The quality of proxy advisors' voting recommendations is important for policymakers and industry participants. We analyze the design of recommendations (available to all market participants) and research reports (available only to subscribers) by a proxy advisor, whose objective is to maximize its profits from selling information to shareholders. We show that even if all shareholders' interests are aligned and aim at maximizing firm value, the proxy advisor benefits from biasing its recommendations against the a priori more likely alternative. Such recommendations "create controversy" about the vote, increasing the probability that the outcome is close and raising each shareholder's willingness to pay for advice. In contrast, it serves the interest of the proxy advisor to make private research reports unbiased and precise. Our results help reinterpret empirical patterns of shareholders' voting behavior.
{"title":"Creating Controversy in Proxy Voting Advice","authors":"A. Malenko, Nadya Malenko, Chester Spatt","doi":"10.2139/ssrn.3843674","DOIUrl":"https://doi.org/10.2139/ssrn.3843674","url":null,"abstract":"The quality of proxy advisors' voting recommendations is important for policymakers and industry participants. We analyze the design of recommendations (available to all market participants) and research reports (available only to subscribers) by a proxy advisor, whose objective is to maximize its profits from selling information to shareholders. We show that even if all shareholders' interests are aligned and aim at maximizing firm value, the proxy advisor benefits from biasing its recommendations against the a priori more likely alternative. Such recommendations \"create controversy\" about the vote, increasing the probability that the outcome is close and raising each shareholder's willingness to pay for advice. In contrast, it serves the interest of the proxy advisor to make private research reports unbiased and precise. Our results help reinterpret empirical patterns of shareholders' voting behavior.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"45 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134536876","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
I estimate welfare benefits of eliminating idiosyncratic consumption shocks unrelated to the business cycle as 47.3% of household utility and benefits of eliminating idiosyncratic shocks related to the business cycle as 3.4% of utility. Estimates of the former substantially exceed earlier ones because I distinguish between idiosyncratic shocks related/unrelated to the business cycle, estimate the negative skewness of shocks, target moments of idiosyncratic shocks from household-level CEX data, and target market moments. Benefits of eliminating aggregate shocks are 7.7% of utility. Policy should focus on insuring idiosyncratic shocks unrelated to the business cycle, such as the death of a household’s prime wage earner and job layoffs not necessarily related to recessions.
{"title":"Welfare Costs of Idiosyncratic and Aggregate Consumption Shocks","authors":"G. Constantinides","doi":"10.2139/ssrn.3882034","DOIUrl":"https://doi.org/10.2139/ssrn.3882034","url":null,"abstract":"I estimate welfare benefits of eliminating idiosyncratic consumption shocks unrelated to the business cycle as 47.3% of household utility and benefits of eliminating idiosyncratic shocks related to the business cycle as 3.4% of utility. Estimates of the former substantially exceed earlier ones because I distinguish between idiosyncratic shocks related/unrelated to the business cycle, estimate the negative skewness of shocks, target moments of idiosyncratic shocks from household-level CEX data, and target market moments. Benefits of eliminating aggregate shocks are 7.7% of utility. Policy should focus on insuring idiosyncratic shocks unrelated to the business cycle, such as the death of a household’s prime wage earner and job layoffs not necessarily related to recessions.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"132 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127589559","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The nature of society begins with citizen fundamental moral choice determining the jurisprudence adopted and applied in society: Is necessary social discipline to be imposed, or is all law to draw forth citizen self-discipline, asserting the rights of the individual asserted over those of the state? The former a compliant society, assertion of group rights over individual rights; the latter, defined as a free society, assertion of individual rights over group rights. Humans create ideas then apply them in managing circumstance, with intensity of action derived from the associated emotions. Having made the fundamental moral choice, the society architecture must be built with ideas congruent with that choice combined with workable compromise, the ethic for peaceful co-existence. Social development in free democratic societies begins in the middle with appropriate governance offering balanced, accurate, reasoned ideas to citizens. Citizens choose, within social architecture designed to enable self-discipline. Government then becomes government by following citizen thinking. To begin to secure the future of freedom, media must be required to offer balanced views, never opinion. And academe must dismiss peer review as the standard of intellectual quality, replacing it with strategic science
{"title":"The Future of Freedom","authors":"G. Little","doi":"10.2139/ssrn.3875980","DOIUrl":"https://doi.org/10.2139/ssrn.3875980","url":null,"abstract":"The nature of society begins with citizen fundamental moral choice determining the jurisprudence adopted and applied in society: Is necessary social discipline to be imposed, or is all law to draw forth citizen self-discipline, asserting the rights of the individual asserted over those of the state? The former a compliant society, assertion of group rights over individual rights; the latter, defined as a free society, assertion of individual rights over group rights. Humans create ideas then apply them in managing circumstance, with intensity of action derived from the associated emotions. Having made the fundamental moral choice, the society architecture must be built with ideas congruent with that choice combined with workable compromise, the ethic for peaceful co-existence. Social development in free democratic societies begins in the middle with appropriate governance offering balanced, accurate, reasoned ideas to citizens. Citizens choose, within social architecture designed to enable self-discipline. Government then becomes government by following citizen thinking. To begin to secure the future of freedom, media must be required to offer balanced views, never opinion. And academe must dismiss peer review as the standard of intellectual quality, replacing it with strategic science","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-06-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130968400","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper studies a coordination game with incomplete information and the option to delay. The delay option enables the agents to observe a binary signal depending on whether the early actions (e.g., investment) surpasses a threshold. The anticipation of information incentivizes agents to wait and free-ride on the information, whereas acting early can help to generate good news, and consequently induce more coordination. Relying on this trade-off, we find the unique monotone equilibrium, which features the inability of the delay option in facilitating coordination. If the waiting period is sufficiently short or the interest rate is sufficiently low, the delay option induces more inaction and makes coordination more difficult to achieve, as compared with the static case. We further discuss the theoretical implications for understanding the impact of monetary policy on economic recovery and how the accessibility of information affects financial stability.
{"title":"Delay and Learning in Coordination","authors":"Christophe Chamley, Zhen Zhou","doi":"10.2139/ssrn.3870878","DOIUrl":"https://doi.org/10.2139/ssrn.3870878","url":null,"abstract":"This paper studies a coordination game with incomplete information and the option to delay. The delay option enables the agents to observe a binary signal depending on whether the early actions (e.g., investment) surpasses a threshold. The anticipation of information incentivizes agents to wait and free-ride on the information, whereas acting early can help to generate good news, and consequently induce more coordination. Relying on this trade-off, we find the unique monotone equilibrium, which features the inability of the delay option in facilitating coordination. If the waiting period is sufficiently short or the interest rate is sufficiently low, the delay option induces more inaction and makes coordination more difficult to achieve, as compared with the static case. We further discuss the theoretical implications for understanding the impact of monetary policy on economic recovery and how the accessibility of information affects financial stability.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-06-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125263941","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This study examines current fiscal system for the petroleum industry in China using three hypothetical oil field models which are assumed in the South China Sea and tries to find whether current regime can boost oil production in deep-water oil fields in South China Sea. The result is discouraging. All the fields are marginal and are not worth to invest. Because of low oil price, high cost and high government take, all three fields show negative post-tax NPV and negative NPV/I ratio. High case which is 250 million barrels reserve shows the highest IRR, 7.88%. Furthermore, it is found that Chinese fiscal system is regressive. When economic rents are lower, government takes higher share. The early revenue to government further aggravates burden to investors and discourage investment. From the sensitivity analysis, the biggest influencing factor is development cost including capital expenditure and drilling cost. The second and third ones are oil price and reserve. The final one is operating cost or OPEX which is very small in scale. From Monte Carlo simulation, the probability of loss for post-tax NPV is higher than 50% in most circumstances.
{"title":"Economic Assessment of Deep-Water Fields in China Under Present Fiscal Scheme","authors":"Hongjie Zhao","doi":"10.2139/ssrn.3868932","DOIUrl":"https://doi.org/10.2139/ssrn.3868932","url":null,"abstract":"This study examines current fiscal system for the petroleum industry in China using three hypothetical oil field models which are assumed in the South China Sea and tries to find whether current regime can boost oil production in deep-water oil fields in South China Sea. The result is discouraging. All the fields are marginal and are not worth to invest. Because of low oil price, high cost and high government take, all three fields show negative post-tax NPV and negative NPV/I ratio. High case which is 250 million barrels reserve shows the highest IRR, 7.88%. Furthermore, it is found that Chinese fiscal system is regressive. When economic rents are lower, government takes higher share. The early revenue to government further aggravates burden to investors and discourage investment. From the sensitivity analysis, the biggest influencing factor is development cost including capital expenditure and drilling cost. The second and third ones are oil price and reserve. The final one is operating cost or OPEX which is very small in scale. From Monte Carlo simulation, the probability of loss for post-tax NPV is higher than 50% in most circumstances.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"5 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-06-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"120902196","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study the role of perceived trade-offs between human lives and economic benefits in shaping policy views. In an online experiment with a representative sample from the US conducted during the early Covid-19 pandemic, we provide randomized information on the medium-run costs of restricting economic activity to mitigate infections. A one standard deviation lower perceived economic cost of lockdowns increases support by about twice as much as having a Covid at-risk condition, and by half as much as being a Democrat. Varying projected health benefits has a similar effect. Personal exposure to health risks reduces people's responsiveness to cost-benefit considerations.
{"title":"Lives or Livelihoods? Perceived Tradeoffs and Policy Demand","authors":"Sonja Settele, Cortnie Shupe","doi":"10.2139/ssrn.3589891","DOIUrl":"https://doi.org/10.2139/ssrn.3589891","url":null,"abstract":"We study the role of perceived trade-offs between human lives and economic benefits in shaping policy views. In an online experiment with a representative sample from the US conducted during the early Covid-19 pandemic, we provide randomized information on the medium-run costs of restricting economic activity to mitigate infections. A one standard deviation lower perceived economic cost of lockdowns increases support by about twice as much as having a Covid at-risk condition, and by half as much as being a Democrat. Varying projected health benefits has a similar effect. Personal exposure to health risks reduces people's responsiveness to cost-benefit considerations.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-04-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131897552","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The paper compares utilitarianism and prioritarianism as alternative social welfare frameworks for evaluating climate policies. We review the main debates in the climate policy literature concerning the parameters of the utilitarian social welfare function, and discuss the analytical requirements and climate policy implications of prioritarianism both in deterministic and stochastic settings. We show that, given the specific characteristics of the climate issue and the assumptions routinely made in the climate literature, prioritarianism tends to support more lenient climate policies than undiscounted utilitarianism. This is based on the assumption of economic and social progress that makes the current generation worse-off than future generations. The presence of catastrophic climate outcomes that endanger the living conditions of future generations (or of the poorest individuals living in the future) relaxes this result.
{"title":"Prioritarianism and Climate Change","authors":"Maddalena Ferranna, M. Fleurbaey","doi":"10.2139/ssrn.3813825","DOIUrl":"https://doi.org/10.2139/ssrn.3813825","url":null,"abstract":"The paper compares utilitarianism and prioritarianism as alternative social welfare frameworks for evaluating climate policies. We review the main debates in the climate policy literature concerning the parameters of the utilitarian social welfare function, and discuss the analytical requirements and climate policy implications of prioritarianism both in deterministic and stochastic settings. We show that, given the specific characteristics of the climate issue and the assumptions routinely made in the climate literature, prioritarianism tends to support more lenient climate policies than undiscounted utilitarianism. This is based on the assumption of economic and social progress that makes the current generation worse-off than future generations. The presence of catastrophic climate outcomes that endanger the living conditions of future generations (or of the poorest individuals living in the future) relaxes this result.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-03-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131099908","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2021-03-23DOI: 10.1108/jeas-05-2021-0099
Sosson Tadadjeu, Henri Njangang, S. Asongu, Yann Nounamo
PurposeThis study investigates the impact of natural resources on wealth inequality as a first attempt on a panel of 45 developed and developing countries.Design/methodology/approachUsing the generalized method of moments (GMM), the results provide strong evidence that natural resources increase wealth inequality within a linear empirical framework.FindingsThese results are robust to the use of alternative natural resources and wealth inequality measures. Additionally, a nonlinear analysis provides evidence of an inverted U shaped relationship between natural resources and wealth inequality. The net effect of enhancing natural resources on wealth inequality is positive and building on the corresponding conditional negative effect, the attendant natural resource thresholds for inclusive development are provided. It follows that while natural resources increase wealth inequality, some critical levels of natural resources are needed for natural resources to reduce wealth inequality.Originality/valueTo the best of knowledge, this is the first study to assess how enhancing natural resources affect wealth inequality.
{"title":"Natural resources and wealth inequality: a cross-country analysis","authors":"Sosson Tadadjeu, Henri Njangang, S. Asongu, Yann Nounamo","doi":"10.1108/jeas-05-2021-0099","DOIUrl":"https://doi.org/10.1108/jeas-05-2021-0099","url":null,"abstract":"PurposeThis study investigates the impact of natural resources on wealth inequality as a first attempt on a panel of 45 developed and developing countries.Design/methodology/approachUsing the generalized method of moments (GMM), the results provide strong evidence that natural resources increase wealth inequality within a linear empirical framework.FindingsThese results are robust to the use of alternative natural resources and wealth inequality measures. Additionally, a nonlinear analysis provides evidence of an inverted U shaped relationship between natural resources and wealth inequality. The net effect of enhancing natural resources on wealth inequality is positive and building on the corresponding conditional negative effect, the attendant natural resource thresholds for inclusive development are provided. It follows that while natural resources increase wealth inequality, some critical levels of natural resources are needed for natural resources to reduce wealth inequality.Originality/valueTo the best of knowledge, this is the first study to assess how enhancing natural resources affect wealth inequality.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"60 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-03-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125109884","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Kirsten Hillebrand, Lars Hornuf, Benjamin Müller, Daniel Vrankar
When using digital devices and services, individuals provide their personal data to organizations in exchange for gains in various domains of life. Organizations use these data to run technologies such as smart assistants, augmented reality, and robotics. Most often, these organizations seek to make a profit. Individuals can, however, also provide personal data to public databases that enable nonprofit organizations to promote social welfare if sufficient data are contributed. Regulators have therefore called for efficient ways to help the public collectively benefit from its own data. By implementing an online experiment among 1,696 US citizens, we find that individuals would donate their data even when at risk of getting leaked. The willingness to provide personal data depends on the risk level of a data leak but not on a realistic impact of the data on social welfare. Individuals are less willing to donate their data to the private industry than to academia or the government. Finally, individuals are not sensitive to whether the data are processed by a human-supervised or a self-learning smart assistant.
{"title":"The Social Dilemma of Big Data: Donating Personal Data to Promote Social Welfare","authors":"Kirsten Hillebrand, Lars Hornuf, Benjamin Müller, Daniel Vrankar","doi":"10.2139/ssrn.3801476","DOIUrl":"https://doi.org/10.2139/ssrn.3801476","url":null,"abstract":"When using digital devices and services, individuals provide their personal data to organizations in exchange for gains in various domains of life. Organizations use these data to run technologies such as smart assistants, augmented reality, and robotics. Most often, these organizations seek to make a profit. Individuals can, however, also provide personal data to public databases that enable nonprofit organizations to promote social welfare if sufficient data are contributed. Regulators have therefore called for efficient ways to help the public collectively benefit from its own data. By implementing an online experiment among 1,696 US citizens, we find that individuals would donate their data even when at risk of getting leaked. The willingness to provide personal data depends on the risk level of a data leak but not on a realistic impact of the data on social welfare. Individuals are less willing to donate their data to the private industry than to academia or the government. Finally, individuals are not sensitive to whether the data are processed by a human-supervised or a self-learning smart assistant.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"415 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-02-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122851033","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We study the effect of entitlement on the willingness to lie. We set up a model of lying where individuals feel more or less entitled to their endowment depending on how they earned it. When given the opportunity to lie to keep their endowment, individuals who feel more entitled are encouraged to lie while others are discouraged. To test the model predictions we use a laboratory experiment where we compare the lying behavior of participants endowed with a high endowment and participants endowed with a low endowment. In one treatment, the allocation of the endowment is decided by participants’ performance, and in the other, it is determined by a random draw. Our study shows that deservingness influences lying in an intuitive direction: when participants performance determines income, those who earn less money lie less than those who earn more. We do not find differences in lying when participants perform the same task but lie to keep windfall endowments.
{"title":"Because I (Don’t) Deserve It: Entitlement and Lying Behavior","authors":"Tilman Fries, Daniel Parra","doi":"10.2139/ssrn.3564587","DOIUrl":"https://doi.org/10.2139/ssrn.3564587","url":null,"abstract":"Abstract We study the effect of entitlement on the willingness to lie. We set up a model of lying where individuals feel more or less entitled to their endowment depending on how they earned it. When given the opportunity to lie to keep their endowment, individuals who feel more entitled are encouraged to lie while others are discouraged. To test the model predictions we use a laboratory experiment where we compare the lying behavior of participants endowed with a high endowment and participants endowed with a low endowment. In one treatment, the allocation of the endowment is decided by participants’ performance, and in the other, it is determined by a random draw. Our study shows that deservingness influences lying in an intuitive direction: when participants performance determines income, those who earn less money lie less than those who earn more. We do not find differences in lying when participants perform the same task but lie to keep windfall endowments.","PeriodicalId":129815,"journal":{"name":"Microeconomics: Welfare Economics & Collective Decision-Making eJournal","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-02-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129519719","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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