More on moral hazard in organizations: Reply

The paper by Thomas Hammond and Gary Miller is an insightful comment on the relevance of budget-breaking incentive schemes to real world organizations. They have made a valuable contribution in considering this line of research within a broader context. Nonetheless, they have not established the invalidity of my theoretical arguments. Therefore, my basic point still holds: that is, theoretically it is possible to show that a bonus-penalty incentive scheme of the sort proposed by Holmström is feasible, despite the principal's incentive to cheat. Regardless, all of this debate may beg the question, since compensation arrangements observed in the real world are rarely of the bonus-penalty type. Linear incentives are far more common, and many compensation schemes do not appear to incorporate optimal incentives. At this point we need more empirical research on the determinants of incentives in organizations. In order to make further advances in this area, a better understanding of the incentive mechanisms actually used in organizations is required.Thanks are due to Richard Frank for helpful comments. The usual caveat applies.     

Approach and avoidant coping: Implications for adolescent mental health

We conducted a short-term longitudinal study examining the structure of coping behavior and the relationship between coping style and depression during adolescence. The sample consisted of 603 adolescents in Grades 6–11 who were surveyed in the fall of 1989 and again in the fall of 1990. A two-dimensional model of coping was found using confirmatory factor analysis with the factors being approach and avoidant coping. Four cross-sectional and seven longitudinal coping groups were formed to explore group differences in depression. Approach copers reported the fewest symptoms of depression, while avoidant copers reported the most. Subjects who changed over time from approach to avoidant coping evidenced a significant increase in depressive symptoms, whereas subjects who switched from avoidant to approach coping displayed a significant decrease in depression over a one-year period. These findings imply that adolescents who are able to elicit social support, engage in problem solving, and cognitively restructure events within a positive light are more likely to successfully negotiate the challenges of adolescence.This research was supported by a grant from the William T. Grant Foundation (8912789), Anne C. Petersen, Principal Investigator. The writing of this article was supported by the National Institute of Mental Health Research Training Grant 5 T32MH18387-06 in Child Mental Health/Primary Prevention.Received Ph.D. in Human Development and Family Studies from Pennsylvania State University. Research interests include adolescent mental health and community research.Received his Ph.D. in Human Development and Family Studies from Pennsylvania State University. Research interests include adolescent mental health and research methodology.Received degree from the University of Chicago. Research interests are in biopsychosocial development in adolescence, with a focus on sex differences in mental health.     

Urban youth under stress: Empirical identification of protective factors

Explored the influence of life stress as mediated or moderated by locus of control, family environment, social support, and coping style on psychological adjustment and school performance in 164 ninth graders from Baltimore. Gender differences in findings were shown. For boys, family cohesion was the only variable found to protect against the effects of stress. Family cohesion did not serve protective functions for girls, and along with overall social support, was associated with increased vulnerability to school problems. The report of problem-focused coping strategies exerted a number of protective functions for girls only. External locus of control was found to increase boys' and girls' vulnerability to the effects of life stress. Empirical development of interventions to improve the psychosocial adjustment of inner-city adolescents is discussed.Received Ph.D. from Virginia Polytechnic Institute and State University in 1991. Research interests include evaluation of school mental health services, empirical development of interventions for children, and the impact of violence on urban youth.Received B.A. from Cornell University. Interests include stress and coping in children, identification of resilience factors, and evaluation of child mental health systems of care.Received Ph.D. from the University of Oklahoma in 1967. Research interests include psychophysiology, sleep disorders, and biofeedback and instrumentation.Received B.A. from Loyola College. Interested in applied work with adolescents and adults.Received M.D. from Duke University in 1968. Research interests include training in child and adolescent psychiatry, adolescent psychopathology, and the development of school mental health programs.     

Do bonus offers shorten unemployment insurance spells? results from the washington experiment

Unemployment insurance is intended to reduce hardship by providing labor force members with partial wage replacement during periods of involuntary unemployment. However, in performing this income maintenance function, unemployment insurance may prolong spells of unemployment. Evidence from a field experiment conducted in Illinois in 1984 suggested that offering unemployment insurance claimants a modest cash bonus for rapid reemployment would increase the speed of return to work and reduce program costs. In 1988 a similar experiment, examining several different bonus offers, was conducted in the state of Washington. Evidence from the Washington experiment indicates that bonus offers do change job seeking behavior, but that only relatively generous bonus offers—about six times the weekly benefit amount—should be expected to significantly change the behavior of people eligible for unemployment benefits.     

The State of American Federalism, 1994-1995

Federalism, as a concept and as a reality, received assistancefrom a variety of sources during 1994–1995. Opinion pollsrevealed a public strongly supportive of shifts in the balanceof power between federal and state governments. The new Republican-controlledCongress, bent on devolving authority to the states, busieditself with an ambitious legislative agenda. The DemocraticPresident pursued his principles of federalism and intergovernmentalrelations by supporting the unfunded mandates bill and by increasingthe use of the administrative waiver. The U.S. Supreme Courtbolstered federalism with its rulings in cases such as Lopez,a state challenge to the federal Gun-Free School Zones Act.The new mood in Washington, D.C. was complemented by state leadersanxious to take on the challenges of a rebalanced federal system     

Government 'strength' and budget deficits in advanced democracies

Abstract. Roubini and Sachs provided the first systematic test of the idea that political structure the size, composition, diversity, and/or stability of a governing cabinet - is related to budget deficits. In this paper, we take issue with several of Roubini and Sachs' choices concerning data and operationalization, and argue that their approach cannot offer clear conclusions about the relationship between national political structure and budget deficits. We test the 'strength of government' hypothesis using central government finance data on 16 countries, 1959–1990. We measure deficits in a way that maximizes comparability across countries but avoids the potential problems of standardizing by GDP. We examine carefully the definition and measurement of 'strength of government', in light of recent theoretical and empirical work in comparative politics. We perform pooled time-series regression analysis of deficit change in 16 OECD countries for the period 1959–1990. We argue that while structural differences between governments may have little impact on deficits during good economic times, they may become especially noticeable and influential during periods when governments struggle to cope with severe economic problems.