choice under uncertainty a model of applications for the social security disability insurance program abstract not all people with health problems are disabled some individuals with severe physical or mental impairments such as blindness or limb amputation continue to hold jobs and generally function satisfactorily they constitute however a group of potentially disabled individuals who might apply and qualify for disability insurance or other disability related benifits if they were to lose their jobs or to decide that employment offered an inadequate financial or non pecuniary reward thus disability or a health related inability to work is more than a medical problem but involves motivational and attitudinal factors we specify a model of the application process which we model as choice under uncertainty about approval of an application for disability insurance we specify the possible outcomes to the choice process of an individual in which the probability of acceptance for disability insurance is a key consideration we then estimate a joint model of labor supply and application to the disability insurance program based on the 1972 survey we then compare our results to the observed time series applications process since 1976 lastly we estimate the sensitivity of the application process to the probability of acceptance and the level of benifits

ownership structure and ceo compensation implications for the choice of foreign market entry modes drawing on agency theory corporate governance and international business literatures we develop arguments relating equity ownership structures and ceo compensation mix to a firm s choice of foreign market entry modes based on a sample of 432 foreign market entries by 118 non diversified firms in the us manufacturing sector between 1991 and 1998 our findings indicate that greater equity ownership by institutional shareholders and inside directors is positively associated with a preference for full control entry modes in addition our results suggest that ceos with a greater proportion of pay tied to firm long term performance are more inclined to choose full control entry modes over shared control modes

the walrasian tatonnement mechanism and information this article reports the results of experiments analyzing the walrasian t tonnement mechanism the t tonnement mechanism has the following characteristics there is only one price at any time there is an information mechanism notifying all traders of the price there is a mechanism for determining quantities offered for sale and purchase at the price and transactions at nonequilibrating prices are forbidden in addition the walrasian pricing rule is utilized by the auctioneer the change in price has the same sign as excess demand the treatment variable used in the experimental design is the degree of segregation of buyers and sellers complete segregation means sellers cannot discover the number of buyers and buyers cannot discover the number of sellers at an announced price the results show that the auction mechanism is stable it exhibits strong convergence properties and efficiency levels averaging better than 97 segregation of the buyers from the sellers leads to a significant difference in underrevelation of demand relative to supply

a disaggregated structural analysis of retirement by race difficulty of work and health intergroup differences in retirement rates by race major occupation and health status are examined and allocated to differences in budget sets and indifference curve parameters in addition comparisons indicate that average retirement rates for groups may at times be misleading indicators of marginal responses to incentives it is predicted that all groups will respond to the work incentives in the 1983 social security amendments even those ill health and difficult jobs and the resulting increases in earnings are predicted to amount to from one sixth to over one half of the reductionin lifetime benefits created by the amendments this abstract was borrowed from another version of this item

innovation policy in an open economy a normative framework for strategic and tactical issues abstract in this paper we present a normative analysis of innovation policy grounded in traditional economic principles which responds to the schumpeterian critique of previous efforts in the neoclassical vein focusing directly on specific policy issues we pursue our analysis in two main directions investigating the role of government in developing an infrastructure for innovation and the optimal design of support schemes for r d projects the analysis suggests that while the structural and developmental issues stressed by the schumpeterian school are of fundamental importance identification of disparities between social and private gains the market failure approach provides an invaluable tool for understanding and formulating innovation policy focusing our attention on such factors as economics of scale the incidence of externalities and the supranormal profits offered by imperfectly competitive markets it provides a rational and realistic basis for anticipating where and how government intervention on behalf of industrial innovation is likely to be most effective we view our contribution as a step towards bridging the gap between the neoclassical mainstream of economic analysis and the practice of innovation policy

risks of corporate entrepreneurship autonomy and agency issues although research on corporate entrepreneurship ce has attracted increasing attention risks of ce are not well examined in this paper we examine direct and indirect agency risks associated with providing middle and operational managers with autonomy in the hopes of encouraging ce the key ideas behind our discussion involve two dilemmas of ce 1 to solve the risk averseness problem of middle and operational managers and unleash their entrepreneurial ideas top management needs to encourage autonomous behaviors which can also exacerbate a different type of agency problem opportunistic behaviors 2 although the generation of new ideas to explore new strategic directions and or opportunities is important the very newness of the ideas make them difficult to evaluate and thus the selection process may be perceived as unfair by some managers we propose that a stock options b passive monitoring and c perceived procedural justice would attenuate the negative side effects associated with ce such as opportunistic behaviors and perceived unfairness although research in ce often stresses autonomy of middle and operational managers for new idea generation as important examining the whole process in terms of idea generation selection and implementation with respect to potential risks will extend the ce literature

unobservable industry characteristics and the innovation concentration advertising maze evidence from an econometric study using panel data for manufacturing industries in the frg 1979 1986 in discussing the nexus between innovations and market structure it is often argued that industry characteristics called opportunities might play an important role as determinants of innovation and that simultaneity rather than one way causality prevails we consider a three equation model for innovation advertising and concentration based on pooled cross section time series data for 26 german manufacturing industries we estimate single equation models with and without fixed industry and or time effects to control for unobservable industry or time effects respectively and simultaneous equation systems including fixed effects and controlling for extreme cases outliers or not furthermore we use two different measures for innovations i e the percentage of shipments due to new products and the percentage of firms which classified themselves as innovators our results can be summarized as follows 1 the firm size has no significant effect on innovation one can therefore not conclude from this data set that large firms are more innovative than small ones 2 unobservable industry effects do matter 3 the treatment of outliers does matter 4 simultaneity does matter 5 the way innovations are measured does matter 6 different stories could be told based on the results of the systems of interdependent equations estimated

walrasian tâtonnement auctions on the tokyo grain exchange the tokyo grain exchange tge s itayose mechanism provides the opportunity to analyze functioning walrasian t tonnement auctions wta in 15 677 auctions conducted over 1997 1998 for corn and redbean futures contracts price formation is unexpectedly similar to that observed in continuous double auctions provisional prices and pledges are informative in contrast to behavior observed in experiments few pledges are deceptive because the traders participate repeatedly and because the auctioneer has flexibility when changing the provisional price and ending the auction both the risk of the auction ending and the more equitable dispersion of information increase depth and the speed at which information is embodied in price

credit default swaps and ceo compensation a long term perspective in this paper we examine whether the onset of credit default swaps cdss affects a firm s executive compensation the availability of cdss allows lenders to transfer credit risk but not control

the effect of long term performance plans on corporate sell off induced abnormal returns this study examines the association between long term performance plans and wealth effects accruing to stockholders of divesting firms at announcements of sell off proposals the results indicate that divesting companies with long term performance plans experience a more favorable stock market reaction at the announcement of sell off proposals relative to firms without long term performance plans the findings imply that long term performance plans serve as an effective mechanism to motivate managers to make better decisions substantial research has been undertaken on restructuring corporate assets liabilities and ownership of publicly traded corporations with regard to asset restructuring most of the literature analyzes mergers and tender offers but recently attention has been given to divesting activities divestiture is a modification of the firm s productive assets and comes in the form of sell offs or spin offs in sell offs the parent company sells part of its assets for cash assets or securities of the acquiring firm spin offs involve transfers of assets to a newly organized firm whose shares are distributed to stockholders of the parent firm or involve the distribution of shares of a subsidiary to the parent firm s shareholders while recent studies1 provide evidence that spin off announcements are associated with significant positive abnormal returns to parent firms around the day of the event the studies on voluntary sell offs report mixed results 2 these results raise questions about management s motivation to sell part of the firm s assets prior research assumes that corporate sell offs are activities consistent with stockholders interests however sell offs can be motivated by managerial selfinterest particularly when sell offs increase reported profits and hence management compensation recent articles in the financial press3 suggest that firms

the economics of invention incentives patents prizes and research contracts though public intervention in the market for research is virtually universal economists have paid surprisingly little attention to the choice of the form of research incentive in a given market structure many studies concentrate on patents but any assumption of their superiority over other incentives has been founded on intuition rather than on formal analysis in this paper i analyze the choice between three of the most common alternative means of public intervention in the research market namely patents prizes and direct contracting for research services i show why and under what conditions any one of the three may be preferred by a social welfare maximizing administrator in a competitive economy using a model that for the first time pays explicit attention to differences in the informational roles of each of these alternatives in the extensive literature on the economics of patents see arnold plant 1934 fritz machlup 1958 charles taylor and z a silberston 1973 morton kamien and nancy schwartz 1975 and f m scherer 1977 for valuable surveys formal analysis weighs the benefits of patents as a solution to the market failure associated with the inappropriability of knowledge against the welfare cost due to the restriction on the use of the knowledge generated and this tradeoff is optimized by patent life adjustment in william nordhaus 1969 scant analytical attention is paid to alternative incentive mechanisms an exception is ben yu 1981 who considers the role of prior contracting for inventions but as many writers for example dan usher 1964 yoram barzel 1968 joseph stiglitz 1969 carole kitti 1973 glenn loury 1979 partha dasgupta and stiglitz 1980a have pointed out in various contexts the incentive offered by an unlimited patent to competitive researchers may be excessive due to the common pool problem discussed further in section i below if the patent administrator and researchers share the same information as implicitly assumed in previous models then the patent life limitation can be adjusted to provide the optimal patent incentive given the common pool problem but in all such models patents would not be chosen in a fully optimized fiscal system researchers and the administrator are assumed to have identical information about the shadow price of potential inventions a patent is just a means of turning this shadow price into a monetary reward but monetary compensation can instead be offered directly to researchers by the state assuming that patent revenues incur a higher deadweight loss than an equivalent amount of public funds financed by less distortionary means for example a minimally efficient tax system appropriate prizes or government contracts are socially preferable to patents with optimal lives if the patent is ever to be the optimal incentive mechanism for research it must possess advantages not captured in existing models informal discussions of patents emphasize their informational role to include the latter as a justification for decentralized invention incentives i incorporate an ex ante imbalance of information about costs and benefits of research in the model presented in section ii but this alone is not quite enough it is further necessary to specify that the terms of the award must be fixed before department of economics economic growth center box 1987 yale station yale university new haven ct 06520 i thank with the usual caveat marguerite alejandro wright cindy arfken martin baily nuong brennan steven englander robert evenson richard levin richard nelson susan rose ackerman denis wright and two referees for assistance of various kinds

foreign ownership and technology adoption evidence from indian firms abstract firms in developing countries rely on foreign technology purchases to improve their technology we use a theoretical framework developed by katz and shapiro to examine the ongoing technology adoption behavior of foreign owned and domestic firms using firm level data on indian firms from 1989 to 1993 we test this theoretical model we find that foreign ownership firm size and market structure are among the variables that impact a firm s probability of adopting new technology we also find that the 1991 liberalization of technology transfer policies in india appears to have had a larger impact on foreign owned firms than domestic firms

disability insurance and male labor force participation a response to haveman and wolfe the percentage of adult males 45 54 years of age who are out of the labor force rose from 4 5 percent to 8 7 percent between 1947 and 1982 a great deal is known about this unprecedented rise in nonparticipation in the labor force of middle aged males much more than would be apparent from reading haveman and wolfe s comment substantial evidence has accumulated that the labor force participation of middle aged males is sensitive both to the characteristics of the social security disability system and to labor market alternatives haveman and wolfe s empirical results are an anomaly in this body of literature their generally insignificant empirical results are apparently not the result of the specification issues they raise but rather of their unfortunate choice of data set an earlier study by leonard 1979 for example was almost identical in design to the haveman and wolfe analysis yet resulted in parameter estimates and conclusions remarkably similar to my own haveman and wolfe s sample unfortunately is one half the size of leonard s sample and one fifth the size of mine and apparently lacks detail in the crucial health measure the issues haveman and wolfe raise are issues of variable measurement they do not take issue with the fundamental choice structure underlying my empirical model an expected utility framework discussed in parsons 1980a since the disability system requires that the individual be incapable of substantial gainful activity potential applicants face a labor force participation decision not a marginal hours variation decision a standard expected utility analysis leads to a probit model for the probability of labor force participation lfp

paradigm changing vs paradigm deepening innovation how firm scope influences firm technological response to shocks we examine the direction of firms research efforts as they respond to the shock of a sharp increase in the price of a key input in terms of direction firms can respond to this shock with paradigm changing investments that develop technologies to use substitute inputs or with paradigm deepening investments that develop technologies to improve the utilization efficiency of the existing input we develop a framework that suggests that firms emphasis on paradigm changing versus paradigm deepening investments depends on the degree of input relatedness across their businesses we test our hypotheses by examining the responses of large manufacturing firms in the united states to the oil shock of the early 1980s our framework predicts and our results show that the more related a firm s businesses are the larger its investments into paradigm changing technologies are and the smaller its investments into paradigm deepening technologies in response to the oil shock are we identify the implications of these findings for technological evolution and diversification literatures

diversification strategy and r d intensity in multiproduct firms this study provides empirical evidence that choice of diversification strategy systematically affects r d intensity in large multiproduct firms research and development intensity in dominant busin

marshallian vs walrasian stability in an experimental market the experiments discussed below are an attempt to examine concepts of stability as found in economic textbooks two concepts of stability which stem from two different concepts of market adjustment seem to have dominated thinking whilst these two concepts are typically called walras stability and marshall stability some controversy exists over the extent to which these two models represent their respective thinking no doubt the current formal statements of the theories reflect an evolution of the ideas through the work of many theorists the terminology is retained for convenience regardless of their origins these two concepts lead to competing hypotheses about the conditions under which market instability will be observed so the subject is a natural one for experimental investigation furthermore since this is the first experimental examination of the stability of equilibria the strategy is to inquire about stability in the context of these two classical models and to avoid the temptation to attempt to extend them or integrate them with more modern theory the old models have not been checked they seem to be an appropriate place to start

an evaluation of federal policy instruments to stimulate basic research in industry a model of the resource allocation behavior of a group of firms demonstrates that unaided industry allocation to basic inappropriable research is suboptimal furthermore provision of seed money is generally counterproductive while the provision of a matching subsidy is not very cost efficient in increasing the allocation innovative policy alternatives are proposed

the retirement health nexus a new measure of an old puzzle traditional empirical models of retirement which use a self assessed health measure have often found that the wage rate has a surprisingly small effect on retirement using both a self reported health measure and one not based on self report subsequent mortality experience in a more general reduced form joint demand framework we test the importance of the interaction effects of health and retirement our findings are consistent with a joint determination of health and retirement the wage elasticity using either health measure is about equal to that found in a single equation model when a mortality measure is used but all three elasticities are five times greater than one found using self reported health in a traditional single equation model

buyer market structure and r d effort a simultaneous equations model the theoretical and empirical investigations of the relationship between market structure and the firm s incentive to invent and innovate have concentrated on the effects of the structure of the supply side of the market this focus on the supply side originated in schumpeter s controversial hypothesis that current market power provided the necessary conditions and future market power provided the incentive for technical change schumpeter 1950 this hypothesis stimulated a vast number of theoretical refinements and empirical tests of relations between research and development activity r d and supply side characteristics such as concentration firm size and diversification this literature has been well summarized by kamien and schwartz 1975 and scherer 1980 the analysis of the effects of the buyer market structure on the selling industry conduct and performance has been limited both theoretically and empirically stigler 1964 modeled the effects of the size distribution of buyers on price competition in oligopoly telser 1964 devel oped a theory of advertising messages in which he suggested that advertising would increase when buyers were many and small lustgarten 1975 tested the effects of buyer market structure on price cost margins and advertising and found the relations suggested by stigler and telser invention and innovation are forms of competition which like price and advertising will be affected by both buyer market structure and seller market structure however unlike price and advertising competition there have not been explicit attempts to establish theoretical and empirical relations between buyer market structure and inventive and innovative activity the effects of buyer market structure on the selling industry s incentive to invent and innovate is relevant to interpreting the effects of seller market structure on this effort a number of previous studies of the effects of seller market structure on technical change have found that seller concentration may have a slight positive impact on inventive and innovative effort kamien and schwartz 1975 p 20 even this weak relation may be due to not controlling for buyer market structure if galbraith s 1952 countervailing power hypothesis is correct lustgarten 1975 p 128 concentration in the buyer and seller markets may be positively correlated if buyer market concentration is positively related to inventive and innovative effort in the selling industry the empirical estimate of the partial effect of seller concentration will be biased upward this paper investigates the effect of buyer market structure on r d effort section ii draws together the literature that is relevant to the issue of the relation between buyer market structure and seller inventive and innovative activity section iii develops a simultaneous equation model of r d activity where r d advertising and concentration are endogenous variables section iv uses data on scientific and engineering inputs to test this model section v summarizes these results

demand revelation and tâtonnement auctions abstract the t tonnement process is inherently a price taking process an auctioneer calls out a price and traders respond with a quantity signal this t tonnement groping process contrasts with a double auction continuous bid ask process that utilizes price signals do traders in this institution fully reveal quantity or do they underreveal affecting price quantity and efficiency in the experiments reported here traders playing against a fully revealing automaton systematically attempt to manipulate price by underrevealing quantity bid or offered

executive stock options as mixed gambles revisiting the behavioral agency model conceiving of stock options as providing ceos with cues for the possibility of both greater prospective wealth and losses to current wealth we revisit predictions of the behavioral effects of equity based pay using the behavioral agency model bam we refine the bam s original formulation and provide an explanation for previous conflicting empirical results by theorizing that the anticipation of prospective wealth attenuates the negative effect of accumulated current equity wealth upon ceo strategic risk taking in doing so we offer an advancement of the dialectic between 1 classical agency scholars arguing that equity based pay leads to more risk taking and 2 behavioral scholars arguing that equity wealth creates risk bearing leading to less risk taking we also suggest that the influences of prospective wealth and current wealth on strategic risk taking depend on the extent to which agents can manage the risk inherent in their compensation package and agent vulnerability to losses formal hypotheses to test these expectations are made by focusing on equity based compensation our findings offer strong support for these theoretical expectations

schumpeterian dynamics an evolutionary model of innovation and imitation abstract this paper develops a simple evolutionary model of innovation and imitation it analyzes how dynamic interactions between equilibrating force of imitation and disequilibrating force of innovation mold the evolutionary pattern of an industry s state of technology and shows that in this schumpeterian world the industry will never approach a neoclassical equilibrium with perfect knowlwdge even in the long run the paper also examines the steady state efficiency distribution of firms that characterizes the industry s long run and obtains some comparative dynamics results

disability earnings income and consumption using longitudinal data for the period 1968 2005 for a sample of male household heads we determine the prevalence of disability during the working years and examine how the extent of disability affects a range of outcomes including earnings income and consumption we have seven main findings first disability rates are high we divide the disabled along two dimensions based on the persistence and severity of their work limiting condition we estimate that a person reaching age 56 has a 53 percent chance of having been disabled at least once during his working years and a 19 percent chance that he has begun a chronic and severe disability second the economic consequences of disability are frequently profound ten years after disability onset a person with a chronic and severe disability on average experiences a 68 percent decline in earnings a 32 percent decline in after tax income a 22 percent decline in food and housing consumption and a 21 percent decline in food consumption third the various economic consequences differ sharply across disability groups the outcome declines for those with a chronic and severe disability are often more than twice as large as those for the average disabled fourth our findings show the partial and incomplete roles that individual savings family support and social insurance play in reducing the consumption drop that follows disability only about half of this most disabled group reports receiving social security disability insurance or supplemental security income fifth we find a noticeable fall in earnings and income prior to the onset of a reported disability consumption also falls somewhat suggesting that future disability is partially but incompletely predictable in the short run sixth time use and detailed consumption data further indicate that disability is associated with a decline in well being seventh the quantities we have estimated combined with elasticities from the literature allow us to examine the optimality of current compensation for the disabled we find that the current compensation for our most disabled group appears to be lower than is optimal

labour force participation by disabled males in canada the disabled are not necessarily unemployed although about a quarter of them report they are completely prevented from working a disabled person s decision to work or not depends on a variety of psychological social and economic as well as health factors this paper asks if canadian disability related insurance schemes discourage work it models and measures the impact of disability benefits on the work choice of disabled prime age males it finds that they amount to a significant work disincentive but better yet they likely save many disabled persons from unsuitable and or undesirable jobs

solar power investment in north africa reducing perceived risks abstract climate protection targets for mid century imply a need to scale up european renewable power production to a level that may exceed the available land area within europe s borders one attractive solution from a cost and feasibility perspective is the development of large scale concentrating solar power plants in north africa and the middle east however these developments are seen by many people as risky in terms of both european energy security and in terms of the risks faced by project developers in this paper we focus on the latter of theses issues first we examine the risks that project developers are most concerned about and identify these as being associated not with terrorism and rogue state behavior but rather with corruption and inefficient and unpredictable bureaucracies second we identify a range of policy approaches that can reduce these risks either by mitigating their consequences or by seeking to eliminate their underlying causes third we investigate the financial benefits of taking such steps to reduce or eliminate investment risks we find the potential savings to european electricity consumers to exceed 200 billion

diversification and the risk return trade off the article presents information on a study which investigated the risk return trade off at the level of individual firms with both accounting and market based measures of risk the author describe

performance feedback and firm risk taking the moderating effects of ceo and outside director stock options we contribute to the behavioral theory of the firm and the behavioral agency model by developing a theoretical framework that predicts the differential interaction effects of performance feedback and values of stock option grants of multiple agents on firm risk taking we explain how chief executive officers ceos versus outside directors awarded with stock option grants perceive negative or positive deviations from prior performance we argue that in a negative attainment discrepancy context high values of option grants will increase the risk aversion of ceos who already bear excessive employment and compensation risks resulting in less risk taking however it will enhance the risk taking propensity of influential outside directors who increase monitoring and support for risky projects because their risk preferences are better aligned with those of shareholders in a positive attainment discrepancy context high values of option grants will amplify risk aversion in both ceos and outside directors who

moving closer to the action examining compensation design effects on firm risk we examine the influence of ceo equity based compensation on strategic risk taking by the firm building off the behavioral agency model agency theory and prospect theory we develop arguments about when equity based compensation elements will increase or decrease executive risk propensity and in turn strategic risk taking incorporating a behavioral perspective into our models of incentive alignment provides us with new and potentially more accurate predictions about how individual elements of ceo pay will influence risk selection as well as how equity compensation interacts with cash compensation and with other factors to influence risk preferences in general this study provides evidence that ceo equity based compensation significantly influences strategic risk but that this influence is more nuanced and complex than conventional treatments of executive compensation assume in particular we find that different forms of equity based pay exhibit dissimilar influences on strategic risk and that their influence changes as their value and vesting status change second we find that cash based forms of pay moderate the incentive properties of equity based pay indicating that cash based pay may affect how executives perceive risks associated with equity pay finally we find that stock price volatility and board actions each also moderate the incentive effects of equity based pay in sum our results argue for increased recognition of a behavioral perspective on executive compensation and greater precision in how we measure and model the incentive alignment properties of ceo compensation

external ownership and innovation in the united kingdom this paper examines the impact of ownership and a variety of other variables on the likelihood of innovation and the presence of an r d function within a national sample of uk defence related firms it is shown that foreign ownership has a negative indirect impact upon innovation mixed support is found for the schumpeterian approach to innovation involvement in export markets technological opportunity and r d collaboration are shown to have a positive impact on innovation

r d and ceo departure date do financial incentives make ceos more opportunistic the purpose of this article is to examine whether research and development r d expenditure is biased downward because of self serving behavior of highly incentivized managers this offers an insight into the general relationship between incentives and opportunism using instrumental variables and panel data methods for a sample of high r d spenders in the uk we examine whether r d is reduced in cases of imminent departure of the ceo results show evidence for this but only for the sample above the median in intensity of stock and options in the compensation package this suggests that opportunism is enhanced by inappropriately strong incentives the main results are robust to the inclusion of a number of corporate governance variables jel classification g30 o30

swinging for the fences the effects of ceo stock options on company risk taking and performance we unpack the concept of managerial risk taking distinguishing among three of its major elements the size of an outlay the variance of potential outcomes and the likelihood of extreme loss we

the economic implications of disability insurance in canada the article empirically estimates the effects of disability pensions provided under the canada quebec pension plans on the labor force participation rates of males aged 45 64 years two data sets are used one consists of pooled cross section annual time series data by province for the years 1975 83 the other consists of observations as of 1985 on 651 males in the specified age group naive estimation results from both sets of data suggest a large negative effect of pension income in the case of the micro data this effect becomes small and statistically nonsignificant when more sophisticated estimation methods are used

strategic trading in a two sided foreign exchange auction abstract the market microstructure chosen for foreign exchange markets can influence trading volumes and equilibrium exchange rates with emerging markets and developing countries increasingly utilizing two sided auctions we show that the choice of the discrete t tonnement auction creates incentives for strategic behavior among market participants theoretical predictions on strategic under revelation of demand or supply positions are supported empirically using detailed data from a rare example of a t tonnement market the moscow interbank currency exchange our results suggest that market microstructures should be introduced alongside more traditional asset market fundamentals in studies of foreign exchange market activity especially in developing countries

price dynamics in general equilibrium experiments general equilibrium ge theory faces several related challenges classical theories of out of equilibrium adjustment are intuitive but implausibly centralized further standard restrictions on individual preferences place little structure on aggregate excess demand functions amongst other issues this fact implies that economies can be unstable under classical dynamics and thus instability appears to be an unavoidable feature of ge theory this paper recounts laboratory studies of ge environments which reveal that classical theories of dynamics do in fact organize market activity surprisingly well these experiments suggest that the walrasian auctioneer for example appears to be a constructive abstraction and that instability should be accommodated within theory rather than circumscribed laboratory applications of ge theory focused on issues beyond stability and dynamics are also briefly surveyed

managerial incentives and investment in r d in large multiproduct firms incentives for division managers in large firms affect their risk orientation and thus their decisions to invest in r d this paper reviews theory and hypothesizes that division managers incentive compensation that is based on financial performance is negatively related to risk taking as measured by r d intensity results of a study of 184 major u s firms suggest that incentives based on short term annual division financial performance are negatively related to total firm r d intensity after controlling for industry r d intensity firm diversification size and group structure furthermore the results suggest that an emphasis on long term financial incentives may mitigate the negative relationship between these incentives and r d intensity but does not promote risk taking the results suggest the importance of emphasizing strategic controls evaluating division managers based on operational understanding of strategies proposed strategic criteria as opposed to the use of financial controls evalua

international comparisons of r d effort the case of the canadian pharmaceutical industry abstract the canadian federal government anxious to stimulate innovation announced recently a policy objective for the economy the attainment of industrial research expenditures reaching 1 5 percent of the gross national product the proposed substantial increase over the current level is rationalized by comparison with economy wide research intensities gerd gnp in other oecd countries this paper questions the economic validity and policy relevance of international aggregate comparisons it argues that inter country comparisons should take place at individual industry levels where technologies are similar and proposes a methodology for formulating rd this canadian industry presumably does not require governmental attention to its r d activities

proactive r d management and firm growth a punctuated equilibrium model the external environment is characterized by periods of relative stability interspersed with periods of extreme change implying that high performing firms must practice exploration and exploitation in order to survive and thrive in this paper we posit that r d expenditure volatility indicates the presence of proactive r d management and is evidence of a firm moving from exploitation to exploration over time this is consistent with a punctuated equilibrium model of r d investment where shocks are induced by reactions to external turbulence using an unbalanced panel of almost 11 000 firm years from 1997 to 2006 we show that greater fluctuations in the firm s r d expenditure over time are associated with higher firm growth developing a contextual view of the relationship between r d expenditure volatility and firm growth we find that this relationship is weaker among firms with higher levels of corporate diversification and negative among smaller firms and those in slow clockspeed industries

market structure innovation and optimal patent life m uch work has been directed at determining the relative efficiency of various market structures in the allocation of resources to invention while the conclusions are not entirely clear it seems certain that no single market structure results in a pareto efficient allocation of resources to research and development r d in the light of this certain secondbest procedures must be examined social controls may provide an attractive method of lessening the inefficiencies described above 2 while government research and development subsidies and award programs do exist the most prevalent form of social control is the patent system granting the inventor a monopoly on the use of the discovery for a specified period of time eliminates the free rider problem thus restoring the incentive to invent extension of the duration of protection will increase incentives for private resource allocation toward technical advance unfortunately extension of patent protection by definition brings with it the social inefficiencies recognized in a monopolistic market the

market structure and innovation a survey economics we all recite deals with allocation of limited resources towards satisfaction of unlimited wants resources are typically identified as land labor and capital plus a technology that determines their transformation into consumer goods disparity between the available goods and services and the desired gives rise to scarcity and the question of what how and for whom to produce the focus then shifts to description and evaluation of alternative resource allocation mechanisms for making the choices the pareto criterion by which an allocation of resources is deemed efficient if any reallocation improving the position of some individual worsens the position of others is a commonly employed gauge of a mechanism s performance in the absence of externalities increasing returns to scale and uncertainty a perfectly competitive market system yields a pareto optimal allocation of resources this underlies the view that individual self interest is compatible with society s interest the further conclusion that pareto optimality may not be achieved via the market system in the presence of monopoly elements provides an economic rationale for antitrust laws the objective of a resource allocation mechanism appears to be according to the analysis described above to make the best of available resources the alternative objective of relaxing constraints through expanding the resource base or developing new technology seems to be beyond its scope thus until rather recently technical advance had been regarded in the mainstream of economic theory as unmotivated by the quest for profits and substantially unaffected by resource allocation instead as j schmookler observed technology had been viewed as a parameter like the weather affecting the outcome of resource allocations but itself unaffected by them 84 1965 evidence that technological progress has significantly contributed to growth in productivity together with a substantial increase in research and development activity largely financed by government and carried out by industry see f machlup 51 1962 may have spurred reconsideration of this view once technical advance is regarded as an economic variable it is natural to in

internal capital market controls and financial performance in multidivisional firms it is proposed that within the population of m form firms the control systems necessary to realize economic benefits from interrelationships between subunits o f a firm are incompatible with the systems necessary to realize benef its from an m form type internal capital market this hypothesis is t ested on 156 large u k firms questionnaire data are used to classif y the firms according to their internal control characteristics the findings provide tentative support for the hypothesis copyright 1988 by blackwell publishing ltd

do traders strategically time their pledges during real world walrasian auctions abstract experimental research suggests the walrasian t tonnement auction encourages traders to under reveal preferences even encouraging initial pledges contrary to true desires because pledges are not binding we analyze the timing and characteristics of individual pledges and trades during 9604 auctions for redbeans conducted by the tokyo grain exchange we find no evidence of contrarian pledging and little evidence of under revelation as many traders over reveal as under reveal most traders pledge seriously from the beginning despite the considerable heterogeneity in pledging behavior across individual traders these differences appear to have no relationship with traders profits nor do they appear to affect the achievement of equilibrium

reported vs actual job search by unemployment insurance claimants this study compares self reported job search contacts of unemployment insurance recipients with independently verified job search contacts for the total sample reported contacts averaged 2 61 per week compared with actual contacts of only 1 78 per week nearly one fifth of the sample made no job contacts for the single weeks analyzed the separate equations estimated for reported and actual job contacts suggest that systematic misreporting may distort the conclusions particularly for the impact of unemployment insurance benefits on search intensity that would result from analyzing reported rather than actual contacts some implications of the findings for reported unemployment rates also are explored

strategic commitment with r d the case of bertrand competition abstract when there is multiplicatively separable demand and firms compete in the price dimension there is no room for strategic use of r d by firms under a different demand situation strategic use of r d by firms competing in the price dimension reduces r d spending reduces output increases price and increases profits of each firm

the impact of economic conditions on participation in disability programs evidence from the coal boom and bust abstract we examine the impact of the coal boom of the 1970 s and the coal bust of the 1980 s on disability program participation these shocks provide clear evidence that as the value of labor market participation increases disability program participation falls for the disability insurance program the elasticity of payments with respect to local earnings is between 0 3 and 0 4 and for supplemental security income the elasticity is between 0 4 and 0 7 consistent with a model where qualifying for disability programs is costly the relationship between economic conditions and program participation is much stronger for permanent than for transitory economic shocks

the impact of corporate governance practices on r d efforts a look at shareholders rights cross listing and control pyramid the paper considers the impact of multiple shareholder oriented governance practices on rd decisions based on a sample of 5 528 firms belonging to 110 large french listed business groups our results substantiate the idea that shareholder oriented governance practices and a lower position in a control pyramid are better for rd investment the introduction of any additional shareholder oriented practice is found to result in more rd we show however that this anglo americanization of the french corporate governance system is only partial we provide evidence of the co existence of an old french system of corporate governance with a hybrid model of corporate governance the lack of concrete results on complementarity among shareholder oriented governance practices casts doubt on the stability of this hybrid model in the french context

ceo hubris and firm risk taking in china the moderating role of managerial discretion this study linked ceo hubris to firm risk taking and examined the moderating role of managerial discretion in this relationship drawing on upper echelons theory and behavioral decision theory we

does location matter for firms r d behaviour empirical evidence for danish firms in this paper we analyse whether regional location matters for danish firms r d performance in accordance with kleinknecht and poot s 1992 survey we test the urban hierarchy hypothesis stating that firms in urban agglomerations are more likely to perform r d than firms elsewhere using a micro dataset for danish firms obtained by merging danish r d statistics with account data the evidence of the influence of location on both the probability for undertaking r d and r d intensity is mixed but basically not in favour of any urban hierarchy in danish r d other non regional factors such as size of firm sectoral dummies classified according to pavitt s taxonomy and the dummy controlling for ict service industries are also estimated to have significant influence on firms r d behaviour furthermore the age of a firm only affects its r d intensity significantly cet article cherche a analyser si oui ou non la localisation regionale est importante pour le comportement des entreprises danoises quant

a behavioral understanding of investment horizon and firm performance observers have argued that firms overly emphasize short term results at the expense of long run value using a behavioral perspective we analyze three hypotheses related to this general argument first we examine the association of investment time horizons with firm performance contributing new theory that argues for a quadratic rather than linear association second because the tendency toward immediate results could reflect stock market pressures we consider how the interaction of investor patience and firm horizon relates to firm performance third we examine the argument s implication that most firms have investment horizons at a level where marginal increases in horizon associate positively with firm performance measuring horizon as the expected useful lives of capital expenditures we find empirical support for the hypothesized quadratic relation in a large scale multiyear sample of u s publicly held manufacturing firms and confirm that a majority of firms have horizons in the region where our models predict increases in horizon positively influence performance we also find that the most positive returns occur when long horizon investments are aligned with investor patience