Inefficient Public Provision in a Repeated Elections Model

We consider a dynamic setting with no policy commitment. Two parties that compete for election must choose the level of provision of a public good as well as the tax payment needed to finance it. The cost of producing the good may be high or low and this information is not known to the voters. We show that there exists an equilibrium in which the party that does not want much of the public good uses the inefficient (high cost) technology even though the efficient one is available. Using the low cost technology would, by informing the voters about the cost parameter, force it to produce an excessively high level of the good in the future. Interestingly, this equilibrium is not symmetric, suggesting that a party with a strong taste for the public good is less likely to adopt a wasteful policy.     

Redenomination Risk

Euro redenomination risk is the risk that a euro asset is redenominated into a devalued legacy currency. We propose a time‐varying, country‐specific intra‐euro area redenomination risk measure, defined as the quanto credit default swaps (CDS) of a member country relative to the quanto CDS of a benchmark member country. Focusing on Italy, Spain, and France and using Germany as benchmark, we show that the redenomination risk shocks significantly affect sovereign yield spreads, with Italy and Spain being most adversely affected. Finally, foreign redenomination risk shocks spill over and above local redenomination risk shocks, suggesting that this risk is systemic.     

Strategic Network Disruption and Defense

We study a game between a network designer, who uses costly links to connect nodes in a network, and a network disruptor who tries to disrupt the resulting network as much as possible by deleting either nodes or links. For low linking costs networks with all nodes in symmetric positions are a best response of the designer under both link deletion and node deletion. For high linking costs the designer builds a star network under link deletion, but for node deletion excludes some nodes from the network to build a smaller but stronger network. For intermediate linking costs the designer again builds a symmetric network under node deletion but a star‐like network with weak spots under link deletion.     

A Conference on Postcrisis Banking

This article provides an introduction to the special issue. We focus on four themes that are important for policymakers and researchers alike in view of the experiences of the global financial crisis of 2007–09 and the ensuing sovereign debt crisis in the euro area: the relevance of the banking sector for the real economy, the future structure and regulation of the banking sector, the efficacy of past and current regulatory reforms, and the impact of cross‐border banking on economic stability and financial development.     

El sindicalismo israelí ante el empleo atípico. El fenómeno de la liminalidad permanente

Los comités de empresa israelíes se están adaptando a la economía neoliberal y a las transformaciones laborales concomitantes con una doble postura: por un lado tratan de hacer frente a esta reformulación del capitalismo para salvaguardar los derechos de los trabajadores, y por otro aceptan cada vez más las formas atípicas de empleo. Esta contradicción los sitúa en un estadio de «liminalidad» permanente, en el que sus funciones se reducen a una mera búsqueda de compromisos y soluciones ad hoc. Como consecuencia, su lucha contra los efectos adversos del empleo atípico sigue siendo puntual y fragmentada, lo que contribuye a consolidar estas modalidades de empleo.     

Internal Service Quality and the Psychosocial Work Environment: An Empirical Analysis of Conceptual Interrelatedness

There is a need to integrate service quality concepts withconcepts from other research fields, such as the psychosocialwork environment, to help us better understand and create abasis for quality control in services. The main aim of this paperis to explore empirically the relationships between thepsychosocial work environment and internal service qualily. Weuse concepts and measures derived from psychosocial workenvironment theory and service quality theory respectively. Datawere collected from 555 employees in a Swedish computerservice company using questions from a Stress Profile as well as from a Quality Profile. All 52 items from the Stress Projile and20 items from the Quality Profile were entered into a factoranalysis. The main result of the study is not the exact outcome ofthe factor analysis per se, but rather the point that questionsderived from two different research fields appear to measuredifferent mental representations of work conditions. Clearly,interdependence exists between the psyclzosocial workenvironment and internal quality. It is quite concmon to ncap adrestructure service processes in order to improve internal qualityin an attempt to solve quality problems created by organisationalchanges. We suggest that it should be equally inportant to takenieasures to increase work satisfaction by improvingpsychosocial work conditions.     

An Explanation of Negative Swap Spreads: Demand for Duration from Underfunded Pension Plans

The 30‐year U.S. swap spreads have been negative since September 2008. We offer a novel explanation for this persistent anomaly. Through an illustrative model, we show that underfunded pension plans optimally use swaps for duration hedging. Combined with dealer banks' balance sheet constraints, this demand can drive swap spreads to become negative. Empirically, we construct a measure of the aggregate funding status of defined benefit pension plans and show that this measure helps explain 30‐year swap spreads. We find a similar link between pension funds' underfunding and swap spreads for two other regions.     

What Makes the Output–Inflation Trade‐Off Change? The Absence of Accelerating Deflation in Japan

It is standard to model the output–inflation trade-off as a linear relationship with a time-invariant slope. We assess empirical evidence for two sets of theories that allow for endogenous variation in the slope of the short-run Phillips curve. At an empirical level, we examine why large negative output gaps in Japan in the late 1990s did not lead to accelerating deflation but instead coincided with stable, albeit moderately negative inflation. Our results suggest that this episode is most convincingly interpreted as reflecting a gradual flattening of the Phillips curve. We find that this flattening is best explained by models with endogenous price durations. These models imply that in any economy where trend inflation is substantially lower (or substantially higher) today than in past decades, time variation in the slope of the Phillips curve has become too important to ignore.