the rotten kid theorem meets the samaritan s dilemma a familiar result in the economic theory of the family is becker s rotten kid theorem this theorem states that altruism by a family member will lead other selfish members to act efficiently from the family viewpoint we extend becker s one period model to two periods and show that parental altruism can result in an inefficiency known in other contexts as the samaritan s dilemma implications of this for transfer arrangements within the family and for the ricardian equivalence theorem are drawn

human capital investment in wealth constrained families with two sided altruism abstract it is well known that with one sided altruism a bequest constrained household will under invest in their child s human capital government transfers to such a household will unambiguously increase human capital investment we show with two sided altruism and an operative gift motive human capital investment will be efficient under a subgame perfect equilibrium but will remain inefficiently low under a nash equilibrium government transfers cease to affect investment under either equilibrium notion

parents discount rates for child quality contemporary discussions of economic growth make human capital or knowledge accumulation its primary engine 25 human capital as the lead component of the stock of wealth defines a developed economy becker and murphy 4 show that human capital both increases and is increased by the scope of the market its rate of return rises with the size of its stock 5 human capital also plays significant roles in models of human fertility choice 40 population and environmental degradation 11 34 capital mobility 3 and endogenous technological progress 33 a substantial portion of an adult s human capital is accumulated during childhood children as children however cannot independently contract for the resources required to support investments in this human capital though nearly every society grants parents wide discretion about the nurture they provide their children little is understood about what motivates investment by one generation in another the relative importance of different investment modes or the discount rates which parents apply whatever the motivation and the mode because of the long time span between birth and adulthood parents discount rates potentially exert great leverage upon the investment decisions they make for their children knowledge of these discount rates is a prerequisite to acquiring an improved understanding of the internal decision processes of the household a collective decision unit which economics mostly treats as a black box 1 important policy questions as well as scientific accuracy and logical consistency demand knowledge of the discount rates parents apply to investments in their children healthier better educated and wealthier children have a better chance in life but there is no evident reason to suppose that intrafamily discount rates are socially optimal 2 many of the private reactions and behaviors which reinforce or temper the intended effects of public policies are internal to the household when these intended effects have a substantial temporal dimension parental discount rates will be influential for example increased public investments in children can be neutralized

altruism and time consistency the economics of fait accompli this paper analyzes the strategic and intertemporal interaction between two economic agents who have overlapping concerns such as altruistic concerns for each other s welfare the agents may be two individuals a social bureau and a client or two units in an organization we show how the presence of such common concerns may lead to socially inefficient outcomes in which one economic agent free rides on the other s concern we also briefly how this inefficiency and free riding in the context of interaction between individuals might be mitigated by compulsory social security systems as another example we interpret the inefficiency in terms of kornai s soft budget constraints within organizations

ownership based entry mode strategies and international performance this study examines the relationship between ownership entry modes and performance the ownership entry modes examined are the wholly owned modes of acquisition and new venture entry and the non wholly owned mode of joint venture entry a theoretical relationship is developed for international entry modes that is based on the contingency characteristics of resource requirements and organizational control factors this model suggests that different entry modes have different performance outcomes based upon their resource and organizational control demands the theoretical model although developed using the eclectic theoretical approach is based largely on concepts and relationships previously delineated in contingency theory our hypotheses suggest that new ventures should outperform joint ventures and joint ventures should outperform acquisitions an empirical test using a sample of 321 japanese firms entering the north american market provides supporting evidence

the use and impact of business advice by smes in britain an empirical assessment using logit and ordered logit models this study assesses the effect of differences in types of client on the use and impact of business advice by smes in britain using new survey evidence from the cambridge esrc centre for business research survey of 1997 the survey covering over 2500 respondents is the largest and most definitive assessment available in britain moreover the survey allows an assessment of the full range of providers of external advice the private sector business associations and various public sector bodies as well as the fields of advice using multivariate logit models it is found that size of firm rate of growth and innovation appear to be the main variables influencing the likelihood of firms seeking external advice both from different sources and from different fields other variables which are investigated include age profitability skill levels manufacturer services and exporter nonexporter ordered logit models of the impact of the advice demonstrate that there are significant differences between client

uncertain altruism and the provision of long term care this paper studies the role of private and public long term care ltc insurance programs in a world in which family assistance is uncertain benefits are paid in case of disability but cannot be conditioned directly due to moral hazard problems on family aid under a topping up scheme when the probability of altruism is high there is no need for insurance at lower probabilities insurance is required thought not full insurance this can be provided either privately or publicly if insurance premiums are fair and publicly otherwise moreover the amount of ltc insurance varies negatively with the probability of altruism with an opting out scheme there will be three possible equilibria depending on the children s degree of altruism being low moderate or very high these imply full ltc insurance with no aid from children less than full insurance just enough to induce aid and full insurance with aid fair private insurance markets can support the first equilibrium but not the other two equilibria only a public opting out scheme can attain them by creating incentives for self targeting and ensuring that only dependent parents who are not helped by their children seek help from the government

sme growth the relationship with business advice and external collaboration the paper presents multivariate analysis of the relationship of sme growth with the acquisition of external business advice whilst controlling for the influence of sme characteristics of age manufacturing services high technology innovator level of skill of the workforce exporter and number of competitors the relationship of external business advice with sme performance is statistically significant for only a small number of sources and fields obtaining external advice in fields such as business strategy and staff recruitment is associated with positive firm performance the main positive relationships of advice and performance are dominated by private sector sources such as lawyers suppliers customers and business friends relatives collaborative arrangements with suppliers nationally internationally have a strong positive relationship with employment and turnover growth collaboration with local suppliers has a strong positive relationship with growth in profitability there is little evidence of statistically significant relationships between government backed providers of business advice such as business link and firm performance

the energy efficiency paradox revisited through a partial observability approach the present paper examines the energy efficiency paradox demonstrated in greek manufacturing firms through a partial observability approach the data set used has resulted from a survey carried out among 161 energy saving technology firm adopters maximum likelihood estimates that arise from an incidental truncation model reveal that the adoption of the energy saving technologies is indeed strongly correlated to the returns of assets that are required in order to undertake the corresponding investments the source of the energy efficiency paradox lies within a wide range of factors policy schemes that aim to increase the adoption rate of energy saving technologies within the field of manufacturing are significantly affected by differences in the size of firms finally mixed policies seem to be more effective than policies that are only capital subsidy or regulation oriented

the family and the state the immaturity of children sometimes precludes efficient arrangements between children and parents or others responsible for child care the difficulty in establishing efficient relations within families provides the point of departure for our interpretation of the heavy state involvement in the family the authors believe that a surprising number of state interventions mimic the agreements that would occur if children were capable of arranging for their care many regulations of the family improve the efficiency of family activities these interventions include subsidies to education and training social security and other old age support subsidies to births laws that limit access to divorce and the sale of children and laws that require parents permission for early marriage and other choices of children families that leave bequests can force children to repay parents for investments in human capital by reducing bequests therefore these families do not underinvest in childrens human capital by contrast families that do not leave bequests often poorer families do underinvest in children the state may subsidize schools and other training facilities to raise investments in children by poorer families to efficient levels authors modified

is increased public schooling really a policy for equality abstract empirical findings suggest different causes for higher educational attainment among children of high income earners either that poor parents are credit constrained or that parental human capital per se is important in the educational process my theoretical results show how these two diverging results can be brought together parental and public investments complement each other in the educational process because higher educated parents take advantage of increased productivity educational equality between rich and poor children is not necessarily promoted by further investments in public schooling moreover i show that educational investments in low skilled parents have spill over effects on their children and therefore have an unambiguously positive impact on equality

cost value and foreign market entry mode the transaction and the firm this paper compares and contrasts the mode of foreign market entry decision from the transaction cost internalization and organizational capability perspectives each of these perspectives operates at a different level of analysis respectively the transaction and the firm and consequently differs in the primary arena of attention namely transaction characteristics and the capabilities of firms in making the comparison a key distinction is made between the cost and the value aspects in the management of know how based on which issues pertaining to the transfer of knowledge within and across firm boundaries and the exploitation and enhancement of competitive advantage are closely examined the main purpose of this paper is to demonstrate the implications of a shift in frame from cost to value in the analysis of decisions related to firm boundaries entry into foreign markets is used primarily as a vehicle for the accomplishment of this purpose the paper shows how the value based framework of the organizational capability perspective radically and fundamentally shifts the approach towards the governance of firm boundaries and argues that even though tc internalization theory raises some valid concerns the organizational capability framework may be more in tune with today s business context some of the assumptions of the tc internalization perspective both direct opportunism exploitation of existing advantage and indirect preservation of the value of know how across locational contexts asymmetry between bounded rationality for transaction and production purposes are critically examined and questioned implications of a shift from a cost to a value based framework are discussed and the need for a shift in research focus is emphasized

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

uncertain altruism and investment in children the authors discuss the concept of parental uncertainty about their childrens altruism and the consequences for investment in childrens human capital in this paper we show that if parents are uncertain about their childrens altruism but are at least sure that they will receive some support from their children then the unique optimal investment is the efficient one uncertainty over the exact level of the retirement gift does not alter the conclusion of the perfect certainty case even when parents are risk averse alternatively parents may not know enough about their childrens altruism to feel completely confident that some gift will be forthcoming regardless of the size of their investment under this assumption we show that the optimal investment must be less than the efficient amount excerpt

employment change in independent owner managed high technology firms in great britain there is a growing volume of literature that points to the potential for small technology based firms to achieve substantial employment growth as a direct consequence of such work this sector of any economy has attracted increasing attention from national and local governments concerned with finding ways of revitalising economically deprived localities and creating employment opportunities this paper provides up to date empirical evidence surrounding the ability of small high technology firms to create additional jobs in great britain in addition key founder and business characteristics are isolated which are significantly associated with employment change in growing high technology firms over the 1986 to 1992 period with respect to factors influencing these high levels of employment growth a high firm size in 1986 was found to act positively on employment growth as was a graduate level education for the key founder on the finance side firms which had access to and used a multiplicity of sources of start up finance tended to grow faster futher on the basis of our results we would suggest and recommend a government policy which at the firm level actively encourages high technology firm start ups who record higher rates of survival than firms in more conventional sectors as well as providing support for existing high technology firms who have already demonstrated the inclination and ability to grow in employment size

altruism within the family reconsidered do nice guys finish last this paper criticizes the view that altruism either increases the benefits of group interactions or improves the allocation of resources within families the authors identify a variety of circumstances in which members of a group would prefer to interact with less altruistic individuals and in which the efficiency of resource allocation is inversely related to the prevailing degree of altruism reasons that altruism might be a counter productive social force include 1 it can alter the social utility possibility frontier in surprising and sometimes unfortunate ways 2 it can entail exploitability causing family members to behave in ways that leave all parties worse off 3 altruists may take inefficient actions to preempt exploitation and 4 family members may establish efficient resource allocation by punishing selfish behavior a rise in the level of altruism may lead to the exclusion of certain punishment strategies on the grounds of credibility 1 general positive result is that sufficiently high levels of altruism almost always lead to efficient resource allocation one should not necessarily expect to find strong altruistic linkages between spouses nor should altruism necessarily contributed to marital stability in addition to the connections between this work and the literature on family behavior this analysis has broader implications concerning the role of altruism in society and the evolution of social conscience

finance for smes a u k perspective this paper provide an overview of recent trends in the financing of smaller businesses in the u k it refers in particular to the findings of a major recent programme of work in this area funded by the economic and social research council in which the author participated this programme included the first national survey to address these issues since the bolton report of 1971 as well as a range of projects covering the finance of ethnic businesses and hi tech firms as well as the market for informal venture capital on the basis of this work and of the results of more recent follow up surveyors it is concluded that the evidence for general equity or debt gaps in the u k is weak if anything sme funding was too easy in the boom of the late 1980s it is argued that consideration could be given to the promotion through seedcorn funding of sme co operative or mutual guarantee schemes to reduce information asymmetry in u k credit markets

changing use of external business advice and government supports by smes in the 1990s bennett r j and robson p j a 2003 changing use of external business advice and government supports by smes in the 1990s reg studies 37 795 811 this paper uses cross sectional surveys of 1991 and 1997 a panel survey of firms surviving between 1991 and 1997 and comparison with a further cross sectional survey in 1999 to compare the levels of use by smes of external business advice the resource based theory of the firm indicates that smes seek advice in order to increase their competitive capacity over time increasing competition between smes is expected to lead to increasing use of advice however the paper demonstrates that only modest changes over time have occurred in aggregate use of external advice by smes and these are not statistically significant this suggests that earlier growth in external business advice services may now have plateaued there are some significant changes of use by source increasing for advertising personnel and recruitment new technology and computer servic

a bequest constrained economy welfare analysis bequest constraints have played a major role in discussions of debt neutrality but their welfare implications were not sufficiently dealt with in the literature in this paper we focus on the welfare implications of bequest constraints we found that when institutional constraints to the transfer of resources from children to their parents exists the welfare of the parents generation may be improved by an old age security scheme such a scheme is justified not by income redistribution consideration as is typically the case but rather on pure efficiency grounds due to its intergenerational transfer role the social security scheme is pareto improving with altruistic parents if in addition the real income effect which tends to raise children consumption is relatively strong this abstract was borrowed from another version of this item

efficiency enhancing signalling in the samaritan s dilemma suppose an altruistic person a is willing to transfer resources to a second person b if b comes upon hard times if b anticipates that a will act in this manner b will save too little from both agents point of view this is the samaritan s dilemma this paper shows that the undersaving result is mitigated if we relax the standard assumption of complete information because if a is uncertain about how big b s need for support is b will have an incentive to signal that he is in great need by saving more than he otherwise would have done

social security the family and economic growth we show that a defined benefits payg social security system distorts key family based choices that affect economic growth we identify human capital as the engine of growth and the motivating forces linking the family s overlapping generations as mutually productive intergenerational transfers and or altruism the payg system is shown to affect adversely at least one of three determinants of the economy s growth path fertility savings and investment in human capital the specific effects may vary over different stages of economic development the growth rate is expected to fall in advanced economies our analysis indicates that the effect may be sizeable jel 915 111 850

equity joint ventures and theory of the multinational enterprise this paper extends the internalization approach to the theory of the multinational enterprise mne to include an expanded role for equity joint ventures using the transaction cost paradigm of williamson this paper explains why joint ventures may sometimes be preferred over wholly owned subsidiaries also presented is empirical work on joint venture performance in developing countries which demonstrates that under certain conditions joint ventures can be the optimal mode of foreign direct investment 1987 jibs journal of international business studies 1987 18 1 16

equity joint ventures and the theory of the multinational enterprise this paper extends the internalization approach to the theory of the multinational enterprise mne to include an expanded role for equity joint ventures using the transaction cost paradigm of williamson this paper explains why joint ventures may sometimes be preferred over wholly owned subsidiaries also presented is empirical work on joint venture performance in developing countries which demonstrates that under certain conditions joint ventures can be the optimal mode of foreign direct investment

government advice networks for smes an assessment of the influence of local context on business link use impact and satisfaction business link in britain is one of the main recent government initiatives to support smes in the eu the paper uses a 1997 survey of smes to determine how business link use impact and satisfaction are influenced by firm characteristics local partnership characteristics local geographical context service intensity and other explanatory variables the paper presents econometric estimates based on logit and ordered logit models a key finding of the paper is to demonstrate that local context is not very significant to service use impact or satisfaction but local business link management and adviser performance are important influences on the impact and satisfaction major differences in the way smes use government backed services are also found there are high volumes of use of gateway information services producing only low impact and low volumes but high impacts and satisfaction with intensive advice services governed by contracts between the clients and the adviser implications for the small bus

social security and family support this paper shows how the role of the market the state and the family in providing financial support at old age has evolved over time with changes in factors such as the reliability and the effectiveness of family support the rate of interest the cost of public funds and earning inequality we model a society in which agents with different productivity are asked to vote over the existence of a beveridgian pension system we show that when children assistance is certain and large agents may rely exclusively on family to finance old age consumption and prefer to vote for a zero tax rate only if income inequalities are very large a majority will be in favor of a pension system however when the size and the likelihood of family generosity decreases a pension system is more likely to emerge in that case agents supplement children assistance with pension benefits a pension system is also more likely to emerge when the cost of public fund is small and the return from private savings is high

schooling and economic growth a king rebelo experiment with human capital abstract education is added to the standard neoclassical growth model by calibrating a human capital technology to the empirical evidence on schooling simulation experiments patterned after king and rebelo 1993 american economic review 83 908 931 are conducted when agents act as if they are infinitely lived interest rates are too high and the rise in school spending is too weak over the transitional growth path when schooling is inefficiently low due to binding intergenerational credit constraints interest rates deviate only moderately from the steady state level and the historical rise in school spending is fully explained

the creation and growth of small business service firms in post industrial britain since 1980 the united kingdom has experienced a dramatic growth in firms and employment in information intensive business services such as management consultancy and market research this article reports the results of the first substantial nation wide investigation into the nature and causes of small professional business service firm growth in britain undertaken in 1991 it reveals marked differences in the characteristics markets and competitive requirements of such firms compared with small manufacturing firms the demand for their services comes predominantly from large companies and is more focussed on financial and other services and government but small firms are also making increasing use of business services specialised expertise reputation and educational and professional qualifications are essential prerequisites for the establishment of new business service firms their success is also being enhanced by increasing use of informal networking collaborative partnerships and subcontracting

financial performance and survival of multinational corporations in china this study investigates the impact of entry timing mode of entry market focus and location advantages on the financial performance and survival of multinational corporations mncs in china three major results were found first mncs that entered china in an earlier year had a higher level of profit than those that entered in a later year second equity joint ventures ejvs had a higher profit level than cooperative operations or wholly foreign owned subsidiaries third mncs that utilized well the location advantages in china had a higher profit we also found that ejvs were more likely to survive compared to cooperative operations while wholly owned subsidiaries did not differ from ejvs the findings are based on a 2 year study of about 1000 mnc operations in china copyright 1999 john wiley sons ltd

are business startups debt rationed using a large random sample of u k start ups and a rich data set the paper demonstrates that human capital is the true determinant of survival and that the correlation between financial capital and survival is spurious provision of finance is demand driven with banks supplying funds elastically and business requests governing take up firms self select for funds on the basis of the human capital endowments of the proprietors with better businesses more likely to borrow a reason why others have seemingly identified start up debt gaps may be the failure to test a sufficiently rich empirical model copyright 1996 by royal economic society

savings and wealth in models with altruistic bequests during recent years much attention has been given to the role of bequests in explaining various aspects of economic behavior for example authors have studied the impact of bequests on physical wealth accumulation laurence kotlikoff and lawrence summers 1981 the interest elasticity of savings owen evans 1983 tax reform laurence seidman 1984 and the distribution of wealth alan blinder 1976a more recently economists have begun to distinguish between human and physical bequests gary becker and nigel tomes 1986 acknowledging the presence of bequest in human form is important in analyzing each of the issues mentioned above outlays on children affect the shape of the family s labor supply and expenditure profiles upon which the level of aggregate savings crucially depends if these outlays are interest sensitive substitutes for physical bequests they will also influence the interest elasticity of savings in the area of tax reform the neutrality of the consumption tax depends on the ability of the government to identify human capital bequests from general consumption raymond batina 1987 if this is not possible the portfolio choice of investment in human versus physical capital may be distorted at the margin finally the unequal transmission of wealth across generations may be explained by the lack of physical bequests and the inefficiently low levels of human bequests made by wealthconstrained households becker and tomes 1986 to distinguish clearly the behavior of constrained households from unconstrained households who make sizeable physical bequests both types of bequests must be recognized this paper introduces a model that makes explicit examination of these issues possible it extends lord s 1989 multiperiod model of life cycle savings and adult human capital investment by adding altruistically motivated human and physical bequests 2 the model is calibrated using microeconomic data on earnings time and goods expenditures on children s human capital and physical bequests we then use the model to examine the contribution of bequests to wealth accumulation and the level of savings this topic is the source of an important but yet unresolved debate between franco modigliani 1988 and kotlikoff 1988 kotlikoff maintains that u s wealth accumulation is primarily the consequence of bequests as opposed to life cycle savings for retirement one type of evidence cited by kotlikoff comes from simulation results demonstrating the failure of realistically calibrated life cycle models to generate sufficiently high saving rates and wealth income ratios alan auerbach and kotlikoff 1987 we show however that if a pure life cycle

modelling small business growth and profitability this paper develops a simple structural model relating small business performance to firms market position and the characteristics of their owner managers attention focuses on two questions what determines firms choice of business strategy and how does strategy choice change subsequent business performance taking into account both relationships the paper examines the links between the performance of a large group of irish small businesses over the 1993 94 period and their market and owner managers characteristics in 1991 the analysis suggests three main empirical results first firms turnover growth and return on assets are only weakly related in the short term above average growth rates are therefore no guarantor of high profitability moreover a number of characteristics of firms market position and their owner managers are found to have the opposite effects on profitability and growth rates secondly our data provides no evidence of the persistence of turnover growth rates above or below the average above average profit rates were also found to persist only in the very short term thirdly small firm performance is shown to depend strongly on strategy choice with turnover growth being particularly strategy dependent this highlights the importance for small firms of making the correct strategy choices a point emphasised by the negative profitability and growth effects of some strategy choices one strategy choice that had positive effects on both profitability and growth was the development of new export markets