Structure of the labour market and wage inequality: evidence from European countries

The aim of this paper is to explore how the structural changes that have occurred in the labour market, in terms of employment composition by skill levels, affect wage inequality in three developed countries of Western Europe that are in close geographical proximity but have disparities in their labour market characteristics. More precisely, the analysis compares, from an international perspective, France, Germany—whose labour markets have been characterised in recent years by job polarization and the upgrading of occupations, respectively—and Italy, where neither of the two phenomena can be clearly identified. Using EU-SILC (European Union—Survey on Income and Living Conditions) data, in the first step, RIF-regression (Recentered Influence Function) enables an exploration on the primary factors that are likely to explain the differences in generating personal labour earnings and, in the second step, a decomposition of the change in wage inequality between 2005 and 2013 to evaluate how much of the overall gap is accounted for by the endowments in employees’ individual characteristics (composition effect) rather than the capability of labour markets to transform these characteristics into job opportunities and earnings (wage structure). Regarding France and Germany, the main results highlight how the endowment effect plays a key role in decreasing or, at least, not increasing wage inequality, whereas in Italy the rising inequality may be due to the lower efficiency of the country’s labour market in creating job opportunities, better job-related careers, and higher-salaries for employees.     

NATURAL ADVANTAGE EFFECT, LOCATION AND TRADE PATTERNS IN INCREASING RETURNS TO SCALE INDUSTRIES

In a two sectors, two regions economy I show that the higher the increasing returns to scale of an industry, the more easily it will concentrate in response to natural advantage (giving rise to what I call Natural Advantage Effect). To this end, one sector is assumed to be perfectly competitive and the other is monopolistically competitive, with a region's firms producing at a lower marginal cost than the others in the monopolistic sector (or equivalently producing varieties more intensely demanded by consumers). If capital is mobile between regions in the long run, I analytically characterize the process of industrial location of the imperfectly competitive sector in the region with the natural advantage.     

Threshold cointegration and spatial price transmission when expectations matter

We examine the performance of the threshold cointegration approach, specifically Band‐TVECM, to price transmission analysis in an explicit context where trade decisions are made based on expectation of final prices, because trade takes time. We find that, following a standard inference strategy, a large portion of three‐regime cases are not identified as such. Results show that transfer costs are systematically underestimated, particularly in three‐regime models. The speed of price transmission is also biased in three‐regime models. Furthermore, inferences about occurrence of trade are poor, with estimated models suggesting far lower market integration than is true in the data‐generating process.     

Does skilled migration reduce investment in human capital? An investigation on educational choices in Italian regions (2001–2016)

This paper investigates the effects of prospective migration on students’ investment in tertiary education. A simple theoretical model is presented in which individual educational choices, different across potential students because of heterogeneity in migration costs, are driven by expected returns and costs of tertiary education. In this framework, a larger probability of after-graduation migration is shown to affect educational choices by both reducing the rate of enrollment at home and favoring pre-graduation migration (i.e., enrollment at universities outside the residence region). The theoretical predictions are confirmed by the empirical investigation carried out on Italian interregional graduate migration in 2001–2016. In the lagging regions of Southern Italy, out-migration of students and graduates, and weak incentives to acquire tertiary education turn out to bring about depletion of local human capital.     

Drivers of participation in collective arrangements in the agri‐food supply chain. Evidence from Italy using a transaction costs economics perspective

The analysis of institutions in the agro‐food sector is gaining momentum since it represents a complex and relevant area of study as concerns intermediate‐product markets. Traditionally there has been a problem of organization among farmers mainly due to the reluctance to pool decisional and property rights on input and/or output. Following the Transaction Costs Economics framework, the paper aims to investigate which are the main drivers of the collective forms of organization in the Italian agro‐food system, paying particular attention to transaction costs’ attributes and to the increasing role played by the institutional environment as well. The choice to join a cooperative or producer organization is therefore conceptualized as a governance structure choice. In this regard, based on the Italian version of the Farm Accountancy Data Network, econometric models are estimated in order to account for the two organizational alternatives under investigation.     

Loss or gain? The role of message framing in hotel guests’ recycling behaviour

Abstract

One of the major challenges for the tourism sector is enacting sustainable behaviours. A key strategy for hoteliers is developing persuasive messages, with the goal of encouraging guests’ voluntary participation in green programmes. Through the lens of prospect theory and construal level theory, the present study investigates to what extent a loss or gain-framed message influences recycling of hotel guests via a field and a laboratory experiment. The field experiment tests the moderating effect of message construal level (concrete or abstract) on the message frame that activate pro-environmental behaviour, while the laboratory study delves further into the mechanism by showing that perceived self-efficacy is the mechanism behind the activation of these behaviours. The findings from both studies suggest that hotel guests are more likely to engage in recycling behaviour when a concrete message is paired with a loss-framed message, because of a greater perceived self-efficacy. These results help to understand the theoretical psychological mechanisms and offer managerial implications for operators on how to engage guests to be active partners in sustainable tourism behaviours.     

Wage spillovers across sectors in Eastern Europe

This paper studies the interactions between wages in the public sector and the private traded and non-traded sector in ten transition countries which are members of the European Union, during the period 2000–2011. The theoretical literature on wage spillovers, as well as the Balassa–Samuelson hypothesis, suggests that the internationally traded sector should be the leader in wage setting, with sheltered and public sector wages adjusting. Using a cointegrated VAR approach we show that a large heterogeneity across countries is present, and non-traded and public sector wages are often leaders in wage determination or at least affect traded sector wages in the short run. This result is relevant from a policy perspective since wage spillovers, leading to costs growing faster than productivity, may affect the international cost competitiveness of the traded sector and thus the catching-up process may be accompanied by accumulation of large international imbalances.     

Asset prices, debt constraints and inefficiency

We consider (possibly non-stationary) economies with endogenous solvency constraints under uncertainty over an infinite horizon, as in Alvarez and Jermann (2000) [5]. A sort of Cass Criterion (Cass, 1972 [10]) completely characterizes constrained inefficiency under the hypothesis of uniform gains from risk-sharing (which is always satisfied in stationary economies when the autarchy is constrained inefficient). Uniform gains from risk-sharing also guarantee a finite value of the intertemporal aggregate endowment at a constrained optimum. Hence, no equilibrium exhibits a null interest rate in the long run. Finally, constrained inefficiency occurs if and only if there exists a feasible redistribution producing a welfare improvement at all contingencies.     

Banks and markets in a monetary economy

Modern financial sectors consist of banks, asset markets and a central bank. This paper builds a model where these institutions provide different financial services, and their interaction supports efficient allocations. When one institution is missing equilibria are, by construction, inefficient. The paper analyzes how interest rates and asset prices depend on the structure of the financial sector and characterizes the central bank policy that supports efficient allocations. The analysis relies on the difference between liquidity and real shocks, and relates the notion of liquidity used in this paper to the one adopted in other studies.     

A new class of multidimensional Wishart-based hybrid models

In this article, we present a new class of pricing models that extend the application of Wishart processes to the so-called stochastic local volatility (or hybrid) pricing paradigm. This approach combines the advantages of local and stochastic volatility models. Despite the growing interest on the topic, however, it seems that no particular attention has been paid to the use of multidimensional specifications for the stochastic volatility component. Our work tries to fill the gap: we introduce two hybrid models in which the stochastic volatility dynamics is described by means of a Wishart process. The proposed parametrizations not only preserve the desirable features of existing Wishart-based models but significantly enhance the ability of reproducing market prices of vanilla options.