Demographic Shock and Social Security: A Political Economy Perspective

We assume that individual voters differ not only according to age but also productivity. In the steady state, workers with wages in the intermediate range join the retired persons to form a majority and vote for a positive level of social security. When a shock decreases population growth, entrenched interests can constrain majority voting decisions and prevent reforms in the name of entitlements. We show that from a Rawlsian viewpoint it may be desirable to rely on these entitlements to protect the low wage earners of the transition generations. However, when the possibility of fixing a basic pension is introduced, it constitutes a better instrument than entitlements.     

On the short-time behavior of the implied volatility for jump-diffusion models with stochastic volatility

In this paper we use Malliavin calculus techniques to obtain an expression for the short-time behavior of the at-the-money implied volatility skew for a generalization of the Bates model, where the volatility does not need to be a diffusion or a Markov process, as the examples in Sect. 7 show. This expression depends on the derivative of the volatility in the sense of Malliavin calculus. E. Alòs’ research is supported by grants MEC FEDER MTM 2006 06427 and SEJ2006-13537. J.A. León’s research is partially supported by the CONACyT grant 45684-F. J. Vives’ research is supported by grant MEC FEDER MTM 2006 06427.     

An International Analysis of Earnings, Stock Prices and Bond Yields

Abstract:  This paper assesses the contemporaneous relationship between stock prices, earnings and long-term government bond yields for a large number of countries. The time period of our data spans several decades. In a time series framework our analysis first tests the presence of a long-term contemporaneous relationship between these three variables (the so-called Fed model). Next, we assess if government bond yields play a significant role in the long-run relationship. Our empirical results question the validity of the Fed model in the sense that we show that long-term market movements are mainly driven by the earnings yield and not the differential between bond and earnings yields. As such, our analysis validates the results of Asness (2003) for a much larger collection of countries while using a dynamic time series (cointegration) framework. Finally, we also show that changes in long-term government bond yields have a short-term impact on stock prices.     

Dual VATs and Cross-Border Trade: Two Problems, One Solution?

In recent years, two distinct but related questions have been raised with respect to value-added taxes (VATs). Concern has been expressed over whether it is desirable or even possible for both national and subnational governments in federal countries such as India, Argentina, and Russia to impose VATs. One reason for thinking that such subnational VATs are unlikely to be workable on a destination basis is the problem of cross-border trade. Of course, this same problem also arises within the European Union, where there is no EU VAT. Drawing upon Canadian experience, we argue that not only is it possible to have two-tier or dual VATs on a destination basis in a single country but that the existence of dual VATs may help deal with some of the problems of cross-border trade.     

A Cross-Country Database for Sector Investment and Capital

This article presents a new database of investment and capitalin agriculture, manufacturing, and the overall economy. It covers62 industrial and developing countries for the years 1967–92.A common method is used in the calculations to facilitate comparisonsacross countries and sectors. The sensitivity of the calculationsto choices of parameters and estimation methods is tested. Collectively,the data show that as economies grow, capital stocks accumulate,but the composition of capital changes. Together and individually,capital stocks in agriculture and manufacturing constitute asmaller share of the total capital stock than they did 20 yearsago. Capital-labor ratios show that agriculture has become morecapital intensive in most countries. The composition of agriculturalcapital has changed as well; capital from investments in orchardsand livestock has declined relative to capital from fixed investmentsin machinery, irrigation, and buildings.     

Quality control mechanisms under capitation payment for medical services

As a result of rising health care costs, many countries, including the United States, have turned to managed care organizations and the use of capitation payment systems. Although this type of system is an effective mechanism for reducing excessive utilization of health care, it may lead to the underprovision of medical services. In this paper propensity to underprovide medical services in a prepayment system as well as the effects of auditing/monitoring on physician behaviour and patient well-being are examined. Conditions are found under which managed care yields more efficient outcomes than traditional fee-for-service care.
Suite à la croissance importante des coûts des soins, plusieurs pays, y compris les Etats Unis, ont commencéà se tourner vers des organisations spécialisées pour gérer la prestation des services et à faire usage de systèmes de rémunération per capita. Même si ce genre de système est un mécanisme efficace pour réduire l'usage excessif des service de santé, il peut entraîner une offre déficiente de services médicaux. Ce mémoire examine la propensitéà fournir moins de services dans un système de pré-paiement. On examine aussi les effets de la surveillance et de la vérification sur le comportement des médecins et sur le bien-être des patients. On met en lumière les conditions qui assurent que les soins fournis dans un tel système donneront de meilleurs résultats que la rémunération à l'acte.     

Accounting Discretion in Goodwill Impairments: UK Evidence

This study examines managers’ use of discretion in determining goodwill impairment losses following the mandatory adoption of IFRS 3 “Business Combinations,” and whether this discretion reflects opportunistic reporting by managers or the provision of their private information. Although IFRS 3 was issued to improve the accounting treatment for goodwill and provide users with more useful and value‐relevant information regarding the underlying economic value of goodwill, it has been criticized on the grounds of the managerial discretion inherent in impairment testing. Therefore, ex‐ante, it is unclear how the impairment‐only approach has affected the reporting of goodwill impairment losses. After controlling for economic factors, empirical results reveal that managers are exercising discretion in the reporting of goodwill impairments following the adoption of IFRS 3. Specifically, goodwill impairments are more likely to be associated with recent CEO changes, income smoothing and “big bath” reporting behaviors. However, the results also indicate that goodwill impairments are strongly associated with effective governance mechanisms suggesting that managers are more likely to be exercising their accounting discretion to convey their private information about the underlying performance of the firm rather than acting opportunistically. These inferences are robust to various modeling specifications and variable definitions, suggesting that IFRS 3 has provided managers with a framework to reliably convey their private information about future cash flows consistent with the IASB's objectives in developing the impairment standard.     

Rupture or Continuity? Modern and Postmodern Planning in Toronto

The literature on the transition to postmodernism, postfordism and participatory planning stresses the value of the economic and planning process shifts that have occurred in the late 1960s and early 1970s. This paper compares two periods of planning and urban development in Toronto: one running from 1959 to 1962, at the height of modernism, fordism and expert-driven planning, and the other, from 1989 to 1992, set within the postmodern, postfordist and participatory planning era. In line with expectations arising from the literature, the study reveals stark distinctions between the two periods. It documents the breaking up of the modern consensus around the progress ideology into a postmodern constellation of values. As a result, the range of issues debated on the planning scene was much broader over the second period than over the first. Overall, however, results point to a mixture of continuity and change between the two periods and thus diverge from this literature’s strong emphasis on transition. Contrary to expectations, citizen mobilization was pervasive in both periods, although there were major differences in the nature of activism and in the issues that were raised. Over the first period most activism originated from ratepayer organizations dedicated to the protection of single-family-home neighbourhoods from encroachments, whereas the second period featured, along with such associations, advocacy groups championing environmental and social causes. The two periods are also distinguished by different planning implementation capacities. Whereas in the first period, planning had the means to implement its visions, this was no longer the case in the second period. In the late 1980s and early 1990s, planning was thus incapable of aligning urban development with its environmental and social ideals, which meant that, by default, planning practice over the second period proceeded pretty much according to land-use and transportation principles evolved in the early postwar decades. In sum, distinctions between the two periods were far more evident in the discourse than in the implementation sphere. — Les recherches sur la transition vers le postmodernisme, le postfordisme et la planification participative soulignent la valeur des changements qui ont pris place à la fin des années soixante et au début des années soixante-dix. Cet article compare deux périodes de planification et de dévelopment urbain à Toronto: une qui va de 1959 à 1962, durant l’apogée du modernisme, du fordisme et de la planification contrôlée par les experts, et l’autre, de 1989 à 1992, à l’époque du postmodernisme, du postfordisme et de la planification participative. En accord avec les prévisions émanant des recherches, cette étude révèle des distinctions nettes entre les deux périodes. Elle documente le morcellement du consensus moderne autour l’idéologie du progrès et le changement en faveur d’une constellation de valeurs postmodernes. Il s’ensuit que le champ de problèmes discutés en relation avec la planification était beaucoup plus étendu durant la seconde période que durant la première. Dans l’ensemble, cependant, les résultats indiquent un mélange de continuité et de changement entre les deux périodes et divergent donc de la forte emphase sur la transition que l’on trouve dans les recherches. Contairement aux prévisions, la mobilisation des citoyens était omniprésente à Toronto pendant les deux périodes, mais il y avait des différences importantes quant à la nature de l’activisme et dans les problèmes soulevés. Durant la première période, la plus grande part de l’activisme provenait des organisations de contribuables vouées à la protection des quartiers d’habitations contre les empiètements, alors que la seconde période comprenait, en plus de ces organisations, des groupes de soutien aux causes de l’environnement et aux causes sociales. Les deux périodes sont également distinctes en termes de mise en oeuvre. Alors que dans la première période les urbanistes avaient les moyens de mettre leurs idées à exécution, ce n’était plus le cas dans la seconde. Vers la fin des années quatre-vingt et le début des années quatre-vingt-dix, la planification ne pouvait pas intégrer les développements urbains et ses idéaux sociaux et environnementaux. Par défaut, la pratique de la planification durant la seconde période a fonctionnée selon les principes d’utilisation des terrains et du transport développés dans les premières décennies de l’après-guerre. En somme, les différences entre les deux périodes sont beaucoup plus visibles au niveau du discours qu’au niveau de l’application.     

The cultural dimension of development

Development, both in its essential meaning and in its aims, is an inclusive, multidimensional phenomenon whose various aspects cannot be understood in isolation from each other. Economic development affects, and is affected by, culture. Our author discusses the significance of this fact for the countries of the Third World today.     

FINANCIAL OPERATIONS AND MONETARY STATISTICS: IMPROVED CONCORDANCE IN THE FRENCH NATIONAL ACCOUNTS

National accounts are a powerful means of coordinating different statistical systems. The better their classifications are adapted to the basic statistics or the information blocks one wishes to use, the better the national accounts play their part. This statement explains why, taking the opportunity of revising the whole system, French national accountants tried to improve the concordance between financial operation tables and monetary statistics. Other reasons leading to this attempt can be found in the dissatisfaction of users having to face different and inconsistent financial information such as the monetary statistics on one hand and the financial aggregates of the national accounts on the other; and even more reasons appear in the organizational field since those two statistical systems are issued by two neighbour services of the Banque de France, often depending on the same sources. Further, many propitious factors are converging at the same time: the French financial system is undergoing profound transformations originating as much in the behaviour of economic agents as in the law, and the statistical operations have to adapt to these changes. The national accounts will in the near future include balance sheets in which financial asset holdings are directly comparable to the money supply aggregates. In its first part our paper sets forth the detailed reasons for our attempts, the conditions in which it took place and the present results. We have reached a much better degree of consistency between the two systems, even if the final scheme has not yet been adopted in either the monetary field or in the field of national accounts. But an important question remains open about the durability of the harmonization: we think that it could be relatively uncertain because of the differences in the goals pursued by the two systems and the constraints which they face. That is why in the second part of the paper we tried to review the way such a pragmatic undertaking as ours could call into question the way in which financial operations are described in the system of national accounts. If one agrees with the present boundary between the real and the financial sphere, the articulation must remain somewhat elementary. But if one wants to revise the usual so-called dichotomy between financial and non financial phenomena, we think that a complete rebuilding of the conceptual framework of the accounts has to be done; this would necessitate a considerable amount of theoretical and practical work.