Bringing Unemployed Back to Work: Effective Active Labor Market Policies

We present a theoretical analysis of different types of active labor market policies in the context of a search-matching model. We find that labor market training is effective in bringing down unemployment while public employment services and subsidized jobs are not effective at all. This theoretical finding is confirmed in an explorative empirical analysis using data from 20 OECD countries.     

Bilateral Search and Vertical Heterogeneity

Just like perfect (frictionless) matching models, a search model is proposed that is characterized by bilateral search and vertical heterogeneity. It allows for a generally specified utility function. The equilibrium allocation is unique and exists in iterated strict dominance. The model is robust with the perfect matching model as frictions disappear. Nonetheless, the equilibrium allocations are surprisingly odd. For multiplicatively separable preferences, the distributions are partitioned endogenously. And for a wide range of preferences, matching sets are naturally disconnected.     

Dutch Economic Growth in Comparative-Historical Perspective, 1500–2000

Our knowledge of nineteenth century Dutch economic performance has been greatly improved by recent research. However, the interpretation of long-run Dutch economic development requires a reexamination of the concepts and generalizations used by economists, which derive mostly from the study of other nations, especially Britain. This article proposes both a reassessment of Dutch economic performance in the very long run, and a reconsideration of the concept of modern economic growth.     

ARBITRAGE BOUNDS FOR PRICES OF WEIGHTED VARIANCE SWAPS

We develop a theory of robust pricing and hedging of a weighted variance swap given market prices for a finite number of co‐maturing put options. We assume the put option prices do not admit arbitrage and deduce no‐arbitrage bounds on the weighted variance swap along with super‐ and sub‐replicating strategies that enforce them. We find that market quotes for variance swaps are surprisingly close to the model‐free lower bounds we determine. We solve the problem by transforming it into an analogous question for a European option with a convex payoff. The lower bound becomes a problem in semi‐infinite linear programming which we solve in detail. The upper bound is explicit. We work in a model‐independent and probability‐free setup. In particular, we use and extend Föllmer's pathwise stochastic calculus. Appropriate notions of arbitrage and admissibility are introduced. This allows us to establish the usual hedging relation between the variance swap and the “log contract” and similar connections for weighted variance swaps. Our results take the form of a FTAP: we show that the absence of (weak) arbitrage is equivalent to the existence of a classical model which reproduces the observed prices via risk‐neutral expectations of discounted payoffs.     

Identifying and unravelling persistent problems

Persistent problems feature prominently in transition management and system innovation literature. They serve both as a point of departure, and as justification for the contention that a system innovation is needed. The concept ‘persistent problem’ however is underdeveloped; it is used to label (symptoms of) problems that appear to be complex, uncertain, difficult to manage, and difficult to grasp, but as such provides no way for unravelling how the persistence of these problems actually works. A better understanding can help new practices, like niche-innovations, to overcome enduring problems, contributing to a transition or system innovation. Drawing on the work of Giddens and others, this paper proposes a conceptualisation that can be used to identify and unravel persistent problems. The conceptual framework is built on the notion of systemic reproduction, and further operationalised by iteratively combining a historically informed system analysis with an actor-guided system analysis. The historically informed analysis focuses on features that are exactly the strongholds of the current system, but are said to have negative side effects. In concurrence with that, the systemic reproduction of these negative side effects can be unravelled by analysing how new practices shape their agency in relation to their direct environment. A persistent problem then is a systemically reproduced negative side effect of a success factor of the system in focus. The operationalisation brings the conceptual framework to the actor level, and opens up possibilities for investigating how systemically embedded problems manifest themselves in the daily practice of actors that try to take on enduring problems. In the second part of the paper, this approach is illustrated by using it to unravel problems of tenability of the Dutch health care system. A historically informed analysis is integrated with an analysis of a new practice in health care that deals with patients who suffer from medically unexplained physical symptoms.     

Improving the business impact of foresight

Achieving an impact on business decision-makers with foresight does not appear to be an easy task. Therefore, the Macro Trends team at Deutsche Bank Research has formulated some criteria to guide foresight projects. They should aim to produce plausibility, provide convenience and inspiration as well as an appropriate time perspective with regard to the content of foresight results. In addition, a structured way of producing and delivering foresight, a seamless inclusion in organisational procedures, a high level of interaction with decision-makers, ideational entrepreneurship, innovation regarding communication with business people, and persistence and synchronisation with the business organisation are the key criteria for achieving a higher impact from foresight projects. To live up to these criteria, the Macro Trends team has developed a 'trend map' which provides a conceptual aggregation of trends - to provide orientation for decision-makers and stakeholders.     

Option Pricing in ARCH-type Models

ARCH models have become popular for modeling financial time series. They seem, at first, however, to be incompatible with the option pricing approach of Black, Scholes, Merton et al., because they are discrete-time models and possess too much variability. We show that completeness of the market holds for a broad class of ARCH-type models defined in a suitable continuous-time fashion. As an example we focus on the GARCH(1,1)-M model and obtain, through our method, the same pricing formula as Duan, who applied equilibrium-type arguments.     

Evolution of global airline strategic alliance and consolidation in the twenty-first century

Global airline strategic alliances have emerged since the late 1980s, and their number has slowly risen through the years. Will the number of such alliances continue to proliferate? Or will airlines consolidate with one another to form mega-carriers? In this paper, the likelihood of various airline consolidation and alliance development possibilities was examined based on a number of high-level trends and forces. The most probable near-term industry alliance and consolidation structure is described, accompanied with a probable path of evolution. These predictions have important implications for managers of strategic alliances, carriers who are currently in an alliance as well as carriers who are planning to join one.