Showing papers in "Journal of Economic Perspectives in 2007"
TL;DR: In this article, the authors develop a top-down approach to measure investor sentiment and quantify its effects, and show that it is quite possible to measure sentiment and that waves of sentiment have clearly discernible, important, and regular effects on individual firms and on the stock market as a whole.
Abstract: Investor sentiment, defined broadly, is a belief about future cash flows and investment risks that is not justified by the facts at hand. The question is no longer whether investor sentiment affects stock prices, but how to measure investor sentiment and quantify its effects. One approach is "bottom up," using biases in individual investor psychology, such as overconfidence, representativeness, and conservatism, to explain how individual investors underreact or overreact to past returns or fundamentals. The investor sentiment approach that we develop in this paper is, by contrast, distinctly "top down" and macroeconomic: we take the origin of investor sentiment as exogenous and focus on its empirical effects. We show that it is quite possible to measure investor sentiment and that waves of sentiment have clearly discernible, important, and regular effects on individual firms and on the stock market as a whole. The top-down approach builds on the two broader and more irrefutable assumptions of behavioral finance -- sentiment and the limits to arbitrage -- to explain which stocks are likely to be most affected by sentiment. In particular, stocks that are difficult to arbitrage or to value are most affected by sentiment.
2,147 citations
TL;DR: The authors build a model in which the choices that individuals make depend not just on financial implications, but also on the nature and extent of scrutiny by others, the particular context in which a decision is embedded, and the manner in which participants and tasks are selected.
Abstract: A critical question facing experimental economists is whether behavior inside the laboratory is a good indicator of behavior outside the laboratory. To address that question, we build a model in which the choices that individuals make depend not just on financial implications, but also on the nature and extent of scrutiny by others, the particular context in which a decision is embedded, and the manner in which participants and tasks are selected. We present empirical evidence demonstrating the importance of these various factors. To the extent that lab and naturally occurring environments systematically differ on any of these dimensions, the results obtained inside and outside the lab need not correspond. Focusing on experiments designed to measure social preferences, we discuss the extent to which the existing laboratory results generalize to naturally-occurring markets. We summarize cases where the lab may understate the importance of social preferences as well as instances in which the lab might exaggerate their importance. We conclude by emphasizing the importance of interpreting laboratory and field data through the lens of theory.
1,912 citations
TL;DR: This paper found that exporters are larger, more productive, more skill-and capital-intensive, and to pay higher wages than non-exporting firms, and that the top 10 percent of exporters accounted for 96 percent of total U.S. exports.
Abstract: In discussing the origins and implications of international trade, economists usually emphasize comparative advantage, increasing returns to scale, and consumer love of variety, but pay relatively little attention to the firms that actually drive trade flows. Yet engaging in international trade is an exceedingly rare activity: of the 5.5 million firms operating in the United States in 2000, just 4 percent were exporters. Among these exporting firms, the top 10 percent accounted for 96 percent of total U.S. exports. Since the mid-1990s, a large number of empirical studies have provided a wealth of information about the important role thatfirms play in mediating countries’ imports and exports. This research, based on micro datasets that track countries’ production and trade at the firm level, demonstrates that trading firms differ substantially from firms that solely serve the domestic market. Across a wide range of countries and industries, exporters have been shown to be larger, more productive, more skill- and capital-intensive, and to pay higher wages than nonexportingfirms. Furthermore, these
1,643 citations
TL;DR: In what turned out to be a rhetorical master-move, the 1990 World Development Report from the World Bank defined the extremely poor people of the world as those who are currently living on no more than $1 per day per person, measured at the 1985 purchasing power parity (PPP) exchange rate as discussed by the authors.
Abstract: In what turned out to be a rhetorical master-move, the 1990 World Development Report from the World Bank defined the “extremely poor” people of the world as those who are currently living on no more than $1 per day per person, measured at the 1985 purchasing power parity (PPP) exchange rate. In 1993, the poverty line was updated to $1.08 per person per day at the 1993 PPP exchange rate, which is the line we use in this paper. Poverty lines have always existed—indeed $1 per day was chosen in part because of its proximity to the poverty lines used by many poor countries.1 However the $1-a-day poverty line has come to dominate the conversations about poverty to a remarkable extent.
1,201 citations
TL;DR: In this paper, a detailed accounting of the time-series pattern of shipping costs is provided, showing that the ad-valorem impact of ocean shipping costs was not much lower today than in the 1950s, with technological advances largely trumped by adverse cost shocks.
Abstract: While the precise causes of postwar trade growth are not well understood, declines in transport costs top the lists of usual suspects. However, there is remarkably little systematic evidence documenting the decline. This paper brings to bear an eclectic mix of data in order to provide a detailed accounting of the time-series pattern of shipping costs. The ad-valorem impact of ocean shipping costs is not much lower today than in the 1950s, with technological advances largely trumped by adverse cost shocks. In contrast, air shipping costs have dropped an order of magnitude, and airborne trade has grown rapidly as a result. As a result, international trade has also experienced a significant rise in speed.
1,166 citations
TL;DR: Tax evasion has been extensively studied in the literature as discussed by the authors, with an emphasis on the U.S. income tax, and tax evasion is a legal responsibility of citizens, with penalties attendant on noncompliance.
Abstract: No government can announce a tax system and then rely on taxpayers' sense of duty to remit what is owed. Some dutiful people will undoubtedly pay what they owe, but many others will not. Over time the ranks of the dutiful will shrink, as they see how they are being taken advantage of by the others. Thus, paying taxes must be made a legal responsibility of citizens, with penalties attendant on noncompliance. But even in the face of those penalties, substantial tax evasion exists-and always has. The history of taxation is replete with episodes of evasion, often notable for their inventiveness. During the third century, many wealthy Romans buried their jewelry or stocks of gold coin to evade the luxury tax, and homeowners in eighteenth-century England temporarily bricked up their fireplaces to escape notice of the hearth tax collector (Webber and Wildavsky, 1986, p. 141). This essay reviews what is known about the magnitude, nature, and determinants of tax evasion, with an emphasis on the U.S. income tax. Alm (1999), Andreoni, Erard, and Feinstein (1998), and Slemrod and Yitzhaki (2002) offer more comprehensive recent reviews of the literature. It then places this information into a conceptual and policy context.
1,025 citations
TL;DR: In a striking rejection of this null, a large catalog of variables with no apparent connection to risk has been shown to forecast stock returns, both in the time series and the cross-section as discussed by the authors.
Abstract: Over the last 20 years, the field of behavioral finance has grown from a startup operation into a mature enterprise, with well-developed bodies of of both theory and empirical evidence. On the empirical side, the benchmark null hypothesis is that one should not be able to forecast a stock's return with anything other than measures of its riskiness, such as its beta. This hypothesis embodies the familiar idea that any other form of predictability would represent a profitable trading rule and hence a free lunch to investors. Yet in a striking rejection of this null, a large catalog of variables with no apparent connection to risk has been shown to forecast stock returns, both in the time series and the cross-section. Many of these results have been replicated in a variety of samples and have stood up sufficiently well that they are generally considered to be established facts. One prominent set of patterns from the cross-section has to do with mediumterm momentum and post-earnings drift in returns. These describe the tendency for stocks that have had unusually high past returns or good earnings news to continue to deliver relatively strong returns over the subsequent six to twelve months (and vice-versa for stocks with low past returns or bad earnings news). Early work in this area includes Jegadeesh and Titman (1993) on momentum and Bernard and Thomas (1989, 1990) on post-earnings drift. Another well-established pattern is longer-run fundamental reversion-the tendency for "glamour" stocks with high ratios of market value to earnings, cashflows, or book value to deliver weak returns over the subsequent several years (and vice-versa for "value" stocks with low ratios of market value to fundamentals). Standard references for this
791 citations
TL;DR: The economic approach to the family seeks to explain these trends by reference to models that can also explain how and why families form as mentioned in this paper, which is not a static institution and the defining characteristics of marriage have changed.
Abstract: The family is not a static institution. In recent decades, marriage rates have fallen, divorce rates have risen, and the defining characteristics of marriage have changed. The economic approach to the family seeks to explain these trends by reference to models that can also explain how and why families form. Gary Becker’s (1981) Treatise on the Family proposed a theory based on “production complementarities,” in which husband and wife specialize in the market and domestic spheres, respectively. Production complementarities also arise in the production and rearing of one’s own children. However, production complementarities—at least as initially described—are decreasingly central to modern family life. Increased longevity and declining fertility mean that most of one’s adult life is spent without one’s own children in the household. Also, the rise in marital formation at older ages, including remarriage, means that many families form with no intention of producing children. Moreover, increases in female labor force participation suggest that household specialization has either declined or, at least taken on a different meaning. These changes have come about as what is produced in the home has been dramatically altered both by the emergence of labor-saving technology in the home and by the development of service industries that allow much of what was once provided by specialized homemakers to be purchased in the market. The availabil
789 citations
TL;DR: In this paper, the authors investigate both the heuristics and the biases that emerge in the area of retirement savings, and discuss the possible role of interventions aiming to improve retirement decision making.
Abstract: Standard economic theories of saving implicitly assume that households have the cognitive ability to solve the relevant optimization problem and the willpower to execute the optimal plan. Both of the implicit assumptions are suspect. Even among economists, few spend much time calculating a personal optimal savings rate. Instead, most people cope by adopting simple heuristics, or rules of thumb. In this paper, we investigate both the heuristics and the biases that emerge in the area of retirement savings. We examine the decisions employees make about whether to join a savings plan, how much to contribute, and how to invest. Saving for retirement is a difficult problem, and most employees have little training upon which to draw in making the relevant decisions. Perhaps as a result, investors are relatively passive. They are slow to join advantageous plans; they make infrequent changes; and they adopt naive diversification strategies. In short, they need all the help they can get. We discuss the possible role of interventions aiming to improve retirement decision making. Fortunately, many effective ways to help participants are also the least costly interventions: namely, small changes in plan design, sensible default options, and opportunities to increase savings rates and rebalance portfolios automatically.
588 citations
TL;DR: In this article, the authors describe the incidence of natural disasters, where they strike, and their development over time, and discuss how societal factors act to protect people from or expose them to natural hazards.
Abstract: Natural disasters are one of the major problems facing humankind. Between 1980 and 2004, two million people were reported killed and five billion people cumulatively affected by around 7,000 natural disasters, according to the dataset maintained by the Centre for Research on the Epidemiology of Disasters (CRED) at University of Louvain (Belgium). The economic costs are considerable and rising. The direct economic damage from natural disasters between 1980-2004 is estimated at around $1 trillion. This paper starts by describing the incidence of natural disasters, where they strike, and their development over time. It then discusses how societal factors act to protect people from or expose them to natural hazards. The final section discusses the determinants and targets of international aid to disaster victims.
535 citations
TL;DR: The Sarbanes-Oxley Act of 2002 as mentioned in this paper was the first attempt to fix auditing of U.S. public companies, consistent with its full, official name: the public company accounting reform and investor protection act of 2002.
Abstract: The primary goal of the Sarbanes-Oxley Act was to fix auditing of U.S. public companies, consistent with its full, official name: the Public Company Accounting Reform and Investor Protection Act of 2002. By consensus, auditing had been working poorly, and increasingly so. The most important, and most promising, part of Sarbanes-Oxley was the creation of a unique, quasi-public institution to oversee and regulate auditing, the Public Company Accounting Oversight Board (PCAOB). In controversial section 404, the law also created new disclosure-based incentives for firms to spend money on internal controls, above increases that would have occurred after the corporate scandals of the early 2000s. In exchange for these higher costs, which have already fallen substantially, Sarbanes-Oxley promises a variety of long-term benefits. Investors will face a lower risk of losses from fraud and theft, and benefit from more reliable financial reporting, greater transparency, and accountability. Public companies will pay a lower cost of capital, and the economy will benefit because of a better allocation of resources and faster growth. Sarbanes-Oxley remains a work in progress -- section 404 in particular was implemented too aggressively - but reformers should push for continued improvements in its implementation, by PCAOB, rather than for repeal of the legislation itself.
TL;DR: Tax progressivity of the U.S. federal tax system at the top of the income distribution has declined dramatically since the 1960s as discussed by the authors, due primarily to a drop in corporate taxes and in estate and gift taxes combined with a sharp change in the composition of top incomes away from capital income and toward labor income.
Abstract: This paper provides estimates of federal tax rates by income groups in the United States since 1960, with special emphasis on very top income groups. We include individual and corporate income taxes, payroll taxes, and estate and gift taxes. The progressivity of the U.S. federal tax system at the top of the income distribution has declined dramatically since the 1960s. This dramatic drop in progressivity is due primarily to a drop in corporate taxes and in estate and gift taxes combined with a sharp change in the composition of top incomes away from capital income and toward labor income. The sharp drop in statutory top marginal individual income tax rates has contributed only moderately to the decline in tax progressivity. International comparisons confirm that is it critical to take into account other taxes than the individual income tax to properly assess the extent of overall tax progressivity, both for time trends and for cross-country comparisons. The pattern for the United Kingdom is similar to the U.S. pattern. France had less progressive taxes than the United States or the United Kingdom in 1970 but has experienced an increase in tax progressivity and has now a more progressive tax system than the United States or the United Kingdom.
TL;DR: In this paper, the authors synthesize from a patchwork of studies across periods, places, and even epochs, and discuss how such patterns vary across countries depending upon economic conditions, societal structures, institutions, and family characteristics.
Abstract: Payments between families at the time of marriage existed during the history of most developed countries and are currently pervasive in many areas of the developing world. These payments can be substantial enough to affect the welfare of women and a society's distribution of wealth. Recent estimates document transfers per marriage amounting to six times the annual household income in South Asia (Rao, 1993), and four times in sub-Saharan Africa (Dekker and Hoogeveen, 2002). This paper first establishes some basic facts about the prevalence and magnitude of marriage payments. It then discusses how such patterns vary across countries depending upon economic conditions, societal structures, institutions, and family characteristics. Such payments have also evolved within societies over time. For example, in some periods such payments have risen sharply. In some cases, payments have shifted from the grooms' sides to the brides', and vice versa. Also, property rights over such payments have sometimes shifted between marrying partners and parental generations. Economists, who have only recently begun to work on the topic, have focused on explaining these facts. The second part of the paper addresses this economic literature. Though considerable insight into many of the facts has been gained, many of the existing economic explanations are weakly convincing, and many puzzles remain. One crucial difficulty is that solid data in this field have been extremely rare. The descriptions of marriage payments in this paper are synthesized from a patchwork of studies across periods, places, and even epochs, and there are doubtless numerous cases which remain undocumented. Thus, the paper
TL;DR: The authors examines how repugnance sometimes constrains what transactions and markets we see and finds that distaste for certain kinds of transactions is a real constraint, every bit as real as the constraints imposed by technology or by the requirements of incentives and efficiency.
Abstract: This essay examines how repugnance sometimes constrains what transactions and markets we see. When my colleagues and I have helped design markets and allocation procedures, we have often found that distaste for certain kinds of transactions is a real constraint, every bit as real as the constraints imposed by technology or by the requirements of incentives and efficiency. I'll first consider a range of examples, from slavery and indentured servitude (which once were not as repugnant as they now are) to lending money for interest (which used to be widely repugnant and is now not), and from bans on eating horse meat in California to bans on dwarf tossing in France. An example of special interest will be the widespread laws against the buying and selling of organs for transplantation. The historical record suggests that while repugnance can change over time, it can persist for a very long time, although changes in institutions that reflect repugnance can occur relatively quickly when the underlying repugnance changes.
TL;DR: To alleviate the conflict of interest between dispersed small shareowners and powerful controlling managers, the separation of ownership and control and its consequences have been discussed in the corporate governance debate as discussed by the authors.
Abstract: to alleviate the conflict of interest between dispersed small shareowners and powerful controlling managers. Classic works like Berle and Means (1932) andJensen and Meckling (1976) discussed this separation of ownership and control and its consequences. Although some companies in the United States are controlled by large blockholders-for instance, Microsoft, Ford, and Wal-Martsuch firms are relatively few and have thus drawn less attention in the corporate governance debate (Anderson and Reeb, 2003). In contrast, the fundamental problem of corporate governance in continental Europe and in most of the world is different. There, few listed companies are widely held. Instead, the typical firm in stock exchanges around the world has a dominant shareholder, usually an individual or a family, who controls the majority of votes. Often, the controlling shareholder exercises control without owning a large fraction of the cash flow rights by using pyramidal ownership, shareholder agreements, and dual classes of shares (La Porta, Lopez-de-Silanes, and Shleifer, 1999).
TL;DR: In this article, the International Wage Flexibility Project provides new microeconomic evidence on how wages change for continuing workers and finds evidence of both downward nominal and real wage rigidities across countries.
Abstract: How do the complex institutions involved in wage setting affect wage changes? The International Wage Flexibility Project provides new microeconomic evidence on how wages change for continuing workers. We analyze individualsA¢â¬â¢ earnings in 31 different data sets from sixteen countries, from which we obtain a total of 360 wage change distributions. We find a remarkable amount of variation in wage changes across workers. Wage changes have a notably non-normal distribution; they are tightly clustered around the median and also have many extreme values. Furthermore, nearly all countries show asymmetry in their wage distributions below the median. Indeed, we find evidence of both downward nominal and real wage rigidities. We also find that the extent of both these rigidities varies substantially across countries. Our results suggest that variations in the extent of union presence in wage bargaining play a role in explaining differing degrees of rigidities among countries.
TL;DR: It is shown that monetary incentives would increase the supply of organs for transplant sufficiently to eliminate the very large queues in organ markets, and the suffering and deaths of many of those waiting, without increasing the total cost of transplant surgery by more than about 12 percent.
Abstract: We evaluate the introduction of monetary incentives in the market for live and cadaveric organ donations. We show that monetary incentives would increase the supply of organs for transplant sufficiently to eliminate the very large queues in organ markets, and the suffering and deaths of many of those waiting, without increasing the total cost of transplant surgery by more than about 12 percent. We build on the value-of-life literature and other parts of economic analysis to estimate the equilibrium cost of live transplants for kidneys and livers. We also show that market price for kidneys will be determined by the cost of live donations, even though most organs will come from cadavers.
TL;DR: Personnel economics has been used to study human resource management practices like compensation, hiring practices, training, and teamwork as mentioned in this paper, and it has been applied in many areas of human resources management, from incentive pay to teamwork.
Abstract: Personnel economics drills deeply into the firm to study human resource management practices like compensation, hiring practices, training, and teamwork. Many questions are asked. Why should pay vary across workers within firms--and how "compressed" should pay be within firms? Should firms pay workers for their performance on the job or for their skills or hours of work? How are pay and promotions structured across jobs to induce optimal effort from employees? Why do firms use teams and how are teams used most effectively? How should all these human resource management practices, from incentive pay to teamwork, be combined within firms? Personnel economics offers new tools and new answers to these questions. In this paper, we display the tools and principles of personnel economics through a series of models aimed at addressing the questions posed above. We focus on the building blocks that form the foundation of personnel economics: the assumptions that both the worker and the firm are rational maximizing agents; that labor markets and product markets must reach some price-quantity equilibrium; that markets are efficient or that market failures have introduced inefficiencies; and that the use of econometrics and experimental techniques has advanced our ability to identify underlying causal relationships.
TL;DR: In this article, the authors survey and quantify the trends in two major areas of central bank governance: independence and transparency, and discuss the effects of these aspects of governance on inflation.
Abstract: The past two decades have seen enormous changes in central banks and their practices. In some countries, older institutions have been fundamentally restructured. In other, such as the countries of the former Soviet Union, entirely new central banks have been established. The member countries of the European Union have created a supranational central bank that oversees a monetary union. In all of these situations, central bank law was either revised or written de novo , while institutional objectives, practices, and structures were amended or created from scratch. In this article, we survey and quantify the trends in two major areas of central bank governance: independence and transparency. We document the steady progress toward greater central bank independence and transparency in a large number of industrial and developing countries over the past 10 to 15 years and discuss the effects of these aspects of governance on inflation. Finally, we touch on committee structure and decision making.
TL;DR: In this paper, the authors provide some statistics about the gay and lesbian population in the United States, and ask if analysis based on economic reasoning can provide insight into the family outcomes they observe.
Abstract: In this essay, we provide some statistics about the gay and lesbian population in the United States, and ask if analysis based on economic reasoning can provide insight into the family outcomes we observe. We do not start with a hypothesis of innate differences in preferences, but instead seek to understand how differences in constraints systematically alter incentives faced by gay, lesbian, and heterosexual people. Our work reinforces a central theme of Gary Becker's: that family life and economic life are interwoven. Decisions within families -- including couples' decisions to commit to one another, divorce, bear children, or adopt children -- are intrinsically connected to other economic decisions, including human capital accumulation, labor supply, occupational choice, consumption, and decisions about where to live. We provide evidence addressing number of questions: Do differing biological constraints faced by gay, lesbian, and heterosexual couples affect choices over children? Do differences in fertility (or anticipated fertility), again owing to differences in constraints, influence where people live? Do same-sex couples have patterns of household specialization that differ in predictable fashion from heterosexual couples?
TL;DR: The authors survey the muddled state of affairs in the 1970s, and then ask: What happened in Federal Reserve policy to produce an understanding of the practical principles of monetary policy? How did formal institutional support for targeting low inflation abroad follow from an international acceptance of these ideas? And how did a consensus theoretical model develop in academia?
Abstract: The worldwide progress in monetary policy is a great achievement and, especially considering the situation 30 years ago, a remarkable success story. I describe how the world achieved a working consensus on the core principles of monetary policy by the late 1990s. I survey the muddled state of affairs in the 1970s, and then ask: What happened in Federal Reserve policy to produce an understanding of the practical principles of monetary policy? How did formal institutional support for targeting low inflation abroad follow from an international acceptance of these ideas? And how did a consensus theoretical model develop in academia? I explain how the modern theoretical consensus -- known alternatively as the New Neoclassical Synthesis or the New Keynesian model of monetary policy -- reinforces key advances: the priority for price stability; the targeting of core rather than headline inflation; the importance of credibility for low inflation; and preemptive interest rate policy supported by transparent objectives and procedures. Of course, a working consensus does not constitute complete agreement. Accordingly, the conclusion identifies important monetary policy issues that remain to be explored.
TL;DR: The American family has changed radically in recent decades as discussed by the authors and there is an ongoing effort to understand partnering, parenting, and care of the elderly as results of maximizing choices made by individuals.
Abstract: Gary Becker's path-breaking Treatise on the Family (1981) subjected individuals' decisions about sex, marriage, childbearing, and childrearing to rational choice analysis The American family has changed radically in recent decades; we survey these changes as well as the ongoing effort to understand partnering, parenting, and care of the elderly as results of maximizing choices made by individuals First, we describe the recent changes in the American family: the separation of sex, marriage, and childbearing; fewer children and smaller households; converging work and education patterns for men and women; class divergence in partnering and parenting strategies; and the replacement of family functions and home production by government programs and market transactions Second, we examine recent work in family economics that attempts to explain these changes Third, we point out some challenging areas for further analysis and highlight issues of commitment in two primary family relationships: those b
TL;DR: The authors discusses the role of expectations of future policy actions in the monetary transmission mechanism and the importance for the central bank of tracking of the flexible price equilibrium values of the natural levels of output and the real interest rate.
Abstract: We describe some of the main features of the recent vintage macroeconomic models used for monetary policy evaluation. We point to some of the key differences with respect to the earlier generation of macro models, and highlight the insights for policy that these new frameworks have to offer. Our discussion emphasizes two key aspects of the new models: the significant role of expectations of future policy actions in the monetary transmission mechanism, and the importance for the central bank of tracking of the flexible price equilibrium values of the natural levels of output and the real interest rate. We argue that both features have important implications for the conduct of monetary policy.
TL;DR: The authors discusses what is known about Wal-Mart's competitive advantage and its economic impact on local communities, as well as the national and global economy, and highlights the open questions to be addressed by future research.
Abstract: Wal-Mart is the largest company in the world, yet little is known about its economic impact. This essay discusses what is known about Wal-Mart’s competitive advantage and its economic impact on local communities, as well as the national and global economy, and highlights the open questions to be addressed by future research.
TL;DR: For example, the authors found that job dissatisfaction, distrust, and disengagement in American workplaces are getting worse and have a number of negative consequences for employers as well as employees, and how people are managed and their job satisfaction and job attitudes are both substantively and statistically significant predictors of organizational performance, especially when seen through the lens of the rationality and competitive market efficiency concepts so often used in economic theory.
Abstract: American workplaces exhibit three facts which, taken together, could constitute anomalous or paradoxical organizational behavior, especially when seen through the lens of the rationality and competitive market efficiency concepts so often used in economic theory. First, workplaces in America and elsewhere show pervasive job dissatisfaction, distrust, and disengagement, with the evidence suggesting that these problems are getting worse and have a number of negative consequences for employers as well as employees. Second, how people are managed and their job satisfaction and job attitudes are both substantively and statistically significant predictors of a number of dimensions of organizational performance. Comprehensive evidence from studies in numerous industries and countries establishes this point and also helps us identify high-performance management practices. Third, in spite of the fact that much of what is required to build engaged and successful organizations is at once well known and not always costly to implement, many, maybe most, organizations have failed to take appropriate actions, thereby, in some sense, “leaving money on the table.” Theories and empirical research in organizational behavior and social psychology offer insights and explanations about how these three facts can coexist and even persist. These explanations are built on the fundamental insights that both employees and organizations are embedded in a social context that provides taken-for-granted ways of thinking and doing things; social influence matters so
TL;DR: This article found that older and more educated suicide bombers are less likely to fail in their mission and are more likely to cause increased casualties when they attack, and that more educated and older suicide bombers were better suited for more important targets.
Abstract: The authors' empirical analysis suggests that older and more educated suicide bombers are being assigned by their terror organization to more important targets. They find that more educated and older suicide bombers are less likely to fail in their mission and are more likely to cause increased casualties when they attack.
TL;DR: This paper analyzed interracial marriages across black, white, and Asian racial lines, uncovering a rich set of cross-section and time-series patterns and investigated the extent to which three different theories of interracial marriage can account for the patterns discovered.
Abstract: This paper studies marriages across black, white, and Asian racial lines. Marrying across racial lines is a rare event, even today. Interracial marriages account for approximately 1 percent of white marriages, 5 percent of black marriages, and 14 percent of Asian marriages. Following a brief history of the regulation of race and romance in America, I analyze interracial marriage using census data from 1880-2000, uncovering a rich set of cross-section and time-series patterns. I investigate the extent to which three different theories of interracial marriage can account for the patterns discovered. After also testing a social exchange theory and a search model, I find the data are most consistent with a Becker-style marriage market model in which objective criteria of a potential spouse, their race, and the social price of intermarriage are central.
TL;DR: In this paper, the authors compare the organization, performance, and risks of hedge funds and mutual funds and conclude that the performance gap between hedge fund and mutual fund will narrow, regulatory developments will limit the flexibility of hedge fund, and that hedge funds will become more institutionalized.
Abstract: Assets managed by hedge funds have grown faster over the last ten years than assets managed by mutual funds. Hedge funds and mutual funds perform the same economic function, but hedge funds are largely unregulated while mutual funds are tightly regulated. This paper compares the organization, performance, and risks of hedge funds and mutual funds. It then examines whether one can expect increasing convergence between these two investment vehicles and concludes that the performance gap between hedge funds and mutual funds will narrow, that regulatory developments will limit the flexibility of hedge funds, and that hedge funds will become more institutionalized.
TL;DR: This paper argued that a less debtor-friendly bankruptcy policy should be accompanied by changes in bank regulation and truth-in-lending rules, so that lenders have a greater chance of facing losses when they supply too much credit or charge excessively high interest rates and fees.
Abstract: From 1980 to 2004, the number of personal bankruptcy filings in the United States increased more than five-fold, from 288,000 to 1.5 million per year. By 2004, more Americans were filing for bankruptcy each year than were graduating from college, getting divorced, or being diagnosed with cancer. In 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) became law. It made bankruptcy law much less debtor-friendly. Personal bankruptcy filings fell to 600,000 in 2006. This paper explores why personal bankruptcy rates rose, and will argue that the main reason is the growth of "revolving debt" -- mainly credit card debt. It explains how the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 altered the conditions of bankruptcy. Finally, this essay considers the balances that need to be struck in a bankruptcy system and how the U.S. bankruptcy system strikes these balances in comparison with other countries. I argue that a less debtor-friendly bankruptcy policy should be accompanied by changes in bank regulation and truth-in-lending rules, so that lenders have a greater chance of facing losses when they supply too much credit or charge excessively high interest rates and fees.
TL;DR: The authors used ESPlanner to present life-cycle retirement wealth targets for a range of incomes and situations typical of American Economic Association members, which may lead to feelings of financial inadequacy.
Abstract: Many view the soon-to-retire Baby Boomers as woefully unprepared for their golden years, while other economists have taken a more sanguine view of American levels of saving. And if Americans are failures at saving enough for retirement, why are some retirees so happy? The seemingly simple question of "Am I saving enough for retirement?" is apparently not so simple at all. Instead, it touches on a variety of deeper issues in economics, psychology, and health policy. I use the program ESPlanner to present life-cycle retirement wealth targets for a range of incomes and situations typical of American Economic Association members. (Readers are warned that life-cycle retirement wealth targets presented in this paper may lead to feelings of financial inadequacy.)