ALBERT

Notes: We show that the presence of sufficiently significant switching costs, which are increasing in the degree of product differentiation, generates an equilibrium configuration with maximal differentiation within the framework of a Hotelling model with linear transportation costs. The equilibrium with maximal differentiation offers a formalization of the idea that competing firms have noncooperative incentives to establish maximal switching cost barriers. The equilibrium incentives for commitments to high switching costs can be explained with poaching profits, which are increasing in the switching costs. Ex ante competition for market shares in period 1 is unable to eliminate these poaching profits.

Notes: We analyze competition between two private television channels that derive their profits from advertising receipts. These profits are shown to be proportional to total population advertising attendance. The channels play a sequential game in which they first select their profiles (program mixes) and then their advertising ratios. We show that these ratios play the same role as prices in usual horizontal differentiation models. We prove that whenever ads' interruptions are costly for viewers the program mixes of the channels never converge but that the niche strategies are less effective and that the channel “profiles” are closer as advertising aversion becomes stronger.

Notes: All-units discounts in retail contracts refer to discounts that lower a retailer's wholesale price on every unit purchased when the retailer's purchases equal or exceed some quantity threshold. These discounts pose a challenge to economic theory because it is difficult to understand why a manufacturer ever would charge less for a larger order if its intentions were benign. In this paper, we show that all-units discounts may profitably arise absent any exclusionary motive. All-units discounts eliminate double marginalization in a complete information setting, and they extract more profit than would a menu of two-part tariffs in the standard incomplete information setting with two types of buyers. All-units discounts may improve or may reduce welfare (relative to menus of two-part tariffs) depending on demand parameters.

Notes: This paper is concerned with communication within a team of players trying to coordinate in response to information dispersed among them. The problem is nontrivial because they cannot communicate all information instantaneously but have to send longer or shorter sequences of messages, using coarse codes. We focus on the design of these codes and show that members may gain compatibility advantages by using identical codes and that this can support the existence of several, more or less efficient, symmetric equilibria. Asymmetric equilibria may exist only if coordination across different sets of members is of sufficiently different importance. The results are consistent with the stylized fact that firms differ even within industries and that coordination between divisions is harder than coordination inside divisions.

Notes: We analyze optimal patent design when innovators can rely on secrecy to protect their innovations. Secrecy has no fixed term but does not preclude accidental disclosure nor independent creation by other inventors. We derive the optimal scope of the rights conferred to such second inventors, showing that if the patent life is set optimally, second inventors should be allowed to patent and to exclude first inventors who have relied on secrecy. We then identify conditions under which it is socially desirable to increase patent life as much as is necessary to induce first inventors to patent. The circumstances in which it is preferable that they rely on secrecy seem rather limited.

Notes: We provide a novel explanation as to why forming an alliance of buyers (or sellers) across separate markets can be advantageous when input prices are determined by bargaining. Our explanation helps to understand the prevalence of buyer cooperatives among small and medium-sized firms.

Notes: Recent developments in information technology (IT) have resulted in the collection of a vast amount of customer-specific data. As IT advances, the quality of such information improves. We analyze a unifying spatial price discrimination model that encompasses the two most studied paradigms of two-group and perfect discrimination as special cases. Firms use the available information to classify the consumers into different groups. The number of identifiable consumer segments increases with the information quality. Among our findings (1) when the information quality is low, unilateral commitments not to price discriminate arise in equilibrium; (2) after a unique threshold of information precision such a commitment is a dominated strategy, and the game becomes a prisoners' dilemma; and (3) equilibrium profits exhibit a U-shaped relationship with the information quality.

Notes: In the context of (one-sided) delegated bargaining, we analyze how a principal (a seller) should design the delegation contract in order to provide proper incentives for her delegate (an intermediary) and gain strategic advantage against a third party (a buyer). We consider situations in which there are both moral hazard and adverse selection problems in the delegation relationship and where the seller tries to gain strategic advantage by imposing a minimum price above which she pays the delegate a commission. It is shown that incentives and commitment are substitutes. A low-type agent is given less discretion in dealing with the buyer and weaker incentives, while a high-type agent is given more discretion and stronger incentives.

Notes: This paper sutudies the role of debt in committing a seller not to trade at a low price. We consider a discrete-time finite-horizon buyer–seller relationship. The seller makes an upfront relationship-specific investment, which is financed with debt. Debt then is repaid gradually to mitigate the hold-up risk. Even though debt is renegotiable, under the assumption that with a small probability renegotiation may fail and may lead to inefficient liquidation, debt still can be used as a commitment device. We solve for renegotiation proof dynamic debt contracts that are optimal for the seller and show that debt is repaid over the entire course of the relationship with declining repayments.

Notes: Existing models of the principal–agent relationship assume the agent works only under extrinsic incentives. However, many observed agency contracts take the form of a fixed payment. For such contracts to work, the principal must trust the agent to work in the absence of incentives. I show that agency fosters the advent of intrinsic motivation and trustworthy behavior. Three distinct motivational schemes are analyzed: norms, ethical standards, and altruism. I identify conditions under which these mechanisms arise and show how they promote trust. The analysis alters several important predictions of conventional models: (1) Better outcomes may ensue in highly uncertain environments; (2) the principal is better off the more the agent is risk averse; and (3) larger equilibrium extrinsic incentives need not be associated with larger effort or larger total surplus.

Notes: This paper shows that a multiproduct firm may find it optimal not to delegate the sales of all products and therefore to employ different distribution channels for different products. It faces the following trade-off: There is a strategic effect associated with delegation, but if both products' sales are delegated, intrafirm competition is not internalized. By delegating the sales of just one of the products while selling the other product directly—partial delegation—the multiproduct manufacturer strikes just the right compromise: The externalities between its owns products are internalized partially while a strategic advantage is achieved against its rival single-product manufacturer. Partial delegation also holds if both products are sold by a common retailer; it dominates full delegation when both manufacturers are multiproduct firms.

Notes: Recent research finds that firms investing abroad tend to agglomerate with other foreign entrants. Yet firms often invest multiple times within the same host country, which raises the question of whether firms agglomerate with their competitors' or their own prior investments. Collocation's attractiveness also may vary as a firm's entry motives evolve. The activities of prior and present investments often differ—initial investment may be for distribution while later ones might be for manufacturing. For Japanese investment into the United States in the electronics sector from 1980 to 1998, we find that firms tend to collocate only with their own prior investments. The exception is firms with little of their own experience, who tend to collocate with competitors. These results demonstrate the importance of firm heterogeneity in determining agglomeration behavior.

Notes: This paper seeks to understand why improved information technology (IT) might strengthen the case for decentralization, as recent empirical work suggests. We study a firm with a headquarters and two managers, each of whom gathers information about her changing local environment. The firm earns a gross profit that depends on actions taken as well as the current local environments. More information permits better actions, and information-gathering costs drop as IT improves. When the firm is centralized, information-gathering expenditures are first best, but after the firm decentralizes, each manager becomes a self-interested player of a “sharing game” in which she collects a share of gross profit and bears the cost of her chosen information-gathering activities. The firm's actions are determined by the information gathered at the equilibria of the game. As a result, the firm experiences a decentralization penalty, namely the change in net profit (gross profit minus informational costs) after decentralizing. If the penalty is small, then it is outweighed by the advantages of decentralizing—the vanishing of monitoring costs and perhaps the improved motivation of a decentralized manager's staff. To gather information a manager chooses (once and for all) a partitioning of her possible local environments and then searches to find the set in which her current environment lies. Our main measure of a manager's information cost is a technology parameter, θ, times the number of sets in her chosen partitioning. A second measure is θ times the partitioning's “Shannon content,” which may be interpreted as average search time when search is efficient. We ask whether improved IT, i.e., a drop in θ, indeed lowers the decentralization penalty. We obtain a strongly affirmative answer to this question for both cost measures in a class of examples and a mixed answer when we generalize so as to preserve some of the key properties of those examples. In a parallel manner we explore another conjecture suggested in the empirical literature, namely that better IT raises the coordination benefit, which we define as the increase in net profit when the firm bases its actions on pooled information, rather than letting each action variable depend on the information gathered by just one manager.

Notes: This paper analyzes the structure of retail markets by highlighting the differential pattern exhibited across local markets by two different types of firm organization: chain stores versus stand-alone stores. Data from retail alcoholic beverage industry in California suggest that the number of chain stores is proportional to city size. Further evidence on the sales of establishments indicates that average size of a stand-alone store virtually is invariant to city size, whereas chain stores appear to get larger as city size increases. Theories consistent with these findings are discussed.

Notes: In differentiated product markets where consumer preferences are characterized by brand loyalty, an important role for advertising may be to overcome brand loyalty by encouraging consumers to switch to less familiar brands. Using a scanner panel dataset of breakfast-cereal purchases, I find evidence consistent with the hypothesis that advertising counteracts the tendencies of brand loyalty toward repeat purchasing. Equivalently, advertising reduces switching costs in this market. Furthermore, counterfactual experiments demonstrate that in markets with brand loyalty, advertising is an attractive and effective option—relative to alternative promotional activities, such as price discounts—of stimulating demand for a brand.

Notes: Durable-goods producers frequently choose to monopolize the maintenance markets for their own products. This paper shows that, similar to leasing, one reason a firm may employ this practice is that it reduces or even eliminates problems due to time inconsistency. We first demonstrate this result in a setting closely related to Bulow's (1982) classic analysis of durable-goods monopoly. We then show the result in a setting similar to those considered in Waldman (1996, 1997) and Hendel and Lizzeri (1999), in which new and used units are imperfect substitutes. The paper also discusses alternative explanations for the phenomenon.

Notes: While selling an existing product, a durable-goods monopolist may develop a new, improved product. The firm must consider the interaction between its intertemporal pricing and research and development (R&D) decisions. The interactions show a sharp dichotomy depending on pricing regimes. When it is optimal for the firm to continue to sell the old model along with the new model, the interactions disappear. However, when it is optimal for the firm to discontinue the sale of the old model after introducing the new model, the firm will face a time-inconsistency problem in its R&D decision.

Notes: We analyze investment by a population of hyperbolic discounting entrepreneurs. In order to avoid inefficient procrastination, agents with good prospects about their chances of success may choose to forego free information and to invest boldly. This explains an excessive level of investment in the economy. Building on this observation, we show that low risk-free interest rates favor bold entrepreneurship and entry mistakes. Furthermore, public intervention can be socially desirable: Forcing agents to acquire information before deciding whether to invest may reduce competitive interest rates and may be beneficial for all individuals in the economy.〈blockFixed type="quotation"〉And thus the native hue of resolution 
Is sicklied o'er with the pale cast of thought, 
And enterprises of great pith and moment 
With this regard their currents turn awry, 
And lose the name of action. 
          Hamlet, Act 3: Scene 1.

Notes: Observers routinely claim that the Japanese government of the high-growth 1960s and 1970s rationed and ultimately directed credit. It barred domestic competitors to banks, insulated the domestic capital market from international competitive pressure, and capped loan interest rates. In the resulting credit shortage, it promoted industrial policy by rationing credit. As much as the government purported to ration and to direct credit, it apparently accomplished nothing of the sort. It did not block domestic rivals to banks successfully, did not insulate the market from international forces, and did not set maximum interest rates that bound. Using evidence on loans to all 1,000-odd firms listed on Section 1 of the Tokyo Stock Exchange from 1968 to 1982, we find that observed interest rates reflected borrower risk and mortgageable assets and that banks did not use low-interest deposits to circumvent any interest caps. Instead, the loan market seems to have cleared at the nominal rates. We follow our empirical inquiry with a case study of the industry to which the government tried hardest to direct credit: ocean shipping. We find no evidence of credit rationing. Despite the government programs to allocate capital, nonconformist firms funded their projects readily outside authorized avenues. Indeed, they funded them so readily that the nonconformists grew with spectacular speed and earned their investors enormous returns.

Notes: In many markets, firms are able to conduct discriminatory strategies based on whether a customer prefers a competitors' product or their own. This article considers the impact of such discrimination in duopoly models in which firms set prices and conduct precontract-customization efforts for some customers. We identify two effects: (1) The ability to conduct preference-based discrimination increases equilibrium profit as long as long as precontract customization is at least modestly important in competitive dynamics; and (2) The ability to conduct preference-based discrimination enhances social welfare if any precontract customization is done.

Notes: In this paper, we examine Hong Kong's role in intermediating trade between China and the rest of the world. Hong Kong traders distribute a large fraction of China's exports. Net of customs, insurance, and freight charges, re-exports of Chinese goods are much more expensive when they leave Hong Kong than when they enter. Hong Kong markups on re-exports of Chinese goods are higher for differentiated products, products with higher variance in export prices, and products sent to China for further processing. These results are consistent with the view that traders resolve informational problems in exchange. Additional results suggest that traders price discriminate across destination markets and use transfer pricing to shift income from high-tax countries to Hong Kong.

Notes: In a model where upstream network insiders conduct relationship-specific investment, downstream firms have an incentive to transact within networks. Evidence from US auto parts exports to 26 auto-producing countries supports key predictions of the model. Greater production scale for assemblers lowers imported parts per car. Vertical networks matter in two ways. First, although Japan's average import levels are not unusually low, non-Japanese suppliers have relatively low market penetration for parts categories where vertical keiretsu are prominent in Japan. Second, US-owned assembly abroad and foreign-owned parts production in the US both stimulate parts exports.

Notes: Motivated by evidence on the importance of incomplete information and networks in international trade, we investigate the supply of network intermediation. We build a general-equilibrium model in which agents with networks of foreign contacts either can use their networks themselves in support of production or can make their networks available for others to use and thereby can become network intermediaries. We use this model for comparative statics and welfare analysis. One welfare conclusion is that intermediaries may have inadequate incentives to maintain or to expand their networks, suggesting a rationale for the policies followed by some countries to encourage large-scale trading companies.

Notes: We analyze how product differentiation influences firms' choice between exporting and foreign direct investment. When product specifications are determined endogenously, we show that there is no symmetric solution to the product specification subgame. The cost disadvantage of an exporting firm translates into a disadvantage in product specification. Overseas production is favored if this allows the investing firm to adopt a more aggressive product specification. Our analysis suggests an ambiguous relationship among location, product differentiation, and cost and demand functions, confirmed by the existence of a parameter range for which there is no pure strategy equilibrium in location choice.

Notes: We examine a heterogenous goods duopoly model, wherein governments simultaneously and noncooperatively choose whether or not to provide subsidies for their firms and then firms noncooperatively choose output levels, either sequentially or simultaneously. We find that government trade policy and market structure are interdependent. First, the trade regime alters traditional firm preferences over sequential versus simultaneous play. Second, different market structures influence governments' preferences about free trade versus subsidies. Further, if one of the firms is a potential leader, allowing for endogenous market structure generates equilibrium outcomes that sometimes reinforce, and sometimes counter, traditional results in the strategic trade literature.

Notes: The contracting practices of franchisors outside their domestic market have received little attention in the empirical literature on franchising to date, largely because of lack of data. We exploit a novel data set that allows us to describe the contracts offered by a number of US and Canadian franchisors operating in Mexico and also compare them to contracts employed at home. Our analyses reveal a series of stylized facts that we hope will prove useful in guiding future empirical and theoretical research on contracting and especially on cross-border contracting practices. These are as follows: (1) The overwhelming majority of franchisors seeking franchisees in Mexico offer exactly the same contract to potential Mexican franchisees as that employed in the home market; (2) Among those franchisors that already have established outlets in Mexico, nearly half use the exact same fees in Mexico and at home; (3) The majority of those franchisors that make changes only alter the fixed fee component of the contract; (4) There is no evidence that franchisors use franchising more or less in Mexico compared to home as an alternative to royalty rate customization—in fact, the extent of franchising (versus company-owned units) of these firms in Mexico is not different systematically from that observed in their domestic market or worldwide; and (5) There is no evidence of increased customization over time—if anything, the evidence suggests increased similarities in contracting practices over time.

Notes: We study three corporate nonmarket strategies designed to influence the lobbying behavior of other special interest groups: (1) astroturf, in which the firm covertly subsidizes a group with similar views to lobby when it normally would not; (2) the bear hug, in which the firm overtly pays a group to alter its lobbying activities; and (3) self-regulation, in which the firm voluntarily limits the potential social harm from its activities. All three strategies reduce the informativeness of lobbying, and all reduce the payoff of the public decision-maker. We show that the decision-maker would benefit by requiring the public disclosure of funds spent on astroturf lobbying but that the availability of alternative influence strategies limits the impact of such a policy.

Notes: We posit that the value of a manager's human capital depends on the firm's business strategy. The resulting interaction between business strategy and managerial incentives affects the organization of business activities. We illustrate the impact of this interaction on firm boundaries in a dynamic agency model. There may be disadvantages in merging two firms even when such a merger allows the internalization of externalities between the two firms. Merging, by making unprofitable certain decisions, increases the cost of inducing managerial effort. This incentive cost is a natural consequence of the manager's business-strategy-specific human capital.

Notes: Most of the existing empirical literature on franchising investigates the share of company-owned versus franchised establishments within large retail firms. This literature typically has not considered the decision of a business owner to operate an independent business or to become a franchisee. This paper empirically analyzes what determines whether independent ownership or affiliation is observed, using data on the affiliation status of 2,293 motel establishments located throughout the United States. Heterogeneity in the underlying economic environment helps explain affiliation choices at the establishment level. The results also suggest that failure to consider independent establishments may explain the puzzling negative correlation between risk and vertical integration commonly found in the empirical franchising literature.

Notes: I investigate how different sources of information influence the diffusion of pharmaceutical innovations. In prescription-drug markets, both advertising and scientific information stemming from clinical trials can affect physicians' prescription choices. Using novel indices of clinical-research output, I find that both marketing and scientific evidence directly influence the diffusion process in the antiulcer-drug market, with marketing having a more pronounced influence. I also find evidence that clinical outputs are important drivers of firms' marketing efforts, affecting sales indirectly. Taken together, the direct and indirect effects of science on demand imply strong private incentives for clinical research. I conclude that product-market competition in the pharmaceutical industry is shaped by both advertising rivalries and scientific rivalries. Moreover, drug advertising may perform an important informative function.

Notes: The paper studies the effects of bundling on the bidding strategies and seller revenues in auctions when the bidders have common values for the objects. Bundling of objects before the auction reduces the problem of the winner's curse, and the bidders bid more aggressively. This does not mean that a bundled auction is always better for the seller's revenue. Indeed, there is another effect that makes the bundled auction preferable (from the seller's standpoint) if and only if the number of bidders is small. While this is the only effect present in an independent-private-values model, it does not vanish when bidders have pure common values for the objects. The paper concludes that a bundled auction is unambiguously better for the seller than separate auctions when the number of bidders is small.

Notes: There are a growing body of theoretical work, wide anecdotal evidence, and a few large-scale empirical studies supporting the view that business firms quite rarely change their organizational structure, a phenomenon usually referred to in the literature as structural inertia. The present paper aims to analyze empirically the determinants of structural inertia and organizational change. As far as we know, this work constitutes the first attempt to directly address such issues through econometric estimates based on a large, longitudinal dataset at plant level. For this purpose, we consider changes of the organizational structure within a sample composed of 438 Italian manufacturing plants observed from 1975 to 1996. More precisely, we specify and test a duration model of the likelihood of an individual plant changing the number of hierarchical tiers after a spell r, provided that no change has occurred up to T. We also analyze the direction of change, distinguishing increases from decreases of the number of managerial layers. We consider a set of plant- and industry-specific explanatory variables that are expected to induce or oppose organizational change. The findings show that the adoption of advanced manufacturing technologies and new human-resources management practices favors organizational change. On the contrary, the presence of sunk costs and the extent of influence activities figure prominently in explaining structural inertia of business organizations.

Notes: A simple model of open source software (as typified by the GNU-Linux operating system) is presented. Individual user-programmers decide whether to invest their own effort to develop a software enhancement that will become a public good if so developed. The effect of changing the population size of user-programmers is considered; finite and asymptotic results are given. Welfare results are presented. It is shown that whether development will increase when applications have a modular structure depends on whether the developer base exceeds a critical size. Potential explanations of several stylized facts are given, including why certain useful programs don't get written.

Notes: This paper examines the effect of memory loss on the continuity of behavior. We consider a player (individual or firm) who remembers previous actions but not underlying rationales. In a stable environment, relative to a full-recall scenario, memory loss increases the probability of following old policies (inertia). In a volatile environment, memory loss can decrease this probability (impulsiveness). The model provides a memory-loss explanation for some documented psychological biases, implies that inertia and organizational routines should be more important in stable environments than in volatile ones, and provides empirical implications relating memory and environmental variables to economic decisions.

Notes: Syndication arises when venture capitalists jointly invest in projects. We model and test two possible reasons for syndication: project selection, as an additional venture capitalist provides an informative second opinion; and complementary management skills of additional venture capitalists. The central question is whether venture capitalists are engaged primarily in selection or in managerial value added. These alternatives imply contrasting predictions about comparative returns to syndicated and standalone investments. Our empirical analysis, using Canadian data, finds that syndicated investments have higher returns, favoring the value-added interpretation. We also discuss risk sharing and project scale as possible reasons for syndication.

Notes: In the context of an employment relationship, I present an argument suggesting that it is more efficient for the boss to own the productive assets. The idea is that a conflict between productivity and depreciation is internalized if the player deciding what an asset is used for also has residual claims. An empirical test finds evidence consistent with this. By asking whether the boss should own the assets, the paper reverses the reasoning from the literature in which it is argued that the owner has power and thus is the boss.

Notes: Cooperative equilibria can be supported in a repeated game when players use trigger strategies. This paper tests how well trigger strategies explain behavior in two-person experimental games. Reducing payoffs for choices larger than the Cournot level induces smaller average outputs, behavior generally consistent with trigger strategy models. Reducing payoffs for choices well above the Cournot level will not affect behavior if actions are consistent with a trigger strategy involving longer-lived, less intense punishment phases (the grim-reaper strategy), but would matter for trigger strategies with short-lived but intense punishment phases. Results show that behavior is most consistent with the former.

Notes: Knickerbocker (1973) introduced the notion of oligopolistic reaction to explain why firms follow rivals into foreign markets. We develop a model that incorporates central features of Knickerbocker's story—oligopoly, uncertainty, and risk aversion—to establish the conditions required to generate follow-the-leader behavior. We find that rival foreign investment will make risk-neutral firms less inclined to move abroad once its rivals have done so. We show that Knickerbocker's prediction relies on risk aversion and derive an expression for the minimum amount of risk aversion needed to generate oligopolistic reaction.

Notes: Horizontal mergers between firms that have different costs are examined. Owners can transfer technology to an acquired firm and decide whether to consolidate or operate their firms as separate entities in the product market. Thus mergers can exhibit both efficiencies and a market-power effect. The prices of target firms are determined via a bargaining game. An equilibrium sequence of mergers entails the largest firm targeting the next largest rival firm. Initially, this sequence of mergers with technology transfers involves no consolidations and improves welfare. Ultimately, the acquisitions lead to consolidation and may decrease total welfare.

Notes: This note corrects Proposition 3 of Chang (1998).

Notes: It is often claimed that (i) managers work too hard on operational issues and do not spend enough effort on strategic activities, and (ii) something can be done about this by introducing nonfinancial performance measures, as for instance with a balanced scorecard. We give an explanation for both claims in a formal model. The distortion toward operational effort arises because with financial performance measures strategic effort can only be rewarded in the future. But renegotiation-proof long-term compensation plans entail too weak variable components in the future. This problem can be reduced by introducing performance measures that help to disentangle strategic and operational effects.

Notes: Central to so many accounts of post-war Japan, the keiretsu corporate groups lacked economic substance from the start. Conceived by Marxists committed to locating “domination” by “monopoly capital,” they found an early audience among western scholars searching for evidence of culture-specific group behavior in Japan. By the 1990s, they had moved into mainstream economic studies, and keiretsu dummies appeared in virtually all econometric regressions of Japanese industrial or financial structure. Yet the keiretsu began as a figment of the academic imagination, and they remain that today. Regardless of the keiretsu definition used, cross-shareholdings within the “groups” were trivial, even during the years when keiretsu ties were supposedly strongest. Neither does membership proxy for “main bank” ties. Econometric studies basing “keiretsu dummies” on the available rosters produce predictably haphazard and unstable results. In the end, the only reliably robust results are the artifacts of the sample biases created by the definitions themselves.

Notes: We use survey data and field research to investigate the effects of employee involvement practices on outcomes for blue-collar workers in the auto-supply industry. We find these practices raise wages by 3–5%. The causal mechanism linking involvement and wages appears to be most consistent with efficiency-wage theories, and least consistent with compensating differences. We find no evidence that employee involvement affects plants' survival or employment growth.

Notes: The modern corporation is characterized both by a separation of ownership from management and by managerial incentives that often include strategic elements in addition to the standard incentive elements. Despite the importance of these two features in the agency and corporate-governance literatures, they are absent in the treatment of the firm in the patent-licensing literature. The analysis in this paper shows how, by simply taking into account these two features of the modern corporation, it is possible to offer a new explanation for the use of royalties in licensing agreements.

Notes: This paper introduces a theory of network incentives in managed health care. Participation in the plan's network confers an economic benefit on providers; in exchange, the plan expects compliance with its protocols. The network sets a target for the number of outpatient visits in an episode of care. A provider failing to satisfy the target may be penalized by the plan's attempt to direct patients to other providers within its network. There is an equilibrium in which every provider in the network uses the target. We test the theory by observing behavior of providers before and after the introduction of managed mental health care in a large, employed population. Managed care consisted of price reductions, utilization review, and creation of a network. Quantity per episode of care fell sharply after initiation of managed care. We identify a network effect in our empirical work. The results indicate that in this case, network incentives account for most of the quantity reduction due to managed care.

Notes: In this field-based study, we interview top- and middle-level managers at Insteel Industries and conduct statistical analysis of firm-level data in order to shed light on whether activity-based costing (ABC) provides new information to managers and whether activity-based management (ABM) significantly influences product and customer-related decisions. We find that after the ABC analysis, Insteel undertook a number of process improvements that resulted in significant cost savings. Additionally, Insteel displayed a higher propensity to discontinue or increase prices of products and discontinue customers that were found comparatively unprofitable in the ABC study. Thus we provide empirical evidence that ABC influences both strategic and operational managerial decisions.

Notes: Managed care organizations control costs through restrictions on patient access to specialized services, oversight of treatment protocols, and financial incentives for providers. We investigate possible effects of such practices on the care patients receive by studying frequencies of in-hospital complications. We find significant differences in complication rates between managed care and fee-for-service patients. We investigate the sources of this variation by comparing probabilities of complications among patients with different types of managed care coverage and patients treated in different hospitals. For several patient categories, the differences in outcomes we find appear to arise not from differential treatment of patients within hospitals or from heterogeneity in patients, but from variations in care across hospitals that tend to treat patients with different insurance types.

Notes: One of the mechanisms that are implemented in the cost containment movement in the health care sectors in western countries is the definition, by the third-party payer, of a set of preferred providers. The insured patients have different access rules to such providers when ill. The rules specify the copayments patients must pay when using an out-of-plan care provider. This paper studies the competitive process among providers in terms of both prices and qualities. Competition is influenced by the status of providers as in-plan or out-of-plan care providers. Also, there is a moral hazard of provider choice related to the trade-off between freedom to choose and the need to hold down costs. It is possible to achieve the first-best allocation by an appropriate definition of the reimbursement scheme when decisions on prices and qualities are taken simultaneously (as in primary health care sectors). In contrast, some type of regulation is needed to achieve the optimal solution when decisions are sequential (as in specialized health care sectors). We also derive normative conclusions on how price controls should be implemented in some European Union member states.

Notes: If an illness is not contractible, then even partially insured consumers demand treatment for it when the benefit is less than the cost, a condition known as moral hazard. Traditional health insurance, which controls moral hazard with copayments (demand management), can result in either a deficient or an excessive provision of treatment relative to ideal insurance. In particular, treatment for a low-probability illness is deficient if illness per se has little effect on the consumer's marginal utility of income and if the consumer's price elasticity of expected demand for treatment is large relative to the risk-spreading distortion when these are evaluated at a copayment that brings forth the ideal provision of treatment. Managed care, which controls moral hazard with physician incentives, can either increase or decrease treatment delivery relative to traditional insurance, depending on whether demand management results in deficient or excessive treatment.

Notes: This paper asserts that brand pharmaceutical firms (those mostly involved in the invention and production of new drugs) engage in a set of complementary activities that are different from those of generic pharmaceutical firms (those that primarily make off-patent medicines). Complementarities of the Milgrom-Roberts variety within, but not across, these two kinds of firms make it more efficient for pharmaceutical firms to specialize in either brand or generic production. Using FDA data, I show that this is indeed the case. I then examine the firms that produce both types of drugs to see if there are market-level strategic synergies between brand and generic products. I find generic entrants that belong to a corporation that owns the brand in the market are (1) not more likely to enter, (2) not more likely to be approved faster, and (3) not more likely to deter other generics from entering. Thus the advantage, or synergy, from mixing brand and generic activities in one corporation must arise elsewhere in the operations of the firm. If not, the integrated pharmaceutical firm is not the most efficient organizational form for the production of ethical drugs.

Notes: Using a representative sample of the 2001 National School-based Youth Risk Behavior Survey, this study investigated the contemporaneous and intertemporal relationship between the use of licit and illicit substances by American youth between the ages 12 and 18. The results indicated a strong contemporaneous relationship between smoking cigarettes, drinking alcohol, smoking marijuana, and using cocaine. The results supported the gateway hypothesis indicating that prior smoking of cigarettes is significantly associated with the probability of current marijuana and cocaine use, as prior drinking of alcohol is significantly associated with the probability of current marijuana and cocaine use. The results also showed that males had a higher probability of using cocaine than females, whereas black students had a higher probability of smoking marijuana and using cocaine than white students. Age and race were associated with marijuana and cocaine use, but cocaine use was further linked with the factors of gender, region, and metropolitan area. These findings could have implications for public policies regarding prevention.

Notes: Every pre-school child requires an adult to purchase and provide a variety of foods, to help ensure a balanced selection is included in the diet to avoid any nutritional deficiencies. Children under 5 years have a greater demand for nutrients and energy to support the body's requirements for growth and development than at any other time throughout their life cycle. The paper critically reviews the main factors that influence food choices made by parents on behalf of their pre-school child. Dietary deficiencies in inner city areas remain a challenge for the government, educators and health professionals. A particular concern is iron deficiency as the prevalence of anaemia is common especially in British pre-school children from various family backgrounds. Poor parenting skills often exacerbate the problem, especially the early introduction of pasteurized cow's milk, poor weaning practices and lack of dietary knowledge. Therefore, improving education and understanding about the importance of iron could potentially improve dietary iron intake. Phase 1 of the study was completed in West Bridgford area of Nottingham in the UK. This part of the study aimed to determine parental knowledge with regards to the feeding of their pre-school child. A questionnaire and a 3-day diet history method were employed. These methods enabled the diet adequacy of the pre-schoolers to be analysed by NetWISP software. This study highlighted that iron deficiency remains a cause for concern and should be further addressed. The Sure Start programme is a possible means of education as it has the potential to access parents from all socio-economic classes. The programme can support and empower parents to become healthier consumers. Good dietary habits, established early in life, contributes to a positive start, and can be advantageous to individuals throughout their lifetime. Such long-term changes will help contribute to a healthier nation that the government envisages for the future.

Notes: There is focus upon advertising and children for two broad reasons. First, it is because children are children, and are considered separately. Second, it is because children will become adults. Advertising therefore effects behaviour during childhood and continues to do so into adulthood. Advertising to children rarely receives a good press, and it remains a controversial topic in the wider domain. Is it responsible for poor diet? Does it make children pester their parents? Is there too much of it? And does Christmas have to start in September? Subsequently the issue has evolved to question whether there should be advertising to children, and if so whether it should be regulated. This discussion paper examines arguments for and against children's advertising, and concludes that whilst there are compelling arguments on both sides, advertising to children remains an economic necessity in need of adjustment and regulation.

Notes: The nutritional status of children can influence their health and the risk factors for developing chronic diseases later in life. Korea is unique in that it is relatively westernized and yet maintains much of the traditional foods and cooking methods. Effective nutrition education should help children to choose a healthy diet through the establishment of positive dietary practices and habits. The main purpose of this research is to compare awareness towards nutrition education between primary schools in the UK and Korea and nutritional knowledge that children and parents have in these countries. Dietary and healthy eating knowledge data were collected by a questionnaire as part of a case study comparison using one primary school in Manchester, UK, and one in Seoul, Korea. A total of 171 primary school children and 124 parents of the children were recruited. The results indicated that children and parents appeared to be aware of the importance of limiting fat, sodium and sugar intakes, and requiring non-starch polysaccharide (NSP). However, in the case of some foods they did not have satisfactory nutritional knowledge of which foods were high in fat, salt, sugar and NSP. British children had a better understanding of the health implication of fat than Korean children, whereas more Korean children considered excessive salt intake harmful than British children. There seemed to be differences in dietary pattern and familiarity with food between the two countries. Children identified parents as the main source of nutritional information. Therefore, parents as well as children need to learn about nutrition in order to give appropriate information or advice to improve the diets of their children. Children preferred exciting, fun, positive and a practical approach to learning about nutrition, such as computer packages and cookery classes. Parents wanted schools to give their children more information about nutrition. This research has shown that nutrition education in schools should be concerned not only to provide nutritional knowledge but also to encourage children to choose healthy food by redesigning nutrition education and school meals.

Notes: The nutritional habits of UK consumers have become a cause for concern with an increasing number of people suffering from diseases related to nutrition. The way in which food is prepared may contribute to the nutritional content of the diet. Traditional methods of cooking and eating are being influenced by increased ownership of domestic appliances. This study aimed to carry out a cross sectional study of people living on Merseyside to determine the ownership and use of small kitchen domestic appliances in relation to the possible consequences the appliances may have on the nutrient intake of the individual. An opportunistic sample of 276 female adults aged 25–70 years was recruited from amongst university staff and community groups within Merseyside. Data were collected using a self-completion questionnaire consisting of questions concerning personal details, the ownership and use of domestic appliances that may influence nutrient intake. The Liverpool John Moores University Ethics Committee granted ethical approval. Microwave ovens, electric toasters and grills were owned by 80% of the population. Coffee makers, handheld electric food mixers, sandwich makers, blenders and food processors although owned by over 45% were used by the majority only once a week or less. Newer items such as a bread maker were owned by 9% who were significantly more likely to have a professional occupation. Those with unskilled occupations were significantly more likely to own a deep fat fryer and least likely to own a food processor. Those aged 25–34 years were significantly least likely to own a handheld food mixer. Households comprised of couples with or without children were significantly more likely to own sandwich makers, bread makers, food processors and handheld food mixers. No difference in the use of the appliances was found with occupational group or age. A large percentage of people own a variety of domestic appliances, the use of which may have a beneficial effect on their nutrient intake, however, it is of concern that those in the lower socio-economic group were more likely to own appliances that will have a negative effect on their diet.

Notes: This qualitative study examined the consumption of Indian foods among groups of English and Indian people living in the UK. Both convenience and freshly made Indian foods were included in the research. The aim was to explore attitudes (based on ethnicity) towards, and the consumption of, Indian foods. The means–end model and laddering methodology were used in interviews with 24 respondents, 12 from each group (English and Indians). The personal values ‘social life’, ‘health’, ‘adventure’, ‘enjoyment’ and ‘savings’ were found to be the most important for English respondents whereas ‘enjoyment’, ‘good life’, ‘health’, ‘religion’ and ‘culture’ were the most desirable value ends for Indians. The results provide an insight into English and Indian peoples’ perceptions of Indian food that can be used in promotion and marketing positioning of branded Indian foods, sauces and accompaniments.

Notes: People are becoming more health conscious nowadays, but most of them are not able to adopt a lifestyle with adequate physical exercise and a healthier eating pattern. Many attempt to compensate by taking ‘health foods’. Despite the recent economic recession, the functional food market is expanding rapidly in Asian countries. Recent statistics indicate a huge increase in weight loss and functional food product advertising expenditure in Hong Kong and other Asian countries. In a large scale survey conducted by the Hong Kong Consumer Council on advertisements, it was found that 85% of the medicines, health food and therapies sampled contain questionable claims and misleading messages, which was the second most problematic category of the survey. In addition, young people do not understand much about modern food processing, in particular with regard to low energy and functional foods, and they know very little about modern food marketing strategies. The situation is potentially detrimental to consumer welfare, especially to the younger generation. This study was conducted to reflect critically on implications of the issue on the health and well-being of young people in Hong Kong. Attempts are made to explore directions for designing relevant and effective education programmes to empower young people's abilities in understanding food advertising strategies and making informed decisions on food choice. This paper begins with a critical review of the current situation with regard to Hong Kong. Then, the results of an interview survey and a questionnaire survey on pre-service and in-service teachers’ perception towards misleading food advertising and labelling are reported. The situations at schools are defined and problems faced by teachers in providing relevant consumer education programmes to students are identified. Finally, some prospective foci for further investigation of this important issue, with a view to developing students’ critical skills in evaluating claims offered in food advertisements, will be considered.

Notes: The aim of consumer education has been mainly to teach and educate students to act as informed, rational and prudent consumers. This perception of consumption as reasoned behaviour or action is inadequate in the late modern society, where consumerism is first and foremost characterized by globalization, cultural change and the liberation of the individual. The results of a research study involving Danish pupils aged 12–19 years present a picture of consumption connected both to material and non-material aspects of life. Consumption as such has a significant impact on and meaning for the individual: it becomes a means by which human beings communicate and interact. Consumption is part of children's and young people's education and socialization, and plays a role in the development of identity and self-image. Institutional consumer enlightenment and the education of students in school stand in contrast to informal consumer  socialization  and  the  education  of  individuals. The aim of formal consumer education may be described as ‘educating for critical consumer awareness and action competence’. However consumer education finds itself in the dilemma between ‘consumership’ and ‘citizenship’. This pilot study is aimed at understanding consumer socialization in order to improve formal consumer education and to reflect on how empowerment becomes part of consumer education.

Notes: Ethical attitudes in relation to meat purchases were studied among urban and rural consumers in Scotland. All subjects perceived at least some ethical issues in relation to animal production systems, in particular, systems keeping animals in close confinement. Welfare-friendly production systems were viewed as adding value to a food, but this value was not necessarily realizable to producers if purchases occurred only when foods were on special offer. Statements made by individuals were often contradictory, revealing ambivalence, unresolved value conflicts and a general lack of involvement in the nature of meat production. A number of barriers to the establishment of stable attitudes and behaviours in relation to the ethical treatment of food animals were also identified. A key finding of the study is that individuals can hold two views on animal welfare. On the one hand, they may think as citizens influencing societal standards, and on the other, as consumers at the point of purchase. As citizens, they support the notion of animals being entitled to a good life; as meat consumers, they avoid the cognitive connection with the live animal. This paper explores both the citizen–consumer relationship and purchase strategies used by consumers to resolve value conflicts. Lessons for public and commercial policy are highlighted in the context of the Curry Report (2002) which advocates more effective market segmentation where markets are finely attuned to their customers, with the development of a number of assurance schemes discussed in the article.

Notes: The aim of this paper is to offer regional evidence from Spain on alcohol abuse among adolescents. Specifically, we identify the determinants of the decision to abuse alcohol with respect to the five most important regions of Spain, as well as for the country as a whole. To this end, we estimate Probit specifications using data drawn from the Spanish Surveys on Drug Use in the School Population corresponding to 1994, 1996 and 1998. The results first reveal patterns that are qualitatively similar, but quantitatively different. Similarly, it would appear that economic policies aimed at reducing the access of adolescents to alcohol may have a positive effect on reducing abuse. Finally, the results suggest that encouragement be given to healthy habits among young people, as well as to the fight against education failure and the launching of information campaigns that accurately portray the current lifestyle of adolescents.

Notes: The aim of this study was to determine the knowledge and acceptability of soymilk (defined as consumption pattern/usage and taste) by adult consumers, residing in different socio-economic areas (low vs. high) in Cape Town. The study population of 214 participants were selected using convenience sampling. A questionnaire was developed in order to obtain demographic data (four items); basic general knowledge of soymilk (four items); and acceptability of the tested products (consumption patterns and taste) (eight items). There was a significant difference between the two groups (P = 0.000) regarding basic knowledge of soymilk, with significantly more in the high socio-economic area (HSEA) having a score of at least 75%. Gender (P = 0.082) and age (P = 0.122) did not have a significant impact on the consumption patterns of soymilk. There was no significant difference between the two groups with respect to current usage (P = 0.228) and frequency of use (P = 0.213) of soymilk. However, a significantly smaller group (P = 0.000) of participants in the low socio-economic area had previously tasted soymilk compared with those in the HSEA (16.7% vs. 41.5%; P = 0.000). In conclusion, socio-economic status appeared to be associated with knowledge of soymilk. No significant differences with regard to gender, age or current usage in the two groups studied were noted.

Notes: This paper addresses the following subjects: biotechnology and consumers, concern about risks, consumer acceptance, labelling of foods produced using biotechnology, the legal approach to consumer protection, and consumer protection policies relating to biotechnology products in the European Union, the United States, Turkey and global institutions such as the Convention for Biological Diversity (CBD) and the World Trade Organisation (WTO). It is likely that biotechnology will gain ground much more rapidly in the twenty-first century than in the past. Despite rapid, detailed and precise advances in gene technology, its applications have not been the received with a great deal of consumer enthusiasm. Consumers have approached genetically modified foods with considerable apprehension and opposition. Consumer concerns about bioengineered food products focus on the questions of human health, environmental and social risks and benefits. The most important stages in the process of marketing new foods produced using biotechnology are to demonstrate user need and consumer acceptance. Generally, the technical complexity of biotechnology makes it difficult for consumers to understand details of the product and the specific attributes of biotechnology applications. Scientific uncertainty, the nature of consumer concerns and general reluctance to accept biotechnology products, increase the importance of consumer protection. Legal protection is a very important factor in the solution of new social problems related to technological advances. More specifically, consumer and environmental law support consumer protection related to foods produced with biotechnology. The basic principles of consumer law can be re-formulated as consumer rights. Environmental law is a new phenomenon, but precautionary principles and public participation in decision-making for environmental law are relevant to consumer protection relating to bioengineered food products.

Notes: Many variables have been proposed as additions to the theory of planned behaviour structure, and evidence exists to support the value of a measure of ethical obligation and self-identity. Furthermore, some research has suggested that ethical obligation may serve as an antecedent to attitude as well as intention. This paper presents findings from a large scale survey that highlights the usefulness of ethical obligation and self-identity in the prediction of intention. Additionally, the role of both these variables in the prediction of attitude is also suggested. This is examined within the ‘ethical’ context of fair trade grocery purchases. Methodological implications for further research are discussed.

Notes: This paper first presents evidence from Spain on the relationship between the labour situation of both spouses within the family and the time dedicated to the care of the children, the elderly and the infirm. Second, it analyses the effect that government benefits for such care would have on the labour market and on household poverty. The results show that while Spanish society has advanced in the incorporation of women into the labour market, most of them still have to assume total responsibility for housework and the care of the children, the elderly and the infirm. Against this background, we find that benefits would decrease female participation in the labour market and the number of hours worked, while they would also contribute towards reducing poverty.

Notes: The curriculum that pupils are taught within the classroom environment can either be reinforced or weakened by what goes on in the rest of the school environment. The study focused on pupils aged 11–12 years, to establish if healthy eating theory was put into practice in the school environment. The research encompassed three areas within the school: the pupils who are the recipients of the theory; the teacher who teaches them the importance of food and cooking skills; and the providers of food within the school environment. Three different post-primary schools located within the Coleraine area of Northern Ireland were used.

Notes: Focus group interviews were carried out at 12 preschools. The aim was to investigate children's perceptions and experiences of food, and the possibility of using focus group techniques with children aged 3–5 years. A total of 103 children participated. The children associated food and eating with rules and norms. Most children described these rules and norms as well as what they were and were not allowed to do. They knew very well the difference between acceptable and non-acceptable mealtime behaviour, and were especially aware of what they were not allowed to do. When children were asked to rate foods they ‘disliked’, they spoke instead about their favourite foods. They did not categorize food as good or bad, as adults often do, but as ‘food’ and ‘non-food’, for example, sweets were not food. The method used in this study, the focus group interview, was judged to be a useful tool for exploring how children think about and jointly reflect upon food.

Notes: The Food Standards Agency was set up in April 2000 to protect the health of the public and the interests of consumers in relation to food. Its principal purpose is to put the consumer first. But what does this mean in practice? The Agency is finding ways to help consumer organizations and consumer representatives contribute more effectively to its work. However, consumer organizations cannot hope to represent the full range of consumer perspectives, and so the Agency is keen to reach out to individual consumers using a variety of innovative mechanisms. This article will describe why the Agency was established and how it achieves its main objective of putting the consumer first. It will discuss how the Agency is developing and testing new ways of working to ensure that the consumer perspective is fully accounted for when developing and evaluating policies, including setting up an influential new Consumer Committee. It will go on to highlight a number of recent innovative consumer consultations and structures that have been established to involve consumers in Agency policy making. It will discuss these processes and how the lessons that have been learnt are informing future Agency strategies. The article will then describe how the Agency protects consumers through effective risk communication strategies and how its Annual Consumer Attitudes Survey will help it measure success so that it can continue to set new stand-ards in putting consumers first in relation to food.

Notes: Despite the increased documentation of consumers’ purchases of organic food products, the motivations for such purchases are relatively under-researched. An individual’s choice of food products can be linked clearly to ethical stances, but ethical choices can also vary from individual to individual, from industry to industry and among countries. Consequently, this paper investigates the degree to which ethical beliefs influence Scottish consumer perceptions, beliefs, attitudes and purchasing decisions, with regard to organic dairy products. Consumer purchasing motivations are revealed as being self-interest-centred (i.e. better tasting, safer), rather than altruistic. Therefore, to achieve future market development, organic dairy producers cannot rely upon the minority of hardcore green consumers to sustain growth, but must aim to modify perceptions and attitudes of larger consumer segments by implementing educational marketing campaigns that reinforce the ethical, environmental and societal benefits of organic production.

Notes: Physically disabled women today have to face the inconvenience of shopping for their own as well as their families’ clothes and the inability of finding fashionable clothes that fit any disability. A total of 40 physically disabled women between the ages of 21 years and 60 years were interviewed on the problems they experienced when shopping for fashionable clothes that fit their disabilities. A total of 40 clothing shops were observed to get information on the extent to which the shops cater for the needs of the physically disabled consumer. Results from the interviews showed that the majority of physically disabled female clothing consumers experienced major problems in finding fashionable clothes that fit their disabilities. It was also clear that these women experienced problems with unusable access routes, unsuitable parking lots, display racks that are too high, spaces between racks that are too narrow, inadequate space in fitting rooms and a lack of assistance in shops. The observations were compared with the complaints the women had and it was found that these women had not overestimated their problems.

Notes: Three denim jeans products from the same manufacturer with differentiated pricing and labels (antiqued, sandblasted, and stonewashed) were used to determine the relationship between price and quality. Both qualitative and quantitative procedures were used to analyse the garments. All three jeans were made of twill weave with 3 × 1 repeat. Both structural and performance characteristics were compared using standardized tests. Analysis of variance was used to compare the selected structural and performance characteristics among the three jeans products. Tukey’s HSD tests were used for post hoc multiple comparisons for three jeans. The findings revealed that despite the fact that all three jeans products were from the same store, and that the fabrics used the same weave, degree and direction of twist, the jeans differed significantly for several structural and performance characteristics. Several possibilities for future research were explored.

Notes: This paper focuses on three issues. First, it analyzes the increasing inequality of wealth in Sweden in terms of percentile age and birth cohort differences, and finds very weak evidence of life-cycle savings. There are rather strong birth cohort differences in wealth accumulation. Second, it is shown that bequests and inter vivo gifts contribute to the age and cohort differences in wealth, but do not increase the inequality of wealth. The third theme is mobility of wealth as a function of bequests, age, period, length of the transition period, and the magnitude of quantile differences.

Notes: Using PSID data for the years 1984–99, we estimate the level and severity of asset poverty. We find that despite a sharp decline in the official poverty rate, the asset poverty rate barely budged over this period. Moreover, the severity of asset poverty increased during this period. The likelihood of being asset-poor decreased for those who are college graduates or married with children, whereas it increased for those who are white, for the unmarried elderly, and for those without a college degree. Lifetime events such as changes in job market, marital and homeownership status are correlated with transitions into and out of asset poverty.

Notes: Horizontal and vertical measures of inequality are related through mobility. The paper draws attention to two types of mobility: quantity mobility, which refers to mobility in income itself, and rank mobility, which refers to mobility in the position in the distribution of income. Individually matched census data for earnings in Israel are used to illustrate these concepts empirically. Mobility is measured between 1983 and 1995. It is shown that earnings in Israel are highly mobile. The high degree of earnings mobility implies that horizontal measures of inequality considerably overstate the underlying level of inequality. The method of errors in variables is used to distinguish between current and permanent mobility and inequality. Permanent earnings are more equal than current earnings and less mobile. Finally, the methodology is applied to PSID. It is shown that earnings were more mobile in Israel than in the United States.

Notes: This paper investigates the impact of economic growth, and more specifically robust economic growth along with other macroeconomic determinants, on poverty levels using both the U.S. official measure of poverty and an estimated time series of Sen indices of poverty. The results reveal that the period of robust economic expansion that the U.S. economy experienced during the 1990s did not have a significant impact on poverty using either measure. In addition, we find that the impact of growth and other macro controls is dramatically different when a subset of the poverty population, namely non-white poverty, is investigated. The percentage of households headed by women is shown to be a significant factor in examining poverty for this subgroup.

Notes: This paper describes a new dataset of annual time series relating to the U.S. nonfinancial corporate sector: its market value, returns, and the major underlying stocks and flows that are valued by financial markets. The data cover the entire twentieth century, and thus fill a significant gap in the documentation of financial and real economy linkages. Previously available data cover either shorter periods, or a more restricted sample of quoted companies. A range of series are constructed on a consistent basis: returns; dividend yields (including an alternative “cashflow” measure); earnings; and “q”, on a range of definitions; as well as corporate leverage measures. The main features are: the relative long-run stability of both q and the cashflow dividend yield; the systematic tendency for q to be less than unity; and the ambiguous picture presented by alternative measures of corporate leverage.

Notes: Review of Explaining Growth: A Global Research Perspective, edited by Gary McMahon and Lyn Squire and Productivity Growth, Inflation, and Unemployment: The Collected Essays of Robert J. Gordon by Robert J. Gordon

Notes: While GDP is the appropriate measure of output, I argue that Weitzman's NDP (WNDP)—nominal net domestic product deflated by the price of consumption—is the appropriate measure of welfare. Total factor productivity (TFP) growth measures the shift in the GDP frontier, and there is an analogous concept for WNDP, which I call total factor welfare (TFW) growth. I calculate and compare WNDP and GDP, and TFP and TFW, for the United States in the 1990s. I find that the acceleration of WNDP post 1995 was as great as that of GDP, even though the aggregate depreciation rate was rising.

Notes: While China's official statistics are often regarded as of questionable quality, critics are rarely aware of just how difficult it is to compile accurate statistics in a developing and transition economy. This paper traces the challenges economic reforms pose for the development of China's statistical system, establishes a typology of the resulting data problems in official Chinese statistics today, and examines how these challenges and data problems are being addressed through institutional innovations in data compilation. Analysis of China's data compilation methods allows broad judgments on data quality. Special attention is given to GDP data as the aggregate measure of productive activities in China.

Notes: Economic transition from a planned to a market oriented economy is often associated with a widening of income inequality. The nature of this change, however, may differ during different stages of the economic transition. This paper investigates the increase in income inequality in urban China during two phases of economic reform: a moderate reform era (1988–95) and a radical reform era (1995–99). It is found that although income inequality increased considerably during both stages, the nature and causes of the increase are different. In the moderate reform period, the increase in inequality was a result of some parts of society sharing more of the economic gain than others, and the main cause of this inequality is regional income dispersion. During the radical reform period income reductions at the lower end of the distribution is observed, and it is mainly due to the large-scale unemployment generated by labor reallocation.

Notes: In recent years quality adjustment of price indices has been vigorously explored and the hedonic regression method has become popular in official statistics. In service sectors, however, the current CPI seems not to have been successfully adjusted to accommodate quality changes. In this paper I focus on the railway industry in Japan, where quality change is a vital factor in the measurement of price indices and productivity. Using hedonic regressions to adjust CPI railway fares, the paper suggests that there may be a significant degree of upward bias in the current CPI railway fares. Also, this leads to the results that the total factor productivity (TFP) of the Japanese railway industry, which is calculated by using the newly adjusted CPI as a deflator, has been improved contrary to previous research on this issue.

Notes: This paper evaluates the linkage between social security strategies and redistributive effects in EU social transfer systems. It is argued that the various European systems produce different patterns of redistribution that may be explained by the adoption of different mixes of social security strategies. In support of this argument, several ideal-typical strategies are characterized and a classification of European social transfer systems is introduced. Subsequently, the redistributive effects of the systems are assessed and the relationship to their class assignment is investigated. We conclude that the redistributive effects differ markedly between systems of different classes, indicating that redistributive patterns are heavily influenced by the adopted strategy mix.

Notes: Books reviewed:Review of Gender and the Labor Market: Econometric Evidence of Obstacles to Achieving Gender Equality, edited by Siv Gustafsson and Danièle Meulders; and Gender and the Welfare State: Care, Work and Welfare in Europe and the USA, by Mary Daly and Katherine Rake 
Reviewed by Martha MacDonald

Notes: This paper is inspired by the work of Nancy and Richard Ruggles promoting national economic accounting in academic and non-academic areas. They were concerned with both compilation and use of national accounts as well as developmental issues. Now that the subject has matured with the 1993 SNA standards, the compilation, development and understanding of the accounts require special training and experience, but national economic accounting has become a multidisciplinary matter that cannot easily fit into one academic department. Hence we advocate a Certified Economic Accountant (CEA) degree or diploma program to gain enhanced recognition and greater understanding for national economic accountants and their work. The paper includes an annotated list of 50 references, covering the period 1942–2002, that might form a syllabus, and a section outlining the mechanics and problems of organizing such a program.

Notes: The formal accounting logic of the national accounts and other macroeconomic statistics is not always well understood. In addition, the relation between macro statistics and micro accounting data often is not clear. This paper starts out by summarizing the main bookkeeping conventions at the macro level. A distinction is made between vertical and horizontal double-entry bookkeeping, which, if applied simultaneously, result in quadruple-entry bookkeeping. Vertical bookkeeping refers to the double-entry bookkeeping used in business practice. Horizontal bookkeeping requires that the transactions and other economic relationships between agents answer strict consistency rules regarding valuation, timing, and classification. At the micro level, this consistency is not guaranteed. The article reviews three options to reinforce the micro-macro link (proposals by Nancy and Richard Ruggles, proposals by Harry Postner, and the intermediate accounts in France), and concludes with a few suggestions that could be used in the upcoming revisions of the international statistical manuals.