Oligopolistic Trade and Competition in Wages Legislations

Wages legislation, or selective enforcement of such legislation, may be used to enhance the competitiveness of domestic firms. We show that, if domestic and foreign firms produce close substitutes and are Bertrand rivals, then wages legislation and enforcement display the characteristics of a Prisoner's Dilemma game. Other scenarios are also investigated.
JEL Classification: F13     

Does shareholder primacy lead to a decline in managerial accountability?

Shareholder primacy is increasingly considered to be the mosteffective way to foster managerial (corporate) accountability.Contrary to this now standard argument, we consider that shareholderprimacy, rather than gatekeeper failure, is directly responsiblefor the multiplication of accounting irregularities and thedramatic increase in executive compensations. To defend thisthesis, we propose a new reading of Berle and Means (1932),Galbraith (1973) and Alchian and Demsetz (1972), stressing thelogical failure of a control of the business firm provided forby stock markets: the implementation of shareholder primacyimplies a partial disconnection between access to internal knowledgeand empowerment. In turn, this disconnection favours deceptivebehaviours on the part of corporate insiders. Empirical evidencemostly based on Enron-era financial scandals illustrates ourargument.     

The Financial Modeling of Property-Casualty Insurance Companies

This paper describes a financial model currently being used by a major U.S. multiline property-casualty insurer. The model, which was first developed for solvency monitoring purposes, is now being employed for a variety of internal management purposes as well, including (1) the allocation of equity to corporate units, thereby allowing measurements of profitability by business segment and policy year, as well as analysis of the progression of “free surplus,” (2) the analysis of major risks–such as inflation risks, interest rate risks, and reserving risks–that have heretofore been difficult to quantify, and (3) consideration of varying scenarios on the company’s financial performance, both of macroeconomic conditions as well as of the insurance environment.

Many aspects of financial modeling do not differ significantly between life and property-casualty insurers, and these are not discussed in the paper. Rather, the paper focuses on the following topics:

1. Surplus allocation and profitability: how economic surplus and the returns on this surplus are determined by line of business, separately for new business and for the runoff of existing business, and how the progression of free surplus is viewed.

2. Multifaceted risks: how to model risks that affect multiple components of the insurer’s operations, such as economic risks and financial risks. The multiple effects of macroeconomic conditions and changing inflation rates on workers’ compensation claim frequencies and severities complicate the basic interest rate path modeling of life insurance products and annuity contracts.

3. Scenario building: how to construct scenarios of macroeconomic conditions or industry cyclical movements to test the resilience of the company to changing external conditions.     

THE PARETO PRINCIPLE OF OPTIMAL INEQUALITY*

The Pareto principle is often viewed as a mild requirement compatible with a variety of value judgments. In particular, it is generally thought that it can accommodate different degrees of inequality aversion. We show that this is generally not true in time‐consistent intertemporal models where some uncertainty prevails.     

Incidence and Behavioural Response to Social Security Contributions: An Analysis of Kink Points in France

We study the incidence of social security contributions (SSCs) in France relying on the strategy developed by Alvaredo et al. (De Econ, 2017. doi: 10.1007/s10645-017-9294-7). This strategy infers the incidence of SSCSs from the discontinuities in earnings distributions created by kink points in the SSC schedule. Using administrative data on earnings for the period 1976–2010, we study approximately 200 such kink points and do not find that they systematically induce a discontinuity in the distribution of gross earnings. This allows us to reject the hypothesis that SSCs are incident on workers, at least locally around kinks. Additionally, we exploit the large variations in SSC rates across kinks and years to estimate the local incidence of both employer and employee SSCs around these thresholds. We find that employer SSCs are shifted to employers while employee SSCs are shifted to employees. These findings are consistent with the economic incidence of SSCs being aligned with their statutory incidence, locally around kink points.     

The European Union–West Africa Economic Partnership Agreement: Small impact and new questions

Despite recent modifications, the Economic Partnership Agreement (EPA) between the European Union (EU) and West African (WA) countries is still being criticized for its potential detrimental effects on WA countries. This paper provides updated evidence on the impact of the EPA on these countries. A dynamic multi-country, multi-sector computable general equilibrium trade model with modeling of the dual–dual economy and with a consistent tariff aggregator is used to simulate a series of new scenarios that include updated information on the agreement. We also go beyond estimating macro-level economic effects to analyze the impacts on poverty. The policy simulation results show that the implementation of the EPA between the EU and WA countries would have marginal but positive impacts on Burkina Faso and Côte d'Ivoire and negative impacts on Benin, Ghana, Nigeria, Senegal, and Togo. The impact on poverty indicators in Ghana and Nigeria would be marginal. From the perspective of WA countries, this study supports the view that recent EU concessions are not sufficient and that domestic fiscal reforms are needed in WA countries themselves.     

Changes in the firms behavior after the opening of markets of allowances

This paper focuses on the influence on the general equilibrium of an economy of the opening of markets of allowances, such as the European Union Emission Trading Scheme. Assuming there existed an equilibrium before the opening of allowances’ markets, we describe the changes in the firms behavior which guarantee that an equilibrium can be reached in the enlarged economy. Hence we describe under which conditions the economy can undergo the opening of markets of allowances. This paper is a substantial improvement of previous work in collaboration with Alexandrine Jamin (Jamin and Mandel 2006).The author is grateful to Professor Jean-Marc Bonnisseau for his guidance and to an anonymous referee whose comments led to substantial improvements of the paper.