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Incentives
Kinds of Incentives Terms modified by Incentives Selected AbstractsINSTABILITY AND THE INCENTIVES FOR CORRUPTIONECONOMICS & POLITICS, Issue 1 2009FILIPE R. CAMPANTE We investigate the relationship between corruption and political stability, from both theoretical and empirical perspectives. We propose a model of incumbent behavior that features the interplay of two effects: a horizon effect, whereby greater instability leads the incumbent to embezzle more during his short window of opportunity, and a demand effect, by which the private sector is more willing to bribe stable incumbents. The horizon effect dominates at low levels of stability, because firms are unwilling to pay high bribes and unstable incumbents have strong incentives to embezzle, whereas the demand effect gains salience in more stable regimes. Together, these two effects generate a non-monotonic, U-shaped relationship between total corruption and stability. On the empirical side, we find a robust U-shaped pattern between country indices of corruption perception and various measures of incumbent stability, including historically observed average tenures of chief executives and governing parties: regimes that are very stable or very unstable display higher levels of corruption when compared with those in an intermediate range of stability. These results suggest that minimizing corruption may require an electoral system that features some re-election incentives, but with an eventual term limit. [source] [Commentary] THE BOTTOM LINE ON CASH INCENTIVES WITH DRUG USERSADDICTION, Issue 5 2009DAVID VLAHOV No abstract is available for this article. [source] ALIGNING INCENTIVES AND MOTIVATIONS IN HEALTH CARE: THE CASE OF EARNED AUTONOMYFINANCIAL ACCOUNTABILITY & MANAGEMENT, Issue 4 2007Russell Mannion Delegating greater authority and decision making power to front line organisations, including devolution of control through the system of ,Earned Autonomy' is a key component of the UK Government's modernisation agenda for the public services. The principle of Earned Autonomy is that the highest performing organisations are subject to less central control and allowed increased operating freedoms. This paper explores the implementation of Earned Autonomy in the English NHS and addresses the question of whether the incentives implicit within Earned Autonomy are both sufficiently powered and aligned to the motivations of senior hospital managers to secure the desired improvements in organisational performance. [source] REAL OPTIONS AND PATENT DAMAGES: THE LEGAL TREATMENT OF NON-INFRINGING ALTERNATIVES, AND INCENTIVES TO INNOVATEJOURNAL OF ECONOMIC SURVEYS, Issue 4 2006Jerry Hausman Abstract Patent litigation has become an increasingly important consideration in business strategy. Damage awards in patent litigation are supposed to compensate the patent owner for economic harm created by infringement and are therefore important for protecting returns to innovation. We analyze the effects that a recent court decision in the United States, called Grain Processing, has had on the incentives of potential infringers to infringe and innovators to innovate. We find that Grain Processing has decreased the expected value of damages awards in patent cases by conferring a ,free option' on infringers. Grain Processing also concluded that the patent owner in the case did not suffer lost profits due to the infringement because the infringer would have adopted an (inferior) non-infringing technology had it not infringed. We demonstrate that this conclusion is inconsistent with standard economic models. [source] CREATION OF MARINE RESERVES AND INCENTIVES FOR BIODIVERSITY CONSERVATIONNATURAL RESOURCE MODELING, Issue 2 2010QUACH THI KHANH NGOC Abstract Despite a number of benefits, marine reserves provide neither incentives for fishermen to protect biodiversity nor compensation for financial loss due to the designation of the reserves. To obtain fishermen's support for marine reserves, some politicians have suggested that managers of new marine reserves should consider subsidizing or compensating those fishermen affected by the new operations. The objective of this paper is to apply principal,agent theory, which is still infrequently applied to fisheries, to define the optimal reserve area, fishing effort, and transfer payments in the context of symmetric and asymmetric information between managers and fishermen. The expected optimal reserve size under asymmetric information is smaller than that under symmetric information. Fishing efforts encouraged with a transfer payment are always less compared to those without payment. This reflects the fact that as the manager induces the fishermen to participate in the conservation program, the fishermen will take into account their effects on fish stock by decreasing their effort. Examples are also supplied to demonstrate these concepts. [source] ROYALTY INCENTIVES AND GULF OF MEXICO OIL PRODUCTIONNATURAL RESOURCE MODELING, Issue 3 2007MITCH KUNCE ABSTRACT. This paper employs field-specific estimates of Pindyck's (1978) widely cited model of natural resource supply to simulate effects of changes in federal royalty rates on the timing of exploration and output by firms in the deepwater Gulf of Mexico oil industry. Results suggest that deepwater Gulf oil production is highly inelastic with respect to changes in royalty rates. Royalty rate decreases are shown to increase early period exploration effort, result in little change in reserve additions and future production. Policy implications of this study suggest that public officials should be wary of arguments that large increases in deepwater Gulf oil field activity can be obtained from reductions in federal royalty rates-particularly reductions in the early years of oil field development. [source] INEQUALITY, INCENTIVES AND THE INTERPERSONAL TESTRATIO, Issue 4 2008Kasper Lippert-Rasmussen This article defends three claims: (1) even if Rawls' difference principle permits incentives to induce talented people to be more productive, it does not follow that it permits inequalities; (2) the difference principle, when adequately specified, may in some circumstances permit incentives and allow that the worst off are not made as well off as they could be; and (3) an argument for incentives might pass Cohen's interpersonal test even if it is unsound and might not pass it even if it is sound.1 [source] WHY SOCIAL PREFERENCES MATTER , THE IMPACT OF NON-SELFISH MOTIVES ON COMPETITION, COOPERATION AND INCENTIVESTHE ECONOMIC JOURNAL, Issue 478 2002Ernst Fehr A substantial number of people exhibit social preferences, which means they are not solely motivated by material self-interest but also care positively or negatively for the material payoffs of relevant reference agents. We show empirically that economists fail to understand fundamental economic questions when they disregard social preferences, in particular, that without taking social preferences into account, it is not possible to understand adequately (i) effects of competition on market outcomes, (ii) laws governing cooperation and collective action, (iii) effects and the determinants of material incentives, (iv) which contracts and property rights arrangements are optimal, and (v) important forces shaping social norms and market failures. [source] THE RELATIONSHIP BETWEEN FINANCIAL INCENTIVES FOR COMPANY PRESIDENTS AND FIRM PERFORMANCE IN JAPAN,THE JAPANESE ECONOMIC REVIEW, Issue 4 2008KATSUYUKI KUBO Kaplan (1994) concludes that the relationship between top pay and stock performance in Japan is similar to that in the USA. Using a new and comprehensive data set that includes presidents' stock and their stock option holdings, this study estimates the sensitivity of Japanese presidents' wealth to shareholder wealth in the period 1977,2000. Contrary to the commonly held belief that Japanese corporate governance is becoming more like that in the USA, the results show that pay,performance sensitivity actually decreased substantially after 1990. In 2000, Japanese presidents received $US22,100 when stock returns increased from ,2.1% to 14.8%. [source] CONVERTIBLE DEBT AND RISK-SHIFTING INCENTIVESTHE JOURNAL OF FINANCIAL RESEARCH, Issue 4 2009Assaf Eisdorfer Abstract I argue that convertible debt, in contrast to its perceived role, can produce shareholders' risk-shifting incentives. When a firm's capital structure includes convertible debt, every investment decision affects not only the distribution of the asset value but also the likelihood that the debt will be converted and thereby the distribution of the firm's leverage. This suggests that managers can engage in risk-increasing projects if a higher asset risk generates a more favorable distribution of leverage. Empirical evidence using 30 years of data supports my argument. [source] MANAGERIAL INCENTIVES AND THE PRICE EFFECTS OF MERGERS,THE JOURNAL OF INDUSTRIAL ECONOMICS, Issue 3 2005Abraham L. Wickelgren Most analysis of market power assumes that managers are perfect agents for shareholders. This paper relaxes that assumption. When managers of a multi-product firm exert unobservable effort to improve product quality, there is a trade-off between providing adequate effort incentives and ensuring sufficient price-coordination between the product divisions. This makes some intra-firm price competition optimal, explaining why many multi-product firms allow for competition between divisions. When there are effort spillovers, the optimal amount of price competition can be as great as when the products are under separate ownership. Even with some profit-sharing, intra-firm price competition can reduce quality-adjusted price, which has important implications for antitrust policy. [source] PUBLIC EDUCATION, FERTILITY INCENTIVES, NEOCLASSICAL ECONOMIC GROWTH AND WELFAREBULLETIN OF ECONOMIC RESEARCH, Issue 1 2010Luciano Fanti I28; J13; O41 ABSTRACT Using a simple overlapping generations model of neoclassical growth, we analyse the effects of both child allowances and the system of public education on the rate of fertility, the per capita income and the individual lifetime welfare. The essential message of the present paper is that developed countries plagued by below-replacement fertility and income stagnation may raise per capita income and the rate of fertility at the same time by increasing the public education expenditure rather than by resorting to child allowances. The latter, in fact, are found to be harmful for long-run neoclassical economic growth and, in contrast with the common belief, for the rate of population growth as well. Moreover, welfare analysis has shown the existence of a Pareto-efficient welfare-maximizing educational contribution rate. [source] Incentive-based scheduling in Grid computingCONCURRENCY AND COMPUTATION: PRACTICE & EXPERIENCE, Issue 14 2006Yanmin Zhu Abstract With the rapid development of high-speed wide-area networks and powerful yet low-cost computational resources, Grid computing has emerged as an attractive computing paradigm. In typical Grid environments, there are two distinct parties, resource consumers and resource providers. Enabling an effective interaction between the two parties (i.e. scheduling jobs of consumers across the resources of providers) is particularly challenging due to the distributed ownership of Grid resources. In this paper, we propose an incentive-based peer-to-peer (P2P) scheduling for Grid computing, with the goal of building a practical and robust computational economy. The goal is realized by building a computational market supporting fair and healthy competition among consumers and providers. Each participant in the market competes actively and behaves independently for its own benefit. A market is said to be healthy if every player in the market gets sufficient incentive for joining the market. To build the healthy computational market, we propose the P2P scheduling infrastructure, which takes the advantages of P2P networks to efficiently support the scheduling. The proposed incentive-based algorithms are designed for consumers and providers, respectively, to ensure every participant gets sufficient incentive. Simulation results show that our approach is successful in building a healthy and scalable computational economy. Copyright © 2006 John Wiley & Sons, Ltd. [source] Smallholder Preferences for Agri-environmental Change at the Bhoj Wetland, IndiaDEVELOPMENT POLICY REVIEW, Issue 5 2008Rob Hope Incentive-based approaches have gained policy interest in linking change in agricultural land management with environmental conservation. This article investigates how scheme design influences smallholder farmers' decisions to switch to organic farming to reduce water pollution, drawing on a study at a Ramsar wetland site providing water for the city of Bhopal. Results from a choice experiment suggest that transitional payments are necessary to overcome farmer constraints to adopt organic farming, and that effective land certification has the potential to act as a self-enforcing mechanism linking farmer incomes with wetland conservation benefits. [source] Competition and the Incentive to Produce High QualityECONOMICA, Issue 279 2003Rachel E. Kranton Previous literature indicates that, when quality is a choice variable, firms have an incentive to produce high quality to maintain their reputations with consumers. The strategic interaction among firms and competition for market share is not considered. This paper finds that, when firms compete for market share, perfect equilibria in which firms produce high-quality goods need not exist. Competition for customers can eliminate the price premium needed to induce firms to maintain a reputation for high-quality production. In this case, economists and policy analysts should pay greater attention to the interaction among firms and the institutions, such as professional associations, that structure interfirm relations when considering whether firms have an incentive to produce high-quality goods. [source] Is Financial Stress an Incentive for the Adoption of Businesslike Planning and Control in Local Government?FINANCIAL ACCOUNTABILITY & MANAGEMENT, Issue 1 2000A Comparative Study of Eight Dutch Municipalities Hood has formulated the hypothesis that financial stress is a motive for the adoption of New Public Management (NPM), and particularly of businesslike instruments and styles in government. He has illustrated this hypothesis on a macro-level by comparing different OECD countries. The aim of this paper is to make a start with a micro-level test of this hypothesis by studying individual governmental organization, i.e. eight municipalities in the Netherlands. The financial stress hypothesis has been operationalised by assuming a negative relationship between the financial position of a municipality and the existence of businesslike planning and control instruments. The research shows that there is no evidence for the existence of this relationship. However, a conclusive judgement about the financial stress hypothesis seems to be impossible due to the fact that non-technical aspects of NPM were not taken into account, and also because of an , on average , upward bias in the financial position of the municipalities in the empirical investigation. [source] Optimal Incentive Contracts for Loss-Averse Managers: Stock Options versus Restricted Stock GrantsFINANCIAL REVIEW, Issue 4 2006Anna Dodonova G39; M52 Abstract This paper provides an explanation for the widespread use of stock option grants in executive compensation. It shows that the optimal incentive contract for loss-averse managers must contain a substantial portion of stock options even when it should consist exclusively of stock grants for "classical" risk-averse managers. The paper also provides an explanation for the drastic increase in the risk-adjusted level of CEO compensations over the past two decades and argues that more option-based compensation should be used in firms with higher cash flow volatility and in industries with a higher degree of heterogeneity among firms. [source] Rule 10b5-1 Trading Plans and Insiders' Incentive to MisrepresentAMERICAN BUSINESS LAW JOURNAL, Issue 2 2010Stanley Veliotis First page of article [source] Breastfeeding policies and the production of motherhood: a historical,cultural approachNURSING INQUIRY, Issue 1 2003Dagmar Estermann Meyer Breastfeeding policies and the production of motherhood: a historical,cultural approach This paper revisits some of the aspects that allow us to situate historically the process that has been called the ,politicization of women's breasts'. It is part of a broader research project being undertaken in Rio Grande do Sul, Brazil, which is studying information from the educational material used in the National Campaign for the Incentive of Breastfeeding. The methodological approach used is cultural analysis, and its theoretical basis is informed by feminist studies and cultural studies, from a poststructuralist perspective. Knowledges and practices that produce notions of maternity are problematized to argue that current political and economic arrangements have necessitated a redefinition of motherhood. This re-signification of motherhood has transferred to women the duty of solving an array of problems that were previously considered government's responsibility, in particular those related to the physical and emotional development of infants. [source] A Dynamic Incentive-Based Argument for Conditional Transfers,THE ECONOMIC RECORD, Issue 2008DILIP MOOKHERJEE We compare the long-run effects of replacing unconditional transfers to the poor by transfers conditional on the education of children. Unlike Mirrlees' income taxation model, the distribution of skill evolves endogenously. Human capital accumulation follows the Freeman,Ljungqvist,Mookherjee,Ray OLG model with missing capital markets and dynastic bequest motives. Conditional transfers (funded by taxes on earnings of the skilled) are shown to induce higher long-run output per capita and (both utilitarian and Rawlsian) welfare, owing to their superior effect on skill accumulation incentives. The result is established both with two skill levels, and a continuum of occupations. [source] Incentives and Opportunities to Manage Earnings around Option Grants,CONTEMPORARY ACCOUNTING RESEARCH, Issue 3 2009Terry A. Baker First page of article [source] Corporate Investment Incentives and Accounting-Based Debt Covenants,CONTEMPORARY ACCOUNTING RESEARCH, Issue 4 2003Alan V. S. Douglas Abstract This paper studies the conditions under which accounting-based debt covenants increase firm value in a setting that incorporates the conflicting incentives of shareholders, bondholders, and managers. We construct a model in which debt is needed to discipline managerial investment decisions despite endogenous compensation contracts. We show that accounting covenants increase value when (1) debt serves as a credible commitment to penalize poor investment decisions; (2) the firm faces other (exogenous) sources of uncertainty that can make debt risky despite good investment decisions; and (3) accounting information serves as a contractible proxy for firm's economic performance. In these circumstances, accounting covenants ensure that shareholders do not offer compensation schemes that would encourage bondholder wealth expropriation when the debt becomes risky. A covenant specifying a required level of accounting performance provides additional bondholder power when performance is low. An accounting-based dividend covenant allows a disbursement to maintain investment incentives when performance is high without allowing dividend-based expropriation. The optimal covenants depend on the reliability of accounting information, and the interaction between accounting performance and the different incentive conflicts provides new insight into the empirical literature on accounting-based covenants. [source] Discretionary Accounting Accruals, Managers' Incentives, and Audit Fees,CONTEMPORARY ACCOUNTING RESEARCH, Issue 3 2003Ferdinand A. Gul Abstract This paper examines the linkages between discretionary accruals (DAs), managerial share ownership, management compensation, and audit fees. It draws on the theory that managers of firms with high management ownership are likely to use DAs to communicate value-relevant information, while managers of firms with high accounting-based compensation are likely to use DAs opportunistically to manage earnings to improve their compensation. OLS regression results of 648 Australian firms show that (1) there is a positive association between DAs and audit fees; (2) managerial ownership negatively affects the positive relationship between DAs and audit fees; and (3) this negative impact is further found to be weaker for firms with high accounting-based management compensation. [source] The Impact of Financial and Tax Reporting Incentives on Option Grants to Canadian CEOs,CONTEMPORARY ACCOUNTING RESEARCH, Issue 2 2000KENNETH J. KLASSEN Abstract This study explores the effects of financial and tax reporting incentives on options granted to chief executive officers in Canada. Extant studies with a similar objective (Yermack 1995; Matsunaga 1995) explore predominantly nonqualified U.S. option grants that are deductible to the extent that the options are in the money at the time of exercise. In contrast, Canadian firms do not get a tax deduction for their stock option grants at any time. In both countries, no expense is recorded for financial reporting purposes. As a result, the financial reporting and tax reporting trade-off is more pronounced in the Canadian setting of this study compared with the U.S. setting. We measure option granting behavior as the ratio of the Black-Scholes value of stock option grants to the sum of cash compensation and the value of stock option grants. Using a sample of 806 firm-year observations during the period 1993-95, we find that observed option grants are significantly correlated with proxies for short-run financial reporting incentives. We also find evidence that option granting behavior is correlated with proxies for tax incentives. [source] Retailer's Response to Alternate Manufacturer's Incentives Under a Single-Period, Price-Dependent, Stochastic-Demand Framework,DECISION SCIENCES, Issue 4 2005F. J. Arcelus ABSTRACT This article considers the joint development of the optimal pricing and ordering policies of a profit-maximizing retailer, faced with (i) a manufacturer trade incentive in the form of a price discount for itself or a rebate directly to the end customer; (ii) a stochastic consumer demand dependent upon the magnitude of the selling price and of the trade incentive, that is contrasted with a riskless demand, which is the expected value of the stochastic demand; and (iii) a single-period newsvendor-type framework. Additional analysis includes the development of equal profit policies in either form of trade incentive, an assessment of the conditions under which a one-dollar discount is more profitable than a one-dollar rebate, and an evaluation of the impact upon the retailer-expected profits of changes in either incentive or in the degree of demand uncertainty. A numerical example highlights the main features of the model. The analytical and numerical results clearly show that, as compared to the results for the riskless demand, dealing with uncertainty through a stochastic demand leads to (i) (lower) higher retail prices if additive (multiplicative) error, (ii) lower (higher) pass throughs if additive (multiplicative) error, (iii) higher claw backs in both error structures wherever applicable, and (iv) higher rebates to achieve equivalent profits in both error structures. [source] Ownership and Incentives in Joint Forest Management: A SurveyDEVELOPMENT POLICY REVIEW, Issue 1 2005Tuukka Castrén The relationship between the state and communities has been an overriding issue in the development of forestry institutions globally. In many countries, the trend is for communities to become co-managers of public forests. Meanwhile, in development co-operation both poverty and multiple rural livelihoods have received increased attention. In this article, the potential of joint community-state management of forests is discussed. Forest production has several characteristics that make it suitable for joint management where both parties benefit. Involving communities in management decreases the state's monitoring costs, while communities benefit from better access to market information. For this to take place, however, the state forest apparatus needs to be free from undue rent-seeking. The most advantageous solutions are case- and context-specific. [source] Electoral behaviour in a two-vote system: Incentives for ticket splitting in German Bundestag electionsEUROPEAN JOURNAL OF POLITICAL RESEARCH, Issue 2 2002Franz Urban Pappi The ballot structure of German Bundestag elections allows two votes: one for a constituency candidate and the second for a party list. About one-fifth of the voters usually split their ticket. Several hypotheses are derived about incentives for ticket splitting and tested with survey data from a 1998 pre-election poll. We argue that an explanation of split tickets in the German system has to take into account both party rankings and coalition preferences. One of the most important incentives is a preference or top ranking of a minor party like the FDP or Greens, if it is combined with a preference for a coalition with either the CDU/CSU or SPD. Contrary to this finding, the hypothesis of threshold insurance voting of CDU/CSU or SPD supporters choosing the party list of their prospective minor coalition partner is rejected for the 1998 election. [source] Managerial Risk-Taking Incentives and Executive Stock Option Repricing: A Study of US Casino ExecutivesFINANCIAL MANAGEMENT, Issue 1 2005Daniel A. Rogers I examine the relation between managerial incentives from holdings of company stock and options and stock option repricing. Because options provide incentives to increase both risk and stock price, firms must realize that as options go underwater, executives might face incentives to invest in risky, negative NPV projects. Repricing may alleviate such incentives. I examine repricing activity by firms in the US gaming industry and find that risk-taking incentives from options are positively related to the incidence of executive option repricing. The results support the hypothesis that repricing assists firms in alleviating excessive risk-taking incentives of senior management. [source] Option Expensing and Managerial Equity IncentivesFINANCIAL MARKETS, INSTITUTIONS & INSTRUMENTS, Issue 3 2009Yi Feng We examine the impact of mandatory option expensing on managerial equity incentives. Though effective only after June 15, 2005, there is evidence that U.S. firms begin preparing for option expensing as early as 2002 by making changes to their equity incentive plans. We find that (1) CEO option incentives exhibit a sharp reversal during the period 1993-2005, with the median CEO option incentives increasing 25% a year before 2002 but declining 17% a year after 2001; (2) the reduction in option incentives after 2001 is larger for firms that use excessive levels of equity incentives prior to 2002; (3) firms make similar reductions to options granted to CEOs, other top executives and lower-level employees; (4) CEO stock incentives increase throughout the entire 13-year period, rising at an even greater rate after 2001; and (5) the increase in stock incentives after 2001 is far from offsetting the corresponding decrease in option incentives. These findings are robust to controls for firm and CEO characteristics and for concurrent regulatory, business and market events such as the Sarbanes-Oxley Act of 2002, the option backdating scandal, and the 2000 stock market crash. We also provide a theoretical explanation for the documented changes in option incentives. [source] The Emergence of Corporate Governance from Wall St. to Main St.: Outside Directors, Board Diversity, Earnings Management, and Managerial Incentives to Bear RiskFINANCIAL REVIEW, Issue 1 2003M. Andrew Fields Recent corporate events have brought a heightened public awareness to corporate governance issues. Much work has been accomplished to date, but it is clear that much more remains to be done. This paper provides a review of empirical research in four relevant areas of corporate governance. Specifically, the paper provides an overview of (a) the role that outside directors play in monitoring managers, (b) the emerging literature on the impact of board diversity, (c) the existence of and incentives for corporate executives to manage firm earnings, and (d) managerial incentives to bear risk. [source] | |||||||||||||||||||||||||||||||||||||||||||||||||