Social Welfare Implications Research Articles

The liberalisation of India's labour laws within the National Manufacturing Policy 2011: where business power and social policy collide

Following formal economic liberalisation in 1991, business, in particular big business, has gained increasing access to and influence over policy decision-making in India. Industry has been an outspoken critic of national labour laws and has lobbied extensively for greater labour market flexibility. While business has not been successful in influencing “official” labour reform at the national level, it was able to influence labour policy within the National Manufacturing Policy 2011, which curtailed labour protections and implemented “hire and fire” policies. Utilising qualitative data from 40 face-to-face interviews with policy stakeholders in New Delhi, India, this paper aims to explore how business was able to influence labour reform within this policy as well as underscore the wider social welfare implications that may follow. It will be argued that the ability of business to dictate labour reform, while strong, is somewhat variable as competing factors serve to constrain business influence. Furthermore, the extent to which labour laws are hindering manufacturing investment is widely debatable. Nevertheless, curtailment of labour protections, as afforded in this policy, will have a widespread and damaging impact on workers. While the policy promises to empower rural youth, provide gainful employment, and enable growth to become more sustainable and inclusive for its citizens, it is questionable whether these goals can be achieved alongside the curtailment of labour protections.

Attention misallocation, social welfare and policy implications

We examine how agents allocate attention between private and public signals to reduce the uncertainty about observation noises when coordination is an important concern. In this setting, the attention allocation may not be monotone in endowed attention capacity. Agents may decrease their attention on or even ignore the more accurate signal when capacity increases. As a result, social welfare may decrease when they have more attention to process information. And it can be even higher when agents possess a finite amount of capacity than when they have an infinite amount of capacity. We derive sufficient and necessary conditions under which multiple equilibria emerge and study the implications of equilibrium multiplicity for macroeconomic policies.

Peer-to-Peer Product Sharing: Implications for Ownership, Usage and Social Welfare in the Sharing Economy

Peer-to-Peer Product Sharing: Implications for Ownership, Usage and Social Welfare in the Sharing Economy

Governance of Business and Social Implications for Inequality and Wealth of Nations

In this symposium, we bring together diverse perspectives regarding governance of business and social implications for inequality and growth and wealth of nations. The panelists include management scholars and business leaders who vary in their points of view regarding (a) the extent to which a tradeoff between inequality and growth and wealth of nations exists (b) the institutional and organizational factors that contribute to inequality and growth/wealth of nations, and (c) the proposed solutions to potential tradeoffs. By engaging these thought leaders in dialogue and discussion, we believe the symposium will add value by enhancing the discourse within management scholars on fundamental premises regarding the role of business in society, and the broader implications for individual and social welfare, prosperity and growth.

Managerial delegation in monopoly and social welfare

AbstractThis paper develops a model of managerial delegation in the case of monopoly, without relying on agency theory based arguments, and examines its implications for social welfare. It shows that, in the presence of network externalities, (a) it is optimal for a monopolist to offer a sales‐oriented incentive scheme to her manager and (b) such managerial delegation in monopoly firm is socially desirable: both the monopolist and consumers are better off under managerial delegation than under no delegation. These results are in sharp contrast to the findings of existing studies on managerial delegation.

SOX after Ten Years: A Multidisciplinary Review

SYNOPSIS We review and assess research findings from more than 120 papers in accounting, finance, and law to evaluate the impact of the Sarbanes-Oxley Act. We describe significant developments in how the Act was implemented and find that despite severe criticism, the Act and institutions it created have survived almost intact since enactment. We report survey findings from informed parties that suggest that the Act has produced financial reporting benefits. While the direct costs of the Act were substantial and fell disproportionately on smaller companies, costs have fallen over time and in response to changes in its implementation. Research about indirect costs such as loss of risk taking in the U.S. is inconclusive. The evidence for and social welfare implications of claimed effects such as fewer IPOs or loss of foreign listings are unclear. Financial reporting quality appears to have gone up after SOX but research on causal attribution is weak. On balance, research on the Act's net social welfare remains inconclusive. We end by outlining challenges facing research in this area, and propose an agenda for better modeling costs and benefits of financial regulation.

LICENSING POLICY AND TECHNOLOGY ADOPTION IN STANDARD SETTING ORGANIZATIONS

The standard setting organizations' decisions on licensing policy and standard's technological specification, and the ensuing implications for social welfare are analyzed. The author finds the conditions under which a licensing rule that grants monopoly power to the licensors whose technology is adopted in the standard can be employed by the members of the consortium (ex‐post licensing). Moreover, it is shown that the adoption of ex‐post licensing might lead to the inefficient exclusion of an efficient stand‐alone licensor. Finally, the author discusses the conditions under which a policy of ex‐ante licensing can be less efficient than ex‐post licensing. (JEL K21, L15, L24, L42)

Taking a Beating on the Stock Market: Crime and Stock Returns

Using daily reported crime incidents from over 2,500 law enforcement agencies across 27 states from 1991-2012, I examine the real and social effects of how stock market changes impact revealed utility using micro-level (city/county) data. Exploiting crime as revealed negative utility, I find an instantaneous positive and convex relationship between daily stock returns and overall crime rates. I also find that market changes impact investors’ (proxied by income) and non-investors’ utility differently and attribute this as evidence in support of envy models such as Abel (1990) that individuals care about their own consumption and wealth relative to others. I find that a one standard deviation increase in daily market returns corresponds to a significant 22.8 bps increase in overall crime rates across the US, and exhibits a monotonically increasing relationship when examining the effect from high income to low income locations. The 22.8 bps daily increase in crime is also economically meaningful and corresponds to an additional annualized 36,551 crimes across the US with a corresponding estimated annualized loss of $2.67 billion. I also find a relationship between returns and violent crime, property crime, and white collar crime. For example, a one standard deviation increase in the market return is associated with a 22 bps decrease in assaults for high income locations, and a 40 bps increase in assaults for low income locations. These results are consistent with rational asset pricing models with envy where a positive stock return increases utility for investors, but decreases utility for non-investors whose relative expected future consumption declines. My results also have strong social welfare implications. Specifically, I provide evidence that income inequality and large market swings adversely affect the overall well-being of the US population.

Determinants of the Locations of Alternative Financial Service Providers

Many low-to-moderate income US households rely upon alternative financial service providers (AFSPs) for a variety of credit products and transaction services. The social welfare implications of this segment of the financial services industry are quite controversial. One aspect of the controversy involves the location decisions of AFSPs. This study examines the determinants of the locations of three types of AFSPs: payday lenders, pawnshops, and check-cashing outlets. Using county-level data for the entire country, I find that the number of AFSP outlets per capita is significantly related to demographic characteristics of the county population, measures of the population’s creditworthiness, and the stringency of state laws and regulations that govern AFSPs.

Technology Adoption in Standard Setting Organizations: A Model of Exclusion with Complementary Inputs and Hold-Up

I analyze standard setting organizations' decisions on licensing policy and standard's technological specification, and the ensuing implications for social welfare. I find the conditions under which a licensing rule that grants monopoly power to the licensors whose technology is adopted in the standard can be employed by the members of the consortium (ex-post licensing). Moreover, I show that the adoption of ex-post licensing might lead to the inefficient exclusion of an efficient stand-alone licensor. Finally, I discuss the conditions under which a policy of ex-ante licensing can be less efficient than ex-post licensing.

(Re)Considering the Measurement of Business Group Affiliation: A Research Note

Prior research in economics, finance and management has sought to describe the predominance of business groups in the global economy since the late 1980. Yet, theory still falls short of explaining the role of business groups as a substitute for external markets, particularly as their influence only increases as countries develop. This paper sets out to synthesize the business group literature with a focus on emerging economies, and posits that three main problems hinder the explanatory power of the literature; the difficulty of defining and identifying business groups, the prior focus on social welfare implications, and that the central business group theories are embedded in a decidedly Anglo-American, developed economy perspective. Finally, we provide suggestions for addressing these issues and suggest several hypotheses that will help further future research in explaining the nature of business groups absent an Anglo-American view.

Towards a Minimalist Theory of Intra-Firm Management Professionalism

The social welfare implications of the managerial role may be fruitfully problematized using a simple distinction – extra-firm social welfare (i.e. socially beneficial corporate impact outside the firm’s organizational structure), versus intra-firm social welfare (i.e. socially beneficial corporate impact within the firm’s organizational structure). Focusing on the intra-firm dimension, I argue that managers occupy professional roles, and that management professionalism involves following efficiency imperatives, despite prevalent market failures arising from intra-firm information asymmetries. This approach is grounded upon a novel minimalist theory of the professions and their role in society. Beyond market governance mechanisms, professional governance involves non-market mechanisms such as ethics codes and social norms. Intra-firm management professionalism thus involves promoting social welfare within the firm, by drawing on norms that also have extra-firm and general public interest relevance. Dominant paradigms of business ethics already consider promoting social welfare to be a professional obligation, viz. a special obligation applicable to the managerial role, as opposed to a general obligation applicable to all individuals and corporations at large. An intra-firm theory of management professionalism thus facilitates a dynamic engagement with on-going debates about a unified intra-firm/extra-firm theory of business ethics.

Retrenchment and restructuring: family support and children's services reform under the coalition

Purpose– With the UK Conservative-Liberal Democrat Government reaching its mid-term point, this paper examines its austerity measures and public expenditure reductions in family support and children's services, and its revisions of family support, family intervention, child poverty, child well-being and children's services reform policies in contrast to the former Labour governments.Design/methodology/approach– The paper is informed by policy analysis and research reviews.Findings– The analysis focuses on three dimensions of policy change: first, reductions in income support for children and families and central government funding for children's services; second, refocusing child poverty, child well-being and family policies around the Conservative's “Broken Britain” campaign and the Liberal Democrats targeted social mobility initiatives; and finally, broader children's services reforms. The paper recognises some progressive developments but charts the social welfare implications of reduced welfare entitlements for families and the pressures on support services for families from children's services reforms.Originality/value– The paper combines reflections on the aims, achievements and limitations of Labour reforms to family support and children's services with a broader analysis of welfare state retrenchment and restructuring under the Coalition. It places current changes in family support and children's services within the context of the ideological influences on the Coalition's social policies and the primacy of its austerity programme and welfare state reform agendas.

Green Recycling Networks

In this paper, we study how two important determinants of recycling costs, economies of scale and material-stream homogeneity, influence endogenous recycling coalition formation. On one hand, strong economies of scale make the coalitions typically larger, due to fixed-cost savings. On the other hand, large coalitions generate typically more heterogeneous material streams, which increases the variable recycling costs due to additional separation efforts. By enacting recent concepts such as Extended Producer Responsibility, which shifts the burden of proper disposal of used goods from the (local) governments to the producers that bring the goods to the market, legislators in many countries and states have fostered such coalition building. We study the efficiency of this strategy by analyzing a game-theoretical model in which producers compete in a horizontally differentiated primary market, but they may collaborate at the same time to organize proper disposal of the goods they bring to the market. We find structural differences in the coalitions that emerge endogenously, compared with both the coalitions that a government would select to maximize social welfare and coalitions that a (local) government would set up to minimize recycling costs of the equilibrium industry output in a setting in which producers ignore recycling costs. We conclude by discussing implications for social welfare of implementing taxes or subsidies.

‘Lend me your ears’: social policy and the hearing body

Recent developments in music regulation policy in some European countries show a recognition of changes in the built environment, contemporary demographics and the sonic profile of popular music. These initiatives have not been echoed in Australian music policy, where the primary focus is on the cultural and economic conditions of production and consumption, with little interest in the mechanics and biology of sound production and circulation, and their social welfare implications. Within the general category of noise pollution, it appears that the proliferation of low-frequency noise (LFN) is the fastest growing problem, in which contemporary popular music is increasingly implicated. This paper explores why LFN should suddenly become so pervasive that it has begun to attract specific social policy and legislative measures, its own scientific journals, and attempts to establish standards of its measurement specific to a profile that evades traditional sound pollution analysis.

Toward a supply-side theory of financial innovation

Innovation. The word is evocative of ideas, products and processes which have somehow made the world a better place. Prior to the global financial crisis, many viewed financial innovation as unequivocally falling into this category. Underpinning this view was a pervasive belief in the self-correcting nature of markets and their consequent optimality as mechanisms for allocating society’s resources. This belief exerted a profound influence on how we regulated financial markets and institutions.This paper examines the influence of this market fundamentalist thinking on the regulation of OTC derivatives markets in the US during the pivotal period between the enactment of the Commodity Futures Trading Commission Act (1974) and the Dodd-Frank Wall Street Reform and Consumer Protection Act (2010). More specifically, it traces how the conventional ‘demand-side’ view of financial innovation played an important role in blinding policymakers to a host of pressing regulatory challenges. The objective of this paper is to start us down the path toward a more complete theoretical account of the nature, sources and potential private and social welfare implications of financial innovation. It also aspires to move us incrementally toward a more constructive equilibrium between the important insights of financial theory and how we conceptualize and pursue the objectives of financial regulation.

Neurological and intellectual disabilities among adolescents within a custodial institution in South-West Nigeria

A total of 67 adolescents from a juvenile remand home were matched with 67 other adolescents by age and gender, with a view to determine the prevalence and spectrum of neurological and intellectual disabilities. Intelligence quotient (IQ) was estimated using an adapted version of the Slosson's Intelligence Test and a full neurological evaluation was carried out. The mean IQ score for the remand home participants was significantly lower than the controls (77 ± 11 vs. 99 ± 14; t = 1.6, P = 0.001). Almost half (46.7%) of the participants in the remand home had intellectual disability of varying degrees, including borderline intellectual functioning, compared with only two (3.3%) of the comparison group (P < 0.001). Epilepsy and neurological deficits were significantly more prevalent among the remand home group, particularly those admitted as victims of neglect, compared with the comparison group (P ≤ 0.02). These findings and recent literature were used to speculate the possible underlying factors. Policy implications for child social welfare in Nigeria were suggested.

A Simple Model of the Commercial Lobbying Industry

In this paper we model the commercial lobbying industry (such as the so-called K-Street lobbyists of Washington, D.C.). In contrast to classical special interest groups commercial lobbying firms are not directly motivated by policy outcomes. They exist to make profits by selling intermediaries services between their clients and policymakers. We explain why these firms exist, and their implications for social welfare. We find that in a simple general equilibrium framework the market level of commercial lobbying services is typically socially inefficient, and characterize the nature of the distortions involved.

Investigating Travel Thresholds for Sports and Recreation Activities

Central to the practice of urban planning is the provision of services, which has potential public health and social welfare implications. However, service area analysis, typically, employs arbitrary travel-distance thresholds. Through this study we provide an empirical investigation into the durations and distances that respondents are willing to travel in order to engage in various sports and recreation activities. This research uses time-diary data, augmented with global positioning system information, to investigate individually based and objectively measured travel thresholds (which define travelsheds) for various sports and recreation activities in Halifax, Nova Scotia. Results accord with national time-diary data, and indicate that duration-based and distance-based travelsheds are generally in the order of 15–30 minutes and 4–20 km, respectively. Georeferenced time-diary data provide unique insights into travel thresholds, which may be used to help improve accessibility and thereby increase the frequency and duration of physical activity engagement.

Solving Want/Should Conflicts in the Workplace

It is common for employees and consumers to face intrapersonal conflicts when making trade-offs between maximizing their long-term utility and satisfying their immediate desires. In such cases, people often choose options they viscerally “want” (e.g., eating pizza, procrastinating on dull assignments, skipping annual check-ups) over options they “should” choose given their long-term interests (e.g., eating salad, quickly completing dull assignments, obtaining annual check-ups). Understanding what factors influence the decisions made by those facing “want/should conflicts” has long intrigued both researchers and practitioners. This is a particularly important topic because of its implications for individual employees, organizations, and social welfare in such diverse areas as physical and psychological well-being, retirement savings, and educational attainment. This symposium examines want/should conflicts both from the perspective of individual decision makers and from that of choice architects (such as managers and policy makers). The four papers that comprise this symposium examine: (1) when people naturally tend to behave in line with their long-term interests (Dai, Milkman, and Riis), (2) whether people can benefit from a novel self-control management technique that bundles “wants” with “shoulds” (Milkman, Minson, and Volpp), and (3) how organizations can design choice contexts to steer employees toward better physical well-being by promoting far-sighted decision making (Putnam-Farr and Riis; VanEpps, Downs, and Loewenstein). Together these papers advance our understanding of want/should conflicts in ways that can both help individuals make more “should” choices and improve organizations’ ability to facilitate “should” decision making among their employees. Precommitment to Cafeteria Choices Presenter: Eric VanEpps; Carnegie Mellon U. Presenter: Julie Downs; Carnegie Mellon U. Presenter: George Loewenstein; Carnegie Mellon U. The Fresh Start Effect: Breaking Points in Life Motivate Virtuous Behavior Presenter: Hengchen Dai; U. of Pennsylvania Presenter: Katherine L. Milkman; U. of Pennsylvania Presenter: Jason Riis; Harvard Business School Holding the Hunger Games Hostage at the Gym: An Evaluation of Temptation Bundling Presenter: Katherine L. Milkman; U. of Pennsylvania Presenter: Julia Alexandra Minson; Wharton School Presenter: Kevin Volpp; U. of Pennsylvania Choosing to Participate: The Effects of Message Type on Enrollment and Participation Presenter: Eleanor Putnam-Farr; MIT Sloan Presenter: Jason Riis; Harvard Business School