Unionization, incomplete contracting, and capital investment

Article Abstract:

The behavior of unionized firms in response to opportunism introduced by incomplete union contracts is examined. Opportunities for union appropriation of the quasi-rents accruing from large irreversible investments exists because union-firm agreements are short-term, cannot prevent unilateral changes in the existing contract prior to expiry and do not cover union members yet to be hired. In order to limit such opportunities, unionized firms reduce their investments in specific durable assets, research and development activities and advertising; hire a smaller number of new employees; and use debt policy to contain wage demands. The application of firm-specific measures of unionization to a sample of public firms supports these effects.

Labor organizations, Management, Finance, Contracts, Labor relations, Capital investments, Labor unions

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Interpreting the movements in short-term interest rates

Article Abstract:

There is very little indication that the Fisher equation for equilibrium asset pricing exerts an effect on the equilibrium of nominal short-term interest rates for a 25-year period. This finding is based on the application of a generalized model of capital assets pricing theory to the analysis of interest behavior as based on the dynamics of consumption growth and inflation.The estimates derived from the model provide a new perspective to the nominal interest rate behavior. The structural model shows that interest rate movement on a month-to-month basis is reflective of the movement of real rates, premiumsof risk and expected inflation.

Analysis, Interest rates, Capital assets pricing model, Capital asset pricing model

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