micro estimates of public spending demand functions and tests of the tiebout and median voter hypotheses responses to questions given to a random sample of michigan households are used to estimate public spending demand functions while income and price elasticities are similar to those obtained from aggregate data positive income elasticities appear to arise because public services are distributed in a prorich manner a relatively small variance in spending demands among urban and suburban communities in metropolitan areas with substantial public service variety suggests that the tiebout mechanism works this interpretation is supported by the fact that actual spending conforms substantially to desired levels in urban areas but less so in rural areas with little public sector choice

potential unemployment insurance duration and labor supply the individual and market level response to a benefit cut we examine how a 16 week cut in potential unemployment insurance ui duration in missouri affected search behavior of ui recipients and the aggregate labor market using a regression discontinuity

the macro effects of unemployment benefit extensions a measurement error approach by how much does an extension of unemployment benefits affect macroeconomic outcomes such as unemployment answering this question is challenging because u s law extends benefits for states experiencing high unemployment we use data revisions to decompose the variation in the duration of benefits into the part coming from actual differences in economic conditions and the part coming from measurement error in the real time data used to determine benefit extensions using only the variation coming from measurement error we find that benefit extensions have a limited influence on state level macroeconomic outcomes we apply our estimates to the increase in the duration of benefits during the great recession and find that they increased the unemployment rate by at most 0 3 percentage point

congestion function specification and the publicness of local public goods abstract this paper is about the measurement of congestion within the median voter demand framework the model of congestion traditionally used in the literature and four others are compared and tested in a median voter framework the results show that a more flexible functional form which imposes fewer a priori restrictions on the data does at least as good a job of explaining variations in local government expenditures furthermore it is shown that measured publicness of local public goods depends entirely on the a priori restrictions imposed on the congestion function

on the measurement of congestion in the provision of local public goods abstract this paper contends that a measurement problem the zoo effect has led to upwardly biased estimates of the degree to which local public goods are subject to congestion the suggestion is that the observed positive correlation between public expenditure and population size reflects in large measure the wider range of services provided in more populous jurisdictions not simply a high propensity of these goods to become congested

the anatomy of corporate control directors shareholders and executive remuneration in giant us and uk corporations this paper provides a contemporary comparison of the anatomy of corporate contol in giant u s and u k corporations the comparison draws upon an analysis of share ownership executive remuneration board membership and the patterns of interlocking directorships the results are of significance not only for the managerialist hypothesis but also for the wider issues concerning the control and behavior of these giant corporations the evidence presented leads to some qualifications of the managerialist position furthermore the study identifies the potentially key role played by nonexecutiv e directors particularly where their board membership is associated with significant shareholdings of financial institutions copyright 1987 by oxford university press

stock options and the strategic use of managerial incentives in cournot based oligopoly models there is an incentive for firms to pursue overly aggressive behavior resulting in prices and profits below those of the cournot equilibrium compensating managers in proportion to a combination of profits and sales provides one mechanism through which aggressive behavior emerges however when the profit component of managerial compensation comes in the form of stock options the aggressive behavior is restrained or even eliminated in equilibrium this result relies only on the nonlinearity of the stock option generalizations to other forms of compensation are discussed copyright 1993 by american economic association

board structure and executive pay evidence from the uk we examine the impact of board structure on executive pay for 1 880 uk public firms over the period 1983 2002 using panel data analysis first the proportion of non executive directors tends to decrease the rate of increase in executive pay whereas board size tends to increase it second the proportion of non executives strengthens the relation between the rate of increase in executive pay and changes in performance in particular although for firms in general the pay performance link is much weaker when performance is poor a higher proportion of non executives strengthens this link considerably finally firms that increase the number of nonexecutives in order to comply with the cadbury code of 1992 experience both a decline in the rate of increase in executive pay and an increase in pay performance sensitivity

heads i win tails you lose a career analysis of executive pay and corporate performance the paper utilises a novel career perspective to examine managerial theories of organisational control in the context of executive reward principal agent theory managerial power and neo institutionalism are evaluated detailed career histories of boardroom executives in all ftse350 companies between 1996 and 2008 are utilised using both a fixed effects panel and a career based approach rival hypotheses are tested in addition to the payperformance relationship the probability of job loss as a function of performance is also estimated the evidence presented points to the importance of institutional considerations in the standard agency theory and managerial power perspectives and lends support to a social theory of agency the analysis is empirical in nature and an effort is made to draw on qualitative studies to further flesh out the discussion the practical implications of the findings point to the inadequacy of existing arrangements to deliver efficient pay outcomes where performance is poor whilst highlighting dangers of relying on naive policy remedies that ignore the role played by institutional forces in their implementation also highlighted is the distinct advantage of boards adopting a cumulative or career oriented approach when evaluating executive performance from a policy perspective the case is made for truly long term incentives in the form of career shares

executive compensation and principal agent theory the empirical literature on executive compensation generally fails to specify a model of executive pay on which to base and test hypotheses regarding its determinants in contrast this paper analy

what explains the rise in ceo pay in germany a panel data analysis for 1977 2009 the compensation of executive board members in germany has become a highly controversial topic since vodafone s hostile takeover of mannesmann in 2000 and it is again in the spotlight since the outbreak of the financial crisis of 2009 based on unique panel data evidence of the 500 largest firms in germany in the period 1977 2009 we test two prominent hypothesis in the literature on executive pay the manager power hypothesis and the efficient pay hypothesis we find support for the manager power hypothesis for germany as executives tend to be rewarded when the sector is doing well rather than the firm they work for we reject however the efficient pay hypothesis as ceo pay and the demand for managers increases in germany in difficult times when the typical firm size shrinks we find further that domestic and global competition for managers has contributed to the rise in executive pay in germany lastly we show that ceos in the banking sector are provided with incentives for performance and that the great recession of 2009 acted as a disciplining devise on ceo pay in germany

unemployment fears and deflationary spirals the interaction of incomplete markets and sticky nominal wages is shown to magnify business cycles even though these two features in isolation dampen them during recessions fears of unemployment stir up precautionary sentiments which induces agents to save more the additional savings may be used as investments in both a productive asset equity and an unproductive asset money but even a small rise in money demand has important consequences the desire to hold money puts deflationary pressure on the economy which provided that nominal wages are sticky increases wage costs and reduces firm profits lower profits repress the desire to save in equity which increases the fear of unemployment and so on this is a powerful mechanism which causes the model to behave differently from both its complete markets version and a version with incomplete markets but without aggregate uncertainty in contrast to previous results in the literature agents uniformly prefer non trivial levels of unemployment insurance

a note on the publicness of local goods evidence from new york state municipalities for more than a decade now the non publicness of goods provided by local governments has been an accepted result in the median voter demand literature mcmillan wilson and arthur 1981 found that publicness was exhausted in ontario towns of more than 10 000 inhabitants but that there were still unexploited economies to collective provision in smaller towns using the original bergstrom and goodman 1973 model and new york state data i find that there is even less evidence of publicness in small towns than in large ones my results call into question the mcmillan wilson and arthur hypothesis une note sur le degre de materialite publique d usage des biens locaux le cas des municipalites de b etat de new york depuis plus d une decennie l un des resultats de la litterature specialisee analysant le comportement de demande du voteur median a ete que les biens fournis par les gouvernements locaux n etaient pas des biens publics mcmillan wilson et arthur 1981 ont montre que le degre de materialite publique d usage etait limite dans le cas des villes de plus de 10 000 habitants en ontario mais qu il existait des economies inexploitees emanant de la fourniture publique dans le cas des plus petites villes a partir du modele de bergstrom et goodman 1973 et de donnees pour l etat de new york l auteur en arrive a la conclusion qu il y a encore moins de materialite publique d usage dans les petites villes que dans les grandes ces resultats remettent en question l hypothese mcmillan wilson et arthur in contrast to the strict samuelsonian dichotomy of pure public and pure private goods the tiebout 1956 and buchanan 1965 models plot goods along a continuum of congestability goods provided by local governments or collectively purveyed and consumed in clubs are described as lying somewhere between the two polar cases the median voter demand model as developed by borcherding and deacon i would like to thank wallace oates william oakland suk kang and an anonymous referee for helpful comments on earlier drafts of this paper they are of course exonerated from association with such errors as may still remain canadian journal of economics revue canadienne d economique xix no 3 august aout 1986 printed in canada imprime au canada 0008 4085 86 568 573 1 50 canadian economics association this content downloaded from 157 55 39 102 on mon 03 oct 2016 05 08 06 utc all use subject to http about jstor org terms publicness of local goods 569 1972 and bergstrom and goodman 1973 incorporates this hypothesis observed levels of local public expenditures are said to reflect the preference of the median voter however the empirical models also include a congestion function intended to reflect the effect of collective consumption on individual enjoyment the function used in the literature is of the form

a unified welfare analysis of government policies we conduct a comparative welfare analysis of 133 historical policy changes over the past half century in the united states focusing on policies in social insurance education and job training taxes and cash transfers and in kind transfers for each policy we use existing causal estimates to calculate both the benefit that each policy provides its recipients measured as their willingness to pay and the policy s net cost inclusive of long term impacts on the government s budget we divide the willingness to pay by the net cost to the government to form each policy s marginal value of public funds or its mvpf comparing mvpfs across policies provides a unified method of assessing their impact on social welfare our results suggest that direct investments in low income children s health and education have historically had the highest mvpfs on average exceeding 5 many such policies have paid for themselves as governments recouped the cost of their initial expenditures through additional taxes collected and reduced transfers we find large mvpfs for education and health policies amongst children of all ages rather than observing diminishing marginal returns throughout childhood we find smaller mvpfs for policies targeting adults generally between 0 5 and 2 expenditures on adults have exceeded this mvpf range in particular if they induced large spillovers on children we relate our estimates to existing theories of optimal government policy and we discuss how the mvpf provides lessons for the design of future research

the equilibrium impact of unemployment insurance on unemployment evidence from a non linear policy rule abstract we estimate the macro effect of an increase in the generosity of unemployment insurance ui on unemployment in sweden using regional data the national ui benefit formula features a benefit ceiling and a statutory replacement rate and does not take regional wage differentials into account changes in the national rules are useful for identification since a change in the benefit ceiling for example has a greater impact on ui generosity in a high wage region than in a low wage region because a greater fraction of the workforce will be affected by the benefit ceiling in the high wage region we implement this identification strategy using data for the swedish municipalities over the time period 1992 2014 our estimates suggest that the macro elasticity of an increase in ui on unemployment is around 3 this is twice as large as the corresponding micro elasticity which we estimate to 1 4 1 5 using data from the same time period

total board remuneration and company performance using a hitherto neglected source of data this paper combines executive emoluments with executive options to construct a broader measure of executive pay than has been possible in earlier british studies the result of including the long term share option component of pay along with the more commonly utilized short term component of emoluments is to reveal executive pay as being significantly more sensitive to company performance than has previously been thought to be the case the paper questions the current policy stance of british institutional investors and of the greenbury committee with respect to executive share options copyright 1996 by royal economic society

the publicness of local public goods evidence from ontario municipalities recent studies of local public good provision report publicness parameter estimates of about one indicating private good characteristics this empirical investigation of a wider range of communities obtains parameter estimates of significantly less than one indicating a high degree of publicness exists in smaller municipalities and within the service areas of individual public facilities comprising the supply network in larger centres it is argued that the observed values of the publicness parameters have no normative significance as to the merits of public versus private provision la materialite publique d usage des biens publics locaux resultats d une etude de municipalites ontariennes les etudes recentes sur l approvisionnement de biens publics locaux indiquent des coefficients de materialite publique d usage autour de l unite c est a dire que les biens publics locaux ont de fortes caracteristiques semblables aux biens prives ce memoire presente les resultats d un enquete empirique d un large eventail de communaut6s locales et en arrive a des valeurs pour le coefficient de materialite publique d usage qui sont bien moins que l unite et qui donc indiquent un haut degre de materialite publique d usage dans les petites municipalites mais aussi dans les zones de service d infrastructures particulieres parc bibliotheque poste de pompier etc qui forment le reseau d approvisionnement de biens publics dans les grands centres les auteurs suggerent que les valeurs observees de ces coefficients de materialite publique d usage n ont aucune portee normative et donc ne sauraient arbitrer les merites relatifs d un approvisionnement prive ou public de certains biens

property taxation and local public spending the renter effect the point of departure for this study is the pervasive finding that other things equal local jurisdictions tend to spend more on local services the larger the fraction of renters among their residents this paper seeks to determine the approximate magnitude of this renter effect by posing the question how much smaller would local public budgets be if all residents were home owners making use of two quite different approaches the paper finds a typical renter effect on local public expenditure on the order of ten percent this finding suggests that we might do well to reform the administration of the property tax so that changes in property tax liabilities on rental dwellings are directly and visibly transformed into changes of monthly rental payments

should unemployment insurance vary with the unemployment rate theory and evidence we study how the marginal welfare gain from increasing the unemployment insurance ui bene t level varies over the business cycle we do this by estimating how the moral hazard cost and the consumption smoothing bene t of ui vary with labor market conditions which we identify using variation in the interaction of ui bene t levels with the unemployment rate within u s states over time we nd that the moral hazard cost is procyclical greater when the unemployment rate is relatively low by contrast we do not nd evidence that the consumption smoothing bene t varies with the unemployment rate we use these empirical results to estimate the marginal welfare gain and we nd that it is modest on average but varies positively with the unemployment rate jel h5 j64 j65

corporate performance and managerial remuneration an empirical analysis abstract economic theories of efficient compensation predict a positive relationship between executive pay and corporate performance and yet efforts to document this relationship have been largely unsuccessful in this paper we argue that previous cross sectional studies have omitted important variables which seriously bias their results using data that focus on individual executives over time we find that executive compensation is strongly positively related to corporate performance as measured by shareholder return and growth in firm sales the results are robust to the stock market performance measure utilized

bureaucracy and the divisibility of local public output the empirical results of this paper are derived from a monopoly view of local government decisionmaking in contrast to the competitive view offered by earlier researchers that our results are similar to earlier findings lends additional support to the conclusion that local output is largely private in nature other than park and recreation services there appear to be no economies in consumption for local services nor any economies of density larger cities do not appear to be more efficient than smaller cities 10 of course this result holds only for the sample of cities used here and does not rule out scale economies for communities smaller than those in our sample i e below 25 000 population

estimating the publicness of local government services alternative congestion function specifications the standard approach to estimating median voter expenditure equations has incorporated the specification of a congestion function a n to convert the total output q of a government provided good into individual consumption qi in their classic papers borcherding and deacon 2 and bergstrom and goodman 1 adopted a simple form a n n y using this form estimated values of y 0 imply that the service in question is classified as a pure public good while y 1 implies a private good this approach is attractive from an empirical standpoint because it allows the data to determine the degree of publicness of the local government output the empirical findings of borcherding and deacon bergstrom and goodman and numerous later studies that used the median voter approach indicate that most local government services do not exhibit a significant degree of publicness 2 recent studies have questioned whether estimates of publicness are sensitive to the particular specification of the congestion relationship 6 9 researchers also have objected to the standard form because it holds the degree of publicness fixed which implies a decreasing marginal rate of congestion 3 6 15 moreover holding the degree of publicness fixed implies a single estimated value of y is sufficient to classify the publicness of the good critics of the standard approach argue that the degree of publicness should vary with population size for instance a local park may exhibit no congestion for small population sizes but eventually become congested as population increases unfortunately no clear guidelines for specifying the congestion function are available edwards suggested that flexible functional forms are to be preferred because they let the data speak for themselves 6 92 he also argued that the preferred form is one that fits the data best based on these criteria he concluded that a flexible form such as an exponential form is su

the optimal timing of unemployment benefits theory and evidence from sweden this paper provides a simple yet robust framework to evaluate the time profile of benefits paid during an unemployment spell we derive sufficient statistics formulae capturing the marginal insurance value and incentive costs of unemployment benefits paid at different times during a spell our approach allows us to revisit separate arguments for inclining or declining profiles put forward in the theoretical literature and to identify welfare improving changes in the benefit profile that account for all relevant arguments jointly for the empirical implementation we use administrative data on unemployment linked to data on consumption income and wealth in sweden first we exploit duration dependent kinks in the replacement rate and find that if anything the moral hazard cost of benefits is larger when paid earlier in the spell second we find that the drop in consumption affecting the insurance value of benefits is large from the start of the spell but further increases throughout the spell in trading off insurance and incentives our analysis suggests that the at benefit profile in sweden has been too generous overall however both from the insurance and the incentives side we find no evidence to support the introduction of a declining tilt in the profile

risk aversion performance pay and the principal agent problem this paper calculates numerical solutions to the principal agent problem and compares the results to the stylized facts of ceo compensation the numerical predictions come from parameterizing the models of grossman and hart and of holmstrom and milgrom while the correct incentives for a ceo can greatly enhance a firm s performance providing such incentives need not be expensive for many parameter values ceo compensation need increase only by about 10 for every 1 000 of additional shareholder value for some values the amount is 0 003 cents

equilibrium warrant pricing models and accounting for executive stock options under apb opinion no 25 compensation expense arising from executive stock options consists of the excess of the market value of the stock over the exercise price of the options on their grant dates if the exercise price equals the market value of the stock on the grant date which is typically the case no compensation expense is recognized this accounting treatment has been frequently criticized for its bias toward underestimating the cost of an option to the issuing firm and a number of alternative valuation models have been suggested in the accounting literature by and large these valuation models have been borrowed from the finance literature where they were developed to explain the pricing of warrants and traded options the purpose of this paper is to assess empirically how well two of these valuation models perform in providing estimates of the value of traded securities warrants that are similar in many respects to executive stock options 2 this evidence should help calibrate the magnitude of the errors

the crowding parameter and samuelsonian publicness in a recent issue of this journal gramlich and rubinfeld 1982 introduced a distributive share parameter into a public expenditures demand function they also included a parameter linked to population size and estimated the resulting demand function since the initial median voter formulations by borcherding and deacon 1972 and bergstrom and goodman 1973 it has been standard practice to include the population parameter known as the crowding parameter in public expenditures demand functions it has also been standard practice to interpret the parameter as a samuelsonian index of the extent to which public expenditures constitute a pure public or pure private good gramlich and rubinfeld found public expenditures to be a pure private good a conclusion they share with all previous researchers who have estimated the crowding parameter 1 this comment demonstrates that the private good conclusion is

disincentive effects of unemployment benefits and the role of caseworkers abstract a large literature has documented that the unemployment duration of unemployment insurance ui recipients increases with the generosity of the ui system this has been interpreted as the disincentive effect of ui benefits however unemployed workers typically also have caseworkers assigned who are monitoring and assisting the job search efforts these caseworkers may respond to differences in ui eligibility by shifting resources financial or time between unemployed individuals in order to counteract the moral hazard effect of ui benefits or in order to focus resources to where they have the largest effect this suggests that the typical estimates of the disincentive effects of ui may be biased in studies that compare workers within the same ui agency we estimate whether caseworkers respond to the generosity of ui using a regression discontinuity rd design in germany where potential ui durations vary with age we show that across a wide variety of measures such as meetings sanctions and training programs ui caseworkers do not treat unemployed with different eligibility differently at best we find a very small effect that workers with shorter eligibility close to the exhaustion point are more likely to be assigned to training programs that prolong their ui eligibility the typical rd estimates of the ui disincentive effects thus seem to be valid estimates

institutional investment mergers and the market for corporate control the increasing importance of institutional investors as shareholders in individual companies has led to an important debate on their impact on corporate performance in this paper we focus on their role in the market for corporate control this has so far been the subject of very little systematic investigation despite its theoretical and practical significance we consider the impact of financial institutions using two u k merger samples and employing both univariate and multivariate techniques of analysis in the first sample drawn from the low merger period 1981 1983 pre and post merger differences are found between merging companies with and without a significant institutional presence however in the takeover boom year of 1986 from which the second sample is drawn all such distinctions become blurred

per capita public expenditures and population size a non parametric analysis using french data based on the median voter model we specify a flexible general framework of the effect of municipality size on per capita public expenditures previous literature has recognized that municipality size should have a non linear effect on the quality of public goods provision and to this end different papers have applied a range of alternative parametric specifications using a very large sample of french communes we are able to estimate the effect of municipality size semi parametrically in contrast with the parametric specifications we find evidence of the u shaped relationship between per capita public expenditures and population which is predicted by theory