William M. Chan

External Recruitment versus Internal Promotion

This article analyzes the choice between internal promotion and external recruitment within the framework of an economic contest. Opening up the competition for a position to external candidates reduces the chance of promotion for existing workers and therefore their incentive to work. Increasing the prize for winning can maintain incentives but is limited by moral hazard and potentially disruptive office politics. Alternatively, a competitive handicap can be awarded to existing workers to boost their chances. This strategy is consistent with the general observation that an external candidate is recruited only if she is significantly superior to the internal contestants.

Dowry and Wife's Welfare: A Theoretical and Empirical Analysis

Becker attributes the existence of marital transfers to inflexibility in the division of joint product within the marriage. If that were the only reason, we would not have observed the coexistence of dowries and bride‐prices. This paper offers an alternative analysis. While Beckers interpretation is retained for bride‐prices, a dowry is now represented as a premortem bequest by altruistic parents for a daughter. It not only increases the wealth of the new conjugal household but also enhances the bargaining power of the bride in the allocation of the output within the household, thereby safeguarding here welfare. Using micro data from Taiwan, we found that a dowry improves the brides welfare whereas a bride‐price has no effect. These empirical results support the theoretical predictions of the model.

A Signaling Theory of Grade Inflation

When employers cannot tell whether a school truly has many good students or just gives easy grades, a school has incentives to inflate grades to help its mediocre students, despite concerns about preserving the value of good grades for its good students. We construct a signaling model where grades are inflated in equilibrium. The inability to commit to an honest grading policy reduces the efficiency of job assignment and hurts a school. Grade inflation by one school makes it easier for another school to do likewise, thus providing a channel to make grade exaggeration contagious.

Marital transfer and intra-household allocation: a Nash-bargaining analysis

This paper explores the implications of inter-generational marital transfers on the allocation of resources within a conjugal household. Adopting a Nash-bargaining framework with alternative models of the threat points, it is argued that parents have greater incentive to make transfers to a married child than to a single child because of the efficiency gains from joint consumption and production of family public goods and because of the increase in bargaining power of the child in the allocation of private consumption. Such transfers also enhance marital stability by increasing the efficiency gains from marriage.

An Evaluation of the Hong Kong Employees Retraining Programme

The Employees Retraining Programme, launched by the Hong Kong government in 1993, was promoted as the solution to structural unemployment resulting fromrapid structural transformation of the economy. However, our study of the labourmarket performance of a group of trainees who received training in 1994/5 showsno evidence of any positive effect on the earnings or employment rate of trainees one year after the completion of training in relation to various comparison groups. The apparent lack of success can be traced to low target efficiency and distorted incentives that result in over-utilization of retraining resources.

Intersectoral Mobility and Short-Run Labor Market Adjustments

This article presents a model of labor market adjustments as a sequential process of reallocation among various market and nonmarket sectors. Training costs introduce friction into the process, while fixed costs of working limit work sharing, resulting in unemployment. Adjustments in sectoral labor market variables to demand shocks can follow very different patterns, depending on relative demands and the expected duration of the shocks. In particular, a permanent boom in a sector may result in an initial increase in unemployment and reduction in working hours even as employment increases, reflecting contemporaneous substitution between the margins and intertemporal substitution in recruitment.

The Long-Term Effectiveness of the Hong Kong Employees Retraining Programme

The Employees Retraining Programme in Hong Kong was promoted as the solution to structural unemployment resulting from rapid transformation of the economy. However, our study of the labour market performance of a group of trainees shows no evidence of any positive programme effect, more than three years after the completion of training, when compared to a group of job searchers. In particular, full time training is found to be less effective than part time training, and training in general skills is significantly less effective than training in specific occupational skills. This suggests problems in the design and implementation of retraining in Hong Kong.

Help and factionalism in politics and organizations

Whether in electoral politics or promotions within organizations, players often face the dilemma of whether to enter the contest or to assist other candidates. This article analyzes incentives in a rank-order tournament when the winner has control over resources that he can distribute to his supporters. Some players may then be encouraged to help others in exchange for paybacks, resulting in factionalism, with leaders and supporters sorted by ability. The number and the size of factions depend on the reward structure of the contest and the distribution of abilities. These implications are corroborated by data on U.S. gubernatorial primary elections.