Inference for treatment effects of job training on wages: using bounds to compute Fisher’s exact p-value

In the context of a training program’s randomized evaluation, where estimating wage effects is of interest, we propose employing bounds that control for sample selection as a model-based statistic to conduct randomization-based inference à la Fisher. Inference is based on a sharp null hypothesis of no treatment effect for anyone. In contrast to conventional inference, Fisher p-values are nonparametric and do not employ large sample approximations.     

Assessing Bond Market Developments Pot-Euro

As a result of global trends in the financial industry, European financial markets are in the midst of a major transformation, and Economic and Monetary Union (EMU) is acting as a primary catalyst for such change. Over time financial integration will provide European markets with sufficient liquidity and scale to turn them into effective rivals of the U.S. markets.
This paper provides a framework for assessing the likely consequences of EMU for the evolution of European bond markets. First, it discusses broad fundamental shifts in international capital flows and how EMU is expected to affect them. Second, it analyzes in some detail the two most important portfolio shifts expected to accompany Monetary Union: potential changes in currency reserves held by central banks and diversification of international investors' portfolios. Third, it considers the possibility that the asset management industry and households' increased appetite for risk will lead to a major shift on the demand side. On the supply side, it explores the likely effect of Monetary Union on government bond yield spreads and expected changes in the key pricing factors.
The paper concludes with an overview of the considerable growth prospects for the European corporate bond market. In the Euromarket, which has traditionally been the preserve of borrowers of high credit standing, there have already been signs of increased interest in corporate issues, particularly lower-rated ones. The search for higher yields by investors, greater expertise in analyzing credit risks by institutional investors, and reduced issuance in European government bond markets will combine to spur growth in the European corporate bond market. As a consequence, the traditional bank-oriented relations will clearly weaken, and more companies will find opportunities to raise capital and obtain financing at lower cost.     

Multifactor productivity and its determinants: an empirical analysis for Mexican manufacturing

The aim of this paper is twofold. First, we estimate production functions for the Mexican manufacturing sector and for 14 comprehensive groups, allowing us to construct various measures of multifactor productivity. Second, we analyse some of the determinants of productivity growth. We find that, on the one hand, there is a positive relationship between market concentration and technology adoption; on the other hand, both technology adoption and human capital promote productivity, whilst market concentration exerts a negative influence on it. Our results suggest that, once controlling for the effect on technology adoption, more concentration impacts negatively productivity growth.     

A Social Contract Account for CSR as an Extended Model of Corporate Governance (II): Compliance,Reputation and Reciprocity

This essay seeks to give a contractarian foundation to the concept of Corporate Social Responsibility (CSR), meant as an extended model of corporate governance of the firm. Whereas, justificatory issues have been discussed in a related paper (Sacconi, L.: 2006b, this journal), in this essay I focus on the implementation of and compliance with this normative model. The theory of reputation games, with reference to the basic game of trust, is introduced in order to make sense of self-regulation as a way to implement the social contract on the multi-fiduciary model of corporate governance. This affords understanding of why self-regulation, meant as mere recourse to a long-run strategy in a repeated trust game, fails. Two basic problems for the functioning of the reputation mechanism are examined: the cognitive fragility problem, and the motivational problem. As regards the cognitive fragilities of reputation (which result from the impact of unforeseen contingencies and from bounded rationality), the paper develops the logic and the structure that self-regulatory norms must satisfy if they are to serve as gap-filling tools with which to remedy cognitive limitations in the reputation mechanism. The motivation problem then arises from the possibility of sophisticated abuse by the firm. Developed in this case is an entirely new application of the theory of conformism-and-reciprocity-based preferences, the result of which is that the stakeholders refuse to acquiesce to sophisticated abuse on the part of the firm. Lorenzo Sacconi is professor of economics and Unicredit Chair in economic ethics and corporate social responsibility at the Department of Economics of the University of Trento, where he leads the LaSER - Laboratory of research in Social responsibility, Ethics and Rationality, and head of the graduate program (laurea magistralis) in “economic decisions, enterprise and corporate social responsibility”. He is also director of EconomEtica, the interuniversity centre for economic ethics and corporate social responsibility joining over 20 Italian Universities placed at the Milano-Bicocca University. Past president of tthe Italian Business Ethics Network and past member of the EBEN executive committtee, currrently he is a member of the executive committee of the Italian chapter of EBEN (EBEN Italy). On related subjects, he is author of the book: The social contract of the firm, Springer, 2000     

The time-varying integration of euro area government bond markets

We derive a model in which a standard international capital asset pricing model (ICAPM) for government bonds is nested within an ICAPM with impediments to invest in the local government bond markets. Excess returns or risk premiums are then driven by a country-specific or idiosyncratic stochastic factor on top of the common factor which has a time-varying idiosyncratic impact on the premiums. With this model we investigate the financial integration of government bond markets over time through two channels. First, we allow for gradual convergence from the full ICAPM with impediments to the standard model through the vanishing of the idiosyncratic factors. Second, we allow for gradual equalization of the country-specific impacts of the common factor. State space methods are used to estimate the model with weekly government bond risk premiums for Belgium, France, Italy, Germany, and the Netherlands over the period 1995–2009. Our results suggest, first, that the idiosyncratic factors were almost eliminated by 2006 in all countries but Italy but then reappeared due to the financial crisis that started in 2007. Second, the country-specific exposures to the common international risk factor have converged across countries, with no setback during the crisis.     

Strategic accessibility competition

We analyze the effect of competition in market-accessibility enhancement among quality-differentiated firms. Firms are located in regions with different ex-ante transport costs to reach the final market. We characterize the equilibrium of the two-stage game in which firms first invest to improve market accessibility and then compete in prices. Efforts in accessibility improvement crucially depend on the interplay between the willingness to pay for the quality premium of the median consumer and the ex-ante difference in accessibility between regions. From the social standpoint, also the accessibility investment depends on such a comparison. Finally, we endogenize quality choice and check the robustness of the result to some natural modifications of our assumptions.     

The opportunity cost of social relations: On the effectiveness of small worlds

The aim of this paper is to extend the theoretical literature on knowledge and network structure by studying the use of social networks as a learning mechanism. The novelty of this approach is suggested by the empirical evidence on informal trading of know-how. In the model, we consider a set of actors who create and diffuse knowledge with the aim of increasing their own personal knowledge. They are located on a lattice (identifying the social space) and are directly connected to a small number of other individuals. We assume that individuals can learn individually or socially, and that individuals choose how to learn on the basis of a cost-benefit comparison. Within this framework, we compare network structures in terms of efficiency and equity. We find that the opportunity cost of using the network affects its optimal structure in terms of aggregate performance and that the small world does not emerge unambiguously as being the most efficient.     

Uncovered Interest Parity at Long Horizons: Evidence on Emerging Economies*

This paper estimates uncovered interest parity (UIP) at long horizons using bilateral US dollar rates vis‐à‐vis mature economy and emerging market currencies. The paper finds support in favor of UIP for dollar rates vis‐à‐vis major mature economy currencies, but far less against emerging market currencies. There are also signs that political risk and the exchange risk premium help explain the empirical failure of UIP for these latter currencies. This suggests that whether UIP holds depends more on the currency than on the horizon.