Spot water markets and risk in water supply

Water availability patterns in semiarid regions are typically extremely variable. Even in basins with a highly developed infrastructure, users are subject to unreliable water supplies, incurring substantial economic losses during periods of scarcity. More flexible instruments, such as voluntary exchanges of water among users, can help users to reduce risk exposure. This article looks at the effects of spot water markets on the economic risk caused by water availability variations. Our theoretical and empirical risk analyses are based on the random profits of water users. Profit probability density functions are formally and graphically characterized for both water sellers and buyers under several possible market outcomes. We conclude from this analysis that, where water supply is stochastic, water markets unambiguously reduce both parties' risk exposure. The empirical study is conducted on an irrigation district in the Guadalquivir Valley (Southern Spain), where there is a high probability of periods of extreme water scarcity. Water demand functions for the district representative irrigators and a spatial equilibrium model are used to simulate market exchanges and equilibrium. This programming model is combined with statistical simulation techniques. We show that the profit probability distribution of a representative irrigator is modified if water exchanges are authorized, leading to risk reductions. Results also indicate that if the market were extended to several districts and users that are subject to varying hydrological risk exposure, extremely low‐profit events would be less likely to occur. In sum, we show that exchanging water in annual spot markets can reduce farmers' economic vulnerability caused by water supply variability across irrigation seasons. These results support the water policy reform carried out in Spain in 1999 to allow for voluntary water exchanges among right holders.     

The cost of equity of internet stocks: a downside risk approach

Beta as a measure of risk has been under fire for many years. Although practitioners still widely use the CAPM to estimate the cost of equity of companies, they are aware of its problems and are looking for alternatives. A possible alternative is to estimate the cost of equity based on the semideviation, a well-known and intuitively plausible measure of downside risk. Complementing evidence reported elsewhere about the ability of the semideviation to explain the cross-section of returns in emerging markets and that of industries in emerging markets, this article reports results showing that the semideviation also explains the cross-section of Internet stock returns.     

Converting retirement benefit into a life care annuity with graded benefits*

This paper deals with life care annuities, i.e. bundled products comprising a life annuity and long-term care insurance. It aims to assess the cost of converting retirement benefit into a life care annuity with graded benefits using a pre-existing public pay-as-you-go pension scheme. With this objective in mind, we present an actuarial method based on array calculus for valuing this type of life care annuity. The health dynamics of the annuitant rely on a reversible illness-death multistate framework. The paper contains a numerical example in which mortality and disability assumptions are based on data from the USA and Australia, although this should be viewed simply as an illustration. In addition, in order to check the coherence of these data, we compute life expectancy for both healthy and dependent persons, and then for dependent persons in each of the states of dependence. The effect of ruling out the recovery assumption on the annuity’s cost is also assessed. The analysis provides valuable insights into how much it would cost to introduce these annuities and enables us to make some policy recommendations to help ensure that this combined pension scheme has a good actuarial design.     

An optimization approach to strategic sourcing: A case study of the United States Air Force

The DoD annually procures billions of dollars worth of systems, supplies, and services in support of the national military strategy. Faced with budget cuts and other resource constraints, the DoD must transform its procurement process to ensure cost-effective sourcing of critical supplies and services. One aspect of current transformation in the DoD is the use of a strategic sourcing approach for the procurement of services at military installations. Using the Air Force's strategic sourcing process as our context, we developed an optimization model for selecting a set of proposals from among multiple offerors for services to be performed at multiple installations. The selection achieves the most favorable objective by balancing the confidence level in an offeror's past performance with the cost of services to the Air Force. The research findings, which are based on a realistic scenario, demonstrate improvements over the current sourcing process in both overall performance and cost.     

Testing for structural stability in the whole sample

The paper examines a Lagrange Multiplier type test for the constancy of the parameter in general models with dependent data without imposing any artificial choice of the possible location of the break. In order to prove the asymptotic behaviour of the test, we extend a strong approximation result for partial sums of a sequence of random variables. We also present a Monte-Carlo experiment to examine the finite sample performance of the test and how it compares with tests which assume some knowledge of the possible location of the break.     

Controlling the Urban Fabric: The Complex Game of Distance and Proximity in European Upper‐Middle‐Class Residential Strategies

This article presents an open discussion of the processes of urban secession and gentrification in contemporary European cities, arguing that intergroup social dynamics in urban spaces are generally more complex than either extreme mutual avoidance or the colonization of neighbourhoods by the wealthiest groups. We analyse the residential strategies of urban upper‐middle class managers in various European metropolitan areas through in‐depth semi‐structured interviews to argue that these groups develop complex strategies of proximity and distance in relation to other social groups. The development of these ‘partial exit’ strategies takes place through specific combinations of practices that allow groups to select the dimensions they are willing to share with other social groups, and those in which they prefer a more segregated social environment for themselves and their families. The responses of our interviewees were consistently more nuanced and complex than suggested by a simplistic theory about their drive to withdraw from society, forcing us to develop more sophisticated conceptual frameworks to account for the growing prevalence of multi‐layered identities and spheres of reference and solidarity, specific combinations of elective segregation and local involvement, and more active patterns of mobility combined with local embeddedness.     

Determinants of corporate social responsibility and business ethics education in Spanish universities

The current economic crisis, unsustainable growth, and financial scandals invite reflection on the role of universities in professional training, particularly those who have to manage businesses. This study analyzes the main factors that might determine the extent to which Spanish organizational management educators use corporate social responsibility (CSR) or business ethics stand‐alone subjects to equip students with alternative views on business. A web content analysis and non‐parametric mean comparison statistics of the curricula of undergraduate degrees in all universities in Spain were conducted. The main conclusion of this paper is related to the Bologna effect in Spanish universities. Comparing our results with prior research in this matter, it is demonstrated that the main reason that explains the increase of CSR and ethical education in Spain is the Bologna process and its adaptation to the European Higher Education Area. Also, private universities in Spain are more likely to require an ethics course than public universities. Other factors, such as size, political orientation, or related to CSR chairs are not statistically explanatory of CSR and ethical education.     

Entrepreneurial dynamics of the self-employed and of firms: a comparison of determinants using Spanish data

Entrepreneurship is viewed at either an individual level (self-employment), or a firm level (firms’ creation) phenomenon. We also observe the self-employed and firms that hire employees and grow, and others that do not. This paper theorizes occupational and firm-creation decisions and uses Spanish data on industry, region and time to compare entrepreneurial indicators based on official statistics of the number of self-employed individuals and of the number of firms, both with and without employees. The results show that there are important differences in the patterns of the determinants of growth rates in the self-employed and in firms and, within each of them, between those that hire employees and those that do not. We establish sound arguments to recommend the highest level of disaggregation possible in entrepreneurship studies.     

Delaying retirement in Spain

We study the reform of the Spanish public pension system in a multiperiod, general equilibrium, overlapping generations model economy populated by heterogeneous households. Our households differ in their place of birth, in their age, in their education and, endogenously, in their employment status, in their wealth, and in their pension entitlements. They receive a stochastic endowment of efficiency labor units each period. And they face a disability risk and a survival risk. They understand the link between the payroll taxes that they pay and the public pensions that they receive. And they decide how much to consume and to work, and when to retire from the labor force. We calibrate this economy to Spanish data, and we use it to study the consequences of delaying three years the statutory retirement ages in 2010. We find this reform is sufficient to solve the sustainability problems that plague the current Spanish public pension system. Our model economy predicts that under the current rules, the pension system fund will run out in 2028 and in the reformed economy it will last until 2050. We also find that it is moderately expansionary, and that it improves social welfare from the year 2015 onwards. We conclude that policymakers should seriously consider delaying the statutory retirement ages in Spain sometime in the near future.     

TASTE FOR VARIETY AND OPTIMUM PRODUCT DIVERSITY IN AN OPEN ECONOMY

We extend the Benassy 'taste for variety' model to an open economy setting. With the Benassy effect, the market equilibrium is inefficient, openness reduces the varieties provided in the unconstrained optimum and there are potential gains from international coordination.