The effect of location on finding a job in the Paris region

Do spatial differences in unemployment duration reflect residential sorting or a true local effect? Focusing on the 1300 municipalities of the Paris region, we apply a methodology that disentangles individual and unspecified municipality effects. Estimating a proportional hazard model stratified by municipality and recovering a survival function for each municipality purged of individual observed heterogeneity, we show that local and individual characteristics add up in their contribution to unemployment duration. While only 30% of the spatial disparities in unemployment duration are explained by individual characteristics, 70% of the remaining disparities are captured by local indicators, mainly correlated with residential segregation. Copyright © 2010 John Wiley & Sons, Ltd.     

Does corruption hamper bank lending? Macro and micro evidence

The aim of this paper is to analyze the effect of corruption in bank lending. Corruption is expected to hamper bank lending, as it is closely related to legal enforcement, which has been shown to promote banks’ willingness to lend. Nevertheless the similarities between the consequences for bank lending of law enforcement and corruption are misleading, as they consider only judiciary corruption. Corruption can also occur in lending and may then be beneficial for bank lending via bribes given by borrowers to enhance their chances of receiving loans. This assumption may be validated particularly in the presence of pronounced risk aversion by banks, resulting in greater reluctance on the part of banks to grant loans. We perform country-level and bank-level estimations to investigate these assumptions. Corruption reduces bank lending in both sets of estimations. However, bank-level estimations show that the detrimental effect of corruption is reduced when bank risk aversion increases, even leading at times to situations wherein corruption fosters bank lending. Additional controls show that corruption does not increase bank credit by favoring only bad loans. Therefore, our findings show that while the overall effect of corruption is to hamper bank lending, it can alleviate firm’s financing obstacles.     

Insurance premiums and default risk in mutual insurance

Abstract

Two types of default risk are discussed in the article: The traditional “probability of ruin” (insurer being unable to meet his obligations) and a “perceived probability of ruin” (the probability of the insured being affected by ruin). The explicit relationship between these probabilities on the actuarial loading factors of a mutual insurer were developed. The explicit mathematical formulae obtained for these complex relationships were followed also by numerical results. A second concept presented in the paper is related to the idea of actuarially fair premiums. It is shown that the premium must also be a function of the payments of the other insured as well as their claim distributions, reflecting thereby the simultaneity and mutual dependence of the insured.     

Does Aid for Trade Enhance Export Performance? Investigating the Infrastructure Channel

There are few empirical studies assessing the effectiveness of aid for trade as regards trade performance. Furthermore, existing work does not test which are the channels through which aid for trade has an impact on trade performance. We address this question using a two‐step empirical analysis. Relying on an export performance model, we first test whether institutions and infrastructure, our two potential channels of transmission, are significant determinants of export performance. Second, we test the impact of aid for trade sectoral flows on the previously detected determinants of export performance. We show, as part of the first step, that the infrastructure channel is a highly significant determinant of export performance, whereas the institutional channel turns out to have a limited positive impact on developing countries’ export performance. Furthermore, we show, from the second step, that aid for infrastructure, once instrumented, has a strong and positive impact on the infrastructure level. As a result, we find that a ten per cent increase in aid for infrastructure commitments per capita in developing countries leads to an average 2.34 per cent increase in the exports over GDP ratio. It is also equivalent to a 2.71 per cent reduction in tariff and nontariff barriers. These results highlight the high potential impact of aid for trade on developing countries’ export performance throughout the infrastructure channel.     

Convergence in banking efficiency across European countries

Our paper aims to check whether financial integration has taken place on the EU banking markets, by investigating the convergence in banking efficiency for European countries between 1994 and 2005. We provide evidence of cross-country differences in cost efficiency and of an improvement in cost efficiency for all EU countries. β and σ convergence tests for panel data show a process in convergence in cost efficiency between EU countries. Robustness checks with alternative specifications confirm these findings. These results support the view that financial integration has taken place on the EU banking markets in the recent years.     

The Minimal Quota for a Complete Majority Relation to be Transitive

In this paper, we show that 2/3 is the minimal quota that guarantees the transitivity of a complete majority relation independently of the number of candidates.     

G@RCH 2.2: An Ox Package for Estimating and Forecasting Various ARCH Models

This paper discusses and documents G@RCH 2.2, an Ox package dedicated to the estimation and forecast of various univariate ARCH–type models including GARCH, EGARCH, GJR, APARCH, IGARCH, FIGARCH, HYGARCH, FIEGARCH and FIAPARCH specifications of the conditional variance and an AR(FI)MA specification of the conditional mean.
These models can be estimated by Approximate (Quasi) Maximum Likelihood under four assumptions: normal, Student– t , GED or skewed Student errors. Explanatory variables can enter both the conditional mean and the conditional variance equations. h –step–ahead forecasts of both the conditional mean and the conditional variance are available as well as many mispecification tests.
We first propose an overview of the package's features, with the presentation of the different specifications of the conditional mean and conditional variance. Then further explanations are given about the estimation methods. Measures of the accuracy of the procedures are also given and the GARCH features provided by G@RCH are compared with those of nine other econometric softwares. Finally, a concrete application of G@RCH 2.2 is provided.     

Nonlinear pricing and exclusion:II. Must‐stock products

Dominant firms often are unavoidable trading partners. Buyers may consider switching a fraction of their requirements to rival products, but that fraction is highly uncertain in rapidly evolving industries. Nonlinear pricing serves to adjust the competitive pressure placed on rival firms, depending on the joint distribution of the buyer willingness to pay for the rival's good and the share of contestable demand. Concave price‐quantity schedules erect barriers to entry. Convex parts in schedules introduce barriers to expansion. Dominant firms use all‐units discounts to create high entry barriers for rival firms with intermediate levels of contestable demand.     

Deterministic and stochastic trends in the Lee–Carter mortality model

The Lee and Carter (1992) model assumes that the deterministic and stochastic time series dynamics load with identical weights when describing the development of age-specific mortality rates. Effectively this means that the main characteristics of the model simplify to a random walk model with age-specific drift components. But restricting the adjustment mechanism of the stochastic and linear trend components to be identical may be too strong a simplification. In fact, the presence of a stochastic trend component may itself result from a bias induced by properly fitting the linear trend that characterizes mortality data. We find empirical evidence that this feature of the Lee–Carter model overly restricts the system dynamics and we suggest to separate the deterministic and stochastic time series components at the benefit of improved fit and forecasting performance. In fact, we find that the classical Lee–Carter model will otherwise overestimate the reduction of mortality for the younger age groups and will underestimate the reduction of mortality for the older age groups. In practice, our recommendation means that the Lee–Carter model instead of a one-factor model should be formulated as a two- (or several) factor model where one factor is deterministic and the other factors are stochastic. This feature generalizes to the range of models that extend the Lee–Carter model in various directions.