gender differences in attitudes toward competition lead to differences in naturally occurring labour markets remains an open question to examine this we run a natural field experiment on job entry decisions where we randomize almost 9000 job seekers into different compensation regimes by varying the role that individual competition plays in setting the wage and the gender composition we examine whether a competitive compensation regime by itself can cause differential job entry the data highlight the power of the compensation regime in that women disproportionately shy away from competitive work settings yet there are important factors that attenuate the gender differences including whether the job is performed in teams whether the position has overt gender associations and the age of the job seekers we also find that the effect is most pronounced in labour markets with attractive alternative employment options furthermore our results suggest that preferences over uncertainty can be just as important as preferences over competition per se in driving job entry choices

nonstationarities in stock returns the paper outlines a methodology for analyzing daily stock returns that relinquishes the assumption of global stationarity giving up this common working hypothesis reflects our belief that fundamental features of the financial markets are continuously and significantly changing our approach approximates the nonstationary data locally by stationary models the methodology is applied to the s p 500 series of returns covering a period of over seventy years of market activity we find most of the dynamics of this time series to be concentrated in shifts of the unconditional variance the forecasts based on our nonstationary unconditional modeling were found to be superior to those obtained in a stationary long memory framework and to those based on a stationary garch 1 1 data generating process

high powered performance pay and crowding out of nonmonetary motives a previous literature cautions that paying workers for performance might crowd out nonmonetary motives to work hard empirical evidence from the field however has been based on between subjects designs that are best suited for detecting crowding out due to low powered incentives high powered incentives in the workplace tend to increase output but it is unknown whether this masks crowding out this paper uses a within subject experimental design and finds evidence that crowding out also extends to high powered incentives in a real work setting with paid workers there is individual heterogeneity however with a minority of workers reporting crowding in of motivation thus the impact of performance pay might depend on the mix of worker types data and the online appendix are available at https doi org 10 1287 mnsc 2017 2846 this paper was accepted by uri gneezy behavioral economics

incentives versus reciprocity insights from a field experiment abstractthe authors conduct a field experiment in which they vary the sales force compensation scheme at an asian enterprise that sells consumer durable goods with variation generated by the experimental treatments the authors model sales force performance to identify the effectiveness of various forms of conditional and unconditional compensation they account for salesperson heterogeneity using a hierarchical bayesian framework to estimate the model they find conditional compensation in the form of quota bonus incentives to improve performance however such compensation may lead to lower future performance the authors find little difference in effectiveness between a quota bonus plan and punitive bonus plans framed as a penalty for not achieving quota they find that unconditional compensation in the form of reciprocity is effective at improving sales force performance only when it is given as a delayed reward however the effectiveness of this plan decreases with repeated exposure the authors

modelling oil price volatility with structural breaks in this paper we provide two main innovations i we analyze oil prices of two prominent markets namely west texas intermediate wti and brent using the two recently developed tests by narayan and popp 2010 and liu and narayan 2010 both of which allow for two structural breaks in the data series and ii the latter method is modified to include both symmetric and asymmetric volatility models we identify two structural breaks that occur in 1990 and 2008 which coincidentally correspond to the iraqi kuwait conflict and the global financial crisis respectively we find evidence of persistence and leverage effects in the oil price volatility while further extensions can be pursued the consideration of asymmetric effects as well as structural breaks should not be jettisoned when modelling oil price volatility

economic growth and energy consumption causal nexus viewed through a bootstrap rolling window one puzzling results in the literature on energy consumption economic growth causality is the variability of results particularly across sample periods sample sizes and model specification in order overcome these issues this paper analyzes the causal links between energy consumption and economic growth for g 7 countries using bootstrap granger non causality tests with fixed size rolling subsamples the data used includes annual total energy consumption and real gross domestic product gdp series from 1960 to 2006 for g 7 countries excluding germany for which the sample period starts from 1971 using the full sample bootstrap granger causality test we find that there is predictive power from energy consumption to economic growth only for canada however parameter instability tests show that none of the estimated models have constant parameters and hence the full sample results are not reliable analogous to the full sample results the results obtained from the bootstrap rolling window estimation indicate no consistent causal links between energy consumption and economic growth we however find that causal links are present between the series in various subsamples furthermore these subsample periods correspond to significant economic events indicating that the findings are not statistical artefacts but correspond to real economic changes our results encompass previous findings and offer an explanation to varying findings

the response to incentives and contractual efficiency evidence from a field experiment abstract we use data from a field experiment to estimate worker reaction to incentives and the optimality of piece rate contracts our estimate of the elasticity of output with respect to piece rates is 0 39 regression methods cannot predict performance under hypothetical contracts therefore we apply structural econometric methods without imposing profit maximization to evaluate observed contract optimality using profit as a metric we estimate the distance between observed and profit maximizing contracts to be negligible this suggests that observed contracts closely approximate optimal contracts under asymmetric information about worker ability under complete information the firm could increase expected profits by 14 percent keeping workers indifferent to the observed piece rate contract profits could increase between 44 and 49 percent if the firm exploited information about ability to reduce worker utility to the outside alternative

do household energy expenditures affect mortgage delinquency rates we postulate a direct role for energy prices in the 2008 financial crisis rising energy prices constrain consumer budgets and thereby raise mortgage delinquency rates this hypothesis is tested by estimating a quarterly cointegrating vector autoregressive cvar model that seeks to quantify the factors that influence the percentage of us mortgages that are 30 to 89 days past due and those that enter foreclosure results identify a long run relationship for the percentage of us mortgages that are 30 to 89 days past due that includes the interest rate on one year adjustable mortgages household expenditures on energy nominal home prices rates of home ownership and the fraction of mortgages 90 days or more past due that enter foreclosure unemployment rates have a short run effect together these variables account for much of the historical variation in the percentage of us mortgages that are 30 to 89 days past due and indicate that the post 2006 rise in this measure of mortgage delinquency is associated with falling home prices an increase in household expenditures on energy and rising unemployment

an econometric analysis of income tax evasion and its detection this article presents an econometric analysis of income tax evasion and its detection based on individual level data drawn from the internal revenue service 1982 and 1985 taxpayer compliance measurement programs i specify a model consisting of two equations the first measures the extent of evasion the second the fraction of evasion detected the empirical analysis explores the effects of income the marginal tax rate and various socioeconomic characteristics on filer evasion behavior and it assesses the variability in detection rates among irs examiners finally i use the empirical estimates to construct new estimates of the income tax gap the new estimates are very close to the previous irs estimates

the response of worker effort to piece rates evidence from the midwest logging industry using firm level payroll data from the midwest logging industry i compute a worker s productivity response to a change in piece rate pay an elasticity of effort using an empirical specification developed in paarsch and shearer 1999 maximum likelihood estimation of an agency based structural econometric model of worker choice yields elasticities ranging from 0 413 to 1 507 these estimates are smaller than but qualitatively similar to those reported in paarsch and shearer suggesting that their model has perhaps more general applicability than their british columbia tree planting example

do professionals choke under pressure high rewards or the threat of severe punishment provide strong motivation but also create psychological pressure which might induce performance decrements by analyzing the performance of professional football players in penalty kick situations the paper provides empirical evidence for the existence of detrimental incentive effects two pressure variables are considered in particular 1 the importance of success and 2 the presence of spectators there are plenty of situations in which pressure arises in the workplace knowing how individuals perform under pressure conditions is crucial because it has implications for the design of the workplace and the design of incentive schemes

a lagrange multiplier test for causality in variance we adapt the lagrange multiplier lm principle to test for noncausality in variance of financial returns the new test is compared with a portmanteau statistic cheung y w ng l k 1996 a causality in variance test and its application to financial market prices journal of econometrics 72 33 48 a monte carlo study reveals superior power of the lm test

do women react differently to incentives evidence from experimental data and payroll records abstract we consider the response to incentives as an explanation for observed productivity differences within a firm that paid its workers piece rates we provide a framework within which the observed productivity differences can be decomposed into two parts one due to differences in ability and the other due to differences in the response to incentives we apply this decomposition to male and female workers from a tree planting firm in british columbia canada our evidence both experimental and nonexperimental suggests that there was no difference in the reaction to incentives between male and female planters the productivity differential male planters enjoyed arose because of differences in ability interpreted as strength in our application

peers at work we study peer effects in the workplace specifically we investigate whether how and why the productivity of a worker depends on the productivity of coworkers in the same team using high frequency data on worker productivity from a large supermarket chain we find strong evidence of positive productiv ity spillovers from the introduction of highly productive personnel into a shift worker effort is positively related to the productivity of workers who see him but not workers who do not see him additionally workers respond more to the presence of coworkers with whom they frequently interact we conclude that social pressure can partially internalize free riding externalities that are built into many workplaces jel j24 l81 m54

the ratchet effect and the market for secondhand workers workers in a long term relationship often have an incentive to hide their ability early in the relationship to avoid having the firm increase the level of output expected from them in the future we show that competition for older workers will permit the implementation of efficient piece rate contracts when the difficulty of the job is unobserved by the firm gibbons 1987 has shown that all piece rate contracts will be inefficient together these results may explain why piece rates are common in some jobs such as agricultural work and sales and not as popular for many manufacturing jobs

an empirical analysis of sales force compensation plans among the array of direct and indirect methods of motivation and control available to the sales manager is sales force compensation in this article the authors summarize theoretical predictions from the economics marketing finance and accounting literatures on the structure of optimal sales force compensation plans guided by these insights they then construct empirical models to quantify the effect of various sales force factors firm and product factors and market factors on compensation using data from 286 firms in 39 industries the authors examine determinants of incentive components and total pay and the optimal horizon for incentive pay copyright 1992 by university of chicago press

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

environmental and resource economics a canadian retrospective the paper reviews research contributions to environmental and resource economics by scholars in canada we focus mainly on work from the past 25 years but also highlight earlier pathbreaking work we begin by looking at broad trends in research both internationally and within canada we then review canadian contributions to various topics in the field canadians have played a leading role in the development of the field especially in resource economics international environmental economics and the valuation of environmental amenities

racial earnings differentials and performance pay this paper presents an information model in which workers receiving output based pay experience less racial earnings discrimination than those receiving time rates and supervisory evaluations tests using the national longitudinal survey of youth reveal no racial wage differential among male workers paid output based pay while confirming a significant differential among those paid time rates in addition the racial wage differential among those receiving bonus pay usually based on supervisory evaluations tends to be larger than for those not receiving such bonuses while both racial earnings differences and payment methods have generated enormous literatures the two subjects rarely interact this paper argues that the observed racial earnings gap should be narrower among those receiving output based pay such as piece rates and commissions when discriminating in earnings the intensity of racial preferences must be greater when an owner or manager confronts a standardized measure of productivity than when effort is subjectively evaluated and those evaluations are used to set earnings more important use of a standardized measure of productivity makes the practice of discrimination more transparent and this improved information increases the probability of detection the increased probability of detection raises the expected cost of racial discrimination and should be associated with a reduction in its extent our empirical estimates confirm that output based pay is associated with reduced racial earnings discrimination

differentiated products and evasion of import tariffs emerging literature has demonstrated some unique characteristics of trade in differentiated products this paper contributes to the literature by postulating that differentiated products may be subject to greater tariff evasion due to the difficulties associated with assessing their quality and price using product level data on trade between germany and 10 eastern european countries during 1992 2003 the authors find empirical support for this hypothesis they show that the trade gap defined as the discrepancy between the value of exports reported by germany and the value of imports from germany reported by the importing country is positively related to the level of tariff in 8 out of 10 countries further the authors show that the responsiveness of the trade gap to the tariff level is greater for differentiated products than for homogeneous goods a one percentage point increase in the tariff rate is associated with a 0 6 percent increase in the trade gap in the case of homogeneous products and a 2 1 percent increase in the case of differentiated products finally the data indicate that greater tariff evasion observed for differentiated products tends to take place through misrepresentation of the import prices

productivity in piece rate labor markets evidence from rural malawi abstract piece rate compensation is a common feature of developing country labor markets but little is known about how piece rate workers respond to incentives or the tradeoffs that an employer faces when setting the terms of the contract in a field experiment in rural malawi we hired casual day laborers at piece rates and collected detailed data on the quantity and quality of their output specifically we use a simplified becker degroot marschak mechanism which provides random variation in piece rates conditional on revealed reservation rates to separately identify the effects of worker selection and incentives on output we find a positive relationship between output quantity and the piece rate and show that this is solely the result of the incentive effect not selection in addition we randomized whether workers were subject to stringent quality monitoring monitoring led to higher quality output at some cost to the quantity produced however workers do not demand higher compensation when monitored and monitoring has no measurable effect on the quality of workers willing to work under a given piece rate together the set of worker responses that we document lead the employer to prefer a contract that offers little surplus to the worker consistent with an equilibrium in which workers have little bargaining power

an analysis of the principal agent problem most analyses of the principal agent problem assume that the principal chooses an incentive scheme to maximize expected utility subject to the agent s utility being at a stationary point an important paper of mirrlees has shown that this approach is generally invalid we present an alternative procedure if the agent s preferences over income lotteries are independent of action we show that the optimal way of implementing an action by the agent can be found by solving a convex programming problem we use this to characterize the optimal incentive scheme and to analyze the determinants of the seriousness of an incentive problem

investigating consumer purchase behavior in related technology product categories we present a framework of durable goods purchasing behavior in related technology product categories that incorporates the following aspects unique to technology product purchases first it accounts for consumers anticipation of declining prices or increasing quality over time second the durable nature of technology products implies that even if two categories are related as complements consumers may stagger their purchases over several periods third the forward looking consumer decision process as well as the durable nature of technology products implies that a consumer s purchase in one category will depend on the anticipated price and quality trajectories of all categories as a potential aid to future researchers we also lay out the data requirements for empirically estimating the parameters of our model and the consequences of not having various elements of these data on our ability to estimate the parameters the data available for our empirical analysis are household level information on category level first time adoption decisions in three categories personal computers digital cameras and printers our results reveal a strong complementary relationship between the three categories policy simulations based on a temporary price decrease in any one category provide interesting insights into how consumers would modify their adoption behavior over time and also across categories as a consequence of the price decrease

us agricultural exports and labor market adjustments this study empirically investigates the impact of us agricultural exports on farm and nonfarm employment and tests how individuals adjust to agricultural export shocks based on the data from 1991 to 2017 and a bartik style instrument that exploits cross regional variation in agricultural export exposure stemming from initial differences in agricultural specialization and temporal variation in predicted us exports from exogenous tariff reductions we find that a 1 increase in agricultural exports increases farm employment by 0 302 and has no statistically significant impact on nonfarm employment the individual level analysis shows that in response to positive agricultural export demand shocks natives with a college degree are more likely to become self employed and start farm activities and while non natives without a college degree are more likely to become hired farmworkers a back of the envelope calculation based on the estimates of agricultural trade elasticities of employment shows that on balance job gains due to us agricultural exports are slightly larger than job loss due to agricultural imports resulting in a net gain of around 0 24 million farm jobs over 1991 2017

oil prices and real estate investment trusts reits gradual shift causality and volatility transmission analysis abstract according to literature oil price shocks and volatility can have sector specific impacts in the market while these studies include most asset groups the dynamic relationship between the oil market and real estate investment trusts reits has not been tested this study examines the role of oil price shocks and volatility on six reit categories residential hotel healthcare retail mortgage and warehouse industrial reits for the january 2005 december 2013 period in addition a new causality approach is proposed by augmenting the toda yamamoto method with a fourier approximation this approach is capable of capturing gradual or smooth shifts and does not require a prior knowledge regarding the number dates and form of structural breaks the so called fourier toda yamamoto causality mean spillover test finds uni directional causality running from oil prices to all reits except for the mortgage reits in the latter case the causality is reversed in addition the relatively new and simple causality in variance test shows that there is bi directional volatility transmission between the oil market and all reits our results have important implications for reit managers and investors

piece rate incentive schemes this paper uses recent results from incentive theory to study heretofore informal critiques of piece rate compensation schemes the informal critiques are based on the history of failed attempts to install piece rate compensation schemes at the turn of the century the formal analysis emphasizes the importance of information and commitment in contracting the main result is as follows in a work environment characterized by hidden information and a hidden action if neither the firm nor the worker can commit to future behavior then no compensation scheme piece rate or otherwise can induce the worker not to restrict output

oil prices and economic policy uncertainty evidence from a nonparametric panel data model abstract we examine the relationship between oil prices and economic policy uncertainty in g7 countries to do so we employ a nonparametric panel data technique that allows the trend and coefficient functions to evolve as unknown time varying functional forms we also estimate country specific and common trend functions allowing them to evolve over time using monthly data from g7 countries over the period 1997 01 2018 06 we find that the effect of oil prices on economic policy uncertainty is time varying our results show that the estimated time varying coefficient function of the oil price was negative in years in which increases in oil prices were driven by a surge in global aggregate demand further our nonparametric local linear estimates show that the country specific and common trend functions are increasing over time our findings are robust to endogeneity and alternative specifications

tax rates and tax evasion evidence from missing imports in china tax evasion by its very nature is difficult to observe we quantify the effects of tax rates on tax evasion by examining the relationship in china between the tariff schedule and the evasion gap which we define as the difference between hong kong s reported exports to china at the product level and china s reported imports from hong kong our results imply that a one percentage point increase in the tax rate is associated with a 3 percent increase in evasion furthermore the evasion gap is negatively correlated with tax rates on closely related products suggesting that evasion takes place partly through misclassification of imports from higher taxed categories to lower taxed ones in addition to underreporting the value of imports

salaries and piece rates compensation can take many forms remuneration can come as pecuniary payments as fringes such as health and pension benefits or as a nonpecuniary reward such as plush office furniture that costs the firm less than it benefits the worker a significant literature has examined the trade offs between pecuniary and nonpecuniary compensation the modern work having been pioneered by rosen 1974 more recently another body of literature has examined the selection of method of total compensation ignoring the distinction between pecuniary and nonpecuniary payment this work has focused on risk and incentive factors it has resulted in comparisons of compensation based on absolute output levels to that based on relative performance it has also led to explorations of the relation of compensation to experience over the work life 2 little attention has been paid to what may be among the most important and obvious distinction in methods of compensation namely the choice between a fixed salary for some period of time that is paying on the basis of input and some workers receive compensation that is specified in advance and not directly contingent on performance instead it depends on an input measure such as hours worked for others compensation is directly related to output this essay is an attempt to predict a firm s choice of compensation method piece rates are defined more rigorously among the more important factors discussed are worker heterogeneity incentives sorting considerations monitoring costs and asymmetric information one result is that salary workers tend to be of lower quality and more homogeneous than are their piece rate counterparts numerous additional results are provided helpful comments by victoria lazear and yoram weiss are gratefully acknowledged support was provided by the department of labor and the national science foundation 1 see lazear and rosen 1981 stiglitz 1981 holmstrom 1982 green and stokey 1983 2 see lazear 1979 1981 and harris and holmstrom in press

multidimensional heterogeneity and the economic importance of risk and matching evidence from contractual data and field experiments we measure the cost of risk and the benefits of matching heterogeneous workers to risk levels within a firm that pays its workers piece rates the workers of this firm are heterogeneous in two dimensions risk preferences and ability our results suggest that workers willingness to pay to avoid risk is heterogeneous it can attain 40 of their expected net earnings but averages to only 1 moreover the benefits to the firm of matching are relatively small profits are predicted to increase by only 2 3 4 if we restrict attention to cases where matching is possible although labor market sorting contributes to this result the workers in this firm are relatively risk tolerant it is not the primary cause more important is the relative homogeneity of risk conditions in this firm that give rise to limited opportunities for matching

piece rates fixed wages and incentive effects statistical evidence from payroll records we develop and estimate an agency model of worker behavior under piece rates and fixed wages the model implies optimal decision rules for the firm s choice of a compensation system as a function of working conditions our model also implies an upper and lower bound to the incentive effect the productivity gain realized by paying workers piece rates rather than fixed wages that can be estimated using regression methods using daily productivity data collected from the payroll records of a british columbia tree planting firm we estimate these bounds to be an 8 8 and a 60 4 percent increase in productivity structural estimation which accounts for the firm s optimal choice of a compensation system suggests that incentives caused a 22 6 percent increase in productivity however only part of this increase represents valuable output because workers respond to incentives in part by reducing quality

the role of oil prices in the forecasts of south african interest rates a bayesian approach this paper considers whether the use of real oil price data can improve upon the forecasts for the nominal interest rate in south africa we employ bayesian vector autoregressive models that make use of various measures of oil prices and compare the forecasting results of these models with those that do not make use of this data the real oil price data is also disaggregated into positive and negative components to establish whether this would improve upon the forecasting performance of the model the full dataset includes quarterly measures of output consumer prices exchange rates interest rates and oil prices where the initial in sample period extends from 1979q1 to 1997q4 we then perform recursive estimations and one to eight step ahead forecasts over the out of sample period 1998q1 to 2014q4 the results suggest that the models that include information relating to oil prices outperform the model that does not include this information when comparing their out of sample properties in addition the model with the positive component of oil price tends to perform better than other models over the short to medium horizons then lastly the model that includes both the positive and negative components of the oil price provides superior forecasts over longer horizons where the improvement is large enough to ensure that it is the best forecasting model on average hence not only do real oil prices matter when forecasting interest rates but the use of disaggregate oil price data may facilitate additional improvements

firms choice of method of pay using data from the bls industry wage survey the author tests the theory that firms choose their methods of pay by balancing the gains from more precise links between performance and pay against m

conditional jump dynamics in stock market returns this article develops a new conditional jump model to study jump dynamics in stock market returns we propose a simple filter to infer ex post the distribution of jumps this permits construction of the shock affecting the time t conditional jump intensity and is the main input into an autoregressive conditional jump intensity model the model allows the conditional jump intensity to be time varying and follows an approximate autoregressive moving average arma form the time series characteristics of 72 years of daily stock returns are analyzed using the jump model coupled with a generalized autoregressive conditional heteroscedasticity garch specification of volatility we find significant time variation in the conditional jump intensity and evidence of time variation in the jump size distribution the conditional jump dynamics contribute to good in sample and out of sample fits to stock market volatility and capture the rally often observed in equity markets following a significant downturn

price and volatility linkages between international reits and oil markets abstract this study analyzes price and volatility transmissions between nineteen real estate investment trusts reits and the oil markets the reits data represents a variety of countries at different stages of their development and the expanded analytical approach includes accounting for structural shifts as gradual processes as opposed to strictly abrupt processes typically assumed in the literature oil prices are found to primarily predict reits prices in mature reits markets but the feedback from reits to oil prices is weak from the perspective of volatility strong evidence of bidirectional transmission in majority of the markets is observed our results are in general robust to a shorter common sample period of the various countries this study further demonstrates the importance of accounting for gradual smooth structural shifts for price transmission analysis

designing multiperson tournaments with asymmetric contestants an experimental study is the right amount of effort exerted in multiperson tournaments where contestants have two different levels of initial endowments termed favorites and underdogs we develop theoretical predictions for the level of effort and the effect of varying the prize structure we test these predictions for three person tournaments using an economic experiment in a social environment where contest outcomes are publicly announced we find that both favorites and underdogs overexert effort relative to the theoretical point predictions moreover in the treatment with two favorites and one underdog favorites increase their effort when the number of prizes is increased from one to two contrary to the theory prediction we show that a generalized model that allows for psychological losses from losing for favorites and psychological gains from winning for underdogs because of social comparisons tracks the experimental results better than the standard theoretical model this paper was accepted by peter wakker decision analysis

structuring a multiproduct sales quota bonus plan for a heterogeneous sales force a practical model based approach this paper presents an agency theoretic model based approach that assists sales managers in determining the profit maximizing structure of a common multiproduct sales quota bonus plan for a geographically specialized heterogeneous sales force operating in a repetitive buying environment this approach involves estimating each salesperson s utility function for income and effort and using these models to predict individual sales achievements and the associated aggregate profit for the firm under a specified plan the utility function estimation is based on the salesperson s own preference rank ordering of alternative sales quota bonus plans once these functions have been estimated they are incorporated in a mathematical programming model that the sales manager can use to determine the best plan the authors demonstrate the approach in the context of a case involving the design of a two product sales quota bonus plan for a set of salespeople at a pharmaceutical products firm

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

binary payment schemes moral hazard and loss aversion we modify the principal agent model with moral hazard by assuming that the agent is expectation based loss averse according to k o szegi and rabin 2006 2007 the optimal contract is a binary payment scheme even for a rich performance measure where standard preferences predict a fully contingent contract the logic is that due to the stochastic reference point increasing the number of different wages reduces the agent s expected utility without providing strong additional incentives moreover for diminutive occurrence probabilities for all signals the agent is rewarded with the fixed bonus if his performance exceeds a certain threshold

can private learn from public governance corporate governance is importantly based on agency theory and relies on extrinsic incentives to align the interests of managers employees and shareholders this article argues that in view of recent corporate scandals private governance can learn from public governance 1 goaloriented intrinsic motivation of agents should be supported by fixed incomes and an extensive selection process of employees 2 extrinsic but non monetary incentives e g conferring orders and titles can be used 3 the power of actors should be restricted by a clear division of power appropriate rules of succession and institutionalised competition for positions in firms

a nonparametric analysis of insufficient wage incentives in the chinese health industry abstractthis study provides empirical results on the insufficient wage incentives in the chinese health industry which may result in the poor productivity of high ability medical personnel we fir

regime switching model of us crude oil and stock market prices 1859 to 2013 this paper examines the relationship between us crude oil and stock market prices using a markov switching vector error correction model and a monthly data set from 1859 to 2013 the sample covers the entire modern era of the petroleum industry which typically begins with the first drilled oil well in titusville pennsylvania in 1858 we estimate a two regime model that divides the sample into high and low volatility regimes based on the variance covariance matrix of the oil and stock prices we find that the high volatility regime more frequently exists prior to the great depression and after the 1973 oil price shock caused by the organization of petroleum exporting countries the low volatility regime occurs more frequently when the oil markets fell largely under the control of the major international oil companies from the end of the great depression to the first oil price shock in 1973 using the national bureau of economic research business cycle dates we also find that the high volatility regime more likely occurs when the economy experiences a recession

higher and higher performance pay and wage inequality in germany performance pay is of growing importance to the wage structure as it applies to a rising share of employees at the same time wage dispersion is growing continuously this leads to the question of how is the growing use of performance pay schemes related to the increase in wage inequality german socio economic panel soep data for the years 1984 2009 confirm the large increase in the application of performance pay schemes this in turn led to an upward shift of the wage distribution by about one log point however it did not contribute to the growth in wage inequality even though wage inequality grew within the group of employees who receive performance pay it grew even more so within the group who do not still the wage difference between both wage schemes remained flat over the distribution the empirical analysis employs sequential decompositions in a quantile regression framework

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

salesforce compensation theory and managerial implications this paper discusses recent advances in the study of salesforce motivation and compensation special emphasis is given to quantitative approaches from the economics finance and marketing literatures the paper summarizes the findings in this analytical work in the context of some examples of compensation practice in order to illustrate the usefulness of the paradigm for the evaluation and setting of compensation systems we consider some major issues in setting compensation such as the firm s own objective the salesperson s objective and the nature of the sales response function variations in these factors imply significant variation in optimal compensation policy where optimal takes into account the components in the plan the parameter levels of the components and whether or not a menu of such plans should be made available to the salesforce by highlighting the results in the literature in light of some relevant compensation examples we show the applicability of theory to the practical concerns of salesforce management we close with a summary of these insights and directions for future research in the area

incentives for managers and inequality among workers evidence from a firm level experiment we present evidence from a firm level experiment in which we engineered an exogenous change in managerial compensation from fixed wages to performance pay based on the average productivity of lower tier workers theory suggests that managerial incentives affect both the mean and dispersion of workers productivity through two channels first managers respond to incentives by targeting their efforts towards more able workers implying that both the mean and the dispersion increase second managers select out the least able workers implying that the mean increases but the dispersion may decrease in our field experiment we find that the introduction of managerial performance pay raises both the mean and dispersion of worker productivity analysis of individual level productivity data shows that managers target their effort towards high ability workers and the least able workers are less likely to be selected into employment these results highlight the interplay between the provision of managerial incentives and earnings inequality among lower tier workers

tariff rates tariff revenue and tariff reform some new facts this article compares the statutory and valorem tariff rates official rates with the ratio of tariff revenues to import values collected rates for jamaica kenya and pakistan it identifies four general features of the tariff codes considers whether these features apply to all developing countries and discusses four implications of these features for tariff reform first the collected rate for any given item in the tariff code is only weakly related to the official rate for the item second the variation of collected rates on average increase much less than the official rates fourth the relation between official rates and collected rates is nonlinear because the slope is lower at higher levels of the official rate

sorting incentives and risk preferences evidence from a field experiment abstract we conducted experiments within a firm to measure the risk preferences of workers who face substantial daily income risk we find that these workers are significantly more risk tolerant than individuals from the broader population this is consistent with sorting risk tolerant workers are attracted to high risk occupations

do different time horizons in volatility have any significance for the emerging markets abstract this paper investigates the influence of u s stock market over emerging markets in terms of volatility and volatility of volatility vov at different time horizons it finds that spillover from the u s to emerging markets exists for vov in a longer term

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

capital flight to germany two alternative measures abstract we use two measures to study two capital flight channels for germany one measure is based on the concept of trade misinvoicing and one on net claims and liabilities in the eurosystem of central banks for both measures we propose refinements to enhance the assessment of capital flight we find that capital flight towards germany via these two channels has been quite sizable in the recent decade and can tally to about 2 of gdp annually regarding their determinants we show that the two capital flight measures are driven by both common and measure specific factors traditional determinants such as covered interest differentials only play a limited role while crisis specific factors such as economic policy uncertainty the ecb collateral policy as well as currency misalignment are driving factors of the investors apparent flight to safety behavior

social loss aversion and optimal contest design when managers are designing a contest to motivate effort by salespeople service employees franchisees or product development teams a key question is what should the optimal proportion of winne

non additivity and the salience of marginal productivities experimental evidence on distributive fairness we investigate the relevance of different distributive fairness norms in a team production process in which the team members contributions to the joint output are not necessarily additive in some of the cases of non additivity the individual marginal contributions to the output are not salient we vary the salience and investigate how third parties allocate the joint output to the team members we find that the prevalent norm is to hold others responsible only for their inputs rather than for the incremental increase in the output the marginal productivities are taken into account only when they are made readily apparent

compensation plans for single and multi product salesforces an application of the holmstrom milgrom model the agency theory approach to understanding salesforce compensation plans is modified to incorporate the intratemporal nature of the salesperson s effort rate decision i e the decision about the effort rate at any given point in time potentially depends upon the sales performance up to that point in time in the accounting period under the assumptions considered in this paper holmstrom and milgrom 1987 have shown that the optimal compensation plan is linear in total sales over the accounting period the comparative statics results obtained here corroborate most of the corresponding results in the salesforce compensation literature moreover we derive many additional results not available in the literature it is demonstrated that the commission income as a fraction of total compensation goes up with an increase in the effectiveness of the sales effort or an increase in base sales on the other hand the salary component of the total compensation goes up with increases in uncertainty absolute risk