selecting suitable compensation plans of executive stock options theoretical and empirical works have emphasized that executive stock option plans play an important role in compensation management and corporate governance owing to the incentives to increase firm stock price and volatility levels this study not only proposes models of executive stock options and constructs value matched financial variables for comparing the incentive effects towards these options but also develops an empirical study exploring the characteristics of executive stock options and suitable compensation management for companies this investigation examines the daily value and compares incentive effects of six kinds of executive stock options with the empirical data of tsmc the world s largest dedicated semiconductor foundry which is listed on the tse and nyse empirical results indicate that purchased options would be the best choice for companies that are unsuitable to undertake risky investments while the relative indexed options are appropriate for bear markets and good for companies

male interracial wage differentials competing explanations persistent interracial wage differentials present a challenge for neoclassical models of discrimination which claim that long rung competition is not consistent with persistent discrimination this study provides an empirical examination of the missing variable and job competition models of interracial wage inequality the results argue strongly against the missing variables approach and strongly in favor of the job competition model specifically this study finds that about one half of the male african american white and latino white interracial wage differentials are due to market discrimination against african americans and latinos in addition the positive and significant coefficients on the race gender employment density variables strongly affirm the job competition model s contention that access to white especially male dominated jobs increases an individual s wage rate regardless of race racial job segregation then is an important explanatory variable for racial wage discrimination copyright 1999 by oxford university press

the determinants of dismissals quits and layoffs a multinomial logit approach in efficiency wage models workers productivity depends positively on the wage giving firms an incentive to pay wages above their market clearing level two models in this literature are the shirking model of shapiro and stiglitz 12 and bowles 1 and the turnover cost model of stiglitz 13 schlicht 11 and salop 10 in the shirking model a higher wage and a higher unemployment rate raise the cost of losing one s job thereby discouraging workers from shirking and increasing their effort in the turnover cost model a higher wage reduces quits and thus lowers the firm s cost of hiring and training new workers given the role of separations in efficiency wage models it is important to understand the determinants of separations this study uses data on individual workers to examine the determinants of dismissals quits and layoffs within the first six months of a hire paying particular attention to dismissals because of the prominence of the shirking model in the efficiency wage literature the purposes of this study are to test whether higher unemployment lowers dismissals as predicted by the shirking model and to examine the effect of firm variables related to the costs of monitoring and shirking on the probability of a dismissal in addition this study provides insight into the effects of firm characteristics and worker characteristics on dismissals quits and layoffs

the extent and determination of performance related pay systems in scandinavian countries the incidence of performance related pay prp varies substantially across countries using individual worker level data it is the intention of this paper to examine initially the extent to which institutional factors across denmark sweden and finland affect the coverage of performance related pay it then identifies the types of workers and firms that choose this form of payment system within each country the initial findings suggest that institutional factors within countries play a role in determining the extent to which the adoption of prp systems varies across countries although this is far clearer for finland than between denmark and sweden for example the results also show that there are significant differences across scandinavia in terms of the workers who choose prp systems and the firms who adopt them strong support is found for the previously identified and positive relationship between firm size and use of prp

neoclassical and marxian conceptions of production incorporating information deficiencies into the neoclassical paradigm has introduced some broad similarities with the marxian analysis of the labor process both approaches predict the existence of a variety of contractual regimes and that workers with equal productivities can be adjudged unequal in the market place and while the marxian approach sees unemployment as inevitable the new neoclassical models also allow for equilibrium unemployment these similarities and areas of divergence in the assessment of productive efficiency and welfare are explored a crucial difference arises from the individualism of the neoclassical model as opposed to the class approach in the marxian model copyright 1988 by oxford university press

spatial targeting of payments for environmental services a tool for boosting conservation benefits abstract payments for environmental services pes have become an increasingly popular market based instrument to translate external non market environmental services into financial incentives for landowners to preserve the ecosystems that provide the services however lack of spatial differentiation in the targeting mechanism may lead to efficiency losses addressing this challenge we construct an applied site selection tool which takes into account three variables that vary in space environmental services provided risks of losing those services and participation costs using data from costa rica s nicoya peninsula we empirically test the tool s potential to increase the financial efficiency of the forest focused pes program in place results show that given a fixed budget efficiency increases radically if per hectare payments are aligned to landowners heterogeneity in participation costs involving opportunity transaction and direct costs of protection respectively selecting sites based on environmental service potential also moderately increases efficiency overall additionality could in the best case be doubled but remains generally limited due to current low deforestation risks prevailing in costa rica to take advantage of the high efficiency potentials of flexible payments we propose inverse auction systems as a cost effective approach for the determination of micro level participation costs

qualitative and quantitative evidence on the true local welfare costs of forest conservation in madagascar are discrete choice experiments a valid ex ante tool summary protected areas may impose local welfare costs through the enforcement of use restrictions predicting their welfare impacts before their establishment could help with the design of compensation schemes discrete choice experiments dces are increasingly used for ex ante evaluations but their validity is largely untested in low income settings using a case study of a new redd reducing emissions from deforestation and forest degradation project in eastern madagascar we explore the validity of dces in two ways i whether the estimates of welfare costs derived from dce are affected by respondents prior experience of conservation ii whether dce results have high theoretical and content validity we surveyed households who have varying degrees of experience of restrictions to swidden agriculture we also qualitatively debriefed a sub sample of respondents to better understand their thought processes latent class analysis shows that dce outcomes vary with conservation experience households more experienced with forest protection are less willing to trade off rights to clear forest for swidden agriculture with any compensatory interventions whereas less experienced households highly favor support for alternative agricultural techniques and a secure right to clear one hectare of forest although the results show apparent non attendance to some attributes e g cash payments qualitative debriefings suggest that respondents infact do expect relatively low or no utility from the given attributes and hence have theoretically valid preferences similarly the dce has generally high content validity although dce can elicit current preferences in this context using ex ante dce to estimate the welfare costs of such a long term intervention requires caution we conclude that it is difficult to robustly estimate compensation in advance of an intervention there is therefore a need to rethink conservation approaches and the feasibility of achieving fair compensations for conservation imposed restrictions

union power cost of job loss and workers effort the authors hypothesize that the effectiveness of external threats in raising workers effort is mediated by among other labor market conditions the presence or absence of a powerful union in particular they argue that because powerful unions reduce the potency of the external threat of job loss by making it more difficult for employers to dismiss workers the pace of work is less responsive to such a threat in strongly unionized plants than in weakly unionized plants the results of an analysis of data from the 1990 workplace industrial relations survey in britain support this hypothesis the analysis also yields evidence that effort is increased where workers are rewarded individually according to results and where there are various communication channels between workers and management

incentives pay and performance a study of australian employees the paper analyses the determinants of self reported work effort using a 1988 survery of australian employees while controlling for the endogeneity of the firm s choice of incentives and pay it is found that direct incentive schemes have predicted effects and the efficiency wage hypothesis is supported pay and work effort are positively correlated two efficiency wage models are tested akerlof s gift exchange model and work discipline arguments regarding monitoring difficulties and threats of dismissal the latter argument is broadly consistent with the data

employment rents and the incidence of strikes a new measure of labor market tightness on workers behavior the employment rent is modeled as a determinant of workplace conflict an empirical estimate of the employment rent workers expected cost of job loss is calculated it is argued that the cost of job loss affects strike incidence this relationship is tested by estimating an econometric model of strike incidence for the united states from 1955 to 1983 the cost of job loss is shown to explain a large percentage of the variation in strike incidence the cost of job loss is a far superior explanatory variable than the unemployment rate which is commonly used in strike models copyright 1987 by mit press

efficiency wages interfirm comparison and unemployment the paper presents an efficiency wage model where worker effort depends on own wages relative both to wages of other workers in the firm and to similar workers in other firms first we show how the solow conditions are modified if internal comparison effects are at work second we discuss the effect of internal wage comparison on wage inequality within firms third we study unemployment and relative wage determination within a general equilibrium model and analyze the effect of technological change and various tax policies on equilibrium unemployment and relative wages finally the short run effects of aggregate demand shocks are analyzed a popular argument for the existence of involuntary unemployment is that a worker s effort rises with wages giving employers incentives to set wages above market clearing levels it is often assumed that the worker s effort is a function of the wage level with no reference to the size of the wage in comparison with that received by other workers yet such comparisons are likely to influence an individual in his effort choice if this is the case then it seems equally likely that workers compare themselves with others both internal and external to their place of work this paper contributes to the efficiency wage literature by providing an understanding of wage setting and unemployment determination within a model where workers efforts depend on their wage relative to both the wages of other workers at the same firm and to the wages of similar workers at other firms

testing alternative theories of the firm transaction cost knowledge based and measurement explanations for make or buy decisions in information services firms boundary choices have undergone careful examination in recent years particularly in information services while transaction cost economics provides a widely tested explanation for boundary choice more recent theoretical work advances competing knowledge based and measurement cost explanations similar to transaction cost economics these theories examine the impact of exchange attributes on the performance of markets and hierarchies as institutions of governance these theories however offer alternative attributes to those suggested by transaction cost economics or offer alternative mechanisms through which similar attributes influence make buy choices traditional empirical specifications of make buy models are unable to comparatively test among these alternative theories by developing and testing a model of comparative institutional performance rather than institutional choice we examine the degree of support for these competing explanations of boundary choice hypotheses are tested using data on the governance of nine information services at 152 companies our results suggest that a theory of the firm and a theory of boundary choice is likely to be complex requiring integration of transaction cost knowledge based and measurement reasoning 1998 john wiley sons ltd

recent advances in the valuation of ecosystem services and biodiversity recent interest in the economics of biodiversity and wider ecosystem services has been given empirical expression through a focus upon economic valuation this emphasis has been prompted by a growing recognition that the benefits and opportunity costs associated with such services are frequently given cursory consideration in policy analyses or even completely ignored the valuation of biodiversity and ecosystem services is therefore increasingly seen as a crucial element of robust decision making and this has been reflected in a growing body of related research we provide a critical review of some of this research considering the valuation methods applied to date and focussing upon their limitations in respect to certain categories of ecosystem services particularly cultural services and the applicability of the extant literature to new settings substantial questions also remain at the interface of natural science and economics and we consider the potential contribution of the conceptualization of ecosystems as assets as a response to this challenge as part of this review we also highlight the role which large scale ecosystem assessments have played as an impetus to extending the valuation evidence base and the way in which frameworks and assessments of how ecosystems contribute to human wellbeing might be translated into policy thinking and decision analyses

global equity and environmental crisis an argument for reducing working hours in the north abstract is an improvement in the distribution of income between north and south compatible with environmental reconstruction to date economic growth rather than redistribution has been the dominant strategy for redressing global inequality but environmental constraints on growth at least in the north may prove desirable this paper argues that one strategy for reconciling these two goals is for the north to take productivity increases in the form of leisure time rather than increased output it discusses the feasibility of such an approach

low income fishermen s willingness to pay for fisheries and watershed management an application of choice experiment to lake tana ethiopia abstract in this paper choice experiment was applied for valuation of lake tana s fishery and watershed two attributes fishing control and lake side plantation were identified as relevant attributes for the choice experiment a monetary attribute payment for fishing permit was also included multinomial and random parameter logit models were used for estimation all the attributes included were significant factors in affecting the probability of choosing an alternative scenario the results suggest that fishermen were more concerned about fishing control as reflected by the higher value they give to fishing control than lake side plantation household income years of education and family size were found to be significant the economic welfare measures we calculated for two scenarios show that fishermen were willing to pay 57 birr us 5 3 per month for a moderate improvement scenario and 93 birr us 8 6 per month for an aggressive scenario for the two attributes

cooperation among strangers with limited information about reputation abstract the amount of institutional intervention necessary to secure efficiency enhancing cooperation in markets and organizations in circumstances where interactions take place among essentially strangers depends critically on the amount of information informal reputation mechanisms need transmit models based on subgame perfection find that the information necessary to support cooperation is recursive in nature and thus information generating and processing requirements are quite demanding models that do not rely on subgame perfection on the other hand suggest that the information demands may be quite modest the experiment we present indicates that even without any reputation information there is a non negligible amount of cooperation that is however quite sensitive to the cooperation costs for high costs providing information about a partner s immediate past action increases cooperation recursive information about the partners previous partners reputation further promotes cooperation regardless of the cooperation costs

poverty consumption risk and soil conservation abstract this paper studies the impact of poverty and uninsured consumption risk on incentives to invest in soil conservation a stochastic dynamic model is used to show how consumption risks and costs of investment influence incentives to adopt soil conservation measures on low income farms the model is calibrated using production data from hillside farms in the philippines simulations with the model demonstrate how the value of soil conservation depends on the cost of investing the risk characteristics of the soil conservation method and differences among households in capacity to bear risk model predictions are compared with empirical adoption patterns as described by a probit model and nonparametric kernel regressions of adoption probability empirical findings show how differences in farm size tenure security risk exposure and access to credit help to explain patterns of soil conservation adoption implications for policy are discussed

an experimental test of the efficacy of a simple reputation mechanism to solve social dilemmas abstract the evolution of cooperation has been the focus of intense research in the social sciences natural sciences especially biology and even computer science it has long been recognized that the possibility of future consequences is crucial to the emergence of rational cooperation it was thought that random matching was isomorphic to one shot play but kandori 1992 showed that a reputation labeling mechanism can be used to support cooperation in the random matching prisoner dilemma we designed an experiment to test this result we found that while the level of cooperation steadily declined without a reputation mechanism with our color coded reputation mechanism the level of cooperation steadily increased with experience an econometric mixture model consisting of four reputation conditioned strategies as well as a level 0 type was fitted to the data we cannot reject the hypothesis that the majority of subjects used one of these strategies and learned with experience

unemployment long term employment relations and productivity growth using an effort regulation type of efficiency wage model it is demonstrated that a firm may respond to slackening labor markets by acting to increase the intensity with which workers work the magnitude of this work intensity effect depends on the structure of employment relations where long term employment relations are prevalent the effect of labor market slack on work intensity may be diminished these propositions are tested empirically by estimating the effects unemployment and long term employment have on productivity growth in two digit manufacturing industries copyright 1987 by mit press

business ascendancy and economic impasse a structural retrospective on conservative economics 1979 87 conservatives have been waging economic revolution since the late carter years have they succeeded some argue in the affirmative pointing to lower rates of inflation and the long expansion since early 1983 insisting that the fundamentals are sound others argue in the negative emphasizing the huge twin trade and federal budget deficits and the financial fragility underscored by the october 1987 stock market crash warning that the party s over both sides of this argument concentrate primarily on short term phenomena in the 1980s neither pays much attention to the experience of the conservative regime since 1979 in long term historical perspective ronald reagan and the early architects of conservative economic policy made no such mistake they sought their place in the history books as institutional innovators not economic tinkerers in this light scrutiny of the usual cyclical macroeconomic indicators may miss far reaching changes in economic structure which promise a sustained economic expansion in years to come the budget and trade imbalances of the late 1980s for example may reflect nothing more than the growing pains of a new economic order whose long run prospects are as bright as the reagan administration promised had the economic record of the new deal been evaluated in the eighth year of roosevelt s presidency one may doubt that we would have found in the standard economic aggregates signs of the profound institutional changes which were to provide the foundations for the long postwar boom

payments for ecosystem services and agricultural intensification evidence from a choice experiment on deforestation in zambia agriculture is considered to be one of the major drivers of deforestation worldwide in developing countries in particular this process is driven by small scale agriculture at the same time many african governments aim to increase agricultural productivity empirical evidence suggests however that win win relationships between agricultural intensification and forest conservation are the exception payments for ecosystem services pes could be linked to agriculture support programmes to simultaneously achieve both goals due to potentially higher profits from intensified agriculture than from pure cash transfers potential payment recipients may prefer in kind over conventional cash payments nevertheless little scientific evidence exists regarding the preferences of potential pes recipients for such instruments we report from a discrete choice experiment in zambia that elicited preferences of smallholder farmers for pes contracts our results suggest that potential pes recipients in zambia value in kind agricultural inputs more highly than cash payments even when the monetary value of the inputs is lower than the cash payment highlighting that pes could potentially succeed in conserving forests and intensifying smallholder agriculture respondents who intended to clear forest within the next three years were found to require higher payments but could be motivated to enrol in appropriately designed pes

industry wage differentials and efficiency wages a dissenting view with south african evidence abstract does industry wage dispersion constitute evidence of either efficiency wages or rent sharing comparison of the industry wage premia of whites and africans in south africa casts doubt upon the rent extraction and the gift exchange explanations of the industry wage structure unions combined with union threats fail to explain the data other explanations unobserved ability compensating differentials and the shirking monitoring and turnover models are rejected here as they have been before remaining possibilities are expense preference theory and internal equity rules implications for future research are pointed out

credit based payments for ecosystem services evidence from a choice experiment in ecuador the original conceptualization of payments for ecosystem services pes promoted direct payments to motivate the provision of environmental public goods but market imperfections and behavioral considerations can mean that pes that reduce market constraints are preferred the main issue with the latter is how to include conditionality we propose credit based pes cb pes as an incentive that links an environmental condition with the reduction of a key market constraint through a choice experiment in ecuador cb pes was found to be a promising form of pes with multiple desirable qualities of an incentive as cited in the behavioral economics and pes literatures

cooperation among strangers under the shadow of the future we study the emergence of norms of cooperation in experimental economies populated by strangers interacting indefinitely can these economies achieve full efficiency even without formal enforcement institutions which institutions for monitoring and enforcement facilitate cooperation finally what classes of strategies do subjects employ we find that first cooperation can be sustained even in anonymous settings second some type of monitoring and punishment institutions significantly promote cooperation and third subjects mostly employ strategies that are selective in punishment

economic valuation of cultural heritage sites a choice modeling approach abstract despite growing attention by researchers and policy makers on the economic value of cultural heritage sites debate surrounds the use of adequate methods although choice modeling techniques have been applied widely in the environmental economics field their application in tourism and cultural economics has been much more limited this paper contributes to the knowledge on the economic valuation of cultural heritage sites through a national choice modeling study of old parliament house australia the study sought to value marginal changes in several attributes of this site and revealed that only some of them are valued positively extending the period of temporary exhibitions hosting various events and having shop and cafe and fine dining advantages of using a mixed logit model are provided and managerial and policy implications are discussed

a near rational model of the business cycle with wage and price inertia this paper presents a model in which insignificantly suboptimal behavior causes aggregate demand shocks to have significant real effects the individual loss to agents with inertial price wage behavior is second order in terms of the parameter describing the shock while the effect on real economic variables is first order thus significant changes in business activity can be generated by anticipated money supply changes provided that some agents are willing to engage in nonmaximizing behavior which results in small losses

are wages too low empirical implications of efficiency wage models firms may pay efficiency wages to enhance productivity the conventional presumption is that efficiency wages are inefficiently high because they lead to unemployment that is also inefficiently high government policies that lower wages raise output using a simple and general efficiency wage model this paper finds a necessary and sufficient condition for the opposite conclusion if the condition holds wages are inefficiently low leading to productivity that is also inefficiently low it is the high wage policies that raise output even if they also lower employment published empirical results support the condition no evidence is found for the conventional presumption

an institutional analysis of payments for environmental services abstract in this paper the characteristics and functioning of pes is analyzed from an institutional perspective while in theory pes is seen as a market solution to environmental problems as an alternative to state hierarchical and community governance a review of a large amount of case studies shows that pes in practice depends rather fundamentally on state and or community engagement hence pes are foremost a reconfiguration of the roles of public bodies and communities becoming core intermediaries or buyers first to establish pes rights to the land that delivers the environmental service must be clarified this demands public action second transacting over environmental amenities is very costly creating markets for environmental services depends therefore crucially on state and community facilitation hence buyers are often public agencies high transaction costs also influence price setting payments do not follow the market format as intermediaries frequently are setting the price with users often being unaware even of the fact that they pay finally the distinction between payments as incentives and as fair compensations is emphasized while payments may strengthen community relations and simplify action for environmental care they may also introduce a purely instrumental logic and in some cases worsen the environmental status by crowding out environmental virtues for the future greater awareness of these dynamics is warranted

on imperfect evaluation and earning differentials this paper investigates the relationship between the technology for evaluating performance and optimal contract choice specifically the paper examines the different compensation packages that arise when occupations differ in evaluation technology workers are risk averse work effort is endogenous and there exists asymmetric information in occupations in which it is less difficult to measure output it is shown that compensation is more closely tied to output the implications for work effort the sorting of workers by ability and average compensation are developed analysis of a new data set confirms our predictions concerning earning differentials and wage growth the powerful 1 6 million member national education association and other teacher organizations have traditionally fought the notion of rewarding better teachers with more money arguing that there is no objective way to measure a teacher s competence and that it would lead to favoritism and bad morale time june 20 1983

carrots and sticks pay supervision and turnover the efficiency wage model ewm has been advanced as an explanation for large and persistent wage differentials the shirking version of the ewm assumes a trade off between self supervision and external supervision the turnover version assumes turnover is costly to the firm variation across firms in the cost of monitoring shirking or turnover then is hypothesized to account for wage variations across firms for homogeneous workers using a new sample of firm data this paper presents empirical evidence of the trade off of wage premiums for supervisory intensity and turnover little evidence is found to support either version of the ewm

payments for environmental services in costa rica costa rica pioneered the use of the payments for environmental services pes approach in developing countries by establishing a formal country wide program of payments the psa program the psa program has worked hard to develop mechanisms to charge the users of environmental services for the services they receive it has made substantial progress in charging water users and more limited progress in charging biodiversity and carbon sequestration users because of the way it makes payments to service providers using approaches largely inherited from earlier programs however the psa program has considerable room for improvement in the efficiency with which it generates environmental services with experience many of these weaknesses are being gradually corrected as the psa program evolves towards a much more targeted and differentiated program an important lesson is the need to be flexible and to adapt to lessons learned and to changing circumstances

salaries and piece rates compensation can take many forms remuneration can come as pecuniary payments as fringes such as health and pension benefits or as a nonpecuniary reward such as plush office furniture that costs the firm less than it benefits the worker a significant literature has examined the trade offs between pecuniary and nonpecuniary compensation the modern work having been pioneered by rosen 1974 more recently another body of literature has examined the selection of method of total compensation ignoring the distinction between pecuniary and nonpecuniary payment this work has focused on risk and incentive factors it has resulted in comparisons of compensation based on absolute output levels to that based on relative performance it has also led to explorations of the relation of compensation to experience over the work life 2 little attention has been paid to what may be among the most important and obvious distinction in methods of compensation namely the choice between a fixed salary for some period of time that is paying on the basis of input and some workers receive compensation that is specified in advance and not directly contingent on performance instead it depends on an input measure such as hours worked for others compensation is directly related to output this essay is an attempt to predict a firm s choice of compensation method piece rates are defined more rigorously among the more important factors discussed are worker heterogeneity incentives sorting considerations monitoring costs and asymmetric information one result is that salary workers tend to be of lower quality and more homogeneous than are their piece rate counterparts numerous additional results are provided helpful comments by victoria lazear and yoram weiss are gratefully acknowledged support was provided by the department of labor and the national science foundation 1 see lazear and rosen 1981 stiglitz 1981 holmstrom 1982 green and stokey 1983 2 see lazear 1979 1981 and harris and holmstrom in press

firms choice of method of pay using data from the bls industry wage survey the author tests the theory that firms choose their methods of pay by balancing the gains from more precise links between performance and pay against m

redefining payments for environmental services abstract the environmental economics and the ecological economics perspectives on payments for environmental services pes propose rather different views on how to define pes its key elements and on the role of pes in ecosystem conservation and rural development this paper compares these two perspectives and addresses the following questions what is an appropriate definition of pes grounded in the theory and practice underlying it what are the key design elements of pes what should the scope of pes be given the possible trade offs between efficiency and equity it is found that pes schemes should focus on cost effectiveness and best practice for positive livelihood impacts pes schemes should be transparent and provide additional services with conditional payments to voluntary providers

flexibility and reputation in repeated prisoner s dilemma games we study how three matching institutions differing in how relationships are dissolved affect cooperation in a repeated prisoner s dilemma and how cooperation rates are affected by the presence of

decentralized payments for environmental services the cases of pimampiro and profafor in ecuador abstract few payment for environmental services pes schemes in developing countries operate outside of the central state s umbrella and are at the same time old enough to allow for a meaningful evaluation ecuador has two such decentralised consolidated experiences the five year old pimampiro municipal watershed protection scheme and the twelve year old profafor carbon sequestration programme we describe and compare the two cases using a common pes definition and methodology drawing on both primary interview based information and secondary data we find that both schemes have been relatively effective in reaching their environmental objectives in terms of having probably high additionality levels and low leakage effects a strong focus on the targeted environmental service and a strong degree of conditionality seem to be two key factors explaining these achievements although neither scheme has targeted poverty alleviation or other side objectives both are likely to have improved pes recipients welfare mostly through higher incomes we highlight several observations with more generalised relevance and lessons for the design of pes schemes

socio ecological explanations for crowding out effects from economic field experiments in southern africa abstract economic and psychological literature mentions three conditions under which the crowding out effect of pro social behaviour is likely to occur and to crowd out citizens moral obligations to behave co operatively i use a framed field experiment on joint extraction from a common pool resource cpr where the crowding out effect has already been reported before in combination with the trust game carried out in farming communities of namibia and south africa to replicate these conditions the research design and the cross cultural setting enable to explicitly control for these effects the results of the experiments support that the crowding out effect depends on the nature of the external intervention controlling vs supportive external intervention the degree of participants self determination high vs low self determination in the group a society s norms of trust and reciprocity high vs low trust within the society the results imply that outside regulations aiming to conserve natural resources risk worsening the situation when neglecting democratic legitimization as well as local community norms

evidence on incentive effects of subjective performance evaluations the authors investigate the effect of managerial performance evaluation styles on employee work effort using panel data on 4 080 employees in a swiss unit of an international company for the period 1999 2002 they test two hypotheses using paid and unpaid overtime work as effort indicators the company applies two performance based remuneration mechanisms an individual surprise bonus and one in which salary is affected by the extent to which an individual has reached personalized targets the authors hypothesize that effort is higher in departments in which individual performance evaluations are more flexible over time as well as when surprise bonuses are used more frequently both hypotheses are supported and the estimated effects are substantial increases in rating flexibility or bonus payments by one standard deviation above the mean increase average overtime hours by more than 20 the findings are robust and suggest that surprise bonuses and flexible performance evaluations over time provide ef

poor household participation in payments for environmental services lessons from the silvopastoral project in quindio colombia as the use of payments for environmental services pes approaches in developing countries has grown concern has arisen over the ability of poorer households to participate this paper uses data from a pes project implemented in quindio colombia to examine the extent to which poorer households that are eligible to participate are in fact able to do so the project provides a strong test of the ability of poorer households to participate in a pes program as it required participants to make substantial and complex land use changes the results show that poorer households are in fact able to participate at levels that are broadly similar to those of better off households moreover their participation was not limited to the simpler least expensive options transaction costs may be greater obstacles to the participation of poorer households than household specific constraints

a theory of dual labor markets with application to industrial policy discrimination and keynesian unemployment this paper develops a model of dual labor markets based on employers need to motivate workers in order to elicit effort from their workers employers may find it optimal to pay more than the going wage this changes fundamentally the character of labor markets the model is applied to a wide range of labor market phenomena it provides a coherent framework for understanding the claims of industrial policy advocates it also can provide the basis for a theory of occupational segregation and discrimination that will not be eroded by market forces finally the model provides the basis for a theory of involuntary unemployment

valuing wetland attributes an application of choice experiments abstract the interest for wetlands is increasing not only because of the possibility of a cost efficient uptake of nutrients but also because wetlands can be designed to provide other services what values that are supplied depend largely on the design there are numerous different design options and different actors may promote different alternatives whether we want to design a wetland for nutrient retention alone or one that also serves other interests policy makers need information about the value of different options conducting a choice experiment we are able to identify attributes that increase and decrease citizens perceived value of wetlands using a random parameter model we find that biodiversity and walking facilities are the two greatest contributors to welfare while a fenced waterline and introduction of crayfish decrease welfare

bargaining theory inflation and cyclical strike activity in manufacturing this paper presents a theoretical and empirical analysis of cyclical movements in strike activity the first part of the paper develops a bargaining model that demonstrates the crucial role of limi

do welfare benefits cause the welfare caseload analyses of the welfare system generally examine one of five competing models 1 the work disincentive model 2 the human capital model 3 the macroeconomic model 4 the public choice model or 5 the cost of job loss model this paper employs the granger causality concept and the multiple rank f statistic to test the implications of all five of these models simultaneously the results offer modest support to all but the macroeconomic model the relationships among welfare benefits caseloads and labor market conditions appear to be too complex to be fully captured by a single model

union wage practices and wage dispersion within establishments this study analyzes establishment level data primarily to examine the effect of unionism on the wage structure within establishments the major finding is that within establishment dispersion of wages is significantly narrower in unionized than in nonunionized establishments a pattern the author attributes in large part to unions wage practices such as single rate or automatic progression modes of wage payment as opposed to merit reviews and individual wage determination the data also show that dispersion in average wages is narrower among organized plants but by more modest amounts than the within establishment differential overall the evidence suggests a major role for explicit union wage policies in explaining the dispersion of wages within firms and in the economy as a whole

the state of the art of environmental valuation with discrete choice experiments abstract this paper provides with a review of the state of the art of environmental valuation with discrete choice experiments dces the growing body of literature on this field serves to emphasize the increasing role that dces are playing in environmental decision making in the last decade the paper attempts to cover the full process of undertaking a choice experiment including survey and experimental design econometric analysis of choice data and welfare analysis the research on this field is found to be intense although many challenges are put forward e g choice task complexity and cognitive effort experimental design preference and scale heterogeneity endogeneity or model uncertainty reviewing the state of the art of dces serves to draw attention to the main challenges that this methodological approach will need to overcome in the coming years and to identify the frontiers in discrete choice analysis

community conservation and a two stage approach to payments for ecosystem services recent revisions to the theory and definition of payments for ecosystem services pes challenge the generally accepted dominance of direct incentives provided in a buyer seller relationship the revisionist thinking insists indirect incentives and a cooperative reciprocal relationship are often more appropriate those characteristics however hark back to the indirect cooperative interventions that constitute community conservation which pes was originally designed as an improvement over in that context this study revisits the criticisms and potential benefits of community conservation we analyze a case study of community conservation in peru and find that it supported an uptake of forest friendly behaviors we take up the suggestion of a two stage approach to pes but refine it based on our results that indicate an important role for cognitive e g education alongside structural interventions e g provision of alternatives and a strong role for social consensus to support conservationist behavior community conservation can provide these elements in a first stage of pes to create a social context conducive to conservation without creating that context first pes could destabilize local resource management norms rather than improve on them with the social context established however a market mechanism can be implemented in the second stage to reinforce the new conservationist behavior

how sustainable are sustainable development programs the case of the sloping land conversion program in china summary this paper undertakes a comprehensive assessment of the long run sustainability of one of the world s largest sustainable development programs the slopping land conversion program slcp in china under different plausible post slcp scenarios the analysis is based on farmer contingent behavior post program land and labor decisions as well as choice experiment data our econometric results highlight the main obstacles to the program s sustainability which include specific shortfalls in program implementation and certain institutional constraints namely tenure insecurity and poor land renting rights the use of a choice experiment also reveals unique evidence on rural households preferences over tenure reform in china

the cost effectiveness of conservation payments international donors invest billions of dollars to conserve ecosystems in low income nations the most common investments aim to encourage commercial activities such as ecotourism that indirectly generate ecosystem protection as a joint product we demonstrate that paying for ecosystem protection directly can be far more cost effective although direct payment initiatives have imposing institutional requirements we argue that all conservation initiatives face similar challenges thus conservation practitioners would be well advised to implement the first best direct payment approach rather than a secondbest policy option an empirical example illustrates the spectacular cost savings that can be realized by direct payment initiatives

testing dynamic models of worker effort this article derives three dynamic models of worker effort determination based on a shirking efficiency wage model a compensating differentials model and a union firm bargaining model it shows that all of these three models have the same long run comparative statics but differ in their short run dynamics we use these different predictions about the dynamics as a basis for testing the models euler equations for each model are estimated using panel data on 486 u k companies the evidence supports the shirking model in firms with low levels of unionization but the bargaining model in highly unionized industries

recreation demand models with taste differences over people we estimate random parameter logit models of anglers choice of fishing site the models generalize logit by allowing coefficients to vary randomly over anglers rather than being fixed the models do not exhibit the restrictive independence from irrelevant alternatives property of logit and can represent any substitution pattern estimation explicitly accounts for the fact that the variation in coefficients over anglers induces correlation in unobserved utility over trips by the same angler willingness to pay for improved fish stock and the value to anglers of specific sites are calculated from the models and compared with the estimates obtained from a standard logit model

payments for ecosystem services from local to global abstract payment for ecosystem services pes is becoming increasingly popular as a way to manage ecosystems using economic incentives the environmental economics approach to pes tries to force ecosystem services into the market model with an emphasis on efficiency the ecological economics approach in contrast seeks to adapt economic institutions to the physical characteristics of ecosystem services prioritizing ecological sustainability and just distribution and requiring a transdisciplinary approach this paper summarizes the results of a participatory atelier workshop held in costa rica we developed a set of principles the heredia declaration for pes systems and report on evolving initiatives in several countries we discuss how the distinction between ecosystem goods which are stock flow resources and ecosystem services which are fund service resources and the physical characteristics of the fund services affect the appropriate institutional form for pes we conclude that pes systems represent an important way to effectively manage fund service resources as public goods and that this represents a significant departure from conventional market institutions

the evolution of cooperation in infinitely repeated games experimental evidence 1 for example in infinitely repeated prisoner s dilemma games with patient agents both cooperate and defect may be played in equilibrium even though the theory of infinitely repeated games has been used to explain cooperation in a variety of environments no definitive solution has been provided to the problem of equilibrium selection when both cooperation and defection are possible equilibrium outcomes which one should we expect to prevail previous experimental evidence has shown that subjects often fail to coordinate on a specific equilibrium when they play a small number of infinitely repeated games some subjects attempt to establish cooperative agreements while others defect but how would behavior evolve as subjects learn from previous repeated games would cooperation prevail when it can be supported in equilibrium or will subjects learn

reconciling theory and practice an alternative conceptual framework for understanding payments for environmental services article i nfo this article provides an alternative and novel theoretical approach to the conceptualization and analysis of payments for environmental services pes we devote special emphasis to institutional and political economy issues which have been somewhat neglected in the literature on pes we argue that the coasean and pure market approach dominating the conceptualization of pes in the literature cannot be easily generalized and implemented in practice by contrast taking into account complexities related to uncertainty distributional issues social embeddedness and power relations permits acknowledging the variety of contexts and institutional settings in which pes operate the alternative approach presented in this introductory article to the special section may be more appealing to pes practitioners since while avoiding restrictive and prescriptive standpoints it allows some key sources of complexities they usually deal with on the ground to be more easily understood

the revenge of homo economicus contested exchange and the revival of political economy recent developments in microeconomic theory have shown that the self interested behavior underlying neoclassical theory is artificially truncated it depicts a charmingly victorian but utopian world in which conflicts abound but a handshake is a handshake but a handshake is not always a handshake studies of principal agent analysis the economics of information radical political economy mechanism design and transactions cost economics have all focused on the difficulties involved in policing and enforcing the actual process of market exchange abandoning the victorian world of neoclassical theory will redirect economists to an older conception of their profession what once was called political economy by taking optimizing more seriously post walrasian economics has inspired a revolution in economic thought fostering both new theoretical departures and alternative conceptions of the capitalist economy we will offer our own interpretation of this literature focusing on the widely recognized fact that the terms arising from exchange are not generally enforceable at zero cost to the exchanging parties where some aspect of the good or service supplied is both valuable to the buyer and costly to provide the absence of third party enforcement of claims gives rise to endogenous enforcement strategies we refer to this relationship as a contested exchange because unlike the transactions of walrasian economics the benefit the parties derive from the transaction depends on their own capacities to enforce competing claims

microcredit social capital and common pool resources abstract the paper presents a conceptual scheme for understanding the impact of microcredit small loans to poor borrowers on common pool resources impacts on common pool resources are posited to occur through changes in household production and consumption the focus on women and the social capital created from group training decision making and risk bearing with the group lending techniques characteristic of many microcredit programs enhanced human and social capital can improve environmental outcomes a nonrandom survey of microfinance organizations suggests increased environmental awareness and potential cpr stewardship through microcredit but empirical research is needed to demonstrate actual impacts

determinants of farmers willingness to participate in subsidy schemes for pesticide free buffer zones a choice experiment study danish farmers have been far less interested in agri environmental subsidy schemes aes than anticipated in order to examine how to improve the appeal of such schemes a choice experiment was conducted concerning 444 danish farmers preferences for subsidy schemes for pesticide free buffer zones a random parameter logit framework was used to capture heterogeneity among farmers our results indicate that 1 the vast majority of farmers are willing to trade off the size of the subsidy for less restrictive scheme requirements and that 2 the amount of the subsidy they are willing to trade off varies with specific scheme requirements suggesting which features are most important for successful policy design our results suggest that farmers value flexible contract terms higher than reduced administrative burdens finally we suggest a practical approach to estimating a monetary value of farmers reluctance to participate in aes while the trade off s that farmers are willing to make between subsidy size and individual scheme requirements are case specific our results concerning increased use of farm advisors farmers ability of valuing different types of flexibility and our attempt to place a monetary value on farmers reluctance to engage in regulatory subsidy schemes have a potentially broader application platform

heterogeneous firms and the organization of production firms in the same industry exhibit systematic differences in the organization of production and the structure of employment entrepreneurial ability is the specific scarce input that limits the size of a firm this input must be allocated to two activities coordinating production and monitoring workers able entrepreneurs can convert calendar time into larger supplies of coordinating effort that enable them to assemble large firms greater ability implies a higher shadow price of time which increases the implicit costs of monitoring a dispersion of entrepreneurial abilities generates an equilibrium size distribution of firms differences in monitoring costs affect the choice of worker productivities the design of products and the organization of production the monitoring cost hypothesis advanced in this paper goes a long way in explaining the equilibrium of an industry containing heterogeneous firms that differ in size and behavior

self selection and the power of incentive schemes an experimental study we examine how self selection of workers depends on the power of incentive schemes and how it affects team performance if the power of the incentive schemes is increased in a laboratory experiment we let subjects choose between low powered team incentives and high powered individual incentives we observe that subjects exhibiting high trust or reciprocity in the trust game are more likely to choose team incentives when exposed to individual incentives subjects who chose team incentives perform worse if both the unobservable interdependency between their efforts and their incentive to cooperate under team incentives are high

the worker discipline effect a disaggregative analysis the authors test for the presence of a worker discipline effect wherein macroeconomic conditions influence worker effort and examine interindustry variation in its strength an employment function analysis is first used to find evidence of a worker discipline effect in the majority of u s three digit manufacturing industries a factor analysis of industry firm and labor market characteristics is then used to identify several underlying factors by which industries can be distinguished the authors find that the strength of the worker discipline effect is positively and significantly correlated with the degree to which industries have secondary characteristics copyright 1990 by mit press

the determinants of strikes in the united states 1900 1977 this study aims to assess the recent debate that has emerged in the literature over the economic and organizational political models of strikes and to propose and test a synthesis of those models as an explanation for the pattern of strike activity in the united states since 1900 the paper begins with a review of strike activity in the post 1900 period and then develops a conceptual framework incorporating six factors the size of union membership economic conditions political events institutional arrangements psychological variables and the extent of rival unionism to explain this historical pattern the second part of the paper contains a regression analysis of strike activity over the 1900 1977 period the regression results show that both the economic factors of unemployment and inflation and various noneconomic factors such as changes in union membership the outbreak of world war ii and enactment of new deal legislation are significant in explaining variations in strike activity during t

worker heterogeneity job screening and firm size a model of job screening is developed in which firms make wage offers to workers based on an imperfect evaluation of their abilities if large firms have higher costs of acquiring information about workers they screen workers with less accuracy and choose a wage compensation scheme different from the one small firms choose this generates the often observed positive correlation between firm size and wages the model also predicts that wage structure and perhaps wage dispersion will differ by firm size and that individuals who acquire more schooling will also choose to work in a larger firm these hypotheses are tested and supported using data from the national longitudinal survey

radical political economy and the economics of labor markets this essay is the result of a long process involving many drafts and revisions i am grateful to duncan foley for the careful and constructive criticisms offered throughout the project the following people read the manuscript at different stages and although they often disagreed with me they generously provided helpful comments two anonymous referees for this journal samuel bowles william dickens greg dow robert drago richard edwards kathleen engel richard freeman james galbraith herbert gintis jody hoffer gittel sandfordjacoby tom kochan david levine lisa lynch paul osterman michael piore bob rebitzer gil skilman dan slesnick robert thomas and tsuyoshi tsuru comments from participants in seminars at the massachusetts institute of technology university of massachusetts at amherst and hitotsubashi university are also gratefully acknowledged