Labor market rigidities and economic efficiency: Evidence from Spain

In the 1990s, Spain approved two labor reforms aimed at reducing the unemployment level and its volatility. Overall, these reforms involved two measures designed to induce firms to meet their labor needs via adjustment of permanent positions: restricting the use of temporary workers and reducing the amount of severance payments. This paper empirically assesses the impact of these reforms on the allocative efficiency of the labor input employing Petrin and Sivadasan's (2011) value of the marginal product-marginal cost gap methodology. We find a statistically significant increase in within-firm permanent labor gaps following the reforms. These results suggest that restrictions on the use of temporary workers (increasing the probability of hiring fragile workers for permanent positions), when coupled with uncertainty about enforcement of reduced severance payments, could more than offset the reduction in severance payments; hence, the net effect of the reforms could be to increase adjustment costs for permanent positions.     

The Shifting Welfare State in Hungary and Latvia

This article analyzes the evolution of the welfare system in Hungary and Latvia since the early 1990s. We identify the main components of social protection and investigate whether they have shifted. We find evidence of significant changes, but not of a definite and major shift. Rather, we argue that various benefits have evolved differently. In general, reforms tend to recombine (rather than replace) specific components.     

Principal component analysis of yield curve movements

An important issue in interest rate modeling is the number and nature of the random factors driving the evolution of the yield curve. This paper uses principal component analysis to examine (1) the inherent dimension of historical yield curve changes indicated by the significance of eigenvalues of the covariance matrix, (2) the practical dimension determined by a variance threshold, (3) the shape of the yield curve change associated with the first principal component, and (4) the persistence of this shape over time. We find that although the first two components explain 93% of the sample variation within a 90% confidence interval, the remaining components make statistically significant contribution to the covariance matrix. Consequently, we can establish a practical limit on the dimension only if we are willing to designate a threshold error variance. Further, our results on the persistence of the shape of the yield curve shift associated with the first component depend upon this threshold. If all components are included, the hypothesis that the shape persists between two sample time periods is rejected. On the other hand, if all but the first six components are eliminated, the hypothesis is not rejected.     

Which stock price component drives the Amihud illiquidity premium?

We examine the components of stock prices that play a key role in the pricing of the Amihud (2002) illiquidity measure. We first decompose the stock price series into permanent and transitory components and then construct the half-Amihud illiquidity measures on the days of positive and negative permanent price returns. We find that the transitory half-Amihud measure on the days of negative permanent price returns plays an important role in pricing the Amihud illiquidity even after controlling for the turnover ratio. This finding contrasts with that of Lou and Shu (2017) in that both the trading volume component and transitory price impact, drive the Amihud illiquidity premium.     

Do health system reforms stand a chance?

While most major reforms of health systems fail, those that succeed are motivated by politicians' quest for reducing the health burden on their budget in response to a shift in voters' preferences away from public health. An Edgeworth box is used to depict their preferences, in addition to those of (potential) patients and health‐care providers. Politicians are found to severely constrain the area of mutual advantage, suggesting that only minor reforms are possible unless they promise to lower health‐care expenditure. An efficiency‐enhancing change that would enlarge the box and hence the area of mutual advantage would be to suppress the requirement imposed on health insurers to purchase domestically, rather than being free to directly import health‐care services and drugs.     

Regulation and cost efficiency in the European railways industry

The objective of this article is to analyze European railways’ incentives to improve efficiency in the recent liberalization context. We build and estimate a structural model accounting for regulatory pressures faced by the firms. Our model includes demand equations, capacity constraints and a cost function, in which are specified an exogenous technical efficiency component and an endogenous cost reducing effort parameter. We find a significant positive effect of implementing the reforms on cost reducing activities, and a smaller cost of effort for firms choosing a more advanced separation of infrastructure from operation activities.     

Zero-intelligence agents looking for a job

We study a simple agent-based model of a decentralized matching market game in which agents (workers or job seekers) make proposals to other agents (firms) in order to be matched to a position within the firm. The aggregate result of agents interactions can be summarised in the form of a Beveridge curve, which determines the relationship between unmatched agents, unemployed job seekers and vacancies in firms. We open the black box of matching technology, by modelling how agents behave (make proposals) according to their information perception. We observe more efficient results—in the form of a downward shift of the Beverage curve in the case of simple zero-intelligent agents. Our comparative statics indicate that market conditions, such as the heterogeneity of agents’ preferences, will also shift the Beveridge curve downwards. Moreover, market thickness affects movement along the Beverage curve. Movement right-down along the curve if there is an increasing number of agents compared to positions within firms. Furthermore, we show that frictions in re-matching, such as commitment to a match, could be another factor shifting the Beveridge curve toward the origin.     

Mismatch Shocks and Unemployment During the Great Recession

We investigate the macroeconomic consequences of fluctuations in the effectiveness of the labor market matching process with a focus on the Great Recession. We conduct our analysis in the context of an estimated medium‐scale dynamic stochastic general equilibrium model with sticky prices and equilibrium search unemployment that features a shock to the matching efficiency (or mismatch shock). We find that this shock is not important for unemployment fluctuations in normal times. However, it plays a somewhat larger role during the Great Recession when it contributes to raise the actual unemployment rate by around 1.3 percentage points and the natural rate by around 2 percentage points. The mismatch shock is the dominant driver of the natural rate of unemployment and explains part of the recent shift of the Beveridge curve. Copyright © 2016 John Wiley & Sons, Ltd.     

Forecasting the term structure of government bond yields

Despite powerful advances in yield curve modeling in the last 20 years, comparatively little attention has been paid to the key practical problem of forecasting the yield curve. In this paper we do so. We use neither the no-arbitrage approach nor the equilibrium approach. Instead, we use variations on the Nelson–Siegel exponential components framework to model the entire yield curve, period-by-period, as a three-dimensional parameter evolving dynamically. We show that the three time-varying parameters may be interpreted as factors corresponding to level, slope and curvature, and that they may be estimated with high efficiency. We propose and estimate autoregressive models for the factors, and we show that our models are consistent with a variety of stylized facts regarding the yield curve. We use our models to produce term-structure forecasts at both short and long horizons, with encouraging results. In particular, our forecasts appear much more accurate at long horizons than various standard benchmark forecasts.     

Commodity market reform in Africa: some recent experience

Since the early 1980s, dramatic changes in export commodity markets, shocks associated with resulting price declines and changing views on the role of the state have ushered in widespread reforms to agricultural commodity markets in Africa. The reforms significantly reduced government participation in the marketing and pricing of commodities. This paper examines the background, causes, process and consequences of these reforms and derives lessons for successful reforms from experiences in markets for four commodities important to Africa—cocoa, coffee, cotton, and sugar. The commodity focus of the paper highlights the special features associated with these markets that affect the reform process. The paper complements the current literature on market reforms in Africa, where grain market studies are more common. We suggest that the types of market interventions prior to reform are more easily classified by crop than by country. Consequently, there are significant commodity-specific differences in the initial conditions and in the outcomes of reforms related to these markets. However, there are general lessons as well. We find that the key consequences of reform have been significant changes in or emergence of marketing institutions, and a significant shift of political and economic power from public to private sector. In cases where interventions were greatest and reforms most complete, producers have benefited from receiving a larger share of export prices. Additionally, we conclude that the adjustment costs of reform can be reduced in most cases by better understanding the detailed and idiosyncratic relationships between the commodity subsector, private markets, and public services. Finally, while there are significant costs to market-dependent reforms, experiences suggest that they are a necessary step toward a dynamic commodity sector based on private initiative. Indeed, this is particularly true in countries and sectors where interventions were greatest and market-supporting institutions the weakest.     

Beyond public management

The Netherlands are often considered an excellent example of ‘new public management’ reforms. Especially the ‘Tilburg model’ of management reform that took place in Dutch local government in the mid-1980s has become internationally renowned. In this review of public management reforms that took place in Dutch local and national government during the 1980s and 1990s we will show that managerial reforms were not the only dominant story in the The Netherlands. Dutch administration experienced a shift in frame of reference beyond public management. This review will not concentrate on ‘factual reforms’ but rather on reform ideas. This study departs from the empirical positivist approach where ‘objective facts’ play the central role. There is no one and single ‘objective truth’ about reforms. Managerial reform seemed the dominant story. In ‘reality’ there was a variety of reform ideas.     

The policy environment and relative price efficiency of Egyptian private sector manufacturing: 1987/88–1995/96

We study the impact of policy and institutional constraints, and reforms undertaken to remedy them, on relative price efficiency and cost of the private manufacturing sector of Egypt. We undertake this study using a generalized cost function, which subsumes the standard neoclassical cost function as a special case. This approach allows us to assess the impact of such constraints, which include labor market, energy and financial sector ones, on relative prices and the structure of production, including factor demands, shares and cost. Our findings indicate the presence of substantial distortions in relative prices, and hence on cost, due to the policy environment. We also find improvements in relative price efficiency and cost performance as a result of policy reforms initiated to remove the constraints. Copyright © 2007 John Wiley & Sons, Ltd.     

Factor analysis of permanent and transitory dynamics of the US economy and the stock market

We analyze dynamics of the permanent and transitory components of the US economic activity and the stock market obtained by multivariate dynamic factor modeling. We capture asymmetries over the phases of economic and stock market trends and cycles using independent Markov‐switching processes. We show that both output and stock prices contain significant transitory components, while consumption and dividends are useful to identify their respective permanent components. The extracted economic trend perfectly predicts all post‐war recessions. Our results shed light on the nature of the bilateral predictability of the economy and the stock market. The transitory stock market component signals recessions with an average lead of one quarter, whereas the market trend is correlated with the economic trend with varying lead/lag times. Copyright © 2010 John Wiley & Sons, Ltd.     

转型国家政府审计功能探讨——来自罗马尼亚的经验

罗马尼亚在国家转型期间面临着严重腐败、贫富差距、司法改革等问题,为了加入欧盟,罗马尼亚在这些方面进行了卓有成效的改革。在加强监督和控制的国家治理中,执行公共外部审计的审计院起到了很大的推动作用。在借鉴欧盟法的基础上,罗马尼亚审计院在法律地位、组织框架、职权范围上都得以提高和完善,审计院对国家治理产生重要影响,对政府部门及其他公共部门的监督和控制效率、效果得到很大提高。我国可以借鉴其经验,从提高审计署法律地位和加强外部审计与内部审计协调两个方面强化审计署在国家治理中的功能。     

Shocking Stories

The paper provides a survey of methods that decompose multivariate series into permanent and transitory components by using ideas drawn from the co-integration literature. We adopt a two stage procedure to effect the decomposition. In the first stage a basic set of permanent and transitory components is formed by using standard definitions of the shocks which they are constituted from. The resulting measurements are not unique and further information needs to be employed to get uniqueness. Such information can come in many forms but a particularly important one involves the values of the long-run multipliers for permanent shocks that are available from many calibrated models. A comparison of the methods of effecting the decomposition is performed using a well known data set.     

Employment protection reforms,employment and the incidence of temporary jobs in Europe: 1996–2001

This paper uses longitudinal data on individuals from the European Community Household Panel over the 1996–2001 period to investigate the impact of reforms of employment protection systems in nine countries on the incidence of employment and of temporary jobs for wage and salary workers. Important features of the research design include the use of individual fixed effects models as well as the inclusion of country-specific trends in the dependent variable. A robust finding is that policies making it easier to create temporary jobs on average raise the likelihood that wage and salary workers will be in temporary jobs. This effect is felt primarily when the regional unemployment rate is relatively high. However, there is no evidence that such reforms raise employment. Thus, these reforms, while touted as a way of jump-starting individuals' careers in the job market, appear rather to encourage a substitution of temporary for permanent work.     

The role of liquid government bonds in the great transformation of American monetary policy

A fundamental shift in monetary policy occurred around 1980: the Fed went from a “passive” policy to an “active” policy. We study a model in which government bonds provide transactions services. We present two calibrations of our model, using pre- and post-1980 data. We show that estimates of pre- and post-1980 policy rules all lie within our determinacy regions. But, the pre-1980 policy was a very bad monetary policy, even if it avoided sunspot equilibria. Model simulations suggest that household welfare would have increased by 3.3 percent of permanent consumption in this period under an active policy.     

DIVORCE LAW REFORMS AND DIVORCE RATES IN THE USA: AN INTERACTIVE FIXED‐EFFECTS APPROACH

This paper estimates the effects of unilateral divorce laws on divorce rates in the USA from a panel of state‐level divorce rates. We use the interactive fixed‐effects model to address the issue of endogeneity due to the association between cross‐state unobserved heterogeneity and divorce law reforms. We document that earlier studies in the literature do not fully control for unobserved heterogeneity and result in mixed empirical evidence on the effects of divorce law reforms. While reconciling these conflicting results, our results suggest that divorce law reforms have temporal positive effects on divorce rates, thus confirming the 2006 findings of Wolfers. Via simulation experiments, we assess the degree to which faulty inclusion or faulty exclusion of interactive fixed effects affects the policy effect estimators. Our results suggest that faulty inclusion only results in efficiency loss whereas faulty exclusion causes bias. Copyright © 2013 John Wiley & Sons, Ltd.     

More reforms,less innovation? The impact of structural reform histories on innovation-oriented cultures in public organizations

The environments of public organizations have become substantially volatile due to economic and societal changes, requiring organizations to continuously adapt and to develop an innovation-oriented culture. In response to the multitude of challenges posed by this volatile environment, politicians in inter alia the executive and parliament impose structural reforms upon public organizations, implying that these organizations might be confronted with a series of structural reforms over their lifetime. This paper advances that a history of repeated and frequent structural reforms, irrespective of the underlying drivers of these reforms, has a negative effect on the innovation-orientedness of the organizational culture. We explore the link between an organization’s history of structural reforms and the degree to which the culture within these organizations is innovation-oriented. Results indicate that organizational turmoil generated by repeated structural reforms reduces innovativeness and suggest that too many structural reforms imposed in a too short time span will have detrimental side effects.     

Caught in an evaluatory trap: a dilemma for public services under NPFM

This paper presents a challenge to public sector managers, policy-makers and interested academics. Drawing on the findings of previous international comparative studies of new public financial management (NPFM) reforms, it concludes that public services and their providers are caught in an ‘evaluatory trap’. The continual promotion of NPFM reforms, despite their evident repeated failure to meet specified achievements, is argued to be generating a cycle of ever-decreasing public services at ever-increasing costs per service unit. As the legitimacy of public services increasingly rests on the need to be seen as efficient and effective and as definitions of efficiency frequently demand adoption of the latest set of NPFM reforms, it follows that the future for public services is in question.