Extracting Nontransparent Safety Net Subsidies by Strategically Expanding and Contracting a Financial Institution’s Accounting Balance Sheet

Financial safety nets are embedded in national regulatory systems that embrace at least three conflicting goals: maximizing aggregate social welfare, rescuing distressed institutions, and avoiding blame for things that go wrong. This paper develops a model that shows how opportunistic managers of a financial institution can use financial engineering to increase its access to safety net subsidies in a combination of overt and covert ways. Overtly, it can increase its size, complexity, and geographic footprint. These actions increase the political influence it can wield to subvert regulation. Covertly, it can increase its leverage and portfolio volatility in ways that existing monitoring technologies do not fully register.     

Financial Economists Roundtable Statement on Reforming the Role of the Rating "Agencies" in the Securitization Process

Assets securitized by private companies reached a peak of nearly $12 trillion in 2008, an amount nearly equal to the entire stock of credit intermediated in traditional ways by the world's banking systems. Failures of care and diligence in the origination, rating, and securitization of subprime mortgages led to a collapse in the prices of securitized assets and the public's confidence in the reliability and integrity of the process by which securities are rated. This decline in confidence has in turn undermined prices and credit flows in every market where investors and regulators rely on the credit ratings provided by Statistical Ratings Organizations (SROs) to certify the quality of debt.
With the aim of rebuilding confidence in the securitization process, this statement drafted and signed by 30 distinguished academic economists recommends three kinds of reform that are designed to improve the incentives faced by the SROs. First, to increase accountability for ratings mistakes, the analytic work of SROs must be made more transparent and their managements must accept liability for errors of negligence. Second, explicit reliance on ratings should be eliminated from risk management regulations issued by government agencies. By effectively "outsourcing" public authority to private firms, such regulations have had the effect of intensifying SRO conflicts of interest. Finally, SROs should be required to calculate and state express margins for error in the ratings for every tranche of securitized instruments. This would help investors appreciate the differences in the degree of leverage embedded in various categories of securitized debt.     

British Coal Mining Strikes 1893–1940: Dimensions, Distribution and Persistence

Strikes in manufacturing are known to be highly concentrated in a small number of plants. This study extends the analysis of strike concentration to coal mining and is the first study of strike concentration with significant temporal scope. The authors show that strikes were also highly concentrated in coal mining; that the prevalence of recorded strike activity was far from complete; that there was a rapid turnover in the population of highly strikeprone collieries and places; and that persistent strike activity was rare. These results afford a new perspective on strike concentration, the research implications of which are drawn out in the final section.     

Income mobility and risk during the business cycle: Comparing adjustments in labour markets in two Latin-American countries

This paper uses panel data from Argentina and Mexico and a new measure of mobility ‐ the Gini index of mobility ‐ to answer three questions. First, is there a trend towards rising labour income mobility over time in these two countries? Second, is there a relationship between income mobility and growth common to both countries, or does that relationship depend on the institutional features of each country’s labour markets? Third, do we observe more labour income mobility within some groups such as the young and the less educated than within other groups? JEL classification: D31, E32, J63.     

French unemployment: a transatlantic perspective

The paper compares the French and US labour markets. It shows that differences in unemployment rates are especially acute for young and old workers, but appear to be negligible for middle-aged workers. All French workers, however, experience job flows that are quite distinct from their American counterparts as they are exposed to long spells of infrequent unemployment, which is the opposite to the US case. Critical differences across ages and skills regarding the patterns of exit from and entry into employment are also displayed. The paper dispels the view that these differences originate from the behaviour of the unemployed (or the set of institutions that guide their decisions), and that this is new to the French labour market.