Dual and common agency issues in international joint ventures: Evidence from China

With the help of a theoretical model we analyze the relation between equity sharing in an international joint venture (EJV) and local public goods provision in a setting where the local government faces a commitment problem to provide public services ex post to the set-up of the firm. We show that to overcome such a dual agency problem, the multinational leaves more local rents to the local partner than in the first-best, so as to provide stronger incentives for the government to supply public goods. Applying dynamic panel data estimation, we test the trade-off between local public goods and ownership shares across 31 Chinese provinces to find support for our mechanismEquity sharing, foreign investment, local public goods, China

A Biologically Plausible Learning Rule for Deep Learning in the Brain

Researchers have proposed that deep learning, which is providing important progress in a wide range of high complexity tasks, might inspire new insights into learning in the brain. However, the methods used for deep learning by artificial neural networks are biologically unrealistic and would need to be replaced by biologically realistic counterparts. Previous biologically plausible reinforcement learning rules, like AGREL and AuGMEnT, showed promising results but focused on shallow networks with three layers. Will these learning rules also generalize to networks with more layers and can they handle tasks of higher complexity? We demonstrate the learning scheme on classical and hard image-classification benchmarks, namely MNIST, CIFAR10 and CIFAR100, cast as direct reward tasks, both for fully connected, convolutional and locally connected architectures. We show that our learning rule - Q-AGREL - performs comparably to supervised learning via error-backpropagation, with this type of trial-and-error reinforcement learning requiring only 1.5-2.5 times more epochs, even when classifying 100 different classes as in CIFAR100. Our results provide new insights into how deep learning may be implemented in the brain

Social Exchange and Common Agency in Organizations

We study the relation between formal incentives and social exchange in organizations where employees work for several managers and reciprocate a manager’s attention with higher effort. To this end we develop a common agency model with two-sided moral hazard. We show that when effort is contractible but attention is not, the first-best can be achieved through granting autonomy of effort choice to employees and giving bonus pay to both managers and employees. When neither effort nor attention are contractible, an ‘attention race’ arises, as each manager tries to sway the employee’s effort his way. While this may result in too much social exchange, the attention race may also be a blessing because it alleviates managers’ moral-hazard problem in attention provision. Lastly, we derive the implications of these contract imperfections for optimal organizational design.social exchange, reciprocity, incentive contracts, common agency, organizational design

Regional determinants of FDI in China: A new approach with recent data

We empirically investigate the factors that drive the uneven regional distribution of foreign direct investment (FDI) inflows to China.s 31 provinces from 1995 to 2006. The aim of this paper is to explain the investment patterns in (partly) foreign funded firms across these provinces. We use factor analysis and derive four factors that may drive FDI: institutions, labor costs, market potential, and geography. The factor analysis then structures our dataset to concentrate on these four clusters consisting of 42 province specific and time-varying items. Factor analysis not only helps us to identify the latent dimensions which are not apparent from direct study, but also facilitates econometrics with reduced number of variables. We apply fixed effects panel estimation and GMM to account for endogeneity. In line with theoretical predictions we find that foreign investors choose and invest more in provinces with better institutions, lower labor costs, and larger market size. Nonlinear results denote that the positive effects of infrastructure and market potential on FDI are complementary to each other, which is in line with the economic geography literature. In particular the effect of market size on FDI is larger in provinces with better institutions. Sub-sample study confirms the existences of a large disparity between East and West. In the poorer large western provinces FDI is strongly driven by the geographical factor in contrast to the east of China where institutions play a significant role to build the .factory of the world.. Robustness tests indicate that two sub-dimensions of institutions, namely infrastructure and governance, are important to determine the location choice of FDI in China.FDI, China, factors analysis, regional and spatial distribution of FDI, location choice

Reciprocity and Incentive Pay in the Workplace

We study optimal incentive contracts for workers who are reciprocal to management attention. When neither worker's effort nor manager's attention can be contracted, a double moral-hazard problem arises, implying that reciprocal workers should be given weak financial incentives. In a multiple-agent setting, this problem can be resolved using promotion incentives. We test these predictions using German Socio-Economic Panel data. We find that workers who are more reciprocal are significantly more likely to receive promotion incentives, while there is no such relation for individual bonus pay.Reciprocity, social exchange, incentive contracts, double moral hazard, GSOEP

Evaluating eight field and remote sensing approaches for mapping the benthos of three different coral reef environments in Fiji

Monitoring of coral reef environments require accurate, timely and relevant information on their composition and condition. These environments are challenging to map due to their variation in reef type, remoteness, extent, benthic cover composition and variable water clarities. This work evaluates the accuracy, cost and relevance of eight commonly used benthic cover mapping approaches applied in three different coral reef environments in Fiji. The eight mapping techniques varied in field data source (local knowledge, point and transect surveys), image data (Quickbird 2 and Landsat 5 TM), level of image correction (none or atmospheric) and processing approaches (delineation and supervised classification). The eight mapping approaches were assessed in terms of their: map accuracy; production time and cost. Qualitative assessment was carried out by map users representing the local marine monitoring agencies. These map assessments showed that users and producers preferred mapping approaches based on: supervised classification of Quickbird imagery integrated with a basic field data. This approach produced an accurate map within a short time; with low cost that suited the user's purpose. The findings from this work demonstrate how variations in coral reef environments, and map purpose and resources management requirements affected the user's selection of a suitable mapping approach. ©2008 COPYRIGHT SPIE--The International Society for Optical Engineering