A noncooperative model of contest network formation

In this paper we study a model of weighted network formation. The bilateral interaction is modeled as a Tullock contest game with the possibility of a draw. We describe stable networks under different concepts of stability. We show that a Nash stable network is either the empty network or the complete network. The complete network is not immune to bilateral deviations. When we allow for limited farsightedness, a stable network immune to bilateral deviations must be a complete $M$-partite network, with partitions of different sizes. We provide several comparative statics results illustrating the importance of the structure of stable networks in mediating the effects of shocks and interventions. In particular, we show that an increase in the likelihood of a draw has a nonmonotonic effect on the level of wasteful contest spending in the society. To the best of our knowledge, this paper is the first attempt to model weighted network formation when the actions of individuals are neither strategic complements nor strategic substitutes.     

Integrated system of occupational safety and health and fire protection of the fire rescue brigades members

The objective of the conducted research is the identification and determination of requirements of members of fire rescue brigades during operations in the conditions of high risk in order to minimize the possibilities for injury incidence during the intervention. The research is focused on examination, determination and identification of factors affecting the increasing number of occupational injuries of members of fire rescue brigades during interventions. Hypothetical framework of the research problem consists of general hypothesis and six special hypotheses. Results suggest that almost all respondents believe that their skills and abilities are applicable in the intervention phase, but less than a half believe that their skills are applicable in prevention phase. Two-thirds of respondents stated that in their organization they have support for further education and upgrading while a half of respondents stated that they need education concerning identification, assessment and management of risks that can lead to emergency situations.     

Origins of regional divergence: economic growth in socialist Yugoslavia†

Relative to western Europe, we know very little about the determinants of economic growth at the regional level within socialist Europe. This is somewhat unusual, given that socialist policy-makers have put great emphasis on equitable regional development. This article analyses the regional patterns of growth and divergence in socialist Yugoslavia. New estimates of output and inputs are constructed, and an analysis of output growth, factor accumulation, structural modernization, and productivity is provided. Two novel empirical findings are uncovered. The first is that the sources of growth across the regions were fundamentally different. Total factor productivity was a much more important source of growth in the richer regions than it was in the poorer ones. The second finding is that the source of the regional income divergence lies in the failure of the less developed regions to converge towards the employment rates and total factor productivities of the more developed regions. These failures are interpreted, at least partially, as symptoms of the governing objective and the soft budget constraint of the labour-managed firms that operated in Yugoslavia. It is argued that Yugoslavia's development model was less suited to the pre-conditions that prevailed in the less developed parts of the country.     

Great Recession and Macroeconomic Theory: A Useless Crisis?

ABSTRACT

The global financial crisis of 2007–08 and the subsequent Great Recession have pushed many economists to acknowledge a fundamental limit in the theoretical models elaborated after the monetarist counter-revolution: these models disregard the financial system. The years following the Great Recession have thus been marked by the development of what can be called the ‘Financial Frictions Approach’, a theoretical approach based on the addition of the financial system to the New Keynesian DSGE model. The results of this line of research are beginning to appear also in macroeconomics textbooks. Significant examples are the publication of the seventh edition of Blanchard’s textbook, and the publication of the third edition of the textbook co-authored by Blanchard, Amighini and Giavazzi. The objective of this work is twofold: (i) to show that the new model presented by Blanchard, Amighini and Giavazzi, which reflects the results of the ‘Financial Frictions Approach’, does not allow to elaborate a coherent explanation of the Great Recession and (ii) to present the pillars of an alternative theoretical model based on the lessons of Keynes, Schumpeter and Minsky.     

Autocatalytic Growth and Development and the South-North Convergence

Abstract:

This article engages with the issue of income convergence between North and South by using the autocatalytic hypothesis of growth and development. Two system models describe positive and negative feedback loops which govern economic flows between North and South. The analysis of endogenous and exogenous negative feedbacks points to the process that would slowly push the world economy towards vanishing growth rates and, eventually, halt its material growth. The present work rejects convergence in per capita GDP between North and South from the theoretical perspective. Such an outcome would stand against one of the fundamental properties of autocatalytic dynamics—centripetality— that has its causal roots in the competitive process and capitalist institutions. In that sense, the autocatalytic hypothesis provides a theoretical explanation for those empirical analyses that dismisses convergence.     

Financial Support from the Family Network and Illegal Immigration

Barriers to immigration of low‐skilled workers from developing countries into the advanced countries prevent many potential migrants from leaving their countries of origin. With very low home‐country wages in relation to the cost of undocumented migration, the opportunity to migrate often hinges on the possibility of obtaining credit from a human smuggling organization or family and friends. This paper examines the conditions under which migration is optimal for an individual who lacks liquid assets, with a focus on alternative options for financing migration costs. One is by accumulating the required amount of savings out of source‐country income, with or without financial support from the family or social network. The other is debt‐bonded migration, which involves borrowing from a smuggling organization and paying off the loan while working in the host country. I find that greater financial support from the family network increases the attractiveness of debt‐bonded relative to self‐financed migration.     

A NEW LOOK AT SHORT‐TERM IMPLIED VOLATILITY IN ASSET PRICE MODELS WITH JUMPS

We analyze the behavior of the implied volatility smile for options close to expiry in the exponential Lévy class of asset price models with jumps. We introduce a new renormalization of the strike variable with the property that the implied volatility converges to a nonconstant limiting shape, which is a function of both the diffusion component of the process and the jump activity (Blumenthal–Getoor) index of the jump component. Our limiting implied volatility formula relates the jump activity of the underlying asset price process to the short‐end of the implied volatility surface and sheds new light on the difference between finite and infinite variation jumps from the viewpoint of option prices: in the latter, the wings of the limiting smile are determined by the jump activity indices of the positive and negative jumps, whereas in the former, the wings have a constant model‐independent slope. This result gives a theoretical justification for the preference of the infinite variation Lévy models over the finite variation ones in the calibration based on short‐maturity option prices.     

Tail risk in emerging markets of Southeastern Europe

This article examines the left-tail behaviour of returns on stocks in Southeastern Europe (SEE). We apply conditional extreme value theory (EVT) approach on daily returns of six stock market indices from SEE between 2004 and 2013. Predictive performance of value-at-risk (VaR) and expected shortfall (ES) based on EVT is compared against several alternatives, such as historical simulation and analytical approach based on GARCH with a single conditional distribution. Model backtesting with daily returns shows that EVT-based models provide more reliable VaR and ES forecasts than the alternative models in all six markets. Unlike the alternatives, the EVT-based models cannot be rejected as VaR confidence level is increased. This emphasizes the importance of extreme events in SEE markets and indicates that the ability of a model to capture volatility clustering accurately is not sufficient for a correct assessment of risk in these markets.