union coverage and profitability among u s firms this paper utilizes unique survey data on labor union coverage at the firm level to examine union effects on the profitability of 705 u s companies during the 1970s market value and earnings are estimated to be about 10 15 percent lower in an average unionized company than in a nonunion company following extensive control for firm and industry characteristics deleterious union effects on firm profitability are sizable throughout the 1972 80 period but vary considerably across industries the relatively poor profit performance of unionized companies may help explain the recent decline in u s union membership the author thanks the w e upjohn institute for employment research for financial support elizabeth gregory for assistance with the union coverage survey zvi griliches for providing access to the rd donald deere terry seaks and anonymous referees for helpful suggestions and seminar participants at connecticut florida state harvard texas a m and william and mary for comments on earlier versions of this research

agricultural intensification irrigation and the environment in south asia issues and policy options high population pressure and the rapid pace of human activity including urbanization industrialization and other economic activities have led to a dwindling supply of arable land per capita and a process of agricultural intensification in south asia while this process has significantly increased food production to feed the growing population it has also entailed considerable damage to the physical environment including degradation and depletion of natural resources and unsustainable use of land and water resources this paper employs the analytical tools of economic theory environmental and ecological economics to model the impact of irrigation in south asia it underscores the need for an eclectic approach to policy responses stemming from private and common property rights theories externality theory and sustainability theory with a view to environmentalizing agricultural development

labor unemployment risk and corporate financing decisions this paper examines the impact of labor unemployment risk on corporate financing decisions theory suggests that firms choose conservative financial policies partly as a means of mitigating worker exposure to unemployment risk using changes in state unemployment insurance benefit laws as a source of variation in the costs borne by workers during layoff spells we explore the connection between unemployment risk and the corporate financing decisions of public firms in the united states we find that increases in legally mandated unemployment benefits lead to increases in corporate leverage the impact of reduced unemployment risk on financial policy is especially strong for firms that have greater layoff separation rates labor intensity and financing constraints the estimated premium required to compensate workers for unemployment risk due to financial distress is about 57 basis points of firm value for a bbb rated firm these findings suggest that labor market frictions have a significant impact on corporate financing decisions

environmentalizing economic development a south asian perspective south asia s pursuit of economic development has entailed considerable damage to and exposed the fragility of the physical environment of the region this paper provides an analytical overview of the of the environmental problem that manifest themselves in south asia in a comparative perspective with east and southeast asian countries as well as selected developed market economics to date south asian development process has been environment intensive and environment depleting it is argued that environmental problems are likely to set serious constraints to sustain growth in production to support a growing population by exploring the relationship between indices of human welfare and bio diversity conservation the paper exposes the dichotomy of the development process finally the study underscores the need for a range of policy options that rely both based and non market based instruments in an integrated setting to enviromnentalize south asian economic development c 2004 elsevier b v all rights reserved

union negotiations and corporate policy a study of labor concessions in the domestic steel industry during the 1980s abstract this paper studies managerial compensation financial reporting and dividend policies of the seven major domestic steel producers during requests for union concessions substantial layoffs reported losses and sacrifices by nonunion stakeholders buttressed managers case for union concessions from 1980 to 1988 sample firms reduced their work force by about 300 000 almost two thirds and annual wage payments from 16 1 to 8 6 billion reported income is lower during union negotiations controlling for cash flows as is managerial pay with average ceo salary plus bonus declining 18 dividend reductions and white collar pay cuts are substantial pervasive and clustered during union negotiations

compensating differentials for cyclical and noncyclical unemployment the interaction between investors and employees risk aversion this paper integrates the labor and assets markets equilibria to determine and evaluate the wage differentials generated for cyclical and noncyclical risks of unemployment the relative wage differential is a linear function of unemployment risk measured by the covariance of an index of employment with the rate of change in aggregate output seniority and the hoarding of skilled labor are characteristics of minimum cost contracts because employees with more human capital prefer safer jobs empirical results suggest that a 14 41 wage differential can be explained by interindustry differences in unemployment risks

labor unemployment insurance and earnings management abstract we provide new evidence that firms appear to manage long run earnings upward in order to manage rank and file employees perceptions of employment security in particular we exploit exogenous state level changes in unemployment insurance benefits and test for partial unwinding of prior upward earnings management when benefits increase consistent with the hypothesis we find a significant reduction in abnormal accruals increased recognition of special items and write downs and greater likelihood of net income reducing restatements following an increase in state level unemployment benefits a number of cross sectional results are also consistent with the hypothesis

industrial specialization and the returns to labor comparative advantage and the division of labor make geographic concentration of production within a nation profitable and cause many cities to be specialized in one or a few main industries specialized cities however suffer greater unemployment risk the theory of compensating wage differentials predicts that individuals living in more specialized cities will be compensated in the form of higher wage rates we study the effects of specialization on wages and unemployment in the united states we find evidence of compensating wage differentials that firms choose to locate in more specialized higher wage cities is indirect evidence of the gains to specialization

the effect of worker mobility on compensating wages for earnings risk the effects of worker mobility on the payment of compensating wage differentials for earnings risk are examined previous research consistently finds compensating wages are paid to workers facing earnings uncertainty however job shopping models suggest that if workers have sufficient mobility they may prefer uncertain situations here simultaneous equations are estimated where both wages and worker mobility are endogenous to examine whether workers with greater uncertainty have greater mobility and whether workers with greater mobility receive lower compensating wage differentials results indicate that workers facing more uncertainty have a greater degree of mobility also workers with greater mobility receive lower compensation for income uncertainty although on average this compensation is positive these results are consistent with the traditional model predictions and supportive of job shopping models

unionization and profitability evidence of spillover effects ruback and zimmerman s 1984 event study which showed that formal union organizing activity significantly lowers a firm s market value provides compelling evidence that unionization reduces a firm s profitability union organizing activity may also have sizable cross firm or spillover effects on the performance of neighboring firms thus the total impact of union organizing on the wealth of firm owners may be substantially understated by focusing only on the firm in which the union organizing activity occurs this paper presents an alternative approach for estimating union spillover effects on profitability using a data set and methodology similar to ruback and zimmerman s we find that the total negative effects of unionization on profits after cross firm or spillover effects are included are nearly three times as large as the own firm effects reported by ruback and zimmerman the hypothesis that changes in unionization have spillover effects on nonunion firms is well known formal union organizing activity at one firm may increase the threat of unionization at other firms neighboring firms may respond to the greater threat of unionization

human capital bankruptcy and capital structure we derive a firm s optimal capital structure and managerial compensation contract when employees are averse to bearing their own human capital risk while equity holders can diversify this risk away in the presence of corporate taxes our model delivers optimal debt levels consistent with those observed in practice it also makes a number of predictions for the cross sectional distribution of firm leverage consistent with existing empirical evidence it implies persistent idiosyncratic dierences in leverage across firms an important new empirical prediction of the model is that ceteris paribus firms with more leverage should pay higher wages

the impact of labor unions on investment cash flow sensitivity abstract this paper empirically examines how labor unions affect investment cash flow sensitivity using samples from the us covering the period of 1984 2009 we find a significant positive union effect using a q model of investment the capital expenditures of firms are 1 71 times more sensitive to internal cash flows when unionization rates increase one standard deviation from the mean this effect holds when we control for other proxies of financial constraints in addition unionized firms are associated with lower cash cash flow sensitivity which suggests that the higher investment cash flow sensitivity in unionized firms is primarily driven by the incentive of these firms to reduce liquidity and enhance bargaining power against the union we also show that the above union effects become more pronounced during labor contract negotiation years

intergenerational transmission of risk attitudes a revealed preference approach using data the german socio economic panel gsoep we investigate whether the willingness to take risks which is revealed via observed choices of occupation is transmitted from parents to children our approach resembles the one by dohmen et al 2008 who investigate the same question using stated preferences as risk variable we use earnings risk measured by the cross sectional coecient of residual variation obtained from mincerian wage regressions we nd that fathers riskiness of the job chosen is a signicant determinant of sons occupational risk our results are robust to dierent specications underpinning the hypothesis of intergenerational transmission of risk preferences

compensation for earnings risk under worker heterogeneity we use two large data sets to estimate the risk augmented mincer equation and test for risk compensation in expected earnings we replicate earlier findings of a positive premium for risk and a negative premium for skew and add confirmation of the key results if we control for individual ability we compare risk compensation and risk distributions between some labor market groups and find that immigrants and natives do not differ in risk attitudes that public sector workers are undercompensated for their risk and that risk compensation by gender is not fully consistent with higher risk aversion for women we express concern that a linear compensation model may be too simple

the social and environmental influences of population growth rate and demographic pressure deserve greater attention in ecological economics abstract ecological economists accept that the global population cannot grow forever but papers discussing the relevance of population growth and the prospects for minimising it are rare in the literature on ecological economics even these papers treat population almost exclusively as an issue relating to the scale of human activity the many ways in which population growth rate and local demographic pressures drive negative social and environmental trends remain largely unarticulated the mistaken belief that action to reduce population growth requires involuntary control of people s reproduction has fostered a taboo on the topic and deterred analysis of demographic influences on issues such as inequality unemployment debt social cohesion and conflict this paper discusses how some of these influences relate to ecological economics discourses on natural resources labour capital and governance it argues that population stabilisation is not only ultimately required for a steady state economy but can be a powerful lever in a virtuous cycle of effects diminishing resource consumption and environmental impacts reversing income inequality and undermining the leverage enjoyed by capital over labour a richer more integrated treatment of population dynamics would greatly enhance the ecological economics research agenda in the coming decades

labor absorption and agricultural development bangladesh s experience and predicament significant employment gains have resulted from the green revolution technologies in bangladesh while the kharif wet season employment has remained more or less stagnant employment in the rabi dry season increased fourfold between the early 1960s and the late 1980s with overall crop sector employment increasing by 30 interseasonal differences in employment have declined steadily the employment generating effect of the green revolution is slowing down i e agricultural growth at the margin has become progressively less labor intensive in recent years changes in the occupational structure may merely reflect a relocation of surplus labor from the farm to the nonfarm sector where it is also largely surplus rather than heralding a real turning point in bangladesh there is little prospect of agriculture providing much greater employment and there is little sign that labor transfer in bangladesh will lead to a pattern of successful industrialization as in the contemporary developed countries of east asia or the western countries

labor unions and tax aggressiveness abstract we examine the impact of unionization on firms tax aggressiveness we find a negative association between firms tax aggressiveness and union power and a decrease in tax aggressiveness after labor union election wins this relation is consistent with labor unions influencing managers in one or both of two ways 1 constraining managers ability to invest in tax aggressiveness through increased monitoring or 2 decreasing returns to tax aggressiveness that arise from unions rent seeking behavior we also find preliminary evidence that the market expects these reductions around union elections and discounts firms that likely add shareholder value via aggressive tax strategies

are firms underleveraged an examination of the effect of leverage on default probabilities a commonly held view in corporate finance is that firms are less leveraged than they should be given the potentially large tax benefits of debt in this paper i study the effect of firms leverage on default probabilities as represented by the firms ratings using an instrumental variable approach i find that the leverage s effect on ratings is three times stronger than it is if the endogeneity of leverage is ignored this stronger effect results in a higher impact of leverage on the ex ante costs of financial distress which can offset the current estimates of the tax benefits of debt

compensating wage differentials and the duration of wage loss a formal model of occupational choice is developed that shows the extent to which the compensation for increased duration exceeds that for increased risk using the panel study of income dynamics linked to industry data on injuries and unemployment we find nearly all the compensating wage differential for losses due to workplace injuries is for increases in the duration of loss and similarly for losses due to cyclical unemployment the compensating differentials for risk of injury are larger for union than for nonunion workers while those for cyclical unemployment are smaller for union workers

contract costs and financing decisions like bondholders most agents contract for fixed payoffs thus corporate capital structures which are less than 50 percent debt are less levered than overall contract structures in which about 90 percent of total flows are fixed payoffs the hypothesis analyzed here is that loans and bonds lower contract costs by delegating the monitoring and bonding of the default risks of fixed payoffs to credible specialists financial intermediaries bond holder trustees rating agencies and auditors other agents can then focus on their specialties that is efficient supply of labor materials and other services and the contract problems of these specialties copyright 1990 by the university of chicago

flexible contracts and subjective well being theory suggests that when workers choose between permanent and flexible contracts their utility should tend to equalize across contract types new estimates of job satisfaction show the critical role played by unmeasured worker heterogeneity they reveal that flexible contracts are a strong negative determinant of satisfaction with job security but are often a positive determinant of other dimensions of job satisfaction as a consequence flexible contracts have either a weak negative influence or no influence on overall job satisfaction moreover flexible contracts generally have no impact on overall life satisfaction of the employed these results appear broadly consistent with the presence of equalizing differences jel j28 j41

opaque financial reports r2 and crash risk abstract we investigate the relation between the transparency of financial statements and the distribution of stock returns using earnings management as a measure of opacity we find that opacity is associated with higher r2s indicating less revelation of firm specific information moreover opaque firms are more prone to stock price crashes consistent with the prediction of the jin and myers 2006 r2 around the world new theory and new tests journal of financial economics 79 257 292 model however these relations seem to have dissipated since the passage of the sarbanes oxley act suggesting that earnings management has decreased or that firms can hide less information in the new regulatory environment

divorce as a risky prospect in 1910 the divorce rate per 1000 members of the us population stood at 0 9 1 this rate showed a slow upward trend for the next 50 years and by 1960 had more than doubled to 2 2 it took only 20 years for the rate to more than double again so that by 1980 the rate was 5 3 for the last 20 years the marriage rate by contrast has experienced mild fluctuations between 10 0 and 11 0 per 1000 in the population with no discernible trend if the same pattern for both rates holds until the year 2000 the annual number of divorces will exceed the annual number of marriages although sociologists have researched divorce extensively only a few economic studies exist this is unfortunate since divorce is likely to have considerable impact on economic vaiables such as hours of work labour force participation human capital accumulation work performance and earnings 2 without denying the influences of peer groups social norms and role models it seems reasonable to suggest that pecuniary considerations ma

union rent seeking intangible capital and market value of the firm abstract this study considers the effect of unions on intangi ble capital investment and profitability within the context of a market value rather than a more traditional accounting based approach theory is provided suggesting unions are able to affect profitability by sharing in the economic returns to firm specific intangible capital in support of this hypothesis we find unionization reduces the returns to r d and produces a corresponding limiting influence on r d investment at the firm level i introduction a n extensive literature in economics has ex amined the determinants of profitability with much of the focus centering on the role of market structure only recently however have the effects of labor unions on profitability been analyzed ths is surprising since labor economists long have emphasized union influences on wages and productivity that in turn may affect profitabil ity in recent studies freeman 1983 and karier 1985 report a significant limiting influence of unions on price cost margins in high concentra tion manufacturing industries using firm level data and the market based tobin s

compensating wage differentials for schooling risk in denmark in this paper we analyse the association between wage differentials and risk using detailed information on length and type of education as seen in danish administrative registers our contribution to the literature is that we distinguish between transitory time series and permanent cross sectional income shocks and estimate the compensation for both sorts of risk we find that wage risk in a given education cell is associated with higher wages while skewness is associated with lower wages as a robustness check we see that ad hoc risk measures based on earnings mobility indicators confirm these findings

unionization and shareholder interests drawing on agency theory this study examines union nonunion differences in the allocation of both firm profits and business risk to employees and shareholders using a sample of more than 1 000 large private sector firms the authors find that over the period 1970 81 shareholders in unionized firms assumed less of the firm s business risk than shareholders in nonunion firms this finding is interpreted as evidence that managers of unionized firms attempted to minimize agency costs by capitalizing on the incentive effects of risksharing in addition risk adjusted returns to shareholders were lower in unionized firms than in nonunion firms the authors view the relatively poor performance of union firms as a primary motivating factor behind the restructuring of the american industrial relations system during the period studied

do unions affect innovation we examine the effect of unionization on firm innovation using a regression discontinuity design that relies on locally exogenous variation generated by elections that pass or fail by a small margin of votes passing a union election results in an 8 7 12 5 decline in patent quantity quality three years after the election a reduction in r d expenditures reduced productivity of inventors and departures of innovative inventors appear to be plausible underlying mechanisms through which unionization impedes firm innovation in response to unionization firms move their innovation activities away from states where union elections win our paper provides new insights into the real effects of unionization this paper was accepted by gustavo manso finance

the effect of uncertain educational requirements on education and wages this paper examines the effects of uncertain educational requirements the level of education required to enter an occupation varies with a number of factors workers may be uncertain as to their specific job when selecting an occupation thus they are also uncertain as to how much education they will need we find that occupations with more uncertainty pay males compensating wages however females do not receive compensating wages we also find a negative relationship between uncertain educational requirements and completed schooling for both men and women

sluggish institutions in a dynamic world can unions and industrial competition coexist during the 1930s and 1940s collective bargaining emerged as the workplace governance norm in much of the u s industrial sector following its peak in the 1950s union density in the u s private sector fell steadily to only 7 4 percent in 2006 governance shifted from a formalized union norm to one of constrained managerial discretion in competitive and dynamic economic environments a union tax on company earnings and slow response to economic shocks combine to produce poor performance by union companies two industries automotives and airlines are used to illustrate these points if worker based institutions are to flourish they must add value and permit companies to perform at levels similar to those obtained under evolving nonunion governance norms

investment and union certification using data on union certification elections we estimate the impact of unionization on firms investment behavior employing both a standard q model and an investment surprises technique we find that union certification significantly reduces investment in the year following the election we find that a winning certification election has on average about the same effect on investment in the year following the event as would given the elasticity measures taken from the public finance literature a 33 percentage point increase in the corporate tax the magnitude of the response in years further away from the election is less certain

do security analysts improve their performance with experience we investigate if sell side security analysts generate more accurate quarterly earnings forecasts and more profitable stock recommendations as their experience following a specific firm increases we measure firmspecific experience as the number of prior quarters for which the analyst has issued an earnings forecast for the firm if analysts improve their forecasting performance with repetition as suggested by the learning by doing lbd model an analyst s earnings forecasts will become more accurate with experience prior empirical work provides mixed evidence on whether analysts exhibit individual forecasting performance differences e g butler and

was the global settlement effective in mitigating systematic bias in affiliated analyst recommendations regulators have recently relaxed some provisions of the global research analyst settlement of 2003 the global settlement and associated reforms which arose from charges that conflicts of interest within investment banks had induced the issuance of fraudulent or otherwise misleading analyst research reports we examine the effectiveness of the global settlement in reducing the systematic optimism observed in stock recommendations of analysts whose employer is a merger and acquisition m a advisor for the covered firm affiliated analysts by comparing the optimism exhibited in stock recommendations issued by these analysts and by unaffiliated analysts before and after the global settlement to control for the impact on analyst optimism of other time varying factors our sample includes cases from the us and from other countries in which the global settlement had no direct impact we argue that if the global settlement was effective there should be a reduction in the relative optimism of affiliated analysts following this reform and that reduction in the relative optimism should be greater for affiliated us analysts than for affiliated analysts from non us countries when optimism is measured over a 180 day period surrounding the m a announcement we find a significantly greater reduction in us affiliated analysts optimism than occurs outside the us however evidence regarding analysts optimism in the 90 day period prior to the announcement of an m a deal is mixed

firm specific human capital amd optimal capital structure the authors consider the moral hazard in managers undersupplying imperfectly marketable firm specific human capital firms may cope by granting long term wage contracts that protect managers against employment termination although ex ante efficient these contracts may be ex post inefficient when managerial ability is discovered to be low precommitted firms must honor these contracts unless there is ownership transfer that permits their legal invalidation bankruptcy is one such transfer mechanism since managers anticipate the contractual consequence of bankruptcy leverage worsens moral hazard this cost provides a counterbalance to the debt tax shield and leads to an optimal capital structure copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

conflicts of interest in financial intermediation the last years have seen a surge of scandals in financial intermediation this article argues that the agency structure inherent to most forms of financial intermediation gives rise to conflicts of interest though this does not excuse scandalous behavior it points out market imperfections there are four types of conflicts of interest personal individual personal organizational impersonal individual and finally impersonal organizational conflicts analyzing recent scandals we find that all four types of conflicts of interest prevail in financial intermediation

conflict of interest and the credibility of underwriter analyst recommendations brokerage analysts frequently comment on and sometimes recommend companies that their firms have recently taken public we show that stocks that underwriter analysts recommend perform more poorly than buy recommendations by unaffiliated brokers prior to at the time of and subsequent to the recommendation date we conclude that the recommendations by underwriter analysts show significant evidence of bias we show also that the market does not recognize the full extent of this bias the results suggest a potential conflict of interest inherent in the different functions that investment bankers perform

the economic consequences of labor unionization evidence from stock price crash risk this study investigates the impact of labor unionization on stock price crash risk we find that labor unionization is negatively associated with stock price crash risk such negative relation is more pronounced when firms can intimate more credible evidence on unfavorable prospects and when firms face more powerful labor unions our findings are consistent with the notion that firms take strategic actions to reduce the bargaining advantages enjoyed by labor unions and that labor unions force firms to take less risky investments and discontinue underperformed projects more timely which leads to lower stock price crash risk

do wages compensate for anticipated working time restrictions evidence from seasonal employment in austria this article investigates the existence of compensating wage differentials across seasonal and long term jobs that arise due to anticipated working time restrictions using longitudinal information from the austrian administrative records we derive a definition of seasonality based on observed regularities in employment patterns as wages change across seasonal and long term jobs for the same individual over time we can control for individual specific effects and use variation in the starting month of seasonal jobs as an exogenous predictor of anticipated unemployment we find that employers pay on average a positive wage differential of about 11 for seasonal jobs

economic incentives and natural resource management among small scale farmers addressing the missing link small scale farmers face numerous challenges to invest in natural resource management practices the problems are interlinked with such perverse economic problems as high transaction costs and risk rooted in the lack of comprehensive institutional and organizational services to farmers for risk reduction and incentive creation failure to address such a missing link undermines success in natural resource management this paper ponders the importance of such a missing link and proposes analytic framework that explicitly integrates the economics of natural resource management into institutional and organizational analysis the framework features the instrumentality of integrated institutional and organizational innovation to create opportunities and incentives to small scale farmers to encourage investment in natural resource management practices