free banking and the stability of early joint stock banking proponents of free banking argue that systems adopting their policies will be stable in this paper we present evidence suggesting that in general early joint stock banking systems did not adopt free banking and those that did proved to be unstable in particular we demonstrate that those systems imposing regulations were generally stable we rationalise the success of regulation as a pragmatic solution to the time inconsistency problem arising from the peculiar nature of the banking firm notably we find that the golden age of free banking stability can be attributed to restrictions on the organisational form of the early banking firm

urban spatial structure urban structure is increasingly characterized by decentralization dispersion and multiple employment centers much is known empirically about such patterns and about how the interplay between agglomerative and dispersive forces generates spatial structures that are complex and prone to multiple equilibria and dynamic path dependence these forces operate at different spatial scales many entail unpriced interaction and external scale economies deriving from product differentiation and endogenous technical change appear particularly important because these forces interact in complex ways inefficiencies in urban structure are resistant to simple policy interventions

are ghettos good or bad spatial separation of racial and ethnic groups may theoretically have positive or negative effects on the economic performance of those groups we examine the effects of segregation on outcomes for blacks in schooling employment and single parenthood we find that blacks in more segregated areas have significantly worse outcomes than blacks in less segregated areas we control for the endogeneity of location choice using instruments based on political factors topographical features and residence before adulthood a one standard deviation decrease in segregation would eliminate one third of the black white differences in most of our outcomes

limitation of liability and the ownership structure of the firm this paper models the optimal choice of shareholder liability if investors want managers to be monitored the monitors should be residual claimants shareholders and monitoring and firm value will increase as shareholders commit more of their wealth to the firm when liquidating wealth is costly contingent liability dominates direct investment as a wealth commitment device however if wealth is unobservable under this regime only relatively poor investors will hold shares in equilibrium this may be prevented at a cost by verifying shareholder wealth and restricting stock transfers comparative statics on various liability regimes are used to motivate actual contractual arrangements

the role of market forces in assuring contractual performance the conditions under which transactors can use the market repeat purchase mechanism of contract enforcement are examined increased price is shown to be a means of assuring contractual performance a necessary and sufficient condition for performance is the existence of price sufficiently above salvageable production costs so that the nonperforming firm loses a discounted steam of rents on future sales which is greater than the wealth increase from nonperformance this will generally imply a market price greater than the perfectly competitive price and rationalize investments in firm specific assets advertising investments thereby become a positive indicator of likely performance

creative cities creative spaces and urban policy the paper presents the results of an international study of creative industry policies and strategies based on a survey of public sector creative city initiatives and plans and their underlying rationales as well as this survey and an accompanying literature review interviews were carried out with senior policy makers and intermediaries from europe north america africa and south east asia the paper considers the scope and scale of so called new industrial clusters in local cultural and creative quarters and sub regional creative hubs which are the subject of policy interventions and public private investment the semantic and symbolic expansion of the cultural industries and their concentration in once declining urban and former industrial districts to the creative industries and now to the knowledge and experience economy is revealed in economic sectoral and spatial terms whilst policy convergence and emulation are evident manifested by the promotion of creative spaces and industry clusters

an introduction to vote counting schemes t he design of an electoral system is fundamental to any democracy motivation for understanding how electoral system design matters comes from many directions the creation of new constitutions in eastern europe the recent trauma of a three way presidential election in the united states the ongoing debate over u s redistricting and gerrymandering the furor caused by lani guinier s call for a more representative voting system the status quo adds another incentive plurality rule is pervasive even though it is a flawed system fortunately there is no lack of suitable alternatives one of the purposes of this symposium and this paper in particular is to help illustrate and motivate the remarkable variety of alternative mechanisms that aggregate individual preferences to decide an election this overview offers a summary of sixteen distinct methods and demonstrates by example how some of the more complex systems work the shorter papers that follow focus on some of the more popular alternatives including approval voting single transferable vote the maximum likelihood rule and more one can speculate on why alternatives to plurality rule have had such a difficult time being adopted part of the cause may be arrow s general possibility theorem arrow 1951 demonstrates that any voting system applied to an unrestricted collection of voter preferences must have some serious defect we must always choose between flawed alternatives with conflicting theoretical guidance to help select the least flawed option people evaluate a system by its likely effect on the status quo outcome since those in power tend to want to

the role of games in security design we contend that security design should be approached as a problem of game design that is contracts should specify the procedures that govern the behavior of contract participants in determining outcomes as well as the allocations resulting from those outcomes we characterize optimal contracts in two nested classes all contracts including those that depend on the state and state independent contracts we demonstrate that in situations in which the dependence of contracts on the state is limited contracts designed as games can improve the allocation of resources relative to nonstrategic allocation rules article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

a theory of mutual formation and moral hazard with evidence from the history of the insurance industry nonprofit mutually owned insurance and banking organizations have significant market shares in the insurance and banking industries a first step in a systematic study of these financial mutual is to examine the reasons for their formation doing so provides empirical support for the view that these mutual arose as an efficient means of addressing contracting challenges caused by aggregate uncertainties and moral hazard a formal model with this property is presented we argue that information asymmetries do more to explain the kinds of contracts offered by financial mutual than do agency problems between owners managers and customers article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

unlimited liability as a barrier to entry many but not all firms have the freedom to choose liability rules in some countries service professions have unlimited liability rules imposed by government historically banks in some countries faced unlimited liability why do governments impose unlimited liability this is the question we address with a simple model we illustrate the agency conflicts in firms limited liability solves these conflicts efficiently unlimited liability raises the cost of capital inefficiently small firms result but under some conditions selectively applied unlimited liability rules protect rents we test several propositions with data on scottish banking and u s law firms

productivity gains from geographic concentration of human capital evidence from the cities abstract based on recent theoretical developments the argument is made that the average level of human capital is a local public good cities with higher average levels of human capital should therefore have higher wages and higher land rents after conditioning on the characteristics of individual workers and dwellings this prediction is supported by data for standard metropolitan statistical areas smsas in the united states where the smsa average levels of formal education and work experience are used as proxies for the average level of human capital the alternative explanations of omitted smsa variables and self selection are evaluated an estimate of the effect of an additional year of average education on total factor productivity is computed

urban decline and durable housing urban decline is not the mirror image of growth and durable housing is the primary reason the nature of decline is so different this paper presents a model of urban decline with durable housing and verifies these implications of the model 1 city growth rates are skewed so that cities grow more quickly than they decline 2 urban decline is highly persistent 3 positive shocks increase population more than they increase housing prices 4 negative shocks decrease housing prices more than they decrease population 5 if housing prices are below construction costs then the city declines and 6 the combination of cheap housing and weak labor demand attracts individuals with low levels of human capital to declining cities

the impact of contingent liability on commercial bank risk taking abstract from 1863 1935 regulators imposed contingent liability on bank shareholders to discourage risk taking using data from 1900 to 1915 i find that banks subject to stricter liability rules have lower equity and asset volatility hold a lower proportion of risky assets and are less likely to increase their investment in risky assets when their net worth declines consistent with the hypothesis that stricter liability discourages commercial bank risk taking these findings provide lessons for current bank regulatory policy and show that the shape of the residual claimant s payoff function has a significant impact on managerial incentives and firm performance

reputation and imperfect information abstract a common observation in the informal literature of economics and elsewhere is that is multistage games players may seek early in the game to acquire a reputation for being tough or benevolent or something else but this phenomenon is not observed in some formal game theoretic analyses of finite games such as selten s finitely repeated chain store game or in the finitely repeated prisoners dilemma we reexamine selten s model adding to it a small amount of imperfect or incomplete information about players payoffs and we find that this addition is sufficient to give rise to the reputation effect that one intuitively expects

migration and income redistribution responsibilities this study examines whether afdc benefits determine or discourage state to state migration flows in the united states a pooled cross section time series model is developed to estimate afdc benefits in a state and recipients and whether benefits in one state affect benefits in other states a second model using data from the 1980 census and the panel study of income dynamics estimates migration of afdc recipients and the level of benefits in in migration and out migration states both models indicate that small but statistically significant amounts of migration occur which may be quite important but only in the long run movers although small in number are much more likely to move to a state with higher benefits states perceive this migration as important indicating that states should have less control and the federal government more control over income redistribution

double liability and bank risk taking this paper examines double liability as it existed in the united states prior to the great depression and assesses its impact upon bank risk taking under double liability shareholders of failing banks could lose in addition to the initial purchase price of shares an amount equal to the par value of shares owned this paper assesses whether or not banks chartered in states with double liability laws undertook less risk than banks operating under conventional limited liability the results suggest that double liability did reduce bank risk taking but did not guarantee bank stability in times of widespread financial distress

the effect of a large shareholder on corporate value this article analyzes the value of a corporation as a function of its ownership structure shareholders can acquire costly information about the manager s effort to produce output concentrating share ownership leads the largest shareholder to i acquire more precise signals of effort and ii modify the compensation contract better monitoring increases output and hence firm value however the risk averse large shareholder bears more idiosyncratic firm risk as his stake in the firm increases these forces equilibrate at a unique welfare maximizing ownership structure under a strong condition on the purchase or sale of shares by large stockholders investors have incentives to trade toward the ownership structure that maximizes the social surplus when all investors are price takers only a diffuse ownership structure can arise in a competitive equilibrium

community comparisons and subjective well being in a divided society using a south african data set the paper poses six questions about the determinants of subjective well being much of the paper is concerned with the role of relative concepts we find that comparator income measured as average income of others in the local residential cluster enters the household s utility function positively but that income of more distant others others in the district or province enters negatively the ordered probit equations indicate that as well as comparator groups based on spatial proximity race based comparator groups are important in the racially divided south african society it is also found that relative income is more important to happiness at higher levels of absolute income potential explanations of these results and their implications are considered

ownership structure speculation and shareholder intervention an institution holding shares in a firm can use information about the firm both for trading speculation and for deciding whether to intervene to improve firm performance intervention increases the value of the institution s existing shareholdings but intervention only increases the institution s trading profits if it enhances the precision of the institution s information relative to that of uninformed traders thus the ability to speculate can increase or decrease institutional intervention we examine key factors that affect the intervention decision the usefulness of short swing provisions and restricted shares in encouraging institutional intervention and implications for ownership structure across different firms institutional investors hold an ever greater fraction of corporate america s equity traditionally these institutions were stock pickers who tried to beat the market through trading if a firm whose stock they held seemed headed for trouble these investors headed for the door the wall street rule more recently some of these institutions have been using the ownership rights attached to their shares to pressure firms to act in the shareholders interest some have even argued that there is a synergy between gathering information for use in trading shares speculation and intelligently pressuring firms to improve performance intervention we argue that these motives can also conflict analyzing these motives allows us to predict which firms are most likely to attract institutional intervention which in turn has crosssectional implications for firm ownership structure recent examples suggest that institutional investors with large stakes sometimes intervene and sometimes follow the wall street rule so that there is indeed a choice to be studied in the early 1990s there was a wave of activism by a variety of large institutional investors among them calpers the california public employees pension fund putnam management a mutual fund manager and j p morgan a bank holding company these institu

behaviour preferences and cities urban theory and urban resurgence summary the resurgence of big old cities and their regions is real but it is merely a part of a broader pattern of urban change in the developed countries whose broadest tendency is urban emergence including suburbanisation and movements of population to certain sunbelt regions the problem is that it is difficult to accommodate explanation of both resurgence and emergence using the main explanations in the field today these include theories of the knowledge or creative economy urban amenities diversity and tolerance and urban beauty in most of their common specifications they do well for either resurgent or emergent cities but not for both at the same time this suggests that these ideas interesting as they are require much greater specification and in some cases overhaul in order to offer satisfactory responses to the diversity of patterns of urban growth by examining some of these deficiencies we conclude that urban theory needs a better understanding of urban choice behaviours and especially the effects of bundling the limits to preference substitutions and the relationship between past and present preferences in order to become fully effective in explaining urban resurgence and urban emergence when these aspects of choice and preference are better integrated into urban theory then the exogenous causes of urbanisation can be made more endogenous and in addition they can be applied better to both emergence and resurgence urban research can by so doing also potentially become more policy relevant

innovation and reputation this paper analyzes a monopolist that markets successive generations of new and improving nondurable products prices research intensity and product innovations are derived as sequential equilibrium outcomes to a dynamic game with incomplete information asymmetric information is an important feature of the model the monopolist is fully aware of the current product s quality as are consumers who have tried it however the beliefs of other people are characterized by a probability distribution that depends on the monopolist s marketing strategy and the product s popularity the analysis illustrates a new context in which price signaling might serve as a mechanism for ensuring that only high quality products are marketed more important it shows how product life cycles are generated in the absence of signaling and how a reputation for producing high quality goods becomes established in such cases

a contracting theory interpretation of the origins of federal deposit insurance conventional wisdom holds that the enactment of federal deposit insurance helped small rural banks at the expense of large urban institutions this paper uses asymmetricinformation agency cost paradigms from corporate finance theory and data on bank stock prices to show how deposit insurance could and did help stockholders of large banks the broadening stockholder distribution of large banks during the stock market bubble of the late 1920s undermined the efficiency of double liability provisions in controlling incentive conflict among large bank stakeholders federal deposit insurance restored depositor confidence by asking government officials to take over and bond the task of monitoring managerial performance and solvency at u s banks

the past and future of commercial banking viewed through an incomplete contract lens commercial banks emerged at a time when contracts were quite incomplete and property rights insecure they typically offered demand deposits made loans on demand and were regulated each of these aspects of the institutional structure were essential in helping the bank provide the twin functions of liquidity and safety i argue that recent theories of banking which i collectively refer to as incomplete contract theories of banking explain well the origins of banking i also claim that they can explain recent changes in banking as th e informational legal and property rights environment has improved there appear to be fewer synergies between various aspects of the traditional institutional structure of the bank it is now time to think whether there is anything special about the institutional form of the bank or whether all that is special is that it is regulated

a brief empirical note on the tiebout hypothesis and state income tax policies some years ago tiebout 1956 418 hypothesized that the consumervoter may be viewed as picking that community which best satisfies his preference pattern for public goods the consumer voter moves to that community whose local government best satisfies his set of preferences based upon this argument by tiebout this brief note seeks to empirically examine the impact of state income tax policy upon the geographic mobility of consumer voters in the united states more specifically we attempt to determine whether the existence of a state income tax significantly influences the in migration of consumer voters naturally the analysis includes suitable non tax control variables to reflect other factors which may influence the migration decision calculus

a missing touch of adam smith in amartya sen s account of public reasoning the man within for the man without sen claims that his 2009 theory of justice is based in part upon smith s idea of the impartial spectator his claim has received criticism some authors have responded that his interpretation of smith s concept is unfaithful to the original e g ege igersheim and le chapelain 2012 others focusing on internal features of sen s analysis critique his use of the smithian impartial spectator arguing that it is a weak point in his comparative theory of justice e g shapiro 2011 in this paper we address both sets of criticisms while agreeing with commentators that sen s reading of smith is somewhat unfaithful we reiterate that his aim in the idea of justice is not to provide an exegesis of smith but rather to build his own comparative theory of justice by extending adam smith s idea of the impartial spectator ij 134 to his own project after clarifying their distinct approaches to the concept of the impartial spectator we draw upon our account of these differences to evaluate sen s own use of the concept despite significant divergences we show that sen s version of the impartial spectator is not inconsistent with smith s analysis though it does not correspond to smith s concept i e to what the scottish philosopher sometimes calls the man within it is reminiscent of another figure from smith s moral philosophy the man without beyond this analogy there are further connections between smith s imaginary figure of the man within and sen s account of common beliefs both notions are ways of representing our beliefs regarding what is moral or just but whereas smith s moral philosophy offers an analysis of the process by which the man without influences the man within nothing of that kind is to be found in sen s conception of public reasoning and it is here that smith s famous concept of sympathy can supplement sen s theory in a way which furnishes an answer to shapiro s 2011 criticism regarding the possibility of the spontaneous change of beliefs toward greater impartiality

assistance to the poor in a federal system abstract this paper explores the roles of different levels of government in assisting the poor using a model incorporating utility interdependence the paper first presents some theoretical results indicating how levels of poor relief vary with the extent of mobility of the poor under both centralized and decentralized systems of support it then provides a survey of the empirical work on migration of the poor along with a brief historical discussion of the experience under the english poor laws the concluding section turns to normative issues and contends that mobility of the poor is a basic source of inefficiency in wholly decentralized systems of support this inefficiency along with certain other equity considerations establishes a role for the central government in assistance to the poor

information costs duration of search and turnover theory and applications this paper uses a formal model of search over multiattribute alternatives analyzed in a product market setting to investigate the theoretical foundations of the empirical literature on duration of search and turnover in product markets labor markets and marriage markets a number of specific empirical predictions are also derived in particular whether quality is a search attribute or an experience attribute is related to the cost of search the cost of inspection the price of the good and certain properties of the market distribution of price and quality

urban amenities and agglomeration economies the locational behaviour and economic success of dutch fashion design entrepreneurs the spatial clustering of industries is traditionally explained by agglomeration economies benefiting co located firms the focus on firms rather than people has been challenged by florida arguing that urban amenities attract creative people to certain cities on the basis of a questionnaire an analysis is made of the extent to which these two mechanisms affect the locational behaviour of dutch fashion design entrepreneurs it is found that fashion design entrepreneurs consider urban amenities to be more important than agglomeration economies for their location decision designers located in the amsterdam cluster do not profit from agglomeration economies as such but rather from superior networking opportunities with peers both within and outside the cluster

two criteria for social decisions abstract this paper studies the ethical underpinnings of two social criteria which are prominent in the literature dealing with the problem of evaluating allocations of several consumption goods in a population with heterogenous preferences the pazner schmeidler criterion pazner schmeidler egalitarian equivalent allocations a new concept of economic equity quart j econ 92 1978 671 687 and the egalitarian walras criterion fleurbaey and maniquet utilitarianism versus fairness in welfare economics in m salles j a weymark eds justice political liberalism and utilitarianism themes from harsanyi and rawls cambridge university press cambridge 1996 forthcoming are prima facie quite different but it is shown here that these criteria are related to close variants of the fairness condition that an allocation is better when every individual bundle in it dominates the average consumption in another allocation in addition the results suggest that the pazner schmeidler criterion can be viewed as the best extension of the walrasian criterion to non convex economies

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

how serious is the neglect of intrahousehold inequality in this report the authors develop a framework for assessing the consequences of ignoring intrahousehold inequality in the measurement and analysis of poverty and inequality they apply this framework to data for the philippines and conclude that 1 the result of neglecting intrahousehold inequality will probably be considerable understatement of the levels of poverty and inequality with the philippine data measured levels of inequality and poverty were off 30 percent as a result of ignoring intrahousehold variation and 2 patterns of inequality revealed by household level data are somewhat different from patterns revealed by individual level data but the differences seem not to be dramatic to confirm these results the exercise should be repeated with data from other countries

aggregate consumer behavior and the measurement of social welfare this paper describes a new approach to normative economics combining the theory of social choice with econometric modeling of aggregate consumer behavior we first derive a system of aggregate demand functions by exact aggregation over individual demand functions we then construct measures of individual welfare from systems of individual demand functions finally we incorporate these measures into a social welfare function introducing ethical assumptions based on horizontal and vertical equity to illustrate the application of this approach we consider the u s standard of living and its cost over the period 1947 1985 the purpose of this paper is to describe a remarkable convergence that has occurred between economic theory and econometrics over the past decade this conjunction has taken place between the theory of social choice and econometric modeling of aggregate consumer behavior the confluence of these two streams of research has produced a new approach to normative economics this approach has been successfully applied to the evaluation of economic policy the measurement of poverty and inequality and the assessment of the standard of living and its cost a common problem in the modeling of consumer behavior and social choice is the representation of individual preferences in the econometric modeling of aggregate consumer behavior the primary emphasis has been on simplifying aggregate demand functions the most familiar approach to this problem is the model of a representative consumer this model is required to justify applications of the theory of individual consumer behavior to aggregate data on prices and quantities consumed the simplest version of the model is based on identical homothetic preferences for all individuals under identical homothetic preferences aggregate quantities consumed are functions of aggregate expenditure and prices these functions have precisely the same properties as demand functions in the theory of individual consumer behavior the condition of identical homothetic preferences was weakened by gorman 1953 to permit displacements from the origin for individual demand functions gorman showed that a necessary and sufficient condition for aggregate demand functions to depend on aggregate expenditure is that all individu

the impact of legalized abortion on crime we offer evidence that legalized abortion has contributed significantly to recent crime reductions crime began to fall roughly eighteen years after abortion legalization the five states that allowed abortion in 1970 experienced declines earlier than the rest of the nation which legalized in 1973 with roe v wade states with high abortion rates in the 1970s and 1980s experienced greater crime reductions in the 1990s in high abortion states only arrests of those born after abortion legalization fall relative to low abortion states legalized abortion appears to account for as much as 50 percent of the recent drop in crime

nosy preferences benevolence and efficiency author affiliation chetan dave cdave nyu edustefan dodds sdodds uwinnipeg ca acknowledgment we would like to thank ingela alger sheryl ball nathan berg tarek coury rachel croson frances woolley participants at the 2008 canadian economics association meetings seminar participants at queen s university and two anonymous referees for valuable comments all errors are those of the authors 1 introductionthe pareto principle declares that if everyone in a society prefers some social state of the world x to another state y then the aggregated social ranking should reflect this as well minimal liberalism requires that no individual s preference relation between social states say z and w be violated in the social choice provided that the position of other individuals is unaffected across states z and w both of these principles can be appealing to economists as they evaluate the normative features of various policies however the liberal paradox of sen 1970 demonstrates that the pareto principle and minimal liberalism are potentially at odds with one another the paradox shows that if individuals possess nosy preferences that is they hold opinions about what others should do even though their own material well being is unaffected by others actions then it is in general impossible to arrive at a unique social choice that jointly satisfies these two axioms 1 as an elegant proof by contradiction the paradox adds to the list of social choice impossibilities 2sen s paradox highlights the tension between freedom of choice and efficiency with nosiness as the key ingredient in this article we re examine this tension by using recent insights from behavioral economics the idea that individuals may have concern for others namely altruism is well established in the behavioral economics literature becker 1974 however the concept of nosy preferences and what they imply for collective choice environments has not been extensively studied from a behavioral perspective here we provide such a study to do so we recast nosiness as a new form of social preference in a strategic setting this insight stems from the analysis of segal and sobel 2007 who consider a model where players in a game possess preferences over both outcomes and strategies employed by all players we embed our version of nosiness into a more general model of social preferences individuals in the model derive utility from three sources intrinsic payoffs from the outcomes of strategic choice nosy payoffs based on specific actions taken by other individuals to generate such outcomes and unconditionally altruistic or benevolent payoffs positively related to the extended utilities of other individuals this framework allows us to analyze strategic environments in which there exist interdependent preferences over utilities and actions or just one of these features we apply this particular model of preferences to two environments the first was suggested by aldrich 1977 who sought to provide a game theoretic interpretation of sen s paradox for this environment we are interested in the efficiency of equilibria and to what extent inefficiency depends on particular forms of social preferences we thus offer a new behavioral interpretation of sen s paradox following the behavioral theme we show that when individuals exhibit loss aversion over their own actions the paradox may be robust to schemes that attempt to generate efficiency by restricting action sets ex ante the second environment we consider is that of relative consumption concerns we show that applying our particular model of interdependent preferences to this environment allows us to find cases where individuals will voluntarily restrict consumption to mitigate the negative externality arising from nosy concerns about what others consume

welfare measures an international comparison abstract based on previous work by sen and the author alternative welfare measures are proposed that take into account both the level and distribution of income an empirical application shows that there are substantial differences among countries with respect to the level of welfare even among subgroups such as mature capitalist economies

on the observational equivalence of managerial contracts under conditions of moral hazard and self selection managerial contracts often tie compensation to the performance of the firm two models of contracting under asymmetric information moral hazard and self selection are used to explain this phenomenon an important direction for research in this area will be to use data on managerial contracts to sharpen our understanding of the settings in which a given informational problem is most important the purpose of this paper is to ask whether this is possible using static models of contracting under asymmetric information to address this question we compare the standard principal agent model presented by grossman and hart 1983 with a plausible self selection model where the firm only wants to hire a manager with a particular level of productivity we call this self selection model a talent search

behind the scenes the corporate governance preferences of institutional investors we survey institutional investors to better understand their role in the corporate governance of firms consistent with a number of theories we document widespread behind the scenes intervention as well as governance motivated exit these governance mechanisms are viewed as complementary devices with intervention typically occurring prior to a potential exit we further find that long term investors and investors that are less concerned about stock liquidity intervene more intensively finally we find that most investors use proxy advisors and believe that the information provided by such advisors improves their own voting decisions

tiebout or not tiebout the market metaphor and america s devolution debate the market metaphor of intergovernmental choice as a spur to efficiency formalized by charles m tiebout is often invoked to support the shift away from washington and toward the states but the model translates badly to governments governmental entry and exit is costly public sector co11usion often serves citizens interests heterogeneous mobility distorts the signals sent by interstate migration and while tiebout and followers condition efficiency predictions on optimal distribution the u s devolution movement coincides with rising inequality and has gone furthest where distribution matters most the metaphor is misapplied devolution will likely do more to enfeeble government than to improve it

human development in poor countries on the role of private incomes and public services development is often taken to mean rising incomes discussions of the goals of development now often emphasize the reduction of poverty rather than raising average incomes per se the role of social services particularly basic health and education has also received greater emphasis in the 1980s viewed mainly as instruments for raising the incomes of the poor but in all these approaches income growth of one sort or another is what development is all about a rather different view of the meaning of development has recently found expression in the 1990 human development report hrd produced by the united nations development programme a conceptual underpinning for this approach can be found in the work of amartya sen the essence of this view is that human development what people can actually do and be is the overriding purpose of economic development underdevelopment is viewed as the lack of certain basic capabilities rather than lack of income per se we do not aim here to advocate one of these approaches over the other but rather to explore their implications for development policy for instance what does the human development approach imply about the role of economic growth and in particular about reducing income poverty should development priorities shift toward the provision of public services in poor countries even if such a shift is at the expense of income growth

the possibility of social choice the subject of social choice includes within its capacious frame various problems with the common feature of relating social judgments and group decisions to the views and interests of the individuals who make up the society or the group some challenges and foundational problems faced by social choice theory as a discipline are discussed social choice theory is a subject in which formal and mathematical techniques have been very extensively used voting based procedures are entirely natural for some kinds of social choice problems such as elections referendums or committee decisions they are however altogether unsuitable for many other problems of social choice impossibility results in social choice theory led by the pioneering work of arrow 1951 have often been interpreted as being thoroughly destructive of the possibility of reasoned and democratic social choice including welfare economics that view is argued against

wealth and risk effects of adopting deposit insurance in canada evidence of risk shifting by banks and trust companies this paper confirms that adopting explicit deposit insurance expanded risk shifting incentives for canadian banks and trust companies by transferring responsibility for monitoring non systematic risk to the canadian deposit insurance corporation cdic deposit insurance eliminated the compensation previously paid to large block stockholder monitors this transfer fueled a redistribution of insured institution stock from poorly diversified large block shareholders to diversified investors also subsequent changes in market volatility support the hypothesis that cdic insurance and the absorption of catastrophic risk it provided reduced systematic risk in the stock market as a whole even as it increased non systematic risk in the banking and trust company sector

the economics of casino gambling america s casino industry expanded rapidly in the 1990s spreading from nevada and atlantic city to mining towns riverboats race tracks and tribal lands and moving from isolated resort settings to urban and suburban venues this article examines economic characteristics of the casino industry including the evolution of major casino markets pricing of gaming products market structures regulatory constraints and social and economic impacts attributable to casinos when competitive casinos show strong economies of scale and scope but many new jurisdictions limit the number or size of operations thus creating substantial economic rents allocation of these rents are fundamentally politically determined

the interruption of income convergence and income growth in large cities in the 1980s recent studies have documented the divergence of per capita personal income among regions of the us in the 1980s following many decades of income convergence this paper establishes the same patter

an appraisal of shareholder proportional liability shareholders of corporations have their liability for actions of the corporation limited by law unlike the equity holder in a partnership or proprietorship the assets that a shareholder has distinct from her holdings in the enterprise can not be taken to satisfy liabilities arising from actions of the enterprise itself this paper argues that a reasonable principle of fairness argues for an alternative to limited liability proportional liability proportional liability makes a shareholder liable for the same proportion of a corporation s excess of liabilities over assets that her number of shares bears to the total number of shares outstanding the key idea is that it is unfair in situations in which explicit agreements can not be reached for shareholders to bear only limited risk when they may receive gains from stock dividends and appreciation that are not limited to any pre determined amount proportional liability has not been much examined in the financial literature good utilitarian arguments have been given for limited liability over unlimited liability for corporate shareholders but these arguments do not clearly support the choice of limited liability over proportional liability

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

what makes cities attractive the determinants of urban labour migration in germany striking disparities characterise the population growth of cities in industrialised countries some cities suffer from ongoing population decline whereas other cities have experienced increasing numbers of inhabitants in recent years whether labour market conditions or amenities via their impact on migration primarily account for differences in cities demographic development is an important issue this paper investigates the determinants of the migration balance of german cities between 2000 and 2007 the focus is on the mobility of workers because labour migration in particular affects the future prospects of cities the findings suggest that not only labour market conditions but also amenities have an impact on the net migration rate moreover large cities seem to be ceteris paribus more attractive than small cities this finding possibly points to the importance of amenities such as cultural infrastructure and matching externalities in urban labour markets that are linked to city size urban policy aimed at enhancing the attractiveness of cities should thus consider both boosting the local economy and improving the quality of life

principal principal conflicts and corporate philanthropy evidence from chinese private firms the principal principal perspective suggests that controlling shareholders have excessive influence on corporate philanthropy and may direct corporate funds to charitable causes to support their personal interests analysis of a sample of chinese private firms listed on the shenzhen or shanghai stock exchange between 2004 and 2011 shows that 1 there is a significant and negative relationship between corporate giving and the share held by the largest shareholders suggesting that controlling shareholders are opportunistic in directing corporate charitable contributions 2 there is a significant and positive relationship between corporate giving and the political connections of the largest shareholders and their agents suggesting compatibility between corporate contributions and the personal interests of the controlling shareholders 3 there is a stronger negative relationship between corporate giving and the share of the company held by the largest shareholders in politically connected firms suggesting that political connections contribute to increased opportunistic corporate giving overall our study provides important evidence for the one dominant controlling shareholder phenomenon yigududa by testing and extending the principal principal framework and showing that the largest shareholders of chinese firms appear to donate to charitable causes that ultimately serve their personal interests at the expense of minority shareholders

the comparison of multi dimensioned distributions of economic status the literature on inequality measurement has been largely concerned with single dimensioned indicators this paper explores some of the issues which arise when there are several dimensions to inequality and these are not readily reduced to a single index concentrating particularly on the two dimensioned case we make use of results on multi variate stochastic dominance in portfolio theory extending these and applying them to the measurement of inequality the use of the dominance conditions is illustrated by an application to the international distribution of income and life expectancy

when is two better than one how federalism mitigates and intensifies imperfect political competition the current paper models power maximizing politicians behavior subject to imperfect political competition and perfect citizen mobility it then analyzes the welfare implications of federal and non federal structures the model abstracts from both heterogeneous preferences the most common argument in favor of federalism and externalities the most common argument against showing that even in this simplified setting federalism has important welfare implications there is one class of equilibria in which more federalism has the purely beneficial effect of offsetting imperfections in the political process however there is also a second class of equilibria in which citizen mobility makes political imperfections more severe by creating safe districts for both political parties 2001 elsevier science b v all rights reserved

on 64 majority rule introduction d une definition de consensus social base sur deux restrictions une sur les preferences individuelles et l autre sur la distribution des preferences dans ce cas de consensus une regle de majorite a 64 presente de nombreuses proprietes interessantes par opposition aux regles de super majorite possedant des proprietes paradoxales comme les regles electorales americaines

partnership firms reputation and human capital in human capital intensive industries where it is difficult to contract upon the training effort of skilled agents a socially suboptimal level of training may occur we show how partnership organisations can overcome this problem by tying human and financial capital partnerships are opaque so that the willingness of clients to pay depends upon reputation partnerships are illiquid and partners must stay with the firm until clients discover their type and update the firm s reputation this renders unskilled agents who will aversely affect reputation unwilling to accept partnerships skilled agents therefore train the next generation so as to ensure that there is an adequate market for their own shares we comment upon the salient differences between partnerships and joint stock firms

how much do taxes discourage incorporation the double taxation of corporate income should discourage firms from incorporating we investigate the extent to which the aggregate allocation of assets and taxable income in the united states between corporate and noncorporate firms responds to the size of this tax distortion during the period 1959 1986 in theory profitable firms should shift out of the corporate sector when the tax distortion is large and conversely for firms with tax losses our empirical results provide strong support for these forecasts and imply that the resulting excess burden equals 16 percent of business tax revenue one of the most basic distortions created by the double taxation of corporate income in the united states is the disincentive to incorporate even in most countries with integrated or partially integrated tax systems there are differential taxes across organizational forms however obvious this distortion may be most articles investigating the distortions created by the corporate tax have taken as exogenous a firm s choice whether or not to incorporate assuming for example that some industries are inherently corporate while others are inherently noncorporate a variety of nontax factors described below can certainly influence a firm s choice of organizational form causing some to favor incorporating and others not but are these nontax factors so dominant that taxes do not in practice influence a firm s choice of organizational form as gravelle and kotlikoff 1989 1993 emphasize tax induced changes in firms choices of organizational form in principle can create large excess burdens the size of these excess burdens in practice depends on the extent to which firms respond to these tax incentives in this article we calculate how the tax distortion discouraging firms from incorporating has varied over time then estimate the extent to which the allocation of assets and taxable income between corporate and noncorporate

on the price of land and the value of amenities a house represents not only a bundle of structural characteristics but also a set of location specific characteristics adding locational coordinates and site area to other house characteristics makes it possible to estimate a land rent surface as well as thle hedonic prices attached to local patterns of land use and other neighbourhood characteristics one can then estimate how the value of such location specific characteristics are capitalized into land prices this analysis illustrated with estimates based on data from two british towns has a number of wider implications it generates a more parsimonious method of estimating amenity values it also reveals likely systematic biases produced by conventional hedonic studies which exclude land and location finally it clarifies the conceptual definition of land and suggests that monocentric models can perform well despite recent criticism

consumer search with uncertain product quality this paper presents a unified model of consumer search when both prices and qualities are uncertain it is assumed that price can be observed prior to purchase but that quality can be observed only after purchase and experience this two stage decision problem is of particular interest since in practice there is usually some connection between quality and price of the many interesting implications of this dependence explored in this paper is the result that the usual reservation price rule may no longer be optimal indeed the optimal stopping set may take one of several alternative and more realistic forms

economics of devolution decentralization in the uk some questions and answers mcgregor p g and swales k 2005 economics of devolution decentralization in the uk some questions and answers regional studies 39 477 494 the paper explores the economic implications of the radical process of devolution decentralization and delegation of decision making and policy delivery initiated by the post 1997 uk labour government it is argued that the economies of all the presently devolved regions ultimately suffer if the barnett formula is rigorously imposed it is shown that the efficiency of devolving fiscal authority involves a balance of positive and negative elements depending on wage bargaining and migration responses it is then argued that delegation devolution of regional economic development policies while exploiting regional information advantages neglects regional economic interdependence so there are potential gains from greater cooperation coordination