Contract compliance and equal opportunities

In 1983, the Greater London Council adopted a policy of 'Contract Compliance' designed to ensure that firms selling goods and services to the Council complied with its equal opportunity requirements. The initiative aroused wide interest and many other local authorities - 40 are known of to date - have been considering introducing such a policy. Although simple in essence, its execution can be complex and difficult. In April 1986, the Inner London Education Authority, a partner in the GLC policy, took over the Contract Compliance Unit following the GLCs abolition. Linda Smith explains the background to contract compliance, how the GLC, now ILEA, operates the policy; assesses its achievements and its significance and explores some of the lessons learnt in its three years of operation.     

Export survival and the dynamics of experience

This paper focuses on developing countries’ pioneer exports to the OECD and obtains several important results on export dynamics, linking export experience and export survival. Using product level data at the SITC 5-digit level for 114 developing countries over the 1962–2009 period, we show that prior export experience obtained in non-OECD markets significantly increases survival of pioneer exports toward the OECD. The experience does not need to last long, as gaining experience for more than two years does not confer any additional benefit. The effect of experience depreciates rapidly with time: a break in export experience prior to entering the OECD reduces the advantage on survival. Finally, the role of prior export experience is particularly relevant for survival in the first two years upon entry into the OECD. The geographic dynamic of export experience reveals that experience is acquired in neighboring, easy to access markets before reaching more distant, richer partners and ultimately serving the OECD with a higher probability of survival.     

Local Area Inequality and Worker Well-Being

This paper uses General Social Survey data linked to Census data to investigate the effect of local area income and income inequality on worker well-being. Others have found a robust negative correlation between reference group income and self-reported well-being. However, in many cases the reference group is defined as a large geographic area. This paper adds to the literature in two ways. First, it considers multiple nested geographic reference groups with US data. Second, it explicitly considers income inequality in addition to the level of income. It is found that both income and income inequality are positively associated with well-being at the census tract level, but negatively associated at the county level. Further, the effect of inequality on well-being decreases as income increases at the census tract and county level, while it increases at the state level.     

Organizational attraction toward a company that adopts a smoke-free policy

The current study investigated Korean smokers’ and non-smokers’ evaluations of an organization implementing a policy which either mandated or recommended that employees quit smoking. Undergraduates (n = 268) were randomly assigned to one of 2 (high vs. low severity of smoke-free policy implementation) × 2 (high vs. low organizational assistance) conditions and indicated their attraction to a hypothetical organization, posing as job applicants. The findings showed that non-smoking individuals’ perception of organizational support was more strongly and positively related to organizational attraction when they were more likely to endorse employers’ right to control employee smoking behaviors. Ex-smokers indicated greater attraction toward the organization when it was described as implementing a high severity policy than a low severity policy. Non-smokers indicated greater attraction toward the organization when it was described as offering a high level of assistance than a low level of assistance for smokers’ cessation efforts. These and other findings concerning individuals’ perception of severity, perception of organizational support, smoking sensitivity, and employer control are presented in detail, and the implications thereof are discussed.     

The influence of service orientation and interaction orientation on consumer identification

A service orientation aims to provide professional and comprehensive service items to consumers in a sale or a non-sale situation, while an interaction orientation has the goal of creating good interaction ability with individual customers in order to maintain long-term, profitable customer relationships, and in the process obtaining valuable information about individual customers. These orientations build customer-centric operations and develop competitive advantages, thus enhancing firm performance and customer value. The main purpose of this study was to examine the relative and collective contributions of different strategic orientations on a firm's performance, with a focus on consumer–company identification. The structural equation model results indicate that (1) both service orientation and interaction orientation positively influence consumer–company identification and (2) interaction orientation results in higher perceived consumer identification.     

Tariff evasion in global trade data

ABSTRACT

We find evidence of pervasive tariff evasion in the global data on trade from 1988 to 2015. Using over 35 million observations of data on import and export flows at the HS6 product category level, we find evidence of substantial underreporting of imports relative to export data on average and particularly when tariffs on product categories are high. These effects are stronger in more corrupt destination countries, as measured by the World Bank's Worldwide Governance Indicators [World Bank. 2016. Worldwide Governance Indicators. September 25, 2016]. In addition, evidence of tariff evasion increases significantly in economic downturns. We document these patterns in the global data and explore the welfare effects of this evasion by (1) putting a lower bound on the extent to which there are revenue losses from tariff evasion, and by (2) estimating the effects of corruption as measured by this indicator on global trade in a simple gravity model. We estimate that in total, revenue losses from tariff evasion are currently likely to exceed 400 to 670 million USD globally per year, and find that the effects of corruption on trade flows are ambiguous overall but change from weakly positive (‘grease the wheels’) to largely negative over the years in our sample.     

The stop-loss start-gain paradox and option valuation: a new decomposition into intrinsic and time value

The downside risk in a leveraged stock position can be eliminatedby using stop-loss orders. The upside potential of such a positioncan be captured using contingent buy orders. The terminal payoffto this stop-loss start-gain strategy is identical to that ofa call option, but the strategy costs less initially. This articleresolves this paradox by showing that the strategy is not self-financingfor continuous stock-price processes of unbounded variation.The resolution of the paradox leads to a new decomposition ofan option's price into its intrinsic and time value. When thestock price follows geometric Brownian motion, this decompositionis proven to be mathematically equivalent to the Black-Scholes(1973) formula.     

The Variance Gamma Process and Option Pricing

A three parameter stochastic process, termed the variance gamma process, that generalizes Brownian motion is developed as a model for the dynamics of log stock prices. The process is obtained by evaluating Brownian motion with drift at a random time given by a gamma process. The two additional parameters are the drift of the Brownian motion and the volatility of the time change. These additional parameters provide control over the skewness and kurtosis of the return distribution. Closed forms are obtained for the return density and the prices of European options. The statistical and risk neutral densities are estimated for data on the S & P500 Index and the prices of options on this Index. It is observed that the statistical density is symmetric with some kurtosis, while the risk neutral density is negatively skewed with a larger kurtosis. The additional parameters also correct for pricing biases of the Black Scholes model that is a parametric special case of the option pricing model developed here.     

Empirical evidence of a positive inflation premium being incorporated into stock prices

This study demonstrates that in contrast to prior research findings on short-term stock returns, long-term stock returns are positively correlated with inflation. In addition, within the context of a more complete explanatory model, long-term stock returns are found to be negatively related to changes in long-term interest rates and negatively related to beginning price to earnings ratios. The significance of these variables in explaining almost all the time series variation in long-term stock returns demonstrates that changes in stock values are well explained by theory.