The diversity of activation markets in Europe

Purpose – The purpose of this article is to analyse the diversity of markets for the provision of activation services. Design/methodology/approach – The article is based on the outcomes of a project involving nine European countries. The project investigated changing forms of governance of income protection schemes and activation services for unemployed people. Diversity is investigated by focusing on five dimensions of diversity derived from the quasi‐market concept as developed by Le Grand: the purchasers, the providers, the customers, the purchaser‐provider split and the purchaser‐customer split. Findings – The paper finds considerable diversity in the design of markets for the provision of activation. Diversity is visible in all dimensions involved in the analysis. One interesting finding is that a full split between purchasers and providers hardly exists, although some countries have introduced a stricter split than others. Another finding concerns the voice and choice of service consumers, which seems hardly affected by the introduction of market mechanisms in the provision of activation. Finally, marketisation does not seem to be an irreversible project, as de‐marketisation processes were identified as well. Originality/value – Most current research into activation markets and their effects pays little attention to the issue of diversity in the design and functioning of markets. This article argues in favour of more systematic research of market diversity and of the variety of effects of various market models. Rather than comparing marketised with public service provision, a stronger focus on various market models may strengthen our insight into how service provision models affect the effectiveness of activation services.

The Determinants of Personal Income Tax Progressivity Around the Globe

This paper utilizes a novel database collected by the authors to document features of the progressivity of personal income tax systems across 209 countries for the years 1980-2009. We measure progressivity in several ways. First, we associate it with the increase in effective average (marginal) tax rates between a wage of zero and ten times the average wage in a country. Second, we consider the curvature of the tax schedule expressed as the difference between the effective average (marginal) tax schedule from a wage of zero to ten times the average wage and a linear average tax schedule and, alternatively, the diference between the effective average (marginal) tax schedule from the minimum positive taxable income, to ten times the average wage as opposed to a linear average tax schedule. Moreover, the paper assesses patterns regarding the conditional correlation of country-specifc tax progressivity measures with a host of economic and political country-specific characteristics and find the labor supply elasticity and the income replacement rates for the unemployed to be key determinants of progressivity around the globe, in line with economic theory.

A test of the Bolton-Scheinkman-Xiong hypothesis of how speculation affects the vesting time of options granted to directors

This paper investigates empirically the Bolton, Scheinkman, and Xiong (2006) hypothesis, according to which initial shareholders may provide incentives to managers to take actions that stimulate speculative bubbles. We test this hypothesis with data on up to 8,544 directors and up to 1,677 companies between 2004-2008. Using vesting time as a measure of the short-term performance weighting in CEO compensation and various alternative measures of the extent of speculation, the findings support the hypothesis: vesting time decreases with more intensive speculation. The results prove robust in various empirical model specifications.

The Taxation of Bonuses and its Effect on Executive Compensation - Evidence from the UK Experience

This paper explores the reaction of compensation components awarded to executive directors of UK financial institutions following the adoption of the bonus tax in December 2009. Excessive bonuses are blamed for encouraging risk taking and are regarded as one of the pull factors of the financial crisis. The British government attempted to reduce bonuses and accordingly corporate risk-taking by means of a special tax on cashbased bonuses. Using a comprehensive dataset on executive compensation we show that the introduction of the bonus tax decreased the net cash bonuses awarded to directors by about 43%, accompanied however by a simultaneous increase in other compensation components leaving both variable as well as total compensation unaffected. Hence, the incidence of the bonus tax was borne by the firms which compensated their managers for the decrease in cash-based compensation by awarding them different forms of pay. Consistent with this finding our data also suggests that firms reduced dividend pay-outs as a consequence of the bonus tax.