Public Sector Downsizing: An Introduction

Authorities throughout the developing world are turning to downsizingin an effort to reduce budget deficits and address the inefficienciesengendered by state-led development strategies. Because large-scaleinvoluntary dismissals are often politically difficult, a voluntaryapproach to reductions in public sector employment is increasinglypopular among developing-country governments, multilateral organizations,and donor countries. This article (and, more generally, theresearch project on Public Sector Retrenchment) attempts tosketch a protocol for public sector downsizing that takes intoaccount the costs and benefits for the workers and the economy. After reviewing the international experience with downsizing,the article addresses five questions: how to identify the redundantworkers, how to predict their losses from separation, how todesign compensation and assistance packages, how to assess thefinancial and economic returns to downsizing, and how to dealwith downsizing in one-company towns. Based on the answers tothese questions, a decision tree is proposed.     

Agricultural Comparative Advantage and Government Policy Interventions

International trade patterns are often explained by comparative advantage which is frequently thought to depend on variations in national factor endowments. Government intervention in agricultural markets may also have an impact on trade patterns. This study explores the relation between factor endowments and agricultural trade patterns and examines the impact of agricultural and environmental policies on trade flows. Measures of national endowments of capital, labour, land and energy reserves are computed for a sample of 40 countries and used to estimate Heckscher‐Ohlin‐Vanek equations with net trade in several agricultural commodities as the dependant variable. Variables measuring agricultural policy and environmental regulations are added to the equations and tested for significance. The variables representing government intervention do not contribute to the explanation of trade patterns while national factor endowments do account for much of the variation in trade patterns of grains, oilseeds, cotton, and, to a lesser extent, meat products and an aggregate of all agricultural goods. Commodities such as sugar, tropical products and fruits and vegetables do not appear to be well explained by factor endowments.     

Allocation to Anchor Investors,Underpricing, and the After‐Market Performance of IPOs

We study bidding by anchor investors in a two‐stage initial public offering (IPO) process and document a negative, causal relation between allocation to anchor investors and underpricing. We find that anchor investors are likely to invest in hard‐to‐place offerings characterized by valuation uncertainty. We also document a positive relation between allocation to reputed anchor investors and returns up to lock‐up expiration. Our evidence provides support for information revelation and targeting specific investors’ theories of book building. Anchor‐backed IPOs earn superior returns mainly due to monitoring. Who bids in an IPO seems to matter just as particular types of bids do.     

Labor Market Institutions and the Second-Best Tariff

Labor market distortions provide a second-best case for protection. However, the implications are less obvious when the product market is imperfectly competitive too, as suggested by several partial equilibrium studies. This paper adopts a general equilibrium approach, combining unionization in labor markets with monopolistic competition in product markets. Two labor market settings are considered: fully centralized wage bargaining ("Scandinavia", for short) and negotiation at the firm level ("Latin America"). The competitive labor market case is used as a benchmark. It is shown that in Latin America the second-best tariff is higher, and the welfare level lower, than in the benchmark case. Scandinavia reaches the first best under free trade.     

Anti-corruption commissions: lessons for the Asia-Pacific region from a proposed Australian federal anti-corruption watchdog

ABSTRACT

This paper reviews the experience of anti-corruption commissions in the region and argues that the debate on the establishment of a national anti-corruption body in Australia is dependent on the country’s political culture, institutions and elites. Corruption and integrity coexist and are conceived as the obverse and converse, respectively, of a functional and dysfunctional system. Anti-corruption bodies in the Asia-Pacific region are compared against applicable global anti-corruption frameworks, policies and principles. The paper proposes a conceptual model for a National Integrity Ecosystem (NIE), premised on community values and trust and situates the Australian experience within such an ecosystem. A federal anti-corruption watchdog is the missing piece in Australia’s institutional infrastructure. Its acceptance and effectiveness require difficult and sustained change in the underlying political culture of the country and its elites.     

Is there an optimally diversified conglomerate? Gleaning answers from capital markets

Motivated by recent productivity-based theories of diversification, we argue that only conglomerates with an optimal degree of diversification can utilize their comparative advantages across various industries and achieve economies of scope by eliminating redundancies. Evidence from both corporate bond and equity markets suggests that optimally diversified conglomerates consist of either (1) approximately five equally weighted divisions, or (2) one large core business segment that roughly accounts for 75 % sales. Moreover, the relative size of divisions has a critical impact on how diversification affects credit spreads and excess values. Nonparity among divisions correlates with greater costs that increase with the number of divisions.     

Optimal order placement in limit order markets

To execute a trade, participants in electronic equity markets may choose to submit limit orders or market orders across various exchanges where a stock is traded. This decision is influenced by characteristics of the order flows and queue sizes in each limit order book, as well as the structure of transaction fees and rebates across exchanges. We propose a quantitative framework for studying this order placement problem by formulating it as a convex optimization problem. This formulation allows the study of how the optimal order placement decision depends on the interplay between the state of order books, the fee structure, order flow properties and the aversion to execution risk. In the case of a single exchange, we derive an explicit solution for the optimal split between limit and market orders. For the general case of order placement across multiple exchanges, we propose a stochastic algorithm that computes the optimal routing policy and study the sensitivity of the solution to various parameters. Our algorithm does not require an explicit statistical model of order flow but exploits data on recent order fills across exchanges in the numerical implementation of the algorithm to acquire this information through a supervised learning procedure.     

Audit committee characteristics and investment in internal auditing

Regulators and others recently highlighted the increasingly important role of internal auditing in supporting and interacting with the audit committee to ensure the integrity and quality of financial reporting. Likewise, one of the roles of the audit committee is to oversee the quality of monitoring mechanisms implemented by the firm, which includes the internal audit function. However, our understanding of the relationship between the audit committee and internal auditing is limited. We fill this void by providing the first empirical evidence of the association between audit committee characteristics and the investment in internal auditing. Our analyses, from a sample of 181 SEC registrants, suggest that the investment in internal auditing (internal audit budget) is negatively related to the presence of auditing experts on the committee and the average tenure of audit committee members, but positively related to the number of audit committee meetings (a proxy for audit committee diligence). These observations suggest potential complementary and substitution effects between the audit committee and internal auditing, and thus raise important implications for future research.     

Challenges in Measuring Poverty and Understanding its Dynamics: A South Asian Perspective

South Asia’s success at reducing poverty does not imply that the topic has become passé. Poverty rates are by now low, but this is because poverty lines are low as well. And the assessment of living standards and their dynamics are blurred by measurement and interpretation challenges. This paper relies mostly on South Asian examples to highlight four tensions: poorer versus richer households, rural versus urban locations, monetary versus non‐monetary dimensions of wellbeing, and household characteristics versus context. The discussion is conducted against the backdrop of the two analytical approaches with South Asian roots that have shaped the debate for decades. This review leads to three main recommendations: household survey data has to be exploited in a more thorough manner, data that is increasingly available from other sources needs to be incorporated more systematically in the analysis, and the multiple dimensions of wellbeing should be better integrated in a common framework.     

Exploring the animosity domain and the role of affect in a cross-national context

PurposeThe purpose of this paper is to contribute to the development of animosity theory in three areas; construct domain, the mediating role of affect and model testing.Design/methodology/approachExploratory and empirical research is carried out in two countries in order to explore the domain and to test the factor structure and the hypotheses through confirmatory analysis.FindingsWe find animosity is a four-dimensional construct which impacts buying behavior through affect.Originality/valueThe research extends the domain of the animosity construct to a four-dimensional structure rather than the two-dimensional structure used in most previous studies. It is the first study to empirically test an extended animosity domain and investigate the mediating role of affective emotional responses between animosity and buying intentions.