Optimal coexistence of long-term and short-term contracts in labor Markets

We consider a market where firms hire workers to run their projects and such projects differ in profitability. At any period, each firm needs two workers to successfully run its project: a junior agent, with no specific skills, and a senior worker, whose effort is not verifiable. Senior workers differ in ability and their competence is revealed after they have worked as juniors in the market. We study the length of the contractual relationships between firms and workers in an environment where the matching between firms and workers is the result of market interaction. We show that, despite in a one-firm-one-worker set-up long-term contracts are the optimal choice for firms, market forces often induce firms to use short-term contracts. Unless the market only consists of firms with very profitable projects, firms operating highly profitable projects offer short-term contracts to ensure the service of high-ability workers and those with less lucrative projects also use short-term contracts to save on the junior workers' wage. Intermediate firms may (or may not) hire workers through long-term contracts.

Contractual allocation of decision rights and incentives: The case of automobile distribution

We analyze empirically the allocation of rights and monetary incentives in automobile franchise contracts. These contracts substantially restrict the decision rights of dealers and grant manufacturers extensive contractual completion and enforcement powers, converting the manufacturers, de facto, in a sort of quasi-judiciary instance. Variation in the allocation of decision rights andincentive intensity is explained by the incidence of moral hazard in the relation. In particular, when the cost of dealer moral hazard is higher and the risk of manufactureropportunism is lower, manufacturers enjoy more discretion in determining the performance required from their dealers and in using mechanisms such as monitoring, termination and monetary incentives to ensure such performance is provided. We also explore the existence of interdependencies between the different elements of the system. and find some complementarities between completion and termination rights, and between monitoring rights and the intensity of incentives.

Networks of PhD Students and Academic Performance: A Comparison across Countries

In this article we compare regression models obtained to predict PhD students’ academic performance in the universities of Girona (Spain) and Slovenia. Explanatory variables are characteristics of PhD student’s research group understood as an egocentered social network, background and attitudinal characteristics of the PhD students and some characteristics of the supervisors. Academic performance was measured by the weighted number of publications. Two web questionnaires were designed, one for PhD students and one for their supervisors and other research group members. Most of the variables were easily comparable across universities due to the careful translation procedure and pre-tests. When direct comparison was notpossible we created comparable indicators. We used a regression model in which the country was introduced as a dummy coded variable including all possible interaction effects. The optimal transformations of the main and interaction variables are discussed. Some differences between Slovenian and Girona universities emerge. Some variables like supervisor’s performance and motivation for autonomy prior to starting the PhD have the same positive effect on the PhD student’s performance in both countries. On the other hand, variables like too close supervision by the supervisor and having children have a negative influence in both countries. However, we find differences between countries when we observe the motivation for research prior to starting the PhD which increases performance in Slovenia but not in Girona. As regards network variables, frequency of supervisor advice increases performance in Slovenia and decreases it in Girona. The negative effect in Girona could be explained by the fact that additional contacts of the PhD student with his/her supervisor might indicate a higher workload in addition to or instead of a better advice about the dissertation. The number of external student’s advice relationships and social support mean contact intensity are not significant in Girona, but they have a negative effect in Slovenia. We might explain the negative effect of external advice relationships in Slovenia by saying that a lot of external advice may actually result from a lack of the more relevant internal advice

Personal redistribution and the regional allocation of public investment

How should an equity-motivated policy-marker allocate public capital (infrastructure) across regions. Should it aim at reducing interregional differences in per capita output, or at maximizing total output? Such a normative question is examined in a model where the policy-marker is exclusively concerned about personal inequality and has access to two policy instruments. (i) a personal tax-transfer system (taxation is distortionary), and (ii) the regional allocation of public investment. I show that the case for public investment as a significant instrument for interpersonal redistribution is rather weak. In the most favorable case, when the tax code is constrained to be uniform across regions, it is optimal to distort the allocation of public investment in favor of the poor regions, but only to a limited extent. The reason is that poor individuals are relatively more sensitive to public trans fers, which are maximized by allocating public investment efficiently. If! the tax code can vary across regions then the optimal policy may involve an allocation of public investment distorted in favor of the rich regions.

Money, Fame and the Allocation of Talent: Brain Drain, the Matthew Effect and the Institution of Science

The earning structure in science is known to be flat relative to the one in the private sector, which could cause a brain drain toward the private sector. In this paper, we assume that agents value both money and fame and study the role of the institution of science in the allocation of talent between the science sector and the private sector. Following works on the Sociology of Science, we model the institution of science as a mechanism distributing fame (i.e. peer recognition). We show that since the intrinsic performance is less noisy signal of talent in the science sector than in the private sector, a good institution of science can mitigate the brain drain. We also find that providing extra monetary incentives through the market might undermine the incentives provided by the institution and thereby worsen the brain drain. Finally, we study the optimal balance between monetary and non-monetary incentives in science.

Money, fame and the allocation of talent: Brain drain and the institution of science

The earning structure in science is known to be flat relative to the one in theprivate sector, which could cause a brain drain toward the private sector. In thispaper, we assume that agents value both money and fame and study the role ofthe institution of science in the allocation of talent between the science sector andthe private sector. Following works on the Sociology of Science, we model theinstitution of science as a mechanism distributing fame (i.e. peer recognition). Weshow that since the intrinsic performance is less noisy signal of talent in the sciencesector than in the private sector, a good institution of science can mitigate thebrain drain. We also find that providing extra monetary incentives through themarket might undermine the incentives provided by the institution and therebyworsen the brain drain. Finally, we study the optimal balance between monetaryand non-monetary incentives in science.

Endogenous population subgroups: the best population partition and optimal number of groups

The aim of this paper is to suggest a method to find endogenously the points that group the individuals of a given distribution in k clusters, where k is endogenously determined. These points are the cut-points. Thus, we need to determine a partition of the N individuals into a number k of groups, in such way that individuals in the same group are as alike as possible, but as distinct as possible from individuals in other groups. This method can be applied to endogenously identify k groups in income distributions: possible applications can be poverty

Misallocation of capital in a model of endogenous financial intermediation and insurance

In this paper we analyze productivity and welfare losses from capital misallocation in a general equilibrium model of occupational choice and endogenous financial intermediation. We study the effects of borrowing and lending, insurance, and risk sharing on the optimal allocation of resources. We find that financial markets together with general equilibrium effects have large impact on entrepreneurs' entry and firm-size decisions. Efficiency gains are increasing in the quality of financial markets, particularly in their ability to alleviate a financing constraint by providing insurance against idiosyncratic risk.

Optimal second-degree price discrimination and arbitrage: On the role of asymetric information among buyers

The traditional theory of monopolistic screening tackles individualself-selection but does not address the possibility that buyers couldform a coalition to coordinate their purchases and to reallocate thegoods. In this paper, we design the optimal sale mechanism which takesinto account both individual and coalition incentive compatibilityfocusing on the role of asymmetric information among buyers. We showthat when a coalition of buyers is formed under asymmetric information,the monopolist can do as well as when there is no coalition. Although inthe optimal sale mechanism marginal rates of substitution are notequalized across buyers (hence there exists room for arbitrage), theyfail to realize the gains from arbitrage because of the transaction costsin coalition formation generated by asymmetric information.

Competition and cost overruns. Optimal misspecification of procurement contracts

Most cases of cost overruns in public procurement are related to important changes in the initial project design. This paper deals with the problem of design specification in public procurement and provides a rationale for design misspecification. We propose a model in which the sponsor decides how much to invest in design specification and awards competitively the project to a contractor. After the project has been awarded the sponsor engages in bilateral renegotiation with the contractor, in order to accommodate changes in the initial project s design that new information makes desirable. When procurement takes place in the presence of horizontally differentiated contractors, the design s specification level is seen to affect the resulting degree of competition. The paper highlights this interaction between market competition and design specification and shows that the sponsor s optimal strategy, when facing an imperfectly competitive market supply, is to underinvest in design specification so as to make significant cost overruns likely. Since no such misspecification occurs in a perfectly competitive market, cost overruns are seen to arise as a consequence of lack of competition in the procurement market.

The economics of organized crime and optimal law enforcement

This paper extends the optimal law enforcement literature to organized crime.We model the criminal organization as a vertical structure where the principal extracts some rents from the agents through extortion. Depending on the principal's information set, threats may or may not be credible. As long as threats are credible, the principal is able to fully extract rents.In that case, the results obtained by applying standard theory of optimal law enforcement are robust: we argue for a tougher policy. However, when threats are not credible, the principal is not able to fully extract rents and there is violence. Moreover, we show that it is not necessarily true that a tougher law enforcement policy should be chosen when in presence of organized crime.

Radial measures of public services deficit for regional allocation of public funds

The goal of this paper is to present an optimal resource allocation model for the regional allocation of public service inputs. Theproposed solution leads to maximise the relative public service availability in regions located below the best availability frontier, subject to exogenous budget restrictions and equality ofaccess for equal need criteria (equity-based notion of regional needs). The construction of non-parametric deficit indicators is proposed for public service availability by a novel application of Data Envelopment Analysis (DEA) models, whose results offer advantages for the evaluation and improvement of decentralised public resource allocation systems. The method introduced in this paper has relevance as a resource allocation guide for the majority of services centrally funded by the public sector in a given country, such as health care, basic and higher education, citizen safety, justice, transportation, environmental protection, leisure, culture, housing and city planning, etc.

North-South convergence and the allocation of CO2 emissions

We postulate a two-region world, comprised of North (calibrated after the US) and South(calibrated after China). Our optimization results show the compatibility of the following threedesiderata:(1) Global CO2 emissions follow a conservative path that leads to the stabilizationof concentrations at 450 ppm.(2) North and South converge to a path of sustained growth at 1% per year (28.2%per generation) in 2075.(3) During the transition to the steady state, North also grows at 1% per year whileSouth s rates of growth are markedly higher.The transition paths require a drastic reduction of the share of emissions allocated to North,large investments in knowledge, both in North and South, as well as very large investments ineducation in South. Surprisingly, in order to sustain North s utility growth rate, some output mustbe transferred from South to North during the transition.Although undoubtedly subject to many caveats, our results support a degree of optimism byproviding prima facie evidence of the possibility of tackling climate change in a way that is fairboth across generations and across regions while allowing for positive rates of humandevelopment.

The maximum voltage drop in an on-chip power distribution network: analysis of square, triangular and hexagonal power pad arrangements

A mathematical model of the voltage drop which arises in on-chip power distribution networks is used to compare the maximum voltage drop in the case of different geometric arrangements of the pads supplying power to the chip. These include the square or Manhattan power pad arrangement, which currently predominates, as well as equilateral triangular and hexagonal arrangements. In agreement with the findings in the literature and with physical and SPICE models, the equilateral triangular power pad arrangement is found to minimize the maximum voltage drop. This headline finding is a consequence of relatively simple formulas for the voltage drop, with explicit error bounds, which are established using complex analysis techniques, and elliptic functions in particular.

The maximum voltage drop in an on-chip power distribution network: analysis of square, triangular and hexagonal power pad arrangements

A mathematical model of the voltage drop which arises in on-chip power distribution networks is used to compare the maximum voltage drop in the case of different geometric arrangements of the pads supplying power to the chip. These include the square or Manhattan power pad arrangement, which currently predominates, as well as equilateral triangular and hexagonal arrangements. In agreement with the findings in the literature and with physical and SPICE models, the equilateral triangular power pad arrangement is found to minimize the maximum voltage drop. This headline finding is a consequence of relatively simple formulas for the voltage drop, with explicit error bounds, which are established using complex analysis techniques, and elliptic functions in particular.