DOES WAGE DISPERSION MAKE ALL FIRMS PRODUCTIVE?

This article puts the relationship between wage dispersion and firm productivity to an updated test, taking advantage of access to detailed Belgian linked employer–employee panel data. Controlling for simultaneity issues, time‐invariant workplace characteristics and dynamics in the adjustment process of productivity, empirical results reveal the existence of a positive impact from conditional intra‐firm wage dispersion to firm productivity (measured by the average value added per hour worked), which however decreases for higher dispersion levels. Findings thus suggest that the incentive effect of wage dispersion, predicted for instance by the ‘tournament’ model, dominates ‘fairness’ and/or ‘sabotage’ considerations. Further results reveal that the influence of wage dispersion on firm productivity is stronger among firms with a larger proportion of highly skilled workers but does not depend on whether wages are collectively renegotiated at the firm level.     

Options introduction and volatility in the EU ETS

To improve risk management in the European Union Emissions Trading Scheme (EU ETS), the European Climate Exchange (ECX) has introduced option instruments in October 2006. The central question we address is: can we identify a potential destabilizing effect of the introduction of options on the underlying market (EUA futures)? Indeed, the literature on commodities futures suggest that the introduction of derivatives may either decrease (due to more market depth) or increase (due to more speculation) volatility. As the identification of these effects ultimately remains an empirical question, we use daily data from April 2005 to April 2008 to document volatility behavior in the EU ETS. By instrumenting various GARCH models, endogenous break tests, and rolling window estimations, our results overall suggest that the introduction of the option market had the effect of decreasing the level of volatility in the EU ETS while impacting its dynamics. These findings are fairly robust to other likely influences linked to energy and commodity markets.     

Organizational Agility of Family Small and Medium-Sized Enterprises: Evidence from the Eastern Democratic Republic of Congo

International Advances in Economic Research -     

Price premiums,payment delays,and default risk: understanding developing country farmers’ decisions to market through a cooperative or a private trader

Smallholder farmers in developing countries face a competitive disadvantage in modern agricultural supply chains. Joint marketing through cooperatives is a potential tool to mitigate these disadvantages; yet cooperatives’ success in these settings is uneven at best. We develop an analytical model to study a farmer's choice of selling to a private trader who pays cash on delivery but may exercise market power or a cooperative that promises a price premium but delays payment and carries a concomitant risk of default. In the presence of impatient and risk‐averse farmers, we show that these factors can severely limit smallholder patronage of a cooperative, despite a promised price premium. We then construct and parameterize a simulation model to fit a profile of heterogeneous farmers within a prototype developing‐country village, and study the optimal decisions of farmers regarding marketing through a cooperative versus a private trader. Results suggest that modest improvements in either timeliness of payment or probability of default can induce a substantial increase in a cooperative's market share and economic viability. Extending the simulation analysis to a dynamic setting shows how implementing reasonable policies to improve a cooperative's payment timeliness and default probability can markedly improve its growth trajectory.     

Confidence Management: On Interpersonal Comparisons in Teams

Organizations differ in the degree to which they differentiate employees by ability. We analyze how the effect of differentiation on employee morale may explain this variation. We characterize sufficient conditions for the manager to refrain from differentiation. She refrains from differentiation when employees are of similar ability, especially if absolute levels are high. Avoiding differentiation boosts the self‐image of employees. To limit the negative effects of differentiation, the manager's strategy often relies on the coarsest message set possible. The likelihood that the manager differentiates depends on the presence of synergies between employees and on the convexity of the cost of effort function. Finally, we show that in the absence of commitment no differentiation is chosen too often.     

Emerging issues in white space regulation

The secondary use of vacant television channels (TV white spaces) and the reallocation of the digital dividend to provide wireless broadband services are in the final stages of implementation in some countries. Originally seen as a once in a generation opportunity to better allocate UHF spectrum, further digital dividends are now underway as regulators and industry strive to meet exponential increases in demand for mobile data services. Concurrent developments suggest that TV white spaces may be rapidly exploited by global networks with billions of supported devices. The potential for sub-optimal outcomes is identified if the prospect of further digital dividends is not taken into account as technical and regulatory arrangements are put in place to allow productive use of TV white spaces. The importance of considering the potential interaction between further digital dividends and the use of TV white spaces is discussed and technical and regulatory approaches to support optimal outcomes are identified.     

Bidding for money

We analyze monetary exchange in a model that allows for directed search and multilateral matches. We consider environments with divisible goods and indivisible money, and compare the results with those in models that use random matching and bilateral bargaining. Two different pricing mechanisms are used: ex ante price posting, and ex post bidding (auctions). Also, we consider settings both with and without lotteries. We find that the model generates very simple and intuitive equilibrium allocations that are similar to those with random matching and bargaining, but with different comparative static and welfare properties.     

Central Bank Communication in a Low Interest Rate Environment

When interest rates are low, or negative, central banks must increasingly rely on effective communication to ease the stance of monetary policy. Empirical evidence suggests that the ECB’s forward guidance, consisting of a carefully expounded series of expectations involving both key policy rates and asset purchases, has been successful in (i) reducing the sensitivity of forward rates to macroeconomic news, (ii) insulating euro area financial conditions from external shocks and (iii) providing additional monetary policy accommodation at a time when the room for cuts in key policy rates has been very limited. At the same time, a central bank cannot always be sure how its forward guidance works and much of the challenge arises from the interaction between central banks and financial markets. In this environment, and for forward guidance to be credible and effective, policymakers need to be clear about their reaction function, regularly align their policy expectations with the evolving assessment of the state of the economy and its likely evolution, and act accordingly.     

Intensive Board Monitoring,Investor Protection and Segment Disclosure Quality: Evidence from EU

Abstract

This study examined the association between intensive board monitoring (IBM) and segment disclosure quality (SDQ). It also investigated whether this association can be moderated by firm's home country investor protection (IP) level. Based on a panel of 271 non-financial European Union (EU) listed corporations covering the 2007–2012 period, this study estimated two multiple regression models including industry and year fixed effects. We found evidence that the segment disclosure quality is higher when a majority of outside directors serve on monitoring committees. We, also, found that the positive association between IBM and SDQ is more pronounced for firms in a weak IP environment and less pronounced for firms in a strong IP environment. Thus, we provided evidence in favor of a substitutive relationship between IBM and IP level with respect to their association with SDQ. Our findings are evidenced by several robustness tests.