HIGH AND LOW EARNINGS JOBS: THE FORTUNES OF EMPLOYERS AND WORKERS

The focus of the literature on the effect of job changes has been on the consequences of job destruction on the individual worker. In this paper we analyze the impact on the earnings distribution of both job creation and job destruction. We establish a link between job reallocation and the movement of workers into and out of the tails of the earnings distribution. Both job creating and job destroying employers shed jobs mostly from the middle and lower tails of the earnings distribution, although this is cyclically very sensitive. Labor mobility (triggered by job reallocation) is risky: mobile workers will generally end up in the upper or lower tail of the distribution rather than in the middle. If workers move across industry boundaries, they typically move to the lower tails of the distribution. In sum, the fortunes of workers depend on the fortunes of their employers.     

Consumer soft law in Belgium

Soft law as a device of consumer protection is not very popular in Belgium. The best developed example is the advertising self regulation by the J. E. P. (Jury d'Ethique Publicitaire). The J. E. P. however, has no consumer representatives.Recently consumer organisations have concluded collective contracts with professional organisations in the textile cleaning, travel and furniture branches. These contracts provide an arbitration scheme for the settlement of consumer complaints. The consumer-supplier dialogue is getting under way.This article concludes with some information on guidelines by public authorities in the field of insurance and investor protection and the practice of extension of voluntary trade regulations to all traders of a given branch as a possible model for the consumer-supplier dialogue.

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Nicht-rechtliche Maßnahmen zum Verbraucherschutz — das Beispiel Belgien

Zusammenfassung Der Bericht entwickelt zunächst eine Typologie von möglichen soft-law und Verhandlungsmodellen zur Implementation von verbraucherschützenden Maßnahmen. Verhaltenskodices spielen in Belgien keine Rolle. Eine Ausnahme bildet das Selbstkontrollsystem der Werbung, das auf Gesetz und den allgemeinen Grundsätzen der Internationalen Handelskammer beruht. Die Beschwerdekommission ist — neben einem unabhängigen Vorsitzenden — nur aus Vertretern der Anbieterseite zusammengesetzt; Verbrauchervertreter können lediglich Beschwerden eingeben. Als Sanktion steht der Kommission eine bindende Empfehlung bei Verstößen gengen zwingendes Recht und gegen den Grundsatz der Lauterkeit zur Verfügung: die beanstandete Anzeige erscheint nicht in den Medien. Nicht-bindende Empfehlungen betreffen Verstöße gegen den guten Geschmack; hier ist Zensurrolle problematisch. Verbraucherorganisationen schätzen die Selbstkontrolleinrichtung eher negativ ein.Aushandlungsmodelle haben sich in letzter Zeit im Bereich von Standardverträgen, etwa Textilreinigung und neuestens Pauschalreisen entwickelt. Verbraucherorganisationen achten auf die Einrichtung von Beschwerdestellen, die bindende Entscheidungen erlassen können. Richtlinien werden in den Bereichen Versicherten- und Anlegerschutz verwendet. Vereinbarungen von Privaten mit kollektivrechtlichem Einschlag können durch königliches Dekret nach einem besonderen Verfahren allgemeinverbindlich erklärt werden. Obwohl dieses Verfahren bislang im Verbraucherschutz noch nicht verwendet worden ist, könne es Bedeutung für die Zukunft erlangen.

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Jules Stuyck is Lecturer at the Faculty of Law, University of Leuven, Tiensestraat 41, B—3000 Leuven, Belgium.     

An Empirical Model of Optimal Capital Structure1

The authors provide a reasonably user‐friendly and intuitive model for arriving at a company's optimal, or value‐maximizing, leverage ratio that is based on the estimation of company‐specific cost and benefit functions for debt financing. The benefit functions are downward‐sloping, reflecting the drop in the incremental value of debt with increases in the amount used. The cost functions are upward‐sloping, reflecting the increase in costs associated with increases in leverage. The cost functions vary among companies in ways that reflect differences in corporate characteristics such as size, profitability, dividend policy, book‐to‐market ratio, and asset collateral and redeployability. The authors use these cost and benefit functions to produce an estimate of a company's optimal amount of debt. Just as equilibrium in economics textbooks occurs where supply equals demand, optimal capital structure occurs at the point where the marginal benefit of debt equals the marginal cost. The article illustrates optimal debt choices for companies such as Barnes & Noble, Coca‐Cola, Six Flags, and Performance Food Group. The authors also estimate the net benefit of debt usage (in terms of the increase in firm or enterprise value) for companies that are optimally levered, as well as the net cost of being underleveraged for companies with too little debt, and the cost of overleveraging for companies with too much. One critical insight of the model is that the costs associated with overleveraging appear to be significantly higher, at least for some companies, than the costs of being underleveraged.     

VaR and ES for linear portfolios with mixture of generalized Laplace distributions risk factors

In this paper, we propose an explicit estimation of Value-at-Risk (VaR) and Expected Shortfall (ES) for linear portfolios when the risk factors change with a convex mixture of generalized Laplace distributions (M-GLD). We introduce the dynamics Delta-GLD-VaR, Delta-GLD-ES, Delta-MGLD-VaR and Delta-MGLD-ES, by using conditional correlation multivariate GARCH. The generalized Laplace distribution impose less restrictive assumptions during estimation that should improve the precision of the VaR and ES through the varying shape and fat tails of the risk factors in relation with the historical sample data. We also suggested some areas of application to measure price risk in agriculture, risk management and financial portfolio optimization.     

Making strategic judgements

Can a case to be made for managers to become less risk-averse or even act in a manner contrary to conventional wisdom? Jules Goddard and Tony Eccles suggest that may be the best strategy during economic turmoil.     

Dynamic openness and finance in Africa

This study assesses dynamics of openness and finance in Africa by integrating financial development dynamics of depth, activity and size in the assessment of how financial, trade, institutional, political and other openness policies (of second generation structural and institutional reforms) have affected financial development. The empirical evidence is based on Generalized Method of Moments with data from 28 African countries for the period 1996–2010. The following findings are established. (1) While the de jure (KAOPEN) indicator of financial openness improves financial depth, the de facto (FDI) measurement decreases it, with the effect of the latter measure positive on financial size. (2) Whereas trade openness improves financial depth, its effect on financial activity and size is negative. (3) Institutional openness has a positive effect on financial dynamics of depth and activity, while its effect on financial size is negative. (4) Political openness and economic freedom are detrimental to financial depth and activity. Justifications for these nexuses are discussed.