diversification incentives under price based and cost based regulation this article considers two schemes of regulationforfirms that serve both monopoly markets and markets subjected to substantial competition the first form cost based regulation combines elements of rate of return regulation on monopoly markets with filly distributed cost pricing much like the form of regulation currently in place in the domestic telephone industry the secondform price based regulation would establish rate caps on noncompetitive services and allow the firm to enter into competitive markets and charge whatever prices it might like in those markets models of both forms of regulation are developed and analyzed with respect to incentives for cost misreporting choice of technology cost reducing innovation choices of prices and output levels and diversification into competitive markets

the limits of explanation testing the internalization theory of the multinationial enterprise the paper explores the difficulties of testing the internalization approach in the modern theory of the multinational enterprise the structure of the theory is elaborated and the conclusion drawn that testing cannot occur at the most general theoretical level but that the theory requires careful restricting assumptions to be placed on it to allow rigorous testing several empirical circumstances would constitute refutation if they could be shown to hold however the use of unconventional cases or outliers does not constitute disproof more rigour is required in formulating and testing the theory but the current verdict on the theory must be not disproven

detecting potential overbilling in medicare reimbursement via hours worked we propose a novel and easy to implement approach to detect potential overbilling based on the hours worked implied by the service codes which physicians submit to medicare using the medicare part b fee for service ffs physician utilization and payment data in 2012 and 2013 released by the centers for medicare and medicaid services we construct estimates for physicians hours spent on medicare beneficiaries we find that about 2 300 physicians representing about 3 percent of those with 20 or more hours of medicare part b ffs services have billed medicare over 100 hours per week we consider these implausibly long hours

feebates rebates and gas guzzler taxes a study of incentives for increased fuel economy abstract us fuel economy standards have not been changed significantly in 20 years feebates are a market based alternative in which vehicles with fuel consumption rates above a pivot point are charged fees while vehicles below receive rebates by choice of pivot points feebate systems can be made revenue neutral feebates have been analyzed before this study re examines feebates using recent data assesses how the undervaluing of fuel economy by consumers might affect their efficacy tests sensitivity to the cost of fuel economy technology and price elasticities of vehicle demand and adds assessments of gas guzzler taxes or rebates alone a feebate rate of 500 per 0 01 gallon per mile gpm produces a 16 percent increase in fuel economy while a 1000 per 0 01 gpm results in a 29 percent increase even if consumers count only the first 3 years of fuel savings unit sales decline by about 0 5 percent but sales revenues increase because the added value of fuel economy technologies outweighs the decrease in sales in all cases the vast majority of fuel economy increase is due to adoption of fuel economy technologies rather than shifts in sales

the impact of political majorities on firm value do electoral promises or friendship connections matter this paper simultaneously estimates the impact of political majorities on the values of firms that would benefit from the platforms of the two main candidates at the 2007 french presidential election segolene royal and nicolas sarkozy and of those that are ruled or owned by sarkozy s friends we use prediction market data to track each candidate s victory probability and investigate how this relates to firms abnormal returns our estimates suggest that the value of firms that would likely benefit from the platforms of royal and sarkozy changed by 1 and 2 respectively with the candidates victory probabilities and that firms connected to sarkozy out performed others by 3 due to his election

a presumptive pigovian tax complementing regulation to mimic an emissions fee if regulations are used to make cars and fuels cleaner should gasoline taxes be used to manage demand for trips that pollute anaysis of a well composed program for mexico city indicates that the emission reductions would cost 24 percent more if a tax on gasoline was not introduced a simple analytical framework is developed to analyze the use of abatement requirements to make cars cleaner and a gasoline tax to economize on the use of cars the two instruments should be combined to mimic the incentives that would have beeen provided by an emissions fee thus cleaner cars and fewer trips are analogous to competing suppliers of emission reductions the planner should buy from both so that marginal costs are equal applying that rule the marginal cost of emission reductions is simply the gasoline tax rate divided by emissions per liter

betting on hitler the value of political connections in nazi germany this paper examines the value of connections between german industry and the nazi movement in early 1933 drawing on previously unused contemporary sources about management and supervisory board composition and stock returns we find that one out of seven firms and a large proportion of the biggest companies had substantive links with the national socialist german workers party firms supporting the nazi movement experienced unusually high returns outperforming unconnected ones by 5 to 8 between january and march 1933 these results are not driven by sectoral composition and are robust to alternative estimators and definitions of affiliation

measuring the impacts of teachers i evaluating bias in teacher value added estimates are teachers impacts on students test scores value added a good measure of their quality one reason this question has sparked debate is disagreement about whether value added va measures provide unbiased estimates of teachers causal impacts on student achievement we test for bias in va using previously unobserved parent characteristics and a quasi experimental design based on changes in teaching sta using school district and tax records for more than one million children we nd that va models which control for a student s prior test scores exhibit little bias in forecasting teachers impacts on student achievement although teachers have substantial impacts

consensus building how to persuade a group many decisions in private and public organizations are made by groups the paper explores strategies that the sponsor of a proposal may employ to convince a qualified majority of group members to approve the proposal adopting a mechanism design approach to communication it emphasizes the need to distill information selectively to key members of the group and to engineer persuasion cascades in which members who are brought on board sway the opinion of others the paper unveils the factors such as the extent of congruence among group members and between them and the sponsor and the size and governance of the group that condition the sponsor s ability to maneuver and get his project approved

effects of the change from rate of return to price cap regulation this article focuses on the use of incentive regulation in the telephone industry in the united states we first characterize some of the difficulties that have led regulators to move away from traditional rate ofreturn cost based regulation and toward systems of regulation that provide incentives for increasingly efficient production allowing firms to share in the social gains from efficiency with increased profits we then discuss the basic structure of incentive regulation as it has most commonly been adopted in the telephone industry in the united states the first is price cap pc regulation which typically allows the firm to

1 000 cash back the pass through of auto manufacturer promotions automobile manufacturers frequently use promotions involving cash incentives while payments are nominally directed to either customers or dealers the ultimate beneficiary of the promotion depends on the outcome of price negotiation we use program evaluation methods to compare the incidence of these two types of promotions customers obtain 70 to 90 percent of a customer rebate but only 30 to 40 percent of a dealer discount promotion a 500 difference for a typical promotion our leading hypothesis is that pass through rates differ because of information asymmetries customer rebates are well publicized to customers while dealer discount promotions are not

are policy platforms capitalized into equity prices evidence from the bush gore 2000 presidential election abstract this paper tests for the capitalization of policy platforms into equity prices using a sample of 70 firms favored under bush or gore platforms during the 2000 u s presidential election two sources of daily data during the six months leading up to the election are incorporated firm specific equity returns and the probability of a bush victory as implied by prices from the iowa electronic market for this group of politically sensitive firms the daily baseline estimates demonstrate that platforms are capitalized into equity prices under a bush administration relative to a counterfactual gore administration bush favored firms are worth 3 more and gore favored firms are worth 6 less implying a statistically significant differential return of 9 estimates based on weekly returns are even stronger suggesting a differential return of 16 the most sensitive sectors include tobacco worth 13 more under a favorable bush administration microsoft competitors worth 15 less under an unfavorable bush administration and alternative energy companies worth 16 less under an unfavorable bush administration a corresponding analysis of campaign contributions which allows for heterogeneity in the importance of policy platforms to the firms supports the baseline estimates

responding to public disclosure of corporate social irresponsibility in host countries information control and ownership control we extend the internalization literature by theorizing on how public disclosure of corporate social irresponsibility csi can damage reputation based firm specific advantages of multinational companies mncs and how foreign subsidiary governance can subsequently be used as strategic responses specifically we distinguish between two foreign subsidiary governance mechanisms information control and ownership control that the prior literature has often assumed operate in parallel and posit that they function in divergent directions in this context furthermore we explain how two host country characteristics press freedom and regulatory quality amplify the need for mncs to utilize different governance mechanisms as responses to csi disclosure

testing efficiency in intermediate regulated industries abstract a model is developed that permits the testing of hypotheses concerning capital and pricing efficiency in intermediate regulated industries application to us electric utility data for 1988 1990 suggests that low allowable rates of return may have induced shortfalls in capacity

anticipation tax avoidance and the price elasticity of gasoline demand summary least squares estimates of the response of gasoline consumption to a change in the gasoline price are biased toward zero given the endogeneity of gasoline prices a seemingly natural solution to this problem is to instrument for gasoline prices using gasoline taxes but this approach tends to yield implausibly large price elasticities we demonstrate that anticipatory behavior provides an important explanation for this result gasoline buyers increase purchases before tax increases and delay purchases before tax decreases rendering the tax instrument endogenous including suitable leads and lags in the regression restores the validity of the iv estimator resulting in much lower elasticity estimates copyright 2016 john wiley sons ltd

regulatory options and price cap regulation we construct a simple model of the regulatory process in which a monopoly firm has private information about its capabilities and its cost reducing activities the optimal regulatory policy offers the firm a choice between two regulatory regimes one of which resembles pricecap regulation the other regime has thefirm share realized gains in surplus with consumers we examine the optimal linking of the two regimes and show how the optimal regulatory policy varies with changes in the technological climate in the industry and with the nature of the information asymmetry between regulator and firm

modelling the impacts of a carbon emission differentiated vehicle tax system on co2 emissions intensity from new vehicle purchases in ireland abstract the increasing awareness of the effects of climate change on the environment and the economic pressure on oil supply has focused international attention on reducing co 2 emissions and energy usage across all sectors in order to meet their kyoto protocol commitments and in line with european union policy the irish government has introduced a carbon based tax system for new vehicles purchased from the 1st of july 2008 this new legislation aims to reduce carbon emissions in the transport sector a sector which is responsible for a significant proportion of both this paper presents the results of the development calibration and application of a car choice model which predicts the changes in co 2 emissions intensity from new vehicle purchases as a result of the changes in vehicle tax policy and fuel price in ireland the model also predicts the impact of such changes on tax revenue for the irish government and the changes in the split between the number of diesel and petrol vehicles purchased the investigation found that the introduction of these new carbon based taxes in ireland will result in a reduction of 3 6 3 8 in co 2 emissions intensity and a reduction in annual tax revenue of 191 m

are firm specific advantages location specific too much of the research on the role of firm specific advantages on firms subsidiary ownership preferences has been undertaken in the context of advanced country multinationals specifically u s mncs research has found that u s firms derive ownership advantages from their size experience and technological and marketing superiority perhaps having operated in the most developed and sophisticated home market many u s firms generate unique skills that give them absolute advantages over firms in almost all foreign host locations developing country mncs do not have absolute ownership advantages similar to those of the u s firms the relevance of a particular firm specific characteristic for a developing country mnc may be contingent not only upon the home country characteristics as in the case of u s mncs but also upon host country characteristics this study investigates the subsidiary ownership preferences among korean mncs and finds that the influence of three firm specific advantages technological intensity product differentiation and capital intensity on subsidiary ownership levels is contingent upon whether the subsidiary is located in a relatively less developed or a more developed country as compared to the home country although some authors have suggested that the influence of firm specific advantages may be contingent upon the characteristics of both home and host country locations empirical investigations to this effect have been nonexistent

the multinational firm direct investment is incorporated into a simple general equilibrium model of international trade the analysis focuses on an attempt to endogenize the internalization decision it is argued that a reasonable approach assumes that arm s length contracts must be simple so that complex arrangements require internalization the model relates direct investment to the degree of underlying uncertainty and to fundamental trade determinants such as relative factor endowments the behavior of the model contrasts sharply with that of the markusen helpman model which takes internalization for granted

the impact of alternative forms of state regulation of at t on direct dial long distance telephone rates federal and state regulatory agencies have traditionally used rate of return regulation to set profit and rate levels for utilities a price cap framework in which the regulatory agency sets a maximum rate below which the regulated utility has pricing flexibility is possibly a more efficient alternative to rate of return regulation this article presents an econometric analysis that compares at t s prices of intrastate long distance telephone service in states that allow at t pricing flexibility with those in states that do not the results of this analysis suggest that at t s daytime evening nighttime and weekend rates are significantly lower in states that allow pricing flexibility than in states that use rate of return regulation

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

foreign direct investment and investment under uncertainty we show that in uncertain environments ownership and internalization advantages may be negatively rather than positively associated with fdi this reversal from extant theory occurs because ownership advantages often serve to make fdi delayable while internalization advantages often serve to make it less reversible when fdi becomes either more delayable or less reversible it is less likely to occur at a point in time our approach enriches the who where and why explanations offered by current fdi theory to incorporate the question of when

executive constraint political stability and economic growth previous studies have argued that democracy diminishes the extent to which leadership contests depress economic growth by reducing the violence and uncertainty attendant on such contests we recon

hybrid revenue caps and incentive regulation abstract this paper analyzes the incentive effects of a hybrid revenue cap on a regulated monopolistic firm using non discriminatory two part pricing it is shown that the fixed and the variable part of the cap have different meanings in terms of regulation the fixed part of a hybrid revenue cap should be used to control the profit level of the regulated firm while the variable part should be used to control the social efficiency level since detailed information about the firm s cost function is required to determine the revenue cap parameters the overall conclusion is that revenue caps are a rather bad idea in the area of incentive regulation

committee assignments constituent preferences and campaign contributions committee assignments constituent preferences and campaign constributions the familiar economic model of regulation as developed by stigler 1971 peltzman 1976 and becker 1983 posits an essentially frictionless market process for regulatory policy formation in which a single regulator legislator chooses policy to maximize net support from competing groups in this paper we extend the supply side of this model by considering the effect of legislative institutions and unorganized constituent preferences on the ability of incumbents in the house of representatives to serve specific interest groups we then test this formulation by examining the recent history of interest group campaign contributions to these legislators our theoretical model concentrates on how a legislator allocates time between serving specific interest groups outside his district and serving his constituency we do not model interest group decisions directly assuming simply that they purchase their desired amount of service from the lowest cost suppliers our model sorts legislators by the supply price at which they can serve a particular group this price depends on the preferences of the voters in the legislators district and the productivity of the legislator in producing policy service for each group 1 the empirical section tests the model by examining the pattern of interest group campaign contributions to house incumbents from 1978 through 1984 our regression analysis tends to confirm both implications of the theory first the pattern of campaign contributions from specific interest groups to legislators is shaped by the division of substantive legislative and regulatory jurisdictions represented by the system of house standing committees second voter preferences influence the pattern of contributions by affecting the supply price at which a legislator can offer policy to interest groups legislators with sympathetic or indifferent constituencies are able to offer a lower price and are therefore able to attract larger sums than those with hostile constituencies these results are important for two reasons first the influence of congressional institutions such as committees on policy is not widely accepted while several studies faith levins and tollison 1982 weingast and moran 1983 weingast 1984 grier 1989 and robert 1990 have documented the effects of changes in a particular committee on policies under its jurisdiction this work considers the jurisdiction of only a single committee in each case 2 by examining the linkages between congressional committees and political action committees pacs we investigate whether interest groups act as if committees have power second while the chicago model of regulation emphasizes correctly in our view that policy is the result of vote maximizing calculations and the incremental balancing nature of any equilibrium the model is imprecise about which sets of preferences are most important in determining the levels of policy or the size of changes in policies focusing on committees promotes a parsimonious specification of both the political players members of the relevant committee rather than the entire congress and the pivotal voters committee members constituencies more than the nation determining specific policy outcomes the paper is organized as follows section i reviews some issues on the nature and sources of committee influence in the u s congress the second section incorporates committee assignments into a theory of decision making by interest group investors sections iii and iv describe our data and estimation technique and present the empirical results the fifth and final section discusses some implications and conclusions of this research i committee power in congress legislators differ substantively by virtue of their committee assignments committees in congress and particularly in the house of representatives possess disproportionate power over the policy areas in their respective jurisdictions have the right to hold hearings and recommend budget allocations for the bureaus in their jurisdiction goodwin 1970

the economic value of military connections in turkey can financial connections to the military provide economic value in democratic environments we address this question by studying whether firms in which the turkish military had a controlling financial interest earned abnormally high stock returns on the istanbul stock exchange our findings from event studies are that this is indeed the case we infer that militaries can retain substantial power to influence economic policy from behind the scenes even after formally transferring it to democratically elected leaders the paper contributes to the literature in public choice by demonstrating econometrically that the military can be a major rent seeking actor even in democratic environments

mps for sale returns to office in postwar british politics many recent studies show that firms profit from connections to influential politicians but less is known about how much politicians financially benefit from wielding political influence we estimate the returns to serving in parliament using original data on the estates of recently deceased british politicians applying both matching and a regression discontinuity design to compare members of parliament mps with parliamentary candidates who narrowly lost we find that serving in office almost doubled the wealth of conservative mps but had no discernible financial benefits for labour mps conservative mps profited from office largely through lucrative outside employment they acquired as a result of their political positions we show that gaining a seat in parliament more than tripled the probability that a conservative politician would later serve as a director of a publicly traded firm enough to account for a sizable portion of the wealth differential we suggest that labour mps did not profit from office largely because trade unions collectively exerted sufficient control over the party and its mps to prevent members from selling their services to other clients

a model of expertise we study a model in which perfectly informed experts offer advice to a decision maker whose actions affect the welfare of all experts are biased and thus may wish to pull the decision maker in different directions and to different degrees when the decision maker consults only a single expert the expert withholds substantial information from the decision maker we ask whether this situation is improved by having the decision maker sequentially consult two experts we first show that there is no perfect bayesian equilibrium in which full revelation occurs when both experts are biased in the same direction it is never beneficial to consult both in contrast when experts are biased in opposite directions it is always beneficial to consult both indeed in this case full revelation may be induced in an extended debate by introducing the possibility of rebuttal

do physicians financial incentives affect medical treatment and patient health we investigate whether physicians financial incentives influence health care supply technology diffusion and resulting patient outcomes in 1997 medicare consolidated the geographic regions across which it adjusts physician payments generating area specific price shocks areas with higher payment shocks experience significant increases in health care supply on average a 2 percent increase in payment rates leads to a 3 percent increase in care provision elective procedures such as cataract surgery respond much more strongly than less discretionary services non radiologists expand their provision of mris suggesting effects on technology adoption we estimate economically small health impacts albeit with limited precision

incentive regulation and productive efficiency in the u s telecommunications industry this study evaluates the effect of incentive regulation on the productivity of u s local exchange carriers between 1988 and 1993 introducing pure price cap schemes has a strong and positive but lagged effect on technical efficiency where price cap schemes operate in conjunction with an earnings sharing scheme there is immediate effect on technical efficiency but the impact is less strong than the effect of a pure price caps scheme where only an earnings sharing scheme operates its effect is detrimental to technical efficiency weaker though broadly positive results are obtained as to the effect of incentive regulation on scale efficiency copyright 1997 by university of chicago press

intertemporal price cap regulation under uncertainty this paper examines the intertemporal price cap regulation of a firm that has market power under uncertainty the unconstrained firm waits longer before investing or adding to capacity and as a corollary enjoys higher prices over time than would be observed in an equivalent competitive industry in the certainty case the imposition of an inter temporal price cap can be used to realise the competitive market solution by contrast under uncertainty it cannot even if the price cap is optimally chosen under uncertainty the monopoly firm will generally a under invest and b impose quantity rationing on its customers

persuasion by cheap talk we consider the credibility persuasiveness and informativ eness of multidimensional cheap talk by an expert to a decision maker we find that an expert with state independent preferences can always make credible comparative statements that trade off the expert s incentive to exaggerate on each dimension such communication benefits the expert cheap talk is persuasive if her preferences are quasiconvex communication benefits a decision maker by allowing for a more informed decision but strategic interactions between multiple decision makers can reverse this gain we apply these results to topics including product recommendations voting auction disclosure and advertising jel d44 d72 d82 d83 m37

with a little help from my friends cross subsidy and installed base quality in the u s telecommunications industry abstract this article examines the effect of the cross subsidization process which is a key institutional mechanism in the telecommunications sector generally on enhancing the quality of the installed base of telecommunications infrastructure in the united states fiber optic and digital technology usage levels within local exchange carriers in the united states are used to capture installed base quality the results show that local exchange sector cross subsidization has a positive effect on new technology deployed in the installed base regulatory influences are also controlled for and the introduction of pure price cap schemes is shown to positively affect new technology quality where price cap schemes are introduced in conjunction with a mixed earnings sharing scheme or where only an earnings sharing scheme is introduced then the effect on new technology usage is much more mixed

value of corruption in china evidence from anti corruption investigation abstract using recent anti corruption investigation in china we show that chinese listed firms suffered an aggregate loss of usd 30 billion in firm value due to corruption furthermore we show that anti corruption investigation is more effective when top officials are targeted

radio and the rise of the nazis in prewar germany how far can the media protect or undermine democratic institutions in unconsolidated democracies and how persuasive can they be in ensuring public support for dictator s policies we study this question in the context of germany between 1929 and 1939 using geographical and temporal variation in radio availability we show that radio had a significant negative effect on the nazi electoral support between 1929 and 1932 when political news were slanted against nazi party this effect was reversed in just 5 weeks following hitler s appointment as chancellor and the transfer of control of the radio to the nazis pro nazi radio propaganda caused higher vote for the nazis in march 1933 election after full consolidation of power radio propaganda helped the nazis to enroll new party members and encouraged denunciations of jews and other open expressions of anti semitism the effect of nazi propaganda was not uniform depending on listeners priors about the message propaganda could be very effective or could backfire nazi radio was most effective in places where anti semitism was historically high and had a negative effect on the support for anti semitic policies in places with historically low anti semitism

greening the vehicle fleet norway s co2 differentiated registration tax abstract in 2007 norway established its vehicle registration tax linked to vehicle co2 intensities in 2009 the tax was modified to a feebate structure but maintained its link to co2 intensities using a panel dataset to exploit the quasi experimental tax reforms we estimate that a 1000 nok 125 usd tax increment reduces new vehicle sales by 1 06 1 58 this result yields an elasticity of average co2 intensity to co2 price implied by the tax of 0 06 with a pass through of the tax to car prices of 88 the resulting elasticity of average co2 intensity to average car price is 0 53 thus the tax significantly shifts consumers toward lower emission vehicles our counterfactual simulations suggest that high emission vehicle segments lose market shares and become less co2 intensive while low emission vehicle segments gain market shares

internalization advantage and subsidiary performance the role of business group affiliation and host country characteristics we extend internalization theory by examining the contingencies associated with market internalization and its impact on foreign subsidiary survival based on a sample of 6170 subsidiary year observations in 63 countries belonging to 292 mncs from korea during 1995 2013 we find that greater product and labor market internalization have weaker impacts on the survival of subsidiaries operating in countries with more developed institutional environments but stronger for subsidiaries of mncs affiliated with business groups the impact of business group affiliation is further dependent on host country institutional development and the diversification and size of the business group

selection on observed and unobserved variables assessing the effectiveness of catholic schools in this paper we measure the effect of catholic high school attendance on educational attainment and test scores because we do not have a good instrumental variable for catholic school attendance we develop new estimation methods based on the idea that the amount of selection on the observed explanatory variables in a model provides a guide to the amount of selection on the unobservables we also propose an informal way to assess selectivity bias based on measuring the ratio of selection on unobservables to selection on observables that would be required if one is to attribute the entire effect of catholic school attendance to selection bias we use our methods to estimate the effect of attending a catholic high school on a variety of outcomes our main conclusion is that catholic high schools substantially increase the probability of graduating from high school and more tentatively attending college we find little evidence of an effect on test scores

friends with benefits how political connections help to sustain private enterprise growth in china by analysing data from a survey of 511 chinese private enterprises we find that their owners respond to government discrimination by developing political connections with government officials a one standard deviation increase in the insecurity of property rights has the effect of increasing the number of friends in the government by a substantial 22 these friends significantly help to mitigate by half the negative effect arising from the difficulties of obtaining land and excessive regulations on enterprise growth this explains why an institutional environment of weak property rights has not stopped private enterprises in china from developing rapidly

campaign contributions as investments the u s house of representatives 1980 1986 this paper treats the market for special interest campaign contributions and political favors as a simple asset market the model yields a simple equilibrium relationship among three variables the total amount of investor contributions a candidate receives the monetary value of the favors he has promised and his probability of winning using data on open seat races for the u s house of representatives i confront the model with a series of tests despite the starkness of the model the results of these tests are highly supportive

high level politically connected firms corruption and analyst forecast accuracy around the world the international business ib literature has widely recognized political forces as major factors that complicate the strategic decisions of multinational enterprises mnes analyses by financial intermediaries can help to reduce the risk of information asymmetry caused by such factors using firm level data from 17 jurisdictions between 1997 and 2001 this study investigates the association between a firm s high level political connections and earnings forecasts made by financial analysts an important group of financial intermediaries we find that after controlling for other determinants of forecast accuracy analysts experience greater difficulty in predicting the earnings of firms with political connections than those of firms with no such connections however in jurisdictions in which corruption level is relatively high earnings forecast accuracy is influenced more by a firm s political connections our findings contribute to the ib literature by demonstrating that political connections exacerbate the information asymmetry between investors and managers and also that anti corruption measures can curb the adverse effect of political connections on the corporate information environment these findings bear the practical implication that mnes must consider political issues when making resource allocation decisions

the welfare impacts of discriminatory price tariffs this paper looks at the use of asymmetric tariffs as a regulatory instrument we use a monopolistic market setup with two markets and we introduce price controls in one of the two the purpose of the regulator is to maximise consumer welfare through this price discriminatory practice we consider cases where the welfare of the consumers in the two markets is weighted equally and cases where it is not in some cases we allow for the two markets to be linked through a monopsonistic input market the paper focuses on the welfare implications of this regulatory approach with the firm operating under a profit restriction results suggest that having only one price controlled market is in certain cases a good option from a welfare perspective

rise and fall in the third reich social advancement and nazi membership abstract we explore the relationship between nazi membership and social advancement using a unique and highly detailed dataset of the german military during the third reich we find that membership of a nazi organisation is positively related to social advancement when measured by the difference between fathers and sons occupations however we find that this observed difference is mainly driven by individuals with different characteristics self selecting into these organisations rather than from a direct reward to membership this result is supported by an instrumental variable approach that uses the location of catholic priests sympathetic to the nazis as an instrument for nazi membership in addition we explore the determinants of nazi membership we find that ns membership is associated with higher socio economic background and human capital levels in line with occupational choice models of radicalisation

the study of international business a plea for a more interdisciplinary approach scholastic efforts to study and teach international business is entirely dependent on our capability to marshal and organise the necessary human and other assets so as to supply a range of end products which are acceptable to the academic community of which we are part our paymasters and the main purchasers of our products viz the business community of course the determinants of success of the practice and study of ib are interrelated and in our particular pursuit for excellence there is no unique or sure fire recipe for success but i observe that in an ever increasingly complex world of international business which is dominated by rapid and far reaching changes in technology and by environmental turbulence this is no less true of successful practitioners rarely in seeking to identify the reasons for business achievement is one able to find a single common denominator sometimes excellence is primarily based on innovatory ingenuity sometimes on the access to or control of key inputs or markets sometimes on aggressive or novel methods of advertising and marketing sometimes on super efficient capital budgeting sometimes on dynamic and imaginative entrepreneurship sometimes on the diversity of operational experiences and capabilities and sometimes on an unusual aptitude to manage human relationships but in most cases success is founded on some amalgam of these and it is the way in which these discrete though increasingly interdependent advantages are ombined with each other and with complementary assets in different countries and cultures which contemporary research suggests is the key competitive advantages of international firms call it what you will e g

the jeffords effect abstract in may 2001 senator james jeffords left the republican party and tipped control of the u s senate to the democrats this paper uses the surprise event to demonstrate what i term the jeffords effect changes in the political landscape have large effects on the market value of firms i use a firm s soft money donations to the national parties as the measure of how the firm aligns itself politically in this event study a firm lost 8 percent of market capitalization the week of jeffords s switch for every 250 000 it gave to the republicans in the previous election cycle on the basis of the point estimates the stock price gain associated with democratic donations is smaller than the loss associated with republican donations but the estimates are consistent with the effects being equal and opposite the results withstand several robustness checks and the effects appear to persist over time

why is there so little money in u s politics in this paper we argue that campaign contributions are not a form of policy buying but are rather a form of political participation and consumption we summarize the data on campaign spending and show through our descriptive statistics and our econometric analysis that individuals not special interests are the main source of campaign contributions moreover we demonstrate that campaign giving is a normal good dependent upon income and campaign contributions as a percent of gdp have not risen appreciably in over 100 years if anything they have probably fallen we then show that only one in four studies from the previous literature support the popular notion that contributions buy legislators votes finally we illustrate that when one controls for unobserved constituent and legislator effects there is little relationship between money and legislator votes thus the question is not why there is so little money politics but rather why organized interests give at all we conclude by offering potential answers to this question this abstract was borrowed from another version of this item

how responsive is saudi new vehicle fleet fuel economy to fuel and vehicle price policy levers abstract this paper investigates the drivers of recent improvements in saudi arabia s fleet fuel economy for new vehicles including passenger cars and light duty trucks vehicle choice models are estimated using both aggregate new vehicle sales data and disaggregate new vehicle buyer survey data the estimated models are used to simulate counterfactual policy scenarios simulation results suggest that the saudi gasoline price elasticity of demand for new vehicle fuel economy decreased slightly over recent years but it is still more elastic than that of the united states moreover the increase in domestic gasoline prices between 2014 and 2016 accounted for 42 of the increase in estimated new vehicle fleet fuel economy over that period finally the estimated elasticities and thus policy sensitivities vary by income and household size a revenue neutral household income and size based feebate policy could be more progressive than a gasoline price increase for improving the new vehicle fleet fuel economy

do lenders favor politically connected firms rent provision in an emerging financial market corruption by the politically connected is often blamed for economic ills particularly in less developed economies using a loan level data set of more than 90 000 rms that represents the universe of corporate lending in pakistan between 1996 and 2002 we investigate rents to politically connected rms in banking classifying a rm as political if its director participates in an election we examine the extent nature and economic costs of political rent provision we nd that political rms borrow 45 percent more and have 50 percent higher default rates such preferential treatment occurs exclusively in government banks private banks provide no

conflicts and common interests in committees committees improve decisions by pooling members independent information but promote manipulation obfuscation and exaggeration of private information when members have conflicting preferences committee decision procedures transform continuous data into ordered ranks through voting this coarsens the transmission of information but controls strategic manipulations and allows some degree of information sharing each member becomes more cautious in casting the crucial vote than when he alone makes the decision based on own information increased quality of one member s information results in his casting the crucial vote more often committees make better decisions for members than does delegation

a note on countertrade contractual uncertainty and transaction governance in emerging economies this paper develops a conceptual framework for analyzing organizational responses to contractual uncertainty in the context of emerging economies elaborating on hennart s 1989 transaction cost rationale for countertrade we develop a typology of exchange and transaction governance pertinent to the study of emerging economies contract trust and hostage notwithstanding the traditional explanation based on foreign exchange shortage we argue that the persistence of international countertrade illustrates organizational remedies to institutional deficiency in transaction governance

strategic transmission of costly information it is ofren the case that an individual s decision is at least partly based on information received from another and when the agents payoffs depend on both the former s decision and on the latter s information there is an incentive for the informed individual to attempt to bias the decision maker s decision in his or her favor by strategically manipulating the information transmitted in a seminal paper crawford and sobel 1982 hereafter c s study such strategic information transmission in the context of an abstract sender receiver game variants of the crawford and sobel model have been applied widely and as the application varies so often does the interpretation of type in some cases type refers to a preference parameter given by nature as for example in bargaining theory e g farrell and gibbons 1989 matthews 1989 whereas in other settings for instance legislative decision making or expert testimony type refers to more or less technical information concerning how decisions map into final consequences and as such is acquired information e g gilligan and krehbiel 1987 milgrom and roberts 1986 when the information has to be acquired it is natural to suppose the acquisition is costly for otherwise there is no reason why such information is asymmetrically distributed so long as the receiver can observe surely or at least accurately infer whether the sender is informed and so long as messages are cheap talk there is no issue here for strategic information transmission save whether to become informed at all however there are many circumstances when it is inappropri ate to assume the receiver has such knowledge one possibility is that a receiver may know that a sender has some relevant informa tion but be uncertain of the quality of this information a second perhaps more important possibility is that a receiver is unable to tell whether a potential sender is uninformed inter alia this problem constitutes the rationale for ignorance of the law being inadmissible as a legal defense were it admissible then informed miscreants would mimic uninformed transgressors leads voters to be skeptical of politicians claiming ignorance of illegal arms deals and makes the sec sensitive to problems in distinguishing insider trading from legitimate good judgement so there is an intrinsic asymmetry in that it is generally possible for say senders to verify possession of at least some information but it is typically prohibitively difficult to verify any lack of knowledge

cost reductions cost padding and stock market prices the chilean experience with price cap regulation we study the chilean electricity distribution industry and find that costs the ratio of reported costs to revenues have fallen since price caps were introduced cost reductions are u shaped since 1989 strong initial cost reductions reverse every four years coinciding with regulatory reviews a possible explanation is that firms are behaving strategically we then use stock market data to complement our study we construct a measure of cumulative abnormal returns for regulated firms around their quarterly announcements and a measure of naive cost expectations which excludes any indication of the occurrence of review periods in general cost reports in excess of naive cost expectations have a negative effect on returns even after we control for company fixed effects the exception is cost surprises that happen during review periods which increase abnormal returns the estimated effects fall over time this is consistent with the hypothesis of strategic firms and that the regulatory regime translates these games into higher rates in a way that is not completely anticipated by the market more generally the results suggest there may be value in complementing regulatory procedures with stock market information

bad news from the front and from above bombing raids military fatalities and the death penalty in nazi germany we examine how the decision making of political elites respond to an imminent external threat to the existence of the state in times of war to do so we exploit exogeneous variation in exposure to battle deaths and bombing raids to estimate the effect of variation in the intensity of war on the probability that individuals charged with treason and or high treason in nazi germany received the death sentence a doubling of the number of military fatalities as well as bombing raids in the same week in which a defendant was sentenced increased the likelihood of receiving the death penalty by about 10 percentage points jel k14 n44

competitive policy development we present a model of policy development in which competing factions have different ideologies yet agree on certain common objectives policy developers can appeal to a decision maker by making productive investments to improve the quality of their proposals these investments are specific to a given proposal which means that policy developers can potentially obtain informal agenda power competition undermines this agenda power forcing policy developers to craft policies that are better for the decision maker this beneficial effect is strongest if policy developers have divergent ideological preferences because their intense desire to affect policy motivates them to develop higher quality proposals jel d72 d73 d78 e61 during the early years of the new deal president franklin delano roosevelt faced an enormous challenge he believed that dramatic policy innovation was urgently needed on a wide range of issues including agriculture trade banking employment and social insurance however although roosevelt was well versed in policy crafting workable proposals for such a far reaching agenda was well beyond his capacity or that of his immediate advisors instead the president had to rely on a broader array of politicians and bureaucrats to develop new policies although these individuals shared some common goals e g ending the great depression they also had deep seated ideological disagreements among themselves and with the president about what policies the federal government should pursue classic and contemporary theories of bureaucratic politics would suggest that this situation was ripe for exploitation and inefficiency weber 1991 famously argued that the typical ruler of a modern state is reduced to being a mere dilettante when dealing with institutionalized bureaucratic actors more recently scholars

how firms grow clustering as a dynamic model of internationalization this paper provides a methodology for identifying the dynamics of international firm expansion demonstrating systematic evidence of both toe in the water and concentrated bursts of internationalization by us multinational enterprises we use the methodology of statistical process control to analyze initial investments in host countries and develop a numerical measure of temporal clustering or bunching using this measure we identify two distinct patterns of growth whereas some firms cluster their investments over time others do not cluster their investments for firms that cluster three types of clustering strategy are identified concentrating hibernating and hybrid arguments based on internal firm architecture experience and learning are advanced to explain these findings

political power economic freedom and congress effects on bank performance abstract this paper studies the linkages between bank performance connections to powerful politicians and the degree of economic freedom in a bank s home state we find that bank performance is positively related to state economic freedom we also reconfirm the finding of gropper et al 2013 that bank performance is improved by political connections however the positive effect of political connections appears to be significantly reduced when there is a higher degree of economic freedom in the state indicating that political connections may matter less to banks when there is more economic freedom economic freedom in a state can have a beneficial effect on state economic growth and hence may outweigh any political connection benefits however the declines in state economic freedom in recent years could make political connections potentially more valuable to banks

pandering to persuade a principal chooses one of multiple projects or an outside option an agent is privately informed about the projects benets and shares the principal s preferences except for not internalizing her value from the outside option we show that for moderate outside option values strategic communication is characterized by pandering the agent biases his recommendation toward conditionally better looking projects even when both parties would be better o with some other project a project that has lower expected value can be conditionally better looking we develop some comparative statics of pandering pandering is also induced by an optimal mechanism without transfers

how much do incentives affect car purchase agent based microsimulation of consumer choice of new cars part ii forecasting effects of feebates based on energy efficiency abstract in this paper we simulate the car market in order to forecast the effects of feebate systems based on an energy labeling scheme using categories a to g very fuel efficient a cars receive a cash incentive highly inefficient g cars pay additional fees consumers have different price elasticities and behavioral options to react to feebates they can switch to a smaller sized car but as energy efficiency varies widely within size segments they can also stick to the preferred size class and choose a more efficient smaller engine in addition previously owned cars influence the next car to be chosen we use an agent based microsimulation approach particularly suited to predict environmental and market effects of feebates heteorogenous agents choose from a choice set drawn from a detailed fleet of new cars incentives of 2000 for a labeled cars induce an additional rated co 2 emission decrease of new car registrations between 3 4 and 4 3 with co 2 abatement costs between 6 and 13 per ton and otherwise little undesired market disturbance the risk of rebound effects is estimated to be low after adopting the frequencies of consumer segments to a given country the model presented is applicable to all european car markets

good regulatory regimes assuming simple functional forms numerical methods are used to analyze linear regulatory rules that include cost plus and price cap regimes regulators are assumed to observe actual cost but not the disutility of cost reduction and are assumed unable to impose taxes or make transfers best linear regimes depend importantly on the level and form of uncertainty the regulatory objective function and the firm profitability constraint under uncertainty regimes in which price depends in part on actual cost generally substantially outperform pure price caps particularly in terms of consumers surplus

the regulation of privatized monopolies in the united kingdom this article examines the experience in the united kingdom with the regulation of privatized monopolies its conclusions are 1 that there are significant differences between rpi x or price cap and u s rate of return regulation which provides greater scope for bargaining in the former system 2 that u k regulators have taken seriously their duty to promote competition but that the existing economic literature is of limited help in this task 3 that price regulation is likely to be more effective where technology is changing slowly and or where technology is changing rapidly and 4 that the case for rpi x price cap rather than rate of return regulation is strongest in telecommunications gas supply and electricity supply and least strong in gas and electricity transmission grids

asymmetric information incentives and price cap regulation a regulatory incentive mechanism is presented in which the regulated firm has superior information about both cost and demand compared to the regulator the mechanism leads to truthful revelation of the demand function and extracts all rents due to private demand information in a nondistorting way the scheme assumes that the regulator can observe lagged expenditures by the firm this mechanism leads to efficient pricing operating and investment behavior by the firm finally it is shown that the mechanism is closely related to recent proposals for price cap regulation and that under certain assumptions simple modifications of these proposals will lead to the mechanisms discussed herein

political connections and the process of going public evidence from china abstract we examine how political connections impact the process of going public specifically we test how political connections impact the pricing of the newly offered shares the magnitude of underpricing and the fixed cost of going public based on the experience of the newly public firms from chinese security markets and using multiple measures of political connections we find robust evidence that the issuing firms with political connections reap significant preferential benefits in the process of going public to be specific we find that firms irrespective of their ownership status with greater political connections have relatively higher offering price lower underpricing and lower fixed costs during the going public process

partisan impacts on the economy evidence from prediction markets and close elections analyses of the effects of election outcomes on the economy have been hampered by the problem that economic outcomes also influence elections we sidestep these problems by analyzing movements in economic indicators caused by clearly exogenous changes in expectations about the likely winner during election day analyzing high frequency financial fluctuations following the release of flawed exit poll data on election day 2004 and then during the vote count we find that markets anticipated higher equity prices interest rates and oil prices and a stronger dollar under a george w bush presidency than under john kerry a similar republican democrat differential was also observed for the 2000 bush gore contest prediction market based analyses of all presidential elections since 1880 also reveal a similar pattern of partisan impacts suggesting that electing a republican president raises equity valuations by 2 3 percent and that since ronald reagan republican presidents have tended to raise bond yields

the impact of tax reform on new car purchases in ireland we examine the impact of recent tax reforms in ireland on private car transport and its greenhouse gas emissions a carbon tax was introduced on fuels and purchase vehicle registration and ownership motor taxes were switched from engine size to potential emissions we use a demographic model of the car stock by age size and fuel and a car purchase model that reflects the heterogeneous distribution of mileage and usage costs across various engine sizes the model shows a dramatic shift from petrol to diesel cars particularly for large engines the same pattern is observed in the latest data on car sales this has a substantial impact on tax revenue as car owners shift to the lower tax rates the tax burden has shifted from car ownership to car use and that the overall tax burden on private car transport falls as diesel engines are more fuel efficient than petrol engines carbon dioxide emissions fall modestly or if we consider the rebound effect of travel costs on mileage minimally from the perspective of the revenue the costs per tonne of carbon dioxide avoided are very high

is it whom you know or what you know an empirical assessment of the lobbying process abstract do lobbyists provide issue specific information to members of congress or do they provide special interests access to politicians we present evidence to assess the role of issue expertis

peer effects in science evidence from the dismissal of scientists in nazi germany this paper analyses peer effects among university scientists specifically it investigates whether the quality and the number of peers affect the productivity of researchers in physics chemistry and mathematics the usual endogeneity problems related to estimating peer effects are addressed by using the dismissal of scientists by the nazi government in 1933 as a source of exogenous variation in the peer group of scientists staying in germany to investigate localized peer effects i construct a new panel data set covering the universe of scientists at the german universities from 1925 to 1938 from historical sources i find no evidence for peer effects at the local level even very high quality scientists do not affect the productivity of their local peers

the market impact and the cost of environmental policy evidence from the swedish green car rebate we quantify the effects of the swedish gcr a program to reduce oil dependence and greenhouse gas emissions in the automobile industry we find the gcr to increase the market shares of green cars and its cost to be 109 tonco2 saved thus 5 times the price of an emission permit since the main green cars in sweden are ffvs flexible fuel vehicles which can switch between petrol gasoline and ethanol we also account for fuel choice which increases the cost of the program finally we show that consumers would have purchased ffvs regardless of the rebate provided by the gcr

strategic nonlinear pricing under price cap regulation we examine profit maximizing nonlinear pricing under a stylized version of the fcc s price cap plan for at t whereby the firm s average revenue in each period is constrained not to exceed some fixed level when average revenue in each period is calculated as the ratio of total revenue in that period to output in the preceding period as in the fcc s plan for at t incentives are created for the firm to engage in strategic nonlinear pricing these incentives can lower both consumers surplus and total surplus under price cap regulation we propose alternative implementations of price cap regulation that eliminate these incentives for strategic pricing we also examine whether current profits should influence future revisions of the cap we show that small amounts of such linkage can enhance total surplus due to pricing distortions that arise under price cap regulation

welfare effects of price discrimination by a regulated monopolist should a multiproduct monopolist whose average price is capped by regulation be allowed to engage in third degree price discrimination if the cap applies to a price index with weights proportional to demands at uniform prices then price discrimination benefits consumers as well as the firm but if perhaps more realistically it is the firm s average revenue that is capped then consumers prefer uniform pricing in this case total output is higher when discrimination is allowed which increases welfare but marginal utilities differ across markets which is inefficient and the overall effect is ambiguous a small amount of discrimination is desirable however it is better not to allow price discrimination if the price cap is close to the level of marginal cost the consequences of tightening the price cap when discrimination is allowed are also examined

strategic communication with lying costs i study a model of strategic communication between an uninformed receiver and an informed but upwardly biased sender the sender bears a cost of lying or more broadly of misrepresenting his private information the main results show that inflated language naturally arises in this environment where the sender almost always claims to be of a higher type than he would with complete information regardless of the intensity of lying cost there is incomplete separation with some pooling on the highest messages the degree of language inflation and how much information is revealed depend upon the intensity of lying cost the analysis delivers a framework to span a class of cheap talk and verifiable disclosure games unifying the polar predictions they make under large conflicts of interest i use the model to discuss how the degree of manipulability of information can affect the trade off between delegation and communication copyright 2009 wiley blackwell

revolving door lobbyists we study how ex government ocials benet from the personal connections acquired during public service lobbyists with experience in the oce of a us senator suer a 24 drop in generated revenue when that senator leaves oce the eect is immediate discontinuous around the exit period and long lasting consistent with the notion that lobbyists sell access to powerful politicians the drop in revenue is increasing in the committee assignments power held by the exiting politician

price quality and regulation an analysis of price capping and the reliability of electricity supply abstract this paper examines the relationship between price cap regulation and the reliability of supply of a private monopoly two situations are considered one in which reliability is excluded from the price cap and one in which it is included if reliability is excluded it is shown that there is a tendency for the firm to protect profits by lowering reliability when cost increases must be absorbed whereas if reliability is included then this tendency is eliminated however this inclusion creates an incentive for the firm to exploit the positive relationship between price and reliability when cost increases can be passed on but this problem can be controlled by reducing the exogenous weight applied to reliability in the price cap formula

industry input in policy making evidence from medicare in setting prices for physician services medicare solicits input from a committee that evaluates proposals from industry the committee itself comprises members from industry we investigate whether this arrangement leads to regulatory capture with prices biased toward industry interests we find that increasing a measure of affiliation between the committee and proposers by one standard deviation increases prices by 10 we then evaluate whether employing a biased committee as an intermediary may nonetheless be desirable if greater affiliation allows the committee to extract information needed for regulation we find industry proposers more affiliated with the committee produce less hard evidence in their proposals however on soft information we find evidence of a trade off private insurers set prices that more closely track medicare prices generated under higher affiliation

low powered vs high powered incentives evidence from german electricity networks abstract we propose a difference in differences approach to estimating the impact of incentives on cost reduction in the context of german electricity networks when subject to a lower powered regulation mechanism relatively more efficient operators pile up more costs in the year used to determine future prices this pattern is consistent with the idea that incentives matter higher powered incentives lead to cost reduction the results are also consistent with an equilibrium where more efficient firms pool with less efficient ones under the threat of ratcheting

problems and developments in the core theory of international business the established theory of international business is not without problems it is necessary to specify the key relationships between internalisation and market structure and between internalisation and competitive advantage more carefully this chapter attempts to clarify the former relationship by reference to the work of hymer and the latter by contrasting the nature of internalisation decisions with those building short run competitive advantage avenues of development of the theory include the integration of non traditional concepts and the reintegration of areas of research which have become divorced from core international business theory