Labour Adjustment Implications of Service Offshoring: Evidence from Canada

About one‐fifth of Canadian employees are in jobs that are vulnerable to service offshoring. Despite this figure, both theory and our empirical evidence (based on a variety of methodologies and datasets) suggest that the offshoring of business services is not likely to lead to large adverse employment effects. We also conclude that existing active labour market adjustment policies (e.g. increased labour market information, job search, mobility and training) developed for other adjustment pressures such as technological change and free‐trade in goods are just as appropriate (perhaps even more so) to deal with the consequences of service offshoring.     

An agency model to explain trade credit policy and empirical evidence

This article explains trade credit policy based on the agency theory. According to this theory, we have developed an agency model based on the adverse selection and moral hazard phenomena arising from the relation between sellers and buyers. This model has been estimated by using panel data methodology applied to UK companies. Our findings strongly support the model proposed. We find that smaller firms, those with a smaller proportion of fixed assets, and those that are less profitable extend more trade credit, whereas firms with a high proportion of variable costs and high percentage of bad debts extend less.     

The heterogeneous effect of finance on international trade

Is the impact of financial development on international trade heterogeneous – being positive, negative or null – across manufacturing sectors? And is it dependent on the level of sectoral requirement on external finance for capital need? To examine these questions this article uses a panel trade database on 21 manufacturing sectors in 80 countries between 2000 and 2009. The analysis demonstrates that the effect of financial development on trade is indeed heterogeneous by estimating a coefficient for each sector and showing that the signs and significance levels vary across them. The article also demonstrates that sectors with strong reliance on external finance export higher volume from countries with developed financial system and that financial development reduces trade in industries with low financial dependence level.     

The effect of US holidays on the European markets: when the cat’s away…

This paper presents evidence of the existence of a return effect on European stock markets coinciding with New York Stock Exchange (NYSE) holidays, which is particularly marked after positive closing returns on the NYSE the previous day. The effect is large enough to be exploited by trading index futures. This anomaly cannot be explained by seasonal effects, such as the day of the week effect, the January effect or the pre‐holiday effect, nor is it consistent with behavioural finance models that predict positive correlation between trading volume and returns. However, examination of factors such as information volume or investor mix provides a reasonable explanation.     

The Role of Four Universal Moral Competencies in Ethical Decision-Making

Current frameworks on ethical decision-making process have some limitations. This paper argues that the consideration of moral competencies, understood as moral virtues in the workplace, can enhance our understanding of why moral character contributes to ethical decision-making. After discussing the universal nature of four moral competencies (prudence, justice, fortitude and temperance), we analyse their influence on the various stages of the ethical decision-making process. We conclude by considering the managerial implications of our findings and proposing further research.     

DOES POPULATION AGEING PROMOTE FASTER ECONOMIC GROWTH?

Can divergent demographic trends account for differences in per capita output across countries? We address this question by offering evidence that the process of population ageing is positively and significantly related to cross‐country economic performance. We define and estimate the effect of demographic change in two ways. First, a growing cohort of working age persons (15–64) as a share of the total population is found to have a large positive effect on GDP per capita. Second, an increase in the number of prime age persons (35–54) relative to the younger working age population (15–34) is found to have a positive but curvilinear effect with respect to per capita GDP. We find that changes in per capita GDP peak when the ratio of the prime‐to‐younger age population reaches an optimum of prime age workers for every younger aged worker. Beyond or below this optimal ratio, per capita output is lowered.     

Gross national happiness as an answer to the Easterlin Paradox?

The Easterlin Paradox refers to the fact that happiness data are typically stationary in spite of considerable increases in income. This amounts to a rejection of the hypothesis that current income is the only argument in the utility function. We find that the happiness responses of around 350,000 people living in the OECD between 1975 and 1997 are positively correlated with the level of income, the welfare state and (weakly) with life expectancy; they are negatively correlated with the average number of hours worked, environmental degradation (measured by SOx emissions), crime, openness to trade, inflation and unemployment; all controlling for country and year dummies. These effects separate across groups in a pattern that appears broadly plausible (e.g., the rich suffer environmental degradation more than the poor). Based on actual changes from 1975 to 1997, small contributions to happiness can be attributed to the increase in income in our sample. Interestingly, the actual changes in several of the ‘omitted variables’ such as life expectancy, hours worked, inflation and unemployment also contribute to happiness over this time period since life expectancy has risen and the others have, on average, fallen. Consequently the unexplained trend in happiness is even bigger than would be predicted if income was the only argument in the utility function. In other words, introducing omitted variables worsens the income-without-happiness paradox.     

Brotherhood of competition: Foreign Direct Investment and domestic mergers

We examine the effects of mergers on Foreign Direct Investment (FDI), and on shaping national policies regarding FDI. In this work we develop a partial equilibrium model of an oligopolistic industry in which a number of domestic and foreign firms compete in the market for a homogeneous good in a host country. It is assumed that the number of foreign firms is endogenous and can be affected by the government policy in the host country. The government sets the policy (subsidies) to maximise social welfare. We allow domestic mergers. Our main results suggest that when the host country government imposes discriminatory lump-sum subsidy in favor of foreign firms, a merger of domestic firms will increase the number of FDI if the subsidy level is exogenous. With an endogenous level of subsidy, a merger of domestic firms will decrease (increase) the welfare if the domestic firms are more (less) efficient.     

Testing time-homogeneity of rating transitions after origination of debt

When modelling rating transitions as continuous-time Markov processes, in practice, time-homogeneity is a common assumption, yet restrictive, in order to reduce the complexity of the model. This paper investigates whether rating transition probabilities change after the origination of debt. Accordingly, we develop a likelihood-ratio test for the hypothesis of time-homogeneity. The alternative is a step function of transition intensities. The test rejects time-homogeneity for rating transitions observed over 7 years in a real corporate portfolio. Especially 1-year transition probabilities increase over the first year after origination. This time effect suggests that banks should manage their credit portfolios with respect to the age of debt.      

Momentum,market states and investor behavior

This paper shows that the momentum effect appears in the wake of both up-market and down-market states in the Spanish stock market, although in the first of these cases it is followed by return reversal. This evidence, which contradicts the predictions of Cooper et al. (2004), provides the rationale for taking into account the disposition effect among the possible explanatory factors behind the momentum effect in a behavioral theory context.