Research in behavioral economics suggests that, in addition to their traditional incentive effects, formal control systems can influence psychological motivations. We extend this literature by demonstrating experimentally that formal controls directly influence people's sense of what behaviors are appropriate in the setting (personal norms), and indirectly alter people's tendency to conform to the behavior of those around them (descriptive norms). These effects persist even after the controls are changed, so that the effects of current controls can be strongly influenced by past control strength. Our results support those who are incorporating psychological factors into principal-agent models (such as Fischer and Huddart [2008]), and suggest that those models should be further modified to incorporate correlations between personal norms and conformity to descriptive norms.

We present a revealed preference methodology for empirically analysing collective consumption behaviour. First, we introduce an integer programming (IP) methodology for testing data consistency with collective consumption models that account for publicly as well as privately consumed goods. This IP methodology can include information on “assignable quantities” for private goods. Next, we show that the IP methodology allows for recovering the personalized (Lindahl) prices for the public goods and the personalized quantities for the private goods. In turn, this implies recovery of the sharing rule (i.e. personalized income share levels). An empirical application demonstrates the practical usefulness of the methodology.

This paper investigates the relationship between media bias and the influence of the media on voting in the context of newspaper endorsements. We first develop a simple econometric model in which voters choose candidates under uncertainty and rely on endorsements from better informed sources. Newspapers are potentially biased in favour of one of the candidates and voters thus rationally account for the credibility of any endorsements. Our primary empirical finding is that endorsements are influential in the sense that voters are more likely to support the recommended candidate after publication of the endorsement. The degree of this influence, however, depends upon the credibility of the endorsement. In this way, endorsements for the Democratic candidate from left-leaning newspapers are less influential than are endorsements from neutral or right-leaning newspapers and likewise for endorsements for the Republican. We also find that endorsements are more influential among moderate voters and those more likely to be exposed to the endorsement. In sum, these findings suggest that voters do rely on the media for information during campaigns but that the extent of this reliance depends upon the degree and direction of any bias.

We investigate the leverage of hedge funds in the time series and cross-section. Hedge fund leverage is counter-cyclical to the leverage of listed financial intermediaries and decreases prior to the start of the financial crisis in mid-2007. Hedge fund leverage is lowest in early 2009 when the market leverage of investment banks is highest. Changes in hedge fund leverage tend to be more predictable by economy-wide factors than by fund-specific characteristics. In particular, decreases in funding costs and increases in market values both forecast increases in hedge fund leverage. Decreases in fund return volatilities predict future increases in leverage.

Most studies of comparative productivities fail to find evidence of convergence in OECD manufacturing despite major economic growth theories predicting convergence. Using manufacturing data for nineteen OECD countries over the period from 1870 to 2006, this study finds strong evidence of unconditional β-convergence as well as σ-convergence. Panel data estimates suggest that the convergence has been driven by domestic R&D, international R&D spillovers, and financial development as predicted by Schumpeterian growth theories.

This article assesses the role of conditionality in cash transfer programs using a unique experiment targeted at adolescent girls in Malawi. The program featured two distinct interventions: unconditional transfers (UCT arm) and transfers conditional on school attendance (CCT arm). Although there was a modest decline in the dropout rate in the UCT arm in comparison with the control group, it was only 43% as large as the impact in the CCT arm at the end of the 2-year program. The CCT arm also outperformed the UCT arm in tests of English reading comprehension. However, teenage pregnancy and marriage rates were substantially lower in the UCT than the CCT arm, entirely due to the impact of UCTs on these outcomes among girls who dropped out of school.

We examine whether firms utilize governance systems and increased monitoring mechanisms when information asymmetry and managerial discretion are limited. Given that such monitoring is costly, we expect regulated firms to use less monitoring if regulation substitutes for governance. Using data from initial public offerings, we document that regulated firms have greater proportions of monitoring directors and larger boards as well as use similar amounts of equity-based compensation as non-regulated firms. Further, regulated and unregulated firms are analogous in terms of observed trade-offs between traditional monitoring mechanisms and insider ownership. Finally, regulated firms appear to decrease monitoring following a period of deregulation. These findings support the hypothesis that regulation and governance are complements and are consistent with the notion that regulators pressure firms to adopt effective monitoring structures.

We study the link between family violence and the emotional cues associated with wins and losses by professional football teams. We hypothesize that the risk of violence is affected by the “gain-loss” utility of game outcomes around a rationally expected reference point. Our empirical analysis uses police reports of violent incidents on Sundays during the professional football season. Controlling for the pregame point spread and the size of the local viewing audience, we find that upset losses (defeats when the home team was predicted to win by four or more points) lead to a 10% increase in the rate of at-home violence by men against their wives and girlfriends. In contrast, losses when the game was expected to be close have small and insignificant effects. Upset wins (victories when the home team was predicted to lose) also have little impact on violence, consistent with asymmetry in the gain-loss utility function. The rise in violence after an upset loss is concentrated in a narrow time window near the end of the game and is larger for more important games. We find no evidence for reference point updating based on the halftime score.

The study of Ferguson and Shockley (2003) shows that, if the Merton (1974) model can reflect reality, the omission of debt claims from the market portfolio proxy may explain the poor pricing ability of the CAPM in empirical tests. We critically re-assess this argument by first reviewing existing, but also new avenues through which the Merton (1974) model can point to a systematic bias in market beta estimates. However, we also show that some avenues are diversifiable, and that they all rely on excessive economy-wide default risk to create a non-negligible bias. We then use the Merton (1974) model to proxy for the total debt portfolio, but find that its application in empirical tests cannot improve pricing performance. We conclude that there are (so far) no valid theoretical reasons to believe that omitted debt claims undermine CAPM tests.