Public–private wage differential in a post‐transition economy

In this study, we estimate the public sector wage premium in a post‐transition economy, a quarter of a century since the collapse of the old regime. Our methodology uses a copula method to estimate the switching regression model, which allows for the relaxation of the restrictive assumption of joint normality. We control for employment selection into both sectors using an instrument based on information regarding learned professions. We use data from the Polish Survey of Earnings by Occupations (2012). Contrary to earlier results for Poland, we found positive selection into employment in both sectors, with positive average treatment effect on the treated and negative average treatment effect on the untreated. The results suggest that both private and public sector employees select themselves into the sector in which they earn more than they would in a counterfactual scenario.     

Optimal securitization with moral hazard

We consider the optimal design of mortgage-backed securities (MBS) in a dynamic setting in which a mortgage underwriter with limited liability can engage in costly hidden effort to screen borrowers and can sell loans to investors. We show that (i) the timing of payments to the underwriter is the key incentive mechanism, (ii) the maturity of the optimal contract can be short, and that (iii) bundling mortgages is efficient as it allows investors to learn about underwriter effort more quickly, an information enhancement effect. Finally, we demonstrate that the optimal contract can be closely approximated by the “first loss piece.”     

Property insurance risk map in determining bonuses and maluses

This project presents a proposal to build the Insurance Risk Map based on such taxonomy measures as similarity measure of the objects (_io) and the distance measure between objects (d_io). Practical usefulness of the presented construction has been illustrated by means of indicating areas where the a/m Insurance Risk Map can be used by insurance companies. These activities are mainly connected with the process of tariff construction as well as fixing the amount of discounts (bonuses) and surcharges (maluses). In this project, the emphasis has been put on the particular process of fixing bonuses and maluses.     

Mixed systems with minimal and maximal lifetime variances

We consider the mixed systems composed of a fixed number of components whose lifetimes are i.i.d. with a known distribution which has a positive and finite variance. We show that a certain of the k-out-of-n systems has the minimal lifetime variance, and the maximal one is attained by a mixture of series and parallel systems. The number of the k-out-of-n system, and the probability weights of the mixture depend on the first two moments of order statistics of the parent distribution of the component lifetimes. We also show methods of calculating extreme system lifetime variances under various restrictions on the system lifetime expectations, and vice versa.     

Patterns and determinants of the horizontal and vertical intra-industry trade of regions: panel analysis for Spain & Poland

ABSTRACT

Most of the empirical studies in the literature on intra-industry trade are conducted at the country level. Countries, however, differ in terms of granularity and internal heterogeneity. In the present study we empirically identify the determinants of the overall IIT as well as its horizontal and vertical components in the trade of Spanish and Polish NUTS-2 regions with all existing trade partners over the period 2005–2014. In order to obtain unbiased results, we utilize a semi-mixed effect model, estimated with the PPML method. We estimate the models jointly for all Spanish and Polish regions and then disjointly in a comparative manner – in order to identify incongruities of reaction to the various factors investigated. These include both traditional factors and a number of unorthodox factors such as regional path dependence, quality of regional institutions, the core or peripheral status of the reporting region.     

The international transmission of bank capital requirements: Evidence from the UK

We use data on UK banks? minimum capital requirements to study the impact of changes to bank-specific capital requirements on cross-border bank loan supply from 1999Q1 to 2006Q4. By examining a sample in which each recipient country has multiple relationships with UK-resident banks, we are able to control for demand effects. We find a negative and statistically significant effect of changes to banks? capital requirements on cross-border lending: a 100 basis point increase in the requirement is associated with a reduction in the growth rate of cross-border credit of 5.5 percentage points. We also find that banks tend to favor their most important country relationships, so that the negative cross-border credit supply response in “core” countries is significantly less than in others. Banks tend to cut back cross-border credit to other banks (including foreign affiliates) more than to firms and households, consistent with shorter maturity, wholesale lending which is easier to roll off and may be associated with weaker borrowing relationships.     

The valuation of American options in a multidimensional exponential Lévy model

We consider the problem of valuation of American options written on dividend‐paying assets whose price dynamics follow a multidimensional exponential Lévy model. We carefully examine the relation between the option prices, related partial integro‐differential variational inequalities, and reflected backward stochastic differential equations. In particular, we prove regularity results for the value function and obtain the early exercise premium formula for a broad class of payoff functions.     

DYNAMIC COHERENT ACCEPTABILITY INDICES AND THEIR APPLICATIONS TO FINANCE

In this paper, we present a theoretical framework for studying coherent acceptability indices (CAIs) in a dynamic setup. We study dynamic CAIs (DCAIs) and dynamic coherent risk measures (DCRMs), and we establish a duality between them. We derive a representation theorem for DCRMs in terms of a so‐called dynamically consistent sequence of sets of probability measures. Based on these results, we give a specific construction of DCAIs. We also provide examples of DCAIs, both abstract and also some that generalize selected classical financial measures of portfolio performance.     

Management of large-scale interdisciplinary environmental programmes

Four aspects of uniformity (discipline, institution, type of research and sponsorship) are identified as decisive in the organization and management of large-scale research programmes: difficulties increase with increasing non-unifornmty in any of the aspects. Environmental research is an example of a research area in which one has to overcome all of these problems, and this paper describes the authors' experiences in managing just such a programme. Aspects covered include: the organizational framework chosen and its operation in practice, the selection of research goals, methods of data collection, and manpower and social problems in interdisciplinary research. The degree of generalizability of the observations in the paper is left open for discussion.