2008 State New Economy Index: Benchmarking Economic Transformation in the States

Scores and ranks states' economic structures on their competitiveness in the New Economy, as measured by the prominence of knowledge jobs, globalization, economic dynamism, transformation to a digital economy, and capacity for technological innovation

Why Initiative 1098 is right for Washington

Initiative 1098 will reduce taxes for most Washington households by cutting property taxes and exempting small businesses from the business and occupation tax. I-1098 will also raise new revenue dedicated to education, health and long-term care by adding a modest tax on the wealthiest 1.2% -- the group that is now paying the lowest proportion of income in state and local taxes.Washington has fallen behind in providing the education system and public services our people and businesses need to thrive in the global economy. The state struggled to fund upgrades to education and health care even before the recession. Budget cuts of the last two years have pushed us further behind. I-1098's reforms lay the foundations for stronger economic growth and greater opportunity for all people in Washington

How calibration committees can mitigate performance evaluation bias: An analysis of implicit incentives

While prior research on performance evaluation bias has mainly focused on the determinants and consequences of rating errors, we investigate how a firm can provide implicit incentives to supervisors to mitigate these errors via its calibration committee. We empirically examine the extent to which a calibration committee incorporates supervisors' evaluation behavior with respect to their subordinates in the performance evaluation outcomes, i.e., performance ratings and promotion decisions, for these supervisors. In our study, we distinguish between lack of skills and opportunism as two important facets of evaluation behavior, which we expect the calibration committee to address differently. Using panel data of a professional service firm, we show that supervisors' opportunistic behavior to strategically inflate subordinates' performance ratings is disciplined through a decrease in the supervisors' own performance rating, while the supervisors' skills to provide less compressed and thus more informative performance ratings is rewarded through a higher likelihood of promotion.Series: Department of Strategy and Innovation Working Paper Serie

Estimating Public and Private Expenditures on Occupational Training in the United States

[Excerpt] Retraining and upgrading the skills of incumbent workers and providing training to new labor force entrants, dislocated workers, and unemployed persons can help increase the efficiency and effectiveness of the workforce. Funding for occupational training comes from many sources — the federal government, state and local governments, private employers, philanthropic foundations, and individual workers themselves. This report examines occupational training to present a preliminary picture of the total spending on job training in the United States

Corporate payments networks and credit risk rating

Aggregate and systemic risk in complex systems are emergent phenomena depending on two properties: the idiosyncratic risks of the elements and the topology of the network of interactions among them. While a significant attention has been given to aggregate risk assessment and risk propagation once the above two properties are given, less is known about how the risk is distributed in the network and its relations with the topology. We study this problem by investigating a large proprietary dataset of payments among 2.4M Italian firms, whose credit risk rating is known. We document significant correlations between local topological properties of a node (firm) and its risk. Moreover we show the existence of an homophily of risk, i.e. the tendency of firms with similar risk profile to be statistically more connected among themselves. This effect is observed when considering both pairs of firms and communities or hierarchies identified in the network. We leverage this knowledge to show the predictability of the missing rating of a firm using only the network properties of the associated node

Do Stock Prices Incorporate the Potential Dilution of Employee Stock Options?

Employee stock options represent a significant potential source of dilution for many shareholders. It is well known that reported earnings tend to understate the associated costs, but an efficient stock market will show no such bias. If by contrast stock prices underestimate the future costs implied by stock option grants, option exercises will produce negative abnormal returns. We design and implement a stock-picking rule based on predictions of stock-option exercise using widely available data. The rule identifies stocks that subsequently suffer significnt negative abnormal returns using either a CAPM or the three factor Fama-French benchmarks. According to our point estimates, if the cost of employee stock options as a fraction of market capitalization is 10%, the stock will subsequently exhibit a negative abnormal return of between 3% and 5%. There is some evidence of market learning in that the abnormal returns tend to fall over time. We use a restricted sample of actual stock exercises and find that the reduced power of our trading rule does not reflect a reduced ability to predict stock option exercise. It also does not seem to reflect improved accounting disclosure since the portion of option costs recognized in diluted earnings per share appears to be priced by the market in all our sample years.

Pricing Strategies Under Emissions Trading: An Experimental Analysis

An important feature in the design of an emissions trading program is how emissions allowances are initially distributed into the market. In a competitive market the choice between an auction and free allocation should, according to economic theory, not have any influence on firms’ production choices nor on consumer prices. However, many observers expect the method of allocation to affect product prices. This paper reports on the use of experimental methods to investigate behavior with respect to how prices will be determined under a cap-and-trade program. Participants initially display a variety of pricing strategies. However, given a simple economic setting in which earnings depend on this behavior, we find that subjects learn to consider the value of allowances and overall behavior moves toward that predicted by economic theory.carbon dioxide; climate change; emissions trading; distributional effects; electricity; allocation; auctions

Aggregate quasi rents and auditor independence : evidence from audit firm mergers in China

Using a sample of audit firm mergers in China\u27s audit market, this paper provides evidence on the way auditor independence can be improved following audit firm mergers as a result of a change in the aggregate quasi rents that are exposed to risk (i.e., the quasi rents at stake). This setting allows us to examine the relationship between auditor independence and the aggregate quasi rents at stake directly after controlling for the confounding effects of auditor competence, audit firm brand name, and the self-selection problem that may exist in previous studies. We hypothesize that auditors become more independent in the post-merger period only if the mergers increase the aggregate quasi rents at stake. Proxying audit quality by the frequency of modified audit opinions (MAOs) and using a \u27\u27difference-in-differences\u27\u27 research design, we conduct separate tests for two types of mergers under the institutional arrangements in China: one with an increase in the aggregate quasi rents at stake and the other with little change in these rents. Consistent with our hypothesis, we observe an improvement in auditor independence, but only for mergers that increase auditors\u27 aggregate quasi rents at stake. Moreover, the post-merger increase in the propensity for MAOs in this type of merger is positively associated with the magnitude of the change in the aggregate quasi rents at stake. Our empirical findings support the theory that auditor independence is a positive function of the aggregate quasi rents at stake

The Curse of Knowledge in Economic Settings: An Experimental Analysis

In economic analyses of asymmetric information, better-informed agents are assumed capable of reproducing the judgments of less-informed agents. We discuss a systematic violation of this assumption that we call the "curse of knowledge." Better-informed agents are unable to ignore private information even when it is in their interest to do so; more information is not always better. Comparing judgments made in individual-level and market experiments, we find that market forces reduce the curse by approximately 50 percent but do not eliminate it. Implications for bargaining, strategic behavior by firms, principal-agent problems, and choice under un-certainty are discussed

Competition and innovation-driven inclusive growth

The paper investigates the strength of innovation-driven employment growth, the role of competition in stimulating and facilitating it, and whether it is inclusive. In a sample of more than 26,000 manufacturing establishments across 71 countries (both OECD and developing), the authors find that firms that innovate in products or processes, or that have attained higher total factor productivity, exhibit higher employment growth than non-innovative firms. The strength of firms'innovation-driven employment growth is significantly positively associated with the share of the firms'workforce that is unskilled, debunking the conventional wisdom that innovation-driven growth is not inclusive in that it is focused on jobs characterized by higher levels of qualification. They also find that young firms have higher propensities for product or process innovation in countries with better Doing Business ranks (both overall and ranks for constituent components focused on credit availability and property registration). Firms generally innovate more and show greater employment growth if they are exposed to more information (through internet use and membership in business organizations) and are exporters. The empirical results support the policy propositions that innovation is a powerful driver of employment growth, that innovation-driven growth is inclusive in its creation of unskilled jobs, and that the underlying innovations are fostered by a pro-competitive business environment providing ready access to information, financing, export opportunities, and other essential business services that facilitate the entry and expansion of young firms.Environmental Economics&Policies,Labor Policies,Labor Markets,E-Business,Microfinance