Testing for stochastic dominance using the weighted McFadden-type statistic

We demonstrate that when testing for stochastic dominance of order three and above, using a weighted version of the Kolmogorov–Smirnov-type statistic proposed by McFadden [1989. In: Fomby, T.B., Seo, T.K. (Eds.), Studies in the Economics of Uncertainty. Springer, New York, pp. 113–134] is necessary for obtaining a non-degenerate asymptotic distribution. Since the asymptotic distribution is complex, we discuss a bootstrap approximation for it in the context of a real application.     

HOW TRADE UNIONS ARE A ROADBLOCK TO POLAND'S ECONOMIC RENAISSANCE

The trade union movement has played an important role in the modern history of Poland. Its activism precipitated the fall of communism. Yet, with the transition to a free-market economy gaining momentum, it turned out that Solidarity embraced a vision of a new socio-economic model. Its leaders understood it as being a variant of Franco-German welfarism rather than Anglo-Saxon liberalism. Hence, as the union movement grew in power, it started to influence economic policy along interventionist lines, which not only affected labour market performance, but also the structure of the economy and the transformation processes. In consequence, Poland began to turn increasingly dirigiste. Thus the article – pointing to analogies, toutes proportions gardées, between trade union activism in the UK (1970–85) and in Poland (1990–2005) – argues that reducing the power of Polish labour organisations is a prerequisite of free-market reform and economic advancement.     

Stock market volatility around national elections

This paper investigates a sample of 27 OECD countries to test whether national elections induce higher stock market volatility. It is found that the country-specific component of index return variance can easily double during the week around an election, which shows that investors are surprised by the election outcome. Several factors, such as a narrow margin of victory, lack of compulsory voting laws, change in the political orientation of the government, or the failure to form a government with parliamentary majority significantly contribute to the magnitude of the election shock. Furthermore, some evidence is found that markets with short trading history exhibit stronger reaction. Our findings have important implications for the optimal strategies of institutional and individual investors who have direct or indirect exposure to volatility risk.     

Related securities and price discovery: Evidence from NYSE-listed Non-U.S. stocks

In this paper we analyze whether handling related securities improves a market maker's information environment and helps to incorporate new information in stock prices. Our empirical tests are focused on New York Stock Exchange specialists and the U.S. share in price discovery of 64 British and French companies cross-listed on the NYSE. We define related securities as stocks from the same country, the same region, or other foreign stocks. We find strong evidence that a higher prominence of related stocks in the specialist portfolio is associated with a higher U.S. share in price discovery of our sample firms. We interpret our findings as evidence that concentrating market makers in similar stocks reduces information asymmetries and improves the information environment as market makers can extract information relevant to a stock from order flow to related securities. To support our argument, we show that the adverse selection component of the bid–ask spread is negatively related to the prominence of other foreign stocks in the specialist portfolio.     

The mediating role of natural and social resources in the corporate social responsibility—corporate financial performance relationship

Failure to obtain definitive results regarding the influence of corporate social responsibility (CSR) on corporate financial performance (CFP) has prompted scholars to investigate mechanisms behind this relationship. This paper follows the same path and distinguishes two dimensions of CSR (social and environmental) to expand the pool of potential mediators on the basis of natural‐ and social resource‐based view (RBV) of the firm. In a unique dataset comprising seven potential mediators for 300 companies, a direct relationship only existed between environmental CSR and CFP, in contrast to the “new road” from social CSR to CFP that goes through external reputation and innovativeness—variables that form an opposing mediation.     

Migration, human capital accumulation and economic development

We study how the possibility of migration changes the composition of human capital in sending countries, and how this affects development. In our model, growth is driven by productivity growth, which occurs via imitation or innovation. Both activities use the same types of skilled labour as input, albeit with different intensities. Heterogenous agents accumulate skills in response to economic incentives. Migration distorts these incentives, and the accumulation of human capital. This slows down, or even hinders, economic development. The effect is stronger, the farther away the country is from the technological frontier.     

Friend or Foe? On the role of institutional reforms in the investment development path of Central and East European economies

Many existing studies on emerging markets and firms have concentrated on the separate effects of institutional reforms and quality of the institutional infrastructure for attracting inward foreign direct investment (FDI) and fostering outward FDI. We argue that both these perspectives should be considered in an interplay, as there are links between inward and outward FDI in a country's economic development, which is captured by the investment development path (IDP) concept. Moreover, while predominant attention has been paid to emerging markets, little has so far been done to evaluate the sustainability of the institutional development, including later post-transition stages. We extend the IDP with insights from the institutional theory and conduct a comparative analysis of the effects of institutional reforms on IDP paths of ten Central and Eastern European (CEE) post-communist European Union (EU)-members. We find that while most of the studied post-transition economies follow a quadratic relationship between the net outward investment (NOI) position and each country's economic development, the role of institutional reforms is not in all cases accelerating the movement through the stages of the IDP. We attempt to explain the ambiguous role of institutions in an ensuing detailed discussion of the investigated countries.