Good jobs, bad jobs, and trade liberalization

How do labor markets adjust to trade liberalization? Leading models of intraindustry trade (Krugman (1981), Melitz (2003)) assume homogeneous workers and full employment, and thus predict that all workers win from trade liberalization, a conclusion at odds with the public debate. Our paper develops a new model that merges Melitz (2003) with Shapiro and Stiglitz (1984), so also links product market churning to labor market churning. Workers care about their jobs because the model features aggregate unemployment and jobs that pay different wages to identical workers. Simulations show that, for reasonable parameter values, as many as one-fourth of existing “good jobs” (those with above average wage) may be destroyed in a liberalization. This is true even as the model shows minimal impact on aggregate unemployment and quite substantial aggregate gains from trade.     

An Empirical Study of Leader Ethical Values,Transformational and Transactional Leadership,and Follower Attitudes Toward Corporate Social Responsibility

Several leadership and ethics scholars suggest that the transformational leadership process is predicated on a divergent set of ethical values compared to transactional leadership. Theoretical accounts declare that deontological ethics should be associated with transformational leadership while transactional leadership is likely related to teleological ethics. However, very little empirical research supports these claims. Furthermore, despite calls for increasing attention as to how leaders influence their followers’ perceptions of the importance of ethics and corporate social responsibility (CSR) for organizational effectiveness, no empirical study to date has assessed the comparative impact of transformational and transactional leadership styles on follower CSR attitudes. Data from 122 organizational leaders and 458 of their followers indicated that leader deontological ethical values (altruism, universal rights, Kantian principles, etc.) were strongly associated with follower ratings of transformational leadership, while leader teleological ethical values (utilitarianism) were related to follower ratings of transactional leadership. As predicted, only transformational leadership was associated with follower beliefs in the stakeholder view of CSR. Implications for the study and practice of ethical leadership, future research directions, and management education are discussed.     

An integrated product planning model for pricing and bundle selection using Markov decision processes and data envelope analysis

When bundling products during the product planning stage, there are a number of possible combinations that can be offered to customers. Consider a firm that offers N distinctive products, then there are 2^N−(N+1) possible bundling combinations. Now, if we wish to make pricing and bundle selection decisions, keeping in my mind limited inventory and a finite time horizon, then the size of the state space could be very large and finding an optimal solution could be impossible. To tackle this issue, we formulate an integrated model that utilizes a Markov decision process and data envelope analysis. Bundle selections are made using data envelope analysis in each decision epoch. Once the efficient bundles are selected they are priced by solving a Markov decision process using dynamic programming. Numerical examples are solved to exhibit the model's potential in solving real-world problems.     

“KLICing” there and back again: Portfolio selection using the empirical likelihood divergence and Hellinger distance

Stutzer (2000, 2003) proposes the decay-rate maximizing portfolio selection rule wherein the investor selects the asset mix that maximizes the rate at which the probability of shortfall decays to zero. A close examination of this rule reveals that it ranks portfolios by computing the divergence, in the Kullback-Leibler sense, between the unweighted portfolio return distribution and a tilted distribution meaned at the predetermined target or benchmark rate of return selected by or imposed upon the investor. This result implies, in the IID case, that Stutzer's rules can be written as a benchmark constrained Kullback-Leibler-based optimization problem with an endogenous utility interpretation. Here we expand on this idea by introducing two closely related portfolio selection rules based on the empirical likelihood divergence and the Hellinger-Matusita distance. The first of these is the reversed Kullback-Leibler divergence and the second is proportional to the average of the two divergences. The theoretical and in-sample properties of the new criteria suggest them to be competitive with and in some cases better than existing methods, especially in terms of skewness preference.     

FORECASTING PERFORMANCE OF AN ESTIMATED DSGE MODEL FOR THE SOUTH AFRICAN ECONOMY

We construct a small open‐economy New Keynesian dynamic stochastic general equilibrium (DSGE) model for South Africa with nominal rigidities, incomplete international risk sharing and partial exchange rate pass‐through. The parameters of the model are estimated using Bayesian methods, and its out‐of‐sample forecasting performance is compared with Bayesian vector autoregression (VAR), classical VAR and random‐walk models. Our results indicate that the DSGE model generates forecasts that are competitive with those from other models, and it contributes statistically significant information to combined forecast measures.     

Measuring the Impact of Ethanol Plants on Local Grain Prices

A considerable number of farmer-owned ethanol plants have been built in the past few years, with many more planned. In part, farmers' investment in ethanol plants is an attempt to increase grain prices in their local market. We examined this issue by estimating the impact on local grain prices of twelve ethanol plants that opened from 2001 to 2002. We find that these new ethanol plants increased local grain prices, but the impact was not uniform around the plant. Markets downstream from a new plant, where prices tend to be higher, experienced a smaller price impact from the ethanol plant. On average across plants, corn prices increased by 12.5 cents per bushel at the plant site, and some positive price response was felt 68 miles away from the plant.     

A STOCHASTIC DYNAMIC MODEL OF THE MENTAL HEALTH OF CHILDREN*

We estimate the parameters of a dynamic multiperiod model where parents with one child periodically decide whether their child uses mental health services. In this model, parents receive utility from household consumption and from their child's mental health. Mental health services may improve the child's mental health, but may be costly in terms of reduced household consumption and direct disutility. We find that mental health services can slightly improve a child's mental health, but the use of services accounts for a small fraction of the improvement of the mental health of the children in our sample.     

Capacity reduction,quota trading and productivity: the case of a fishery*

We present the first ex post study that quantitatively analyses the effects of a licence buy‐back and enhanced quota trading on the profitability and productivity of individual vessels in a fishery. Using firm‐level data and a profit index decomposition method, we find that small and large vessels and three different trawler fleets all experienced substantial productivity gains in the year immediately following a licence buy‐back and the establishment of a quota brokerage service. The apparent ongoing benefits of the buy‐back and increased quota trading over the sample period are in stark contrast to the generally unfavourable long‐term outcomes commonly associated with vessel buy‐backs in input‐controlled fisheries.