nep-knm New Economics Papers
on Knowledge Management and Knowledge Economy
Issue of 2007‒10‒27
four papers chosen by
Emanuele Canegrati
Catholic University of the Sacred Heart

  1. Do better–informed workers make better retirement choices? A test based on the Social Security Statement By Giovanni Mastrobuoni
  2. Labor Turnover before Plant Closure:'Leaving the sinking ship' vs. 'Captain throwing ballast overboard' By Guido Schwerdt
  3. Cultural Differences, Insecure Property Rights and the Mode of Entry Decision By Jiahua Che; Giovanni Facchini
  4. Information Deficiencies in Agricultural Policy Design, Implementation and Monitoring By David Blandford

  1. By: Giovanni Mastrobuoni
    Abstract: In 1995, the Social Security Administration started sending out the annual Social Security Statement. It contains information about the worker’s estimated benefits at the ages 62, 65, and 70. We use this unique natural experiment to analyze the retirement and claiming decision making. First, we find that, despite the previ- ous availability of information, the Statement has a significant impact on workers’ knowledge about their benefits. These findings are consistent with a model where workers need to gather costly information in order to improve their retirement deci- sion. Second, we use this exogenous variation in knowledge to analyze the optimality of workers’ decisions. We do not find an overall improvement in workers’ retirement behavior, but there are some changes among particular groups. Workers aged 62 and 65 become less sensitive to Social Security Incentives. Age 62 and 65 are the two ages at which the retirement benefits are reported in the Statement, which suggests that some workers may use them as focal points. Additionally, we find evidence that before the Statement was introduced uninformed workers, who are more likely to be low–educated and black, made, on average, worse retirement decisions, and that workers with a dependent spouse usually disregarded their own spouse’s benefits in their calculations. The information contained in the Statement appears to have helped both groups, though with the important exception of black workers.
    Keywords: social security statements, retirement expectations, retirement behavior, social security incentives
    JEL: H55 J26
    Date: 2007
  2. By: Guido Schwerdt
    Abstract: Involuntary job loss in administrative data is commonly identified by focusing on mass-layoffs or plant closures. However, such events usually do not happen without prior knowledge, which potentially leads to selection in the labor turnover of distressed firms. We find that workers separating from closing plants up to 2 quarters before closure are associated with significantly lower displacement costs and on average significantly higher pre-closure earnings levels as opposed to ultimately displaced workers. Furthermore, our results indicate that displaced workers with high pre-closure earnings experience significantly lower reductions in future employment probabilities. These findings suggest that compositional differences cause estimated displacement costs to differ between early leavers and ultimately displaced workers. Focusing exclusively on the latter group would lead to an overestimation of displacement costs.
    Keywords: plant closure, labor turnover, exact-matching, employer-employee data
    JEL: J63 J65 C21 C23
    Date: 2007
  3. By: Jiahua Che; Giovanni Facchini
    Abstract: We develop a theory of a multinational corporation's optimal mode of entry in a new market. The foreign firm can choose between a licensing agreement, a wholly owned subsidiary or shared control (joint venture). In an environment in which property rights are insecure, opportunism is possible, and the identification of new business opportunities is costly, we show that the relationship between the quality of the institutional environment and the mode of entry decision is non-monotonic. Licensing is preferred if property rights are strictly enforced, while a joint venture is chosen when property rights are poorly enforced. For intermediate situations, the better use of local knowledge made possible by shared control under a joint venture works as a double-edged sword. On the one hand, it makes the monitoring activity of the multinational more credible, on the other it offers insurance to both parties, potentially compromising the incentives faced by the local partner.
    Date: 2007–10–15
  4. By: David Blandford
    Abstract: Accurate and complete information is needed to guide the formation, implementation, monitoring and assessment of agricultural policy. Obtaining both qualitative and quantitative information is vital for ensuring that policy measures are targeted, efficient and cost effective. Quantification of impact and benefit-cost analysis are only possible if information of sufficient quantity and quality is available. Meeting this requirement is increasingly challenging due to an expansion in the range and complexity of policy concerns associated with agriculture. Problems can be posed by a lack of knowledge about technical relationships that underlie key processes, by the inherent uncertainty of outcomes or difficulties in monitoring these, and by information asymmetry (i.e. situations in which the information necessary to inform policymaking exists but it is difficult or costly to obtain). This study examines information needs to guide the formation, implementation, monitoring and assessment of policies for agriculture, outlines deficiencies, argues for selective improvements in data availability, quality and relevance in order to satisfy policy priorities, and suggests ways to achieve these. Methods for dealing with remaining deficiencies when designing and implementing policies are also outlined...
    Date: 2007–10

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