The cross-section of currency volatility premia

We identify a global risk factor in the cross-section of implied volatility returns in currency markets. A zero-cost strategy that buys forward volatility agreements with downward sloping implied volatility curves and sells those with upward slopes–a volatility carry strategy–generates significant excess returns. The covariation with volatility carry returns fully explains the cross-sectional variation of our slope-sorted portfolios. The lower the slope, the more the forward volatility agreement is exposed to volatility carry risk.     

The EU policy for a plastic economy: Reflections on a sectoral implementation strategy

After reviewing the main EU policy documents on the plastic waste issue, this work conceptualises an analysis framework to investigate farmers' attitudes to market‐based tools (i.e., subsidies, tax‐credits, and payback mechanisms in extended producer responsibility schemes) through which the introduction of an operational scheme for a better management of their plastic waste can be incentivised in line with the 2018 European Strategy for Plastics in a Circular Economy. A total number of 1,783 farmers responded to a purpose‐built questionnaire. Results show that most of the plastic waste they produce is piping and packaging and that tax credit represents their most favoured incentivising tool.     

Adoption of mobile money and financial inclusion: a macroeconomic approach through cluster analysis

This paper investigates the patterns of adoption of mobile money in emerging and developing countries. Mobile money is a mobile-based service, which provides access to low-cost financial services for people excluded from the banking system. It is designed to overcome the difficulties related to entering the banking system and the unavailability of banking infrastructure. Drawing on macroeconomic comparative and case study analysis conducted by practitioner experts, this study takes a wide macroeconomic approach to the adoption of mobile money adoption in 2011 and 2014, based on the alternative strategy of cluster analysis. We exploit the new technology diffusion frameworks to evaluate dissimilarity among groups of countries with similar levels of adoption of mobile money. We investigate whether adoption of mobile money services are highest in countries where access to formal banking services is lowest. Our analytical results support the predictions in the technology diffusion literature and nuance the potential of mobile money as a tool to counter banking exclusion.     

Why East Germany did not become a new Mezzogiorno

Economic integration is generally thought to favour convergence in the economic performance of previously separated regions; but this is far from universally true, as the experience of the members of the Eurozone testifies. The paper considers the two sharply contrasting cases of East and West German convergence following reunification and the enduring poverty of the Italian Mezzogiorno since Italian unification a century and a half ago. In both countries, political integration delivers much higher consumption in the lagging relative to the leading region than of per capita GDP. Consumption convergence can be supported by transfers but ‘production’ convergence ultimately requires catch-up in the production of tradeables. The paper demonstrates the radically different performance of the tradeable sector in the two cases, and suggests that this may be the result of differences in labour market flexibility, in investment performance and in the social norms required for the production of complex manufacturing.     

Price distortions,joint production and some international trade theorems

Zusammenfassung Preisverzerrungen, verbundene Produktion und einige Theoreme des internationalen Handels. — In diesem Aufsatz werden Faktorpreisunterschiede in ein Modell mit Kuppelprodukten eingefügt. Im Fall verbundener Produktion ohne Marktunvollkommenheiten fanden Chang, Ethier und Kemp heraus, da\ die folgenden vier Theoreme im gro\en und ganzen die Einführung von Kuppelprodukten überstehen. Die vier betrachteten Theoreme sind das Rybczynski-, das Stolper-Samuelson-, das Faktorpreisausgleichs- und das Heckscher-Ohlin-Theorem. Wenn es Unterschiede in den Faktorentgelten gibt, dann zeigt sich, da\ — abgesehen vom Rybczynski-Theorem — diese Theoreme im allgemeinen nicht mehr gültig sind. Es werden Bedingungen genannt, unter denen die Theoreme so-wohl bei verbundener Produktion als auch bei Marktunvollkommenheiten anwendbar sind.

---

Résumé Les distorsions de prix, la production conjointe et quelques théorèmes du commerce international. — Dans cet article des différences dans la rémunération des facteurs sont introduites dans un modèle de la production conjointe. Au cas de la production conjointe et en l’absence des imperfections sur les marchés des facteurs Chang, Ethier et Kemp ont trouvé que les quatre théorèmes suivants, en majeure partie, survivent l’introduction des produits conjoints. Les quatre théorèmes discutés sont ceux de Rybczynski, de Stolper-Samuelson, d’équalisation des prix des facteurs et de Heckscher-Ohlin. Si les rémunérations des facteurs diffèrent le modèle montre que — le théorème de Rybczynski à part — ces théorèmes ne sont pas valables en général. Il y a présenté des conditions sous lesquelles les théorèmes peuvent être généralisés au cas de la production conjointe aussi bien que des imperfections sur les marchés des facteurs.

---

Resumen Distorsiones de precios, producción conjunta y algunos teoremas del comercio internacional. — En este artículo se han introducido diferenciales en la retribución a factures en un modelo de producción conjunta. En el caso de producción conjunta sin imperfecciones en el mercado de factores, Chang, Ethier y Kemp encontraron que los siguientes cuatro teoremas subsistieron en gran medida gracias a la introducción de producción conjunta. Los cuatro teoremas investigados son los de Rybczynski, Stolper-Samuelson, Igualación de Precios de Factores y los teoremas de Heckscher-Ohlin. En presencia de diferenciales en la retribución de factores encontramos que, aparte del teorema de Rybczynski, estos teoremas en general no subsisten. Se presentan las condiciones bajo las cuales los teoremas son generalizables con respecte a producctión conjunta e imperfecciones del mercado de factores.

     

Bids for the UMTS system: An empirical evaluation of the Italian case

The aim of this paper is to analyze the licensing of the telecommunication spectrum as a public good and the search for equilibrium prices through bilateral bargaining and multilateral bidding. It develops a general model of price setting under dynamic uncertainty and applies it to the Italian auction for Universal Mobile Telecommunications System (UMTS). The empirical application shows that the model can be used both to determine the base price as well as other desirable characteristics to organize an auction and to better understand, after the auction is closed, what really happened in terms of the critical factors involved. After recalling some basic concepts on spectrum rights and reviewing the general experience with UMTS auctions in Europe, the formal model and its application are presented. The results confirm certain views on the Italian auction, which are widely shared but were never tested before, namely that: (i) given the initial price, the number of licenses offered for the bidding should have been fewer, or alternatively, (ii) given the number of licenses, the base price should have been higher and (iii) the main bidder underpaid for the license. The model also allows us to quantify the bidders’ reservation price and the State and the bidders’ implicit bargaining powers.     

Social security and intergenerational equity

This paper considers the implications of social security for intergenerational equity. It shows that a balanced-budget unfunded system can be optimal even in a dynamically efficient economy without uncertainty and externalities. The relevant criteria for the optimality of the public transfer program are equity among generations and time consistency. The scheme can survive adverse shocks if the well-being of the elderly at each point in time is sufficiently valued.     

The public administration paradox: an organisation with a low degree of institutionalisation

This paper identifies the distinctive characteristics of the internal labour market of the public administration. It gives some examples of innovation in human resource management (particularly in the field of performance-related pay), and discusses whether and how these processes provide a solution to the problems of identity, efficiency and conflict that have affected the public administration on a broad front over the last decade. The main results of the analysis have revealed the weak institutionalisation of the public administration. The selection criteria by which the organisation determines the professional mix of occupational structure and creates a basis for performance behaviour and attitudes are very weak. Limited mobility and poor wage dynamics are the factors most strongly affecting the internal labour market. This, along with other factors discussed in the paper, makes it extremely difficult to enact private sector principles suitable to the public administration (regardless of the specific traits of the organisations concerned). Without certain structural and social preconditions, managerialism cannot provide a solution; legislation alone is not sufficient to bridge the gap and does not create the conditions for improving the organisation of public administration.     

Illegal Migration, Border Enforcement, and Growth

This paper analyzes the economic consequences of illegal migrants in the context of a model of trade and growth. In the model, capital and domestic labor are mobile sectors while illegal migrants are sector-specific. These assumptions give rise to a production possibility curve (with migrants) that lies partially inside the zero migration production possibility frontier. It is this feature of the model which generates ambiguous results regarding the relation betweendomestic welfare, illegal migrants, and enforcement. The steady-state growth path with migrants may lie above or below the balanced growth path without migrants.