Protection versus Promotion: An Empirical Investigation

Using Turkish industry-level data from 1983 to 1990, we find that politically organized industries receive both higher protection and promotion than unorganized ones. Tariff rates are decreasing (increasing) in the import-penetration ratio and the absolute value of the import-demandelasticity for organized (unorganized) industries. Subsidy rates are decreasing (increasing) in the output-supply elasticity for organized (unorganized) industries. The results are consistent with the predictions of the Grossman–Helpman model and its extension in this paper. The mix of protection and promotion is inversely related to the ratio of their respective marginal deadweight cost measures.     

The Falsification of Four Popular Hypotheses About the Asian Crisis

Various claims have been made about the causes of the Asian crisis and its spread. Here, we use data on the behaviour of capital flows during the crisis to test the strong forms of four such hypotheses, that portfolio investors and hedge funds played a dominant role in initiating and/or spreading the crisis; that moral hazard kept efficient markets from predicting the crisis; and, finally, the common lender hypothesis of Kaminsky and Reinhart. In the process we also test implications of the Calvo-Mendoza model of rational investor ignorance. All are falsified as monocausal explanations. For example, portfolio investments that could not have been subject to substantial moral hazard continued to flow into Asia until very shortly before the crisis. Likewise, banks were a much larger source of capital outflows during the crisis than were portfolio investors. While falsified in their strongest forms, several of these hypotheses in less strong forms should play a role in a more nuanced analysis. It is necessary to move past simple single-factor approaches in order to produce a more complete, synthetic explanation of this episode.     

HEDGING INTEREST RATE RISK UNDER TERM STRUCTURE EFFECTS: AN APPLICATION TO FINANCIAL INSTITUTIONS

In this paper we investigate the use of the structured full rank model for hedging the balance sheet of a financial institution. Simulation results suggest that the optimal hedge is insensitive to changes in parameter estimates. In addition, we hedge a portfolio of Treasury bills using both the full information covariance matrix and the structured covariance matrix. We then contrast these results with those obtained from a duration-based model. Empirical results suggest that the structured full rank model is generally more effective in hedging applications than either the full information model or duration-based model.     

From Experience: Avoiding Marketing's Best-Of-The-Best Specification Trap

Too often companies fall into a trap when developing a list of performance specifications for a new product. Milton Rosenau calls this the best-of-the-best specification trap. The problem arises whenever a company bases a specification on the combination of the best single features observed in available competitive products. When this happens, the new product's design is driven by competition and is not derived from a unique market insight. This may not provide the basis for a sustainable advantage. Sometimes, rumors of competitive improvements may even lead to sudden changes in the specification, creating delays in the development process. A far better goal is to develop a specification that responds to an unrecognized and unfilled user need, one that adds high value to users. His points are illustrated with several examples.     

Immigration and the Global City Hypothesis: Towards an Alternative Research Agenda

The debate around the ‘Global City Hypothesis’ (GCH), and particularly the research agenda of the ‘Globalization and World Cities’ network, have been preoccupied recently with the business and technological dimensions of so–called ‘global cities’. This article seeks to recover the role of immigration in large urban economies. Using mainly observations from European metropolises, I argue first that the GCH requires significant revision insofar as it can be used as a tool for addressing issues of inequality, and I offer five propositions for a renewal of the existing contours of the GCH. Second, beyond these revisions, I suggest a complete reformulation of the debate by linking it with ideas emanating from the literature on transnationalism. Le débat sur ‘l’Hypothèse de la ville globale’, et notamment sur le programme de recherche du réseau ‘Mondialisation et Villes mondiales’, s’est récemment soucié des dimensions économiques et technologiques des dites ‘villes planétaires’. Cet article tente de révéler le rôle de l’immigration dans les grandes économies urbaines. A partir d’observations de métropoles européennes principalement, il affirme d’abord que, dans la mesure où cette hypothèse peut servir d’outil pour aborder les questions d’inégalité, elle requiert une importante révision; sont donc exposées cinq propositions pour en renouveler les profils existents. Il suggère ensuite une reformulation complète du débat en l’associant à des idées émanant de travaux sur le transnationalisme.     

"Flexible" Work Practices and Occupational Safety and Health: Exploring the Relationship Between Cumulative Trauma Disorders and Workplace Transformation

This article matches establishment-level data on workplace transformation (e.g., quality circles, work teams, and just-in-time production) with measures of cumulative trauma disorders at these same establishments to explore the relationship between "flexible" workplace practices and workplace health and safety. The results reveal a positive, statistically significant, and quantitatively sizable relationship between cumulative trauma disorders and the use of quality circles and just-in-time production.     

Exact Ruin Probabilities and the Evaluation of Program Trading On Financial Markets

For a compound Poisson process with negative drift and jump distribution consisting of a mixture of exponentials on [0) and on (-, 0), an exact expression is derived for the probability of hitting the level c, c > 0. the problem is motivated by modeling the returns from trading on financial markets.     

WARRANT PRICING USING OBSERVABLE VARIABLES

The classical warrant pricing formula requires knowledge of the firm value and of the firm‐value process variance. When warrants are outstanding, the firm value itself is a function of the warrant price. Firm value and firm‐value variance are then unobservable variables. I develop an algorithm for pricing warrants using stock prices, an observable variable, and stock return variance. The method also enables estimation of firm‐value variance. A proof of existence of the solution is provided.