Education Subsidies, Social Security and Growth: The Implications of a Demographic Shock

We develop a three-period overlapping-generations model in which individual decisions about education are the engine of growth. In this setting, we investigate the normative role of education subsidies and old age pensions. Calibrating this model on empirical data, it is shown that the case for positive pension benefits is rather weak on the optimal path. An important part of education subsidies should be financed by lump-sum taxes on retirees. We also examine how these transfers should be adjusted in the presence of a baby boom-baby bust demographic shock. It turns out that an appropriate policy could be to increase education when the baby-boom generation is at work. Labor productivity will then be higher when aging peaks so that the pension bill can be financed without reducing welfare for the baby-bust generations.
JEL classification : O 41; J 24; E 62     

A coalitional theory of unemployment insurance and employment protection

This paper examines the role of coalition formation in the empirically observed negative correlation between employment protection and unemployment benefit. We study an economy composed of four groups of agents (capitalists, unemployed people, low- and high-skilled workers), each one represented by a politician. Politicians first form political parties and then compete in a winner-takes-all election by simultaneously proposing policy bundles composed of an employment protection level and an unemployment benefit. We first show that, in the absence of parties (i.e., in a citizen-candidate model), low-skilled workers are decisive and support a maximum employment protection level together with some unemployment benefit. We then obtain that, under some conditions, allowing for party formation results in all policy equilibria belonging to the Pareto set of the coalition formed by high-skilled workers together with unemployed people. Policies in this Pareto set exhibit a negative correlation between employment protection and unemployment benefit.     

Time-Varying Leverage and Basel III: A Look at Canadian Evidence

Why did the conventional leverage indicators not pick up any meaningful signal of the mounting systemic risk before the subprime crisis? They remained almost unchanged in recent decades, whereas the banking landscape underwent a tremendous metamorphosis. Market-oriented banking is characterized by a new type of systemic risk, a risk which essentially evolves off the radar screen, i.e., off-balance sheet (OBS) (Calmès and Théoret Journal of Banking and Finance 34 (7): 1719–1728, 2010, 2011). In this article, we argue that the standard leverage indicators are not fitted to capture this kind of new banking risk. We introduce a new empirical framework which enables us to exploit the cyclical properties of elasticity leverage measures, while at the same time controlling for the noisy information they usually deliver. In a nutshell, thanks to the Kalman filter, we are able to compute optimal levels of bank leverage. This methodology delivers cyclical, forward-looking measures signalling systemic risk bubbles years before their burst. By properly accounting for all activities, including market-oriented banking, these time-varying leverage measures tend to systemically capture regulatory capital arbitrage and the OBS risk it entails.     

Measuring and Accounting for the Deprivation Gap of Portuguese Immigrants in Luxembourg

This paper examines the relative well‐being of Portuguese immigrants in Luxembourg by looking at indicators of material deprivation. We document material deprivation differences between immigrants and nationals—the “deprivation gap”—and measure the extent to which income differentials (and other sociodemographic differences) explain this gap using a combination of non‐parametric methods and a versatile graphical device. We find a large and significant deprivation gap against Portuguese immigrants, whatever the indicator considered. The extent to which the gap is merely a reflection of differences in income, however, depends on what deprivation items are taken into consideration. Income differences almost fully account for material deprivation differences when the latter is measured using the items included in the official EU social indicator of material deprivation. Inclusion of housing condition indicators mitigates this relationship and we then find compelling evidence that the deprivation gap is not entirely accounted for by income differentials.     

The politics of redistributive social insurance

This paper analyses the political support for a social insurance that includes elements of redistribution when there exists an imperfect private insurance alternative. Individuals differ both in their income and risk. The social insurance is compulsory and charges an income-related contribution with pooling of risks. The private insurance is voluntary and charges a contribution based on individual risks. However due to the adverse selection problem, private insurance companies provide only partial insurance. Adopting a non-expected utility model, we show that there is a general majority support for social insurance and that this support is increasing with risk aversion. We also show that a mixed insurance is politically impossible, regardless of the degree of redistribution of social insurance and the joint distribution of risk and income in the population. Lastly, we analyse how the political support for social insurance is affected by any change in its redistributive component and the possibility of using genetic tests.     

Barriers to the “key supplierization” of the firm

The phenomenon of key supply management (KSM) in business companies is far less investigated than the phenomenon of key account management (KAM) which beneficiates, both in practice and in an academic context, from a growing interest. This article is based on the empirical analysis of a sample of 10 international companies which have recently launched KSM programmes or are currently working on launching such programs. It examines the difficulties these companies come up against when implementing such programmes and proposes to organize these difficulties around three dimensions: 1) the difficulties in implementing real supplier portfolio approaches; 2) the narrow view of value co-creation with suppliers, and 3) the persistent lack of integration of the purchasing function with other internal functions within the company. The conclusion of the article is that KSM is far from being a mere symmetric phenomenon of KAM. Several implications are then discussed in relation to the implementation of KSM programmes within companies.     

Measurement of Quality of Life and Well‐Being in France: The Drivers of Subjective Well‐Being

Ever since the publication of the Stiglitz Report, France has been heavily involved in the measurement of well‐being. The French Statistical Institute (INSEE) has expanded the scope of its existing surveys. It has also launched an innovative experimental survey which, drawing upon a single statistical source, aims for the first time to explore the different dimensions of both objective and subjective quality of life, as highlighted in the Stiglitz Report. It allows us to study, at the individual level, correlations between these dimensions and the accumulation of deprivations. It has enabled us to better understand the links between determinants generally referred to as objective dimensions of quality of life (such as health or education) and subjective well‐being. This information is of paramount importance for policy makers who cannot act directly on the level of people's satisfaction but can only act upon the levers of objective dimensions. This paper presents the main findings of the experimental survey.     

Life Expectancy Heterogeneity and the Political Support for Collective Annuities

Individuals, differing in productivity and life expectancy, vote over the size and type of a collective annuity. Its type is represented by the fraction of the contributive (Bismarckian) component (based on the worker's past earnings) as opposed to the non‐contributive (Beveridgean) part (based on average contribution). The equilibrium collective annuity is either a large mostly Bismarckian program, a smaller pure Beveridgean one (in accordance with empirical evidence), or nil. A larger correlation between longevity and productivity, or a larger average life expectancy, both make the equilibrium collective annuity program more Beveridgean, although at the expense of its size.     

Marx's critique of “eternal” political economy: how Mill is alien to Marx's attacks

Marx deplored political economy's claims to establish “eternal” – or “natural” – laws. This paper seeks to defend John Stuart Mill from his critique. It argues that, contrary to what Marx alleged, these two economists have a great deal more in common on this topic than is frequently realised. Both on the theoretical level and on the political one, Mill's views about the relativity of capitalism seem very close to Marx's. This paper also suggests that Marx may have ignored Mill's insistence on the relativity of economic theories because it may have challenged his own “scientific socialism”.