Knowledge that Transforms

Posttakeover moral hazard by the acquirer and free‐riding by the target shareholders lead the former to acquire as few sharcs as necessary to gain control. As moral hazard is most severe under such low ownership concentration, inefficiencies arise in successful takeovers. Moreover, share supply is shown to be upward‐sloping. Rules promoting ownership concentration limit both agency costs and the occurrence of takeovers. Furthermore, higher takeover premia induced by competition translate into higher ownership concen‐tration and are thus beneficial. Finally, one share‐one vote and simple majority are generally not optimal, and socially optimal rules need not emerge through private contracting.

The anomaly is concerned with the observation that in multiple item auctions of identical objects, prices tend to decline over time. I show that in the case of wine auctions, which have been analyzed frequently, the anomaly is likely to be caused by the fact that most bids are entered by absentees, who use nonoptimal bidding strategies. Therefore, wine auctions can hardly be used to illustrate the standard multiple‐object auction model.

Over last two decades punitiveness of juvenile justice system has declined substantially relative adult courts. During that same time period juvenile violent rates have grown almost twice as quickly as adult crime rates. This paper examines degree to which those two empirical observations are related, finding that changes in relative punishments can account for 60 percent of differential growth rates in juvenile and adult violent between 1978 and 1993. Juvenile offenders appear be at least as responsive sanctions as adults. Moreover, sharp changes in criminal involvement with transition from juvenile adult court suggest that deterrence, rather than simply incapacitation important role. There does not, however, appear be a strong relationship between the punitiveness of juvenile justice system that a cohort faces and extent of involvement for that cohort later in life.

As pointed out by Hall (1988), intertemporal substitution by consumers is a central element of many modern macroeconomic and international models. We argue that Hall's estimator or the IES is downward biased because the intra-temporal substitution between nondurable consumption goods and durable consumption goods is ignored and because the changes in real interest rates affect user costs of durable goods.

There exists a positive correlation between an economy's exposure to international trade and the size of its government. The correlation holds for most measures of government spending, in low- as well as high-income samples, and is robust to the inclusion of a wide range of controls. One explanation is that government spending plays a risk-reducing role in economies exposed to a significant amount of external risk. The paper provides a range of evidence consistent with this hypothesis. In particular, the relationship between openness and government size is strongest when terms-of-trade risk is highest.