Wage protection systems, segregation and gender pay inequalities: West Germany, the Netherlands and Great Britain

This paper provides an empirical test of Rubery and Fagan's(1995) hypothesis that gender inequalities are influenced primarilyby the comprehensiveness of the overall wage protection systemin a country and by the extent of gender segregation. Genderdiscrimination in earnings is compared in West Germany, theNetherlands and Great Britain using 1989 ISSP data. Human capitalearnings functions for married males and married females areestimated. Discrimination is measured using standard decompositiontechniques. Earnings discrimination against females in the morecomprehensive systems was 37% in West Germany and 39% in theNetherlands, much less than the 61% found for the less comprehensivelyregulated Great Britain, the latter figure being higher thanprevious estimates using earlier data. Gender segregation isdemonstrated to have contributed to the relative magnitude ofdiscrimination in Great Britain.     

The directors' and officers' insurance premium: an outside assessment of the quality of corporate governance

Using a sample of directors' and officers' (D & O) premiumsgathered from the proxy statements of Canadian companies, thisarticle examines the D & O premium as a measure of ex antelitigation risk. I find a significant association between D& O premiums and variables that proxy for the quality offirms' governance structures. The association between the proxiesfor governance structure quality and D & O premiums is robustto a number of alternative specifications. This article providesconfirmatory evidence that the D & O premium reflects thequality of the firm's corporate governance by showing that measuresof weak governance implied by the D & O premium are positivelyrelated to excess CEO compensation. The overall results suggestthat D & O premiums contain useful information about thequality of firms' governance.     

The Joint Cross Section of Stocks and Options

Stocks with large increases in call (put) implied volatilities over the previous month tend to have high (low) future returns. Sorting stocks ranked into decile portfolios by past call implied volatilities produces spreads in average returns of approximately 1% per month, and the return differences persist up to six months. The cross section of stock returns also predicts option implied volatilities, with stocks with high past returns tending to have call and put option contracts that exhibit increases in implied volatility over the next month, but with decreasing realized volatility. These predictability patterns are consistent with rational models of informed trading.     

The dynamic macroeconomic effects of tax policy in an overlapping generations model

The paper studies the dynamic allocation effects of tax policywithin the context of an overlapping-generations model of theBlanchard-Yaari type. The model is extended to allow for endogenouslabour supply and three tax instruments, viz. a capital tax,labour income tax, and consumption tax. Both analytical expressionsand simple diagrams are used to analyze the impact, transition,and long-run effects of tax policy changes. It is shown thata part of the long-run incidence of capital and consumptiontaxes falls on capital when households' horizons are finitewhereas labour would fully bear the burden of these taxes inan infinite-horizon model.     

The dynamics of the free-rider problem in takeovers

We explore the dynamics of a takeover bid. In contrast to precedingmodels, if the initial takeover bid is unsuccessful a raideris allowed to make a new tender offer in order to try and securethe remaining shares. Numerical analysis shows that the raider'stender offer rises over time as be accumulates more shares.The anticipation of a higher tender offer in the future makesshareholders more inclined to hold their shares and forces theraider to offer a higher premium than is predicted by statictheories. As the time between tender offers goes to zero, weshow analytically that the expected profit from engaging ina takeover goes to zero.     

Trade dynamics in Cape Town township informal foodservice – a qualitative and supply chain study

The township cash economy of fast food, takeaways, and prepared meals is collectively termed ‘informal foodservice’. An analysis of a five-township ～3800 microenterprise census, and qualitative supply chain investigation of 50 informal foodservice retailers and 75 consumers revealed a well-established although deeply informal trade predominated by women preparing takeaway foods and conducting street braai (BBQ). The business demonstrates high dependence on the immediate place of operations which includes local input suppliers and selling to a narrow pool of trade from immediate (walking scale) neighbourhoods. Supply chains are short, linked to formal agriculture and wholesale sectors. Informal foodservice is heavily utilised by local residents on a regular basis who spend up to R218 per week on products (potentially 30% of income) from these outlets. These enterprises make a substantial contribution towards satisfying local food demand whilst serving an important social protection and neighbourhood relationship function.     

Interest rates, risk, and imperfect markets: puzzles and policies

Traditional theory emphasizes the key role that monetary policycan play through the manipulation of interest rates. But thereare several puzzles that cannot be reconciled with standardmodels. These include: the apparent constancy in interest ratesover extended periods, and changes at other times which appearunrelated to changes in technology and demography; the cyclicalpattern of movements in real interest rates; the impact of nominalnot real interest-rate changes on real variables; and the cyclicalpattern of movements in interest-rate spreads. This paper reachesbeyond the standard competitive equilibrium, perfect information,model of credit markets towards imperfect information models,particularly those that focus on the determinants of bank behaviour.Of the standard models, the money demand model is most deficientin understanding these puzzles. The loanable funds theory anda generalized version of real productivity theory can be reconciledwith imperfect information, and markets and the consequent creditand equity rationing regimes help to explain the puzzles. Specifically,banks may be insensitive to changes in monetary stance owingto risk aversion. There are strong policy implications; it isargued, for instance, that in East Asia raising interest ratesexacerbated economic decline and, rather than contributing toexchange-rate stability, may have induced capital flight asdefault risk increased, lowering risk-adjusted expected returns.     

Program trading and intraday volatility

Program trading and intraday changes in the S&P 500 Indexare correlated. Futures prices and, to a lesser extent, cashprices lead program trades. Index arbitrage trades are followedby an immediate change in the cash index, which ultimately reversesslightly. No reversal follows nonarbitrage trades. The cumulativeindex changes associated with buy-and-sell trades and with arbitrageand nonarbitrage trades all are similar. Price decompositionssuggest that the results are not due to microstructure effects.Program trades in this 1989-1990 sample do not seem to havecreated major short-term liquidity problems. The results arestable within the sample.     

Cross-holdings: estimation issues, biases, and distortions

Cross-bolding occurs when listed corporations own securitiesissued by other corporations. We analyze the effect of cross-holdingson market capitalization and return measures as well as implicationsfor econometric testing of asset pricing theories. We show thatcross-holdings generally distort standard market return andrisk measures. The magnitudes of such distortions are calculatedfor simulated economies by using a variety of crossholding patterns.In addition, cross-holdings are shown to induce non-stationarityin the covariance matrix of security returns. We examine theeffect of this nonstationarity for estimating efficient frontiersand factor structures. We also discuss the implications forrisk-return estimates in equilibrium asset pricing models.     

ANALYSIS OF INTERNATIONAL RESERVE HOARDING IN KOREA

Since the Asian financial crisis, Korea's accumulation of international reserves has substantially exceeded benchmark levels. The present paper examines the interaction between international reserve hoarding and mercantilist motives, in the context of Korea's policy of maintaining export competitiveness through exchange rate management. An estimation of cointegration and error correction has found that in both the long term and the short term, Korea has stockpiled reserves as a result of heightened concerns regarding export competitiveness. The short‐run dynamics entail precautionary motives that have contributed to reserve accumulation. A variance decomposition test suggests that the mercantilist motive has been the main driver of reserve accumulation.