In a dynamic model of moral hazard, competition can undermine prudent bank behavior. While capital-requirement regulation can induce prudent behavior, the policy yields Pareto-inefficient outcomes. Capital requirements reduce gambling incentives by putting bank equity at risk. However, they also have a perverse effect of harming banks' franchise values, thus encouraging gambling. Pareto-efficient outcomes can be achieved by adding deposit-rate controls as a regulatory instrument, since they facilitate prudent investment by increasing franchise values. Even if deposit-rate ceilings are not binding on the equilibrium path, they may be useful in deterring gambling off the equilibrium path. (JEL G2, E4, L5)

We study a Lucas asset-pricing model that is standard in all respects, except that the representative agent's subjective beliefs about endowment growth are distorted. Using constant relative risk-aversion (CRRA) utility, with a CRRA coefficient below 10; fluctuating beliefs that exhibit, on average, excessive pessimism over expansions; and excessive optimism over contractions (both ending more quickly than the data suggest), our model is able to match the first and second moments of the equity premium and risk-free rate, as well as the persistence and predictability of excess returns found in the data. (JEL E44, G12)

Abstract We use a linear contracting framework to study how the relation between performance measures used in an agent's incentive contract and the agent's private predecision information affects the value of delegating decision rights to the agent. The analysis relies on the idea that available performance measures are often imperfect representations of the economic consequences of managerial actions and decisions, and this, along with gaming possibilities provided to the agent by access to private predecision information, may overwhelm any benefits associated with delegation. Our analytical framework allows us to derive intuitive conditions under which delegation does and does not have value, and to provide new insights into the linkage between imperfections in performance measurement and agency costs.

Given differences in values about work and family time, we hypothesize that Americans will experience greater family demand, which will have greater impact on work-family conflict, whereas the Chinese will experience greater work demand, which will have the greater impact on work-family conflict. The results of a survey of working men and women in the two countries generally supported the hypothesis; however, work demand did not differ significantly between the two countries and did not have a greater effect than family demand on work-family conflict in China.

We estimate the employment effects of federal minimum wage increases using monthly Current Population Survey (CPS) data from 1979 through 1997. We find that the empirical differences in the new minimum wage literature based on CPS data primarily can be traced to alternative methods of controlling for macroeconomic conditions. We argue that the macroeconomic controls commonly included in models where no employment impact is found are inappropriate. We consistently find a significant but modest negative relationship between minimum wage increases and teenage employment using alternative controls or allowing employer responses to the policy to occur with some delay.