Insurance and Information: Firms as a Commitment Device

We explore the role of firms in insuring risk-averse workers.As a device that allows workers to commit to the delivery of their output, the firm arises endogenously as an alternative to the spot market if workers are suciently risk averse and the firm can base incentive payments on good information.Competition, however, may allow the spot market and explicit contracts to crowd out implicit insurance provided by the firm, even though the latter yields higher welfare.We explain why dierent governance structures coexist in quite homogeneous industries.information;labour;insurance;moral hazard;contracts;principal agent theory

Do corporations have a duty to be trustworthy?

Since the global financial crisis in 2008, corporations have faced a crisis of trust, with growing sentiment against ‘elites and ‘big business’ and a feeling that ‘something ought to be done’ to re-establish public regard for corporations. Trust and trustworthiness are deeply moral significant. They provide the ‘glue or lubricant’ that begets reciprocity, decreases risk, secures dignity and respect, and safeguards against the subordination of the powerless to the powerful. However, in deciding how to restore trust, it is difficult to determine precisely what should be done, by whom, and who will bear the cost, especially if any action involves a risk to overall market efficiency and corporate profitability. The paper explores whether corporations have a moral duty to be trustworthy, to bear the cost of being so and thus contribute to resolving the current crisis of trust. It also considers where the state and other social actors have strong reason to protect and enforce such moral rights, while acknowledging that other actors have similar obligations to be trustworthy. It outlines five ‘salient factors’ that trigger specific rights to trustworthiness and a concomitant duty on corporations to be trustworthy: market power, subordination (threat and intimidation), the absence of choice, the need to preserve systemic trust, and corporate political power which might undermine a state’s legitimacy. Absent these factors and corporations do not have a general duty to be trustworthy, since a responsible actor in fair market conditions should be able to choose between the costs and benefits of dealing with generally trustworthy corporations

Commitment and optimal incentive

We propose an extended principal-agent model considering employee commitment and describe how to motivate committed agent, who not only shows regard for his own income but also cares the organizational benefit. The principal also would like to provide support to such an agent and his utility depends on both the final profit and the payoff to the agent. There are some interesting insights into the characteristic of optimal contracts: First, commitment is an effective motivator and committed employee needs less monetary inducement to perform his job well than one who not. More specifically, undifferentiated pay is sufficient in incentivizing committed agent to implement high effort in some cases. Second, commitment and wage differential are substitutable to each other in the optimal incentive compensation design. Third, commitment is not always good for organizational efficiency when the increase in employee commitment relies on the principal’s support. Our model's finding is consistent with employee incentive in some organizations, and also help to incentive mechanism design under wages differential constraints and understanding excessive compensation.Commitment, Organizational support, Optimal Incentive, Contract

Private Litigation and the Deterrence of Corporate Misconduct

Cox discusses the linkage between private litigation and the deterrence of corporate misconduct

Weak moral motivation leads to the decline of voluntary contributions

This paper provides a general framework that accounts for the decay of the average contribution observed in most experiments on voluntary contributions to a public good. Each player balances her material utility loss from contributing with her psychological utility loss of deviating from her moral ideal. The novel and central idea of our model is that people.s moral motivation is "weak": their judgement about what is the right contribution to a public good can evolve in the course of interactions, depending partly on observed past contributions and partly on an intrinsic "moral ideal". Under the assumption of weakly morally motivated agents, average voluntary contributions can decline with repetition of the game. Our model also explains other regularities observed in experiments, in particular the phenomenon of over-contributions compared to the Nash prediction and the so-called restart e¤ect, and it is compatible with the conditional cooperation hypothesis.

Workplace Performance, Worker Commitment and Loyalty

Using matched employer-employee level data drawn from the 2004 UK Workplace and Employee Relations Survey, we explore the determinants of a measure of worker commitment and loyalty (CLI) and whether CLI influences workplace performance. Factors influencing employee commitment and loyalty include age and gender, whilst workplace level characteristics of importance include human resource practices. With respect to the effects of employee commitment and loyalty upon the workplace, higher CLI is associated with enhanced workplace performance. Our findings that workplace human resources influence CLI suggest that employers may be able to exert some influence over the commitment and loyalty of its workforce, which, in turn, may affect workplace performance.labor productivity, commitment, financial performance, loyalty

Moment of Truth: The Special Relationship of the Federal Government to Alaska Natives and Their Tribes — Update and Issue Analysis

Beyond considering the present state of the statutory relationship between the federal government and Alaska Natives, this analysis focuses on the power of Congress and the Executive Branch to change the relationship. Absent congressional acts which mandate some level of federal responsibility to Natives, the Executive Branch possesses an independent power over Native affairs which can be exercised to expand, reduce, or deny a special relationship as an enforceable federal obligation. Includes an appendix by Stephen Haycox, "Historical Aspects of the Federal Obligation to Alaska Natives."Report prepared pursuant to a planning grant from Rural Alaska Community Action Program, Inc., to Alaska Federation of Natives.Prologue / I. The Current Trust Relationship / II. ANCSA: Its Role in an Age of Self-Determination / III. The Threat of Termination / IV. Conclusion / Footnotes / Appendix I: "Historical Aspects of the Federal Obligation to Alaska Natives" by Stephen Hayco

Limiting Government Predation Through Anonymous Banking: A Theory with Evidence from China

China's economic performance of the past two decades presents a puzzle for the economics of transition and development: Enormous private business incentives were unleashed that have fueled rapid economic growth despite the fact that China has had very weak "conventional institutions" (such as the rule of law and separation of powers) to constrain the government from arbitrary intrusion into economic activities. We argue that one mechanism that has limited the government's ability for predation and harassment is commitment through information decentralization, where the key institutiton is "anonymous banking," that is, a combination of the use of cash for transactions and the use of anonymous savings deposits. The government's incentive for such a mechanism comes form the increased quasi-fiscal revenues collected from the state banking system through "financial repression," a combination of controls on international capital flows with restrictions on domestic interest rates. The major features of China's economy concerning its fiscal decline, financial deepening, and the sectoral dual-track can be better understood using this analytical framework.http://deepblue.lib.umich.edu/bitstream/2027.42/39659/3/wp275.pd

Identity and Commitment: Sen\u27s Conception of the Individual

This paper develops a conception of personal identity for Amartya Sen’s capability framework that emphasizes his self-scrutinizing aspect of the self and related concept of commitment, and compares this conception to the collective intentionality-based one advanced in Davis (2003c). The paper also distinguishes personal identity and social identity, and contrasts Sen’s framework with recent standard economics’ explanation of social identity in terms of conformity. Sen’s concept of commitment is examined in two formulations, and the later version is related to Bernard Williams’ thinking about identity-conferring commitments. The paper’s concludes by arguing that explaining personal identity as a special capability and possible object of social-economic policy provides one way of resolving the debate over whether the capability framework ought to have a short-list of essential capabilities