Firm heterogeneity and wages in unionised labour markets: Theory and evidence

In many countries wages are set in two stages, where industry-level collective bargaining is followed by firm-specific arrangements determining actual paid wages as a mark-up on the industry wage floor. What explains the wage set in each of these stages? In this paper we show that both the industry wage floor and the average wage cushion are systematically associated with the degree of firm heterogeneity in the industry: The former (latter) is negatively (positively) associated with the productivity spread. Furthermore, since the response of the wage floor dominates that of the wage cushion, workers in more heterogeneous industries tend to get lower actual paid wages. These conclusions are reached in a model of Cournot oligopoly with firm productivity heterogeneity and a two-tiered wage setting system. They are then confirmed by administrative data covering virtually all workers, firms and collective bargaining agreements of the Portuguese private sector for the period 1991–2000.     

Measure for Measure: Exact F Tests and the Mixed Models Controversy

We consider exact F tests for the hypothesis of null random factor effect in the presence of interaction under the two factor mixed models involved in the mixed models controversy. We show that under the constrained parameter ( CP ) model, even in unbalanced data situations, MSB/MSE (in the usual ANOVA notation) follows an exact F distribution when the null hypothesis holds. We also obtain an exact F test for what is generally (and erroneously) assumed to be an equivalent hypothesis under the unconstrained parameter ( UP ) model. For unbalanced data, such a corresponding test statistic does not coincide with MSB/MSAB (the test statistic advocated for balanced data cases). We compute the power of the exact test under different imbalance patterns and show that although the loss of power increases with the degree of imbalance, it still remains reasonable from a practical point of view.     

Software Transparency

Software transparency is a new and important concern that software developers must deal with. As society moves towards increased automation, if citizens wish to exercise their right to know, the transparency of public services and processes acquires fundamental importance. Informed discourse is only possible if processes affecting the public are open to evaluation. Achieving software transparency to this level of openness faces several roadblocks. The paper reports on initial findings on exploring the obstacles for enabling software transparency.     

The upswing of regional income inequality in Spain (1860-1930)

This paper studies the evolution of Spanish regional inequality from 1860 to 1930. The results point to the coexistence of two basic forces behind changes in regional economic inequality: industrial specialization and labor productivity differentials. The initial expansion of industrialization, in a context of growing economic integration of regions, promoted the spatial concentration of manufacturing in certain regions, which also benefited from the greatest advances in terms of labor productivity. Since 1900, the diffusion of manufacturing production to a greater number of locations has generated the emulation of production structures and a process of catching-up in labor productivity and wages.     

Peer firms in relative performance evaluation

Relative performance evaluation (RPE) in chief executive officer (CEO) compensation provides insurance against external shocks and yields a more informative measure of CEO actions. I argue that empirical evidence on the use of RPE is mixed because previous studies rely on a misspecified peer group. External shocks and flexibility in responding to the shocks are functions of, for example, the firm's technology, the complexity of the organization, and the ability to access external credit, which depend on firm size. When peers are composed of similar industry-size firms, evidence is consistent with the use of RPE in CEO compensation.     

The effect of agriculture on repayment efficiency: a look at MFI borrowing groups

There is a widely held industry assumption from microfinance institutions that agricultural loans have poorer repayment rates, which has resulted in many loans being provided for small businesses as opposed to agricultural purposes. Using data from a sample of 100 borrowing groups from a south Indian Microfinance Institutions (MFI), this study challenges this belief by analyzing the repayment efficiency of borrowing groups and reflects on the implications for agricultural microfinance loans. The analysis is run using Bayesian stochastic frontier estimation with an exponential hierarchical prior on the efficiency term. Our results indicate that the average efficiency of the borrowing groups analyzed was approximately 75% and that having a higher percentage of agricultural loans increased borrowing group efficiency while gains in efficiency also rose as the size of the borrowing group increases.     

Pricing executive stock options under employment shocks

We obtain explicit expressions for the subjective, objective and market value of perpetual executive stock options (ESOs) under exogenous employment shocks driven by an independent Poisson process. Previously, we obtain the executive's optimal exercise policy from the subjective valuation that is necessary for the objective one, or fair value. The perpetual ESO is compared with the true finite maturity ESO finding that the approximation is reasonably good. To illustrate the usefulness of the objective valuation for accounting purposes, we analyze the statistical distribution of the fair value when there is uncertainty about the employment shock intensity. Finally, the role of ESOs in the design of executives’ incentives is also discussed.     

Public policies,political cleavages and urban space: state infrastructure policies in São Paulo,Brazil, 1975–2000

This article deals with the state policies of urban infrastructure in São Paulo, Brazil, from 1975 to 2000. Working with primary information about the investments made by the state in public works, we discuss a series of arguments present in the urban studies literature about the patterns of state investment in urban spaces and propose an alternative explanation for state action in Brazilian urban spaces in recent decades. We analyze the main elements that have influenced the overall pattern of investments, describe the main characteristics of this policy over time and in each of the municipal governments of the period, as well as develop an evaluation of the spatial distribution of the resources among each of the main social groups in the city.     

Alternative trade strategies and employment in the Argentine manufacturing sector

The paper analyses the employment effects of alternative trade strategies within the manufacturing sector. Estimates of effective protection rates show that Argentinian import substitution (I-S) policies have severely discriminated against exportable manufacturing industries. In turn these industries are shown to be at least 15% more labour-intensive than import-competing industries. Export promotion (EP) policies are characterized by low and relatively uniform protection to domestic and export sales together with the maintenance over time of a realistic exchange rate. The adoption of this strategy would imply a radical departure from I-S policies of escalated incentives and overvalued exchange rates which, as shown in the paper, have on average favoured capital-intensive industries.