The argument against a reductionist approach for measuring sustainable development performance and the need for methodological pluralism

Both sustainability and sustainable development continue to remain elusive concepts even now, 20 years after the Brundtland Commission report that brought them into prominence. This situation most likely stems from the fact that sustainability science encompasses the need to address a wide set of issues over different time and spatial scales and thus inevitably accommodates opinions from diverse branches of knowledge and expertise. However, despite this multitude of perspectives, progress towards sustainability is usually assessed through the development and utilisation of single sustainability metrics such as monetary tools, composite sustainability indices and biophysical metrics including emergy, exergy and the ecological footprint. But is it really justifiable to assess the progress towards sustainability by using single metrics? This paper argues that such a choice seems increasingly unjustifiable not least due to these metrics’ methodological imperfections and limits. Additionally, our recent awareness of economies, societies and ecosystems as complex adaptive systems that cannot be fully captured through a single perspective further adds to the argument. Failure to describe these systems in a holistic manner through the synthesis of their different non-reducible and perfectly legitimate perspectives amounts to reductionism. An implication of the above is the fact that not a single sustainability metric at the moment can claim to comprehensively assess sustainability. In the light of these findings this paper proposes that the further elaboration and refinement of current metrics is unlikely to produce a framework for assessing the progress towards sustainability with a single metric. Adoption of a diverse set of metrics seems more likely to be the key for more robust sustainability assessments. This methodological pluralism coupled with stakeholder involvement seems to offer a better chance of improving the outcome of the decision making process.     

Institutional arrangements of outgrower sugarcane production in Southern Africa

ABSTRACT

Management models are needed that empower local communities to produce biofuel feedstock in a manner that drives rural development. Much can be learnt through the accumulated experiences of sugarcane outgrower schemes in southern Africa. Early schemes provided limited empowerment, but protected outgrowers from the risks of volatile sugar value chains. In later schemes, processing plants were responsible for all operations and simply paid dividends to participating farmers. More recent schemes offer full ownership, which comes with greater rewards and empowerment, but also exposure to risks. The underlying institutional structures of outgrower schemes largely dictate their performance, and thus the factors that affect their viability or collapse. To understand the different institutional arrangements of sugarcane outgrower schemes we undertake a comparative analysis of 13 schemes in southern Africa employing a political economy framework that uses the three key questions: ‘who owns what’, ‘who does what’, and ‘who gets what’.     

On the Real Effect of Financial Pressure: Evidence From Firm‐Level Employment During the Euro‐Area Crisis

Using a large panel of mainly unquoted euro‐area firms over the period 2003–2011, this paper examines the impact of financial pressure on firms’ employment. The analysis finds evidence that financial pressure negatively affects firms’ employment decisions. This effect is stronger during the euro area‐crisis (2010–2011), especially for firms in the periphery compared to their counterparts in non‐periphery European economies. When we introduce firm‐level heterogeneity, we show that financial pressure appears to be both statistically and quantitatively more important for bank‐dependent, small and privately held firms operating in periphery economies during the crisis.     

Dynamics of credit spread moments of European corporate bond indexes

Traditional quantitative credit risk models assume that changes in credit spreads are normally distributed but empirical evidence shows that they are likely to be skewed, fat-tailed, and change behaviour over time. Not taking into account such characteristics can compromise calculation of loss probabilities, pricing of credit derivatives, and profitability of trading strategies. Therefore, the aim of this study is to investigate the dynamics of higher moments of changes in credit spreads of European corporate bond indexes using extensions of GARCH type models that allow for time-varying volatility, skewness and kurtosis of changes in credit spreads as well as a regime-switching GARCH model which allows for regime shifts in the volatility of changes in credit spreads. Performance evaluation methods are used to assess which model captures the dynamics of observed distribution of the changes in credit spreads, produces superior volatility forecasts and Value-at-Risk estimates, and yields profitable trading strategies. The results presented can have significant implications for risk management, trading activities, and pricing of credit derivatives.     

INFLATION TARGETING AND THE STATIONARITY OF INFLATION: NEW RESULTS FROM AN ESTAR UNIT ROOT TEST

In this paper, we examine the time series properties of inflation in seven countries that have adopted inflation targeting. Unlike previous studies, we utilize a non‐linear mean reverting adjustment mechanism for inflation and we discover that, although deviations of inflation from the target can exhibit a region of non‐stationary behaviour, overall they are stationary indicating successful targeting implementation.     

The Impact of Unrealized Fair Value Adjustments on Dividend Policy

We examine the impact of unrealized fair value adjustments on dividend policy. Dividend payouts should include only persistent income [Lintner, J. (1956). Distribution of incomes of corporations among dividends, retained earnings and taxes. American Economic Review, 46(2), 97–113]. In our institutional setting, however, regulators recommend the non-distribution of any income from fair value adjustments, which suggests that they interpret them as transitory. We empirically demonstrate that fair value adjustments on investment property are persistent, while those on financial securities are transitory. We further show that only fair value adjustments from investment properties are distributed. We argue that managers perceive the persistence of the two fair value components correctly, and by doing so, they distribute income consistent with the Lintner framework rather than on regulatory recommendations. Finally, by focusing on managerial optimism, debt contracting, and insider ownership, we demonstrate the conditions under which firms choose to deviate from regulator recommendations and to distribute fair value profits.     

Multiple Job Holding,Skill Diversification,and Mobility

In this article, we investigate the interrelated dynamics of dual jobholding, human capital, occupational choice, and mobility, using a panel sample (1991–2005) of UK employees from the British Household Panel Survey. The evidence suggests that individuals may be using multiple jobholding as a conduit for obtaining new skills and expertise and as a stepping‐stone to new careers, also involving self‐employment. Individuals doing a different secondary job than their primary occupation are more likely to switch to a new primary job in the next year, and a job that is different than their current primary employment. The results show that there are human capital spillover effects between primary and secondary employment.     

Higher co-moments and asset pricing on London Stock Exchange

This study examines the asset pricing implications of preferences over the higher moments of returns’ distributions. We show that in a market populated by risk-averse, prudent and temperate investors, firms whose returns exhibit negative coskewness or positive cokurtosis should yield higher premia relative to counterpart firms with positive coskewness and negative cokurtosis respectively. These theoretical predictions are empirically tested using a comprehensive dataset of shares listed on the London Stock Exchange during the period 1986-2008. Our empirical results confirm that coskewness and cokurtosis premia are genuinely priced in the UK market, over and above what covariance risk, size, value and momentum factors can explain. We also show that a theoretically motivated, higher co-moment asset pricing model has significant explanatory ability over the cross-section of coskewness and cokurtosis portfolio returns.     

The Political Economy of IMF Conditionality: A Common Agency Model

The paper models the relationship between an aid‐providing international financial institution (IFI) and an aid‐receiving government whose economic policy choices are influenced by a domestic interest group. Two assistance schemes are evaluated: conditional aid in which the IFI makes assistance contingent on less‐ distorting economic policies and unconditional aid which is provided without such conditions. Conditional aid is shown to raise welfare of the receiving country and the world as a whole relative to unconditional aid. The paper also examines how conditional and unconditional aid schemes are influenced by the IFI's opportunity cost of providing assistance and the receiving government's political dependence on a domestic interest group.