Notes and Communications, Horses for Courses: Why Europe Should Not Harmonise its Book Policies

European countries have similar cultural goals for books. The most common are the promotion of reading and the production of (literary) books (of a diverse nature). The extent to which the free market can achieve the cultural goals is uncertain and differs across countries. In cases where the free market does not achieve the goals or politicians do not want to accept uncertainty, a policy instrument is needed. Commonly used instruments in Europe include the fixed book price, subsidies, libraries, and lower VAT. We demonstrate that differences among European countries matter and that harmonisation of European book policies is not a good idea.     

The Surge in Short-Duration Contracts in Spain

Until the outbreak of the recent economic and financial crisis, Spain was leading the ranking of countries with the largest share of temporary employees. During the crisis this share has fallen to its lowest level in decades, but this does not mean that working conditions in Spain have improved. The flow of new temporary contracts is larger than ever before. A particularly striking feature is the steep growth in the volume of fixed-duration contracts lasting less than a week or a month. We document these trends and analyse how this phenomenon has affected the transition from temporary to permanent employment.     

Commodity derivatives valuation with autoregressive and moving average components in the price dynamics

In this paper, we develop a continuous time factor model of commodity prices that allows for higher-order autoregressive and moving average components. We document the need for these components by analyzing the convenience yield’s time series dynamics. The model we propose is analytically tractable and allows us to derive closed-form pricing formulas for futures and options. Empirically, we estimate a parsimonious version of the general model for the crude oil futures market and demonstrate the model’s superior performance in pricing nearby futures contracts in- and out-of-sample. Most notably, the model substantially improves the pricing of long-horizon contracts with information from the short end of the futures curve.     

Asset allocation over the life cycle: How much do taxes matter?

We study the welfare effect of tax-optimizing portfolio decisions in a life cycle model with unspanned labor income and realization-based capital gain taxation. For realistic parameterizations of our model, certainty equivalent welfare gains from fully tax-optimized portfolio decisions are less than 2% of present financial wealth and lifetime income compared to a heuristic portfolio policy ignoring the taxation of profits (capital gains, interest and dividend payments). Compared to a heuristic portfolio policy that only ignores the realization-based feature of capital gain taxation and instead assumes mark-to-market taxation, these gains are less than 0.5%. That is, our work provides a justification for ignoring taxes in life cycle portfolio choice problems – a wide-spread assumption in that literature. However, if capital gains are forgiven at death (as in the U.S.), investors with strong bequest motives face substantial welfare costs when not tax-optimizing their portfolio decisions towards the end of the life cycle.     

Determinants of the Choice of Migration Destination*

This paper examines migrants’ choice of destination conditional on migration. The study uses data from two rounds of Nepal Living Standard Surveys and a Population Census and examine how the choice of a migration destination is influenced by various covariates, including income differentials across possible destinations. We find that migrants move primarily to nearby, high population density areas where many people share their language and ethnic background. Better access to amenities is significant as well. Differentials in average income across destination districts are significant in univariate comparisons but not once we control for other covariates. Differentials in consumption expenditures are statistically significant but smaller in magnitude than other determinants. It is differentials in absolute, not relative, consumption between destination districts that are correlated with the destination of work migrants. Except for the latter, results are robust to different specifications and datasets.     

Purchasing Power Parities for Industry Comparisons Using Weighted Elteto–Koves–Szulc (EKS) Methods

This study has three main objectives. First, it develops a generalization of the commonly used EKS method to multilateral price comparisons. It is shown that the EKS system can be generalized so that weights can be attached to each of the link comparisons used in the EKS computations. These weights can account for differing levels of reliability of the underlying binary comparisons. Second, various reliability measures and corresponding weighting schemes are presented and their merits discussed. Finally, these new methods are applied to an international data set of manufacturing prices from the ICOP project. Although theoretically superior, it appears that the empirical impact of the weighted EKS method is generally small compared to the unweighted EKS. It is also found that this impact is larger when it is applied at lower levels of aggregation. Finally, the importance of using sector specific PPPs in assessing relative levels of manufacturing productivity is indicated.     

Some brief notes on the “unfinished business” of qualitative inquiry

The paper argues that there are a variety of implicit issues in qualitative inquiry that need to be addressed if the area is to develop in some normal science sense. This unfinished business is concerned with a deeper investigation of basic terms that are now simply taken for granted, such as theme and pattern. It also includes the need to develop rules which will assist in making and justifying how qualitative interpretations are made from the implicit processes of inference. Specific suggestions are made for accomplishing these issues.     

Modelling the choice between regulation and liability in terms of social welfare

Abstract.  Using a formal political economy model with asymmetric information, we illustrate the conditions under which an environmental protection system based on extending liability to private financiers is welfare superior, inferior, or equivalent to a system based on an incentive regulatory scheme subject to capture by the regulatees. We explicitly consider the following factors: the cost of care and its efficiency in reducing the probability of an environmental accident, the social cost of public funds, the net profitability of the risky activities, the level of damages, and the regulatory capture bias. We characterize in such a parameter space the regions where one system dominates the other. JEL classification: D82, K32     

The moderating effect of management behavior for Lean and process improvement

It is commonly agreed that the success of Lean management is not only determined by its technical practices, but also by the so-called soft practices such as behavior and actions of employees and management. Lean Management behavior is in itself paradoxical in nature as it incorporates technical aspects (e.g., fact-based management, analysis and adhering to the standard operating procedures for sake of efficiency) and social, follower-related aspects (e.g., promotion of employee responsibility to continuously improve their work processes). In this paper, we investigate the (moderating) effect of some important Lean related management actions on the relationship between Lean and the level of process improvement: i) envisioning and communicating the meaning of Lean, ii) setting goals and active steering on improvement performance metrics and ii) encouraging continuous improvement. Survey data of 178 responses from Dutch organizations, shows that these management actions have a positive effect on both Lean and the level of process improvement. In addition, active steering on performance improvement has a reinforcing effect on the relationship between Lean and process improvement. For respondents with a low level of steering on performance improvement Lean does not lead to process improvement, while it does for respondents with average and high levels of steering on performance improvement. The more management operates on performance improvement, the more Lean will result in a higher level of process improvement.     

Concave utility on finite sets

When does a preference relation on a finite set have a concave or a strictly concave utility function? We provide a complete answer. Our proof is an application of the Theorem of the Alternative, and constructs a concave utility if one exists.