Longevity Risk

Most of the western world has seen a steady increase in the average lifetime of its inhabitants over the past century. Although the past trends suggest that further changes in mortality rates are to be expected, considerable uncertainty exists regarding the future development of mortality. This type of uncertainty is referred to as longevity risk. This paper reviews the current state of the literature concerning longevity risk. First, we discuss the modeling of future mortality, including the Lee and Carter (J Am Stat Assoc 87:659–671, 1992)-approach, as well as other approaches. Second we discuss the importance of longevity risk for the solvency of portfolios of pension and life insurance products. Finally, we investigate possibilities for longevity risk management. In particular, we consider longevity risk management through securitization and/or pension and insurance (re)design.     

Hiring Risky Workers: Some Evidence

Lazear recently suggested that firms that do not expect to live for a long time will hire only safe workers. Hence their worker turnover will be lower. In this paper we test this hypothesis using both the industry growth rate and industry-average age of establishments as measures of the horizon for a particular firm. We find mixed results, both at the industry level and at the establishment level. Establishments in growing industries do indeed exhibit higher churning flows, but a high average age of establishments reduces rather than increases churning.     

Exports,borders, distance,and plant size

The fact that large manufacturing plants export relatively more than small plants has been at the foundation of much work in the international trade literature. We examine this fact using Census microdata on plant shipments from the Commodity Flow Survey. We show that the fact is not entirely an international trade phenomenon; part of it can be accounted for by the effect of distance, distinct from any border effect. Export destinations tend to be farther than domestic destinations, and large plants tend to ship farther distances even to domestic locations compared with small plants. We develop an extension of the Melitz (2003) model and use it to set up an analysis with model interpretations of ratios between large plant and small plant shipments that can be calculated with the data. We obtain a decomposition of the overall ratio into a term that varies with distance, holding fixed the border, and a term that varies with the border, holding fixed the distance. The distance term accounts for more than half of the overall difference.     

Sign This Agreement Not to Compete or You're Fired! Noncompete Agreements and the Public Policy Exception to Employment at Will

A California jury recently awarded an employee who was fired for refusing to sign a noncompete agreement $1.2 million in damages for wrongful discharge. Whether employees have a right to refuse to sign unenforceable noncompete agreements is an emerging employment law issue. This article considers whether a wrongful discharge remedy is available in such cases under the public policy exception to the employment-at-will doctrine. State court decisions addressing the question are conflicting. Some courts have allowed employers to discharge employees who refuse to sign a noncompete agreement even if the agreement is unreasonable. Other courts have recognized a claim for damages under the public policy exception. This article explores the issue from policy and managerial perspectives, critically analyzing the policy justifications advanced by the courts in those decisions, and comments on the liability risks to employers and the proper resolution of the issue.