Excess Volatility of Exchange Rates with Unobservable Fundamentals

The authors present tests of excess volatility of exchange rates which impose minimal structure on the data and do not commit to a choice of exchange rate "fundamentals." The method builds on existing volatility tests of asset prices, combining them with a procedure that extracts unobservable fundamentals from survey-based exchange rate expectations. The method is applied to data for the three major exchange rates since 1984, and broad evidence is given of excess volatility with respect to the predictions of the canonical asset-pricing model of the exchange rate with rational expectations.     

A heuristic for balancing the inventory level of different locations through lateral shipments

Solving transshipment problems to optimality is difficult, unless several simplifying hypotheses are assumed (such as unit-sized customer demands and replenishments, negligible replenishment lead time, etc.). For this reason, some heuristics have been recently proposed in order to provide rules, which incorporate relevant factors of the problem, to find conditions under which it makes sense to transship a certain number of units from one retailer to another. Most of these studies concern emergency transshipment, which means that shipments between locations can occur only when a shortage happens, and shipments are assumed to be fast enough to satisfy the location in shortage. When this assumption is not feasible, as in many real cases, transshipments between locations have to be performed before a shortage happens. The paper addresses this case, which can be named ‘preventive’ transshipment, where the inventory level of different locations at the same echelon is balanced through lateral shipments, before a shortage happens. A heuristic for deciding on transshipment policy (when to transship and how much), trying to minimise overall expected costs, is presented. A simulation study considering different scenarios is performed and results confirm the effectiveness of the heuristic.     

European Integration and Inequality among Countries: A Lifecycle Income Analysis

This paper analyzes the effects of the enlargements of the European Union on inequality using an approach based on individuals' lifecycle incomes. This allows one to consider the effect of different rates of growth and survival rates. Inequality in terms of permanent income was substantially less than in current per capita income at the time of all the enlargements except those of the last 10 years. The results point to the key role of policies that stimulate growth in the less developed countries. With an annual β‐convergence of 2% in current income, inequality in permanent income would be less than one third of what it is now.     

The economic impact of migration: productivity analysis for Spain and the UK

Over the past 20?years labour has become increasingly mobile and whilst employment and earnings effects in host countries have been extensively analysed, the implications for firm and industry performance have received far less attention. This paper explores the direct economic consequences of immigration on host nations?? productivity performance at a sectoral level in two very different European countries, Spain and the UK. Whilst the UK has traditionally seen substantial immigration, for Spain the phenomenon is much more recent. Our findings from a growth accounting analysis show that migration has made a negative contribution to labour productivity growth in Spain and a negative but negligible contribution in the UK. This difference is driven by a positive impact from migrant labour quality in the UK. This finding broadly holds across all sectors, but we note considerable variation in magnitudes. Labour productivity growth has a neutral contribution from migrant labour in construction and personal services in the UK, whilst in every case in Spain the effect is negative, most strongly in agriculture. Using an econometric approach to production function estimation we observe a positive long term effect on total factor productivity from migrant workers in the UK and a negative effect in Spain. Our findings suggest that either the UK is better at assimilating migrants or is more selective in terms of who is permitted to migrate.     

The Price of Electricity in Indonesia

Persistent shortages of electric power and of capital to fund power system expansion have recently prompted the Indonesian government to allow the private sector to supply electricity. Price has become a controversial issue—both the retail price private producers would charge the public, and the wholesale price at which they would seil in bulk to the state utility, PLN The government has traditionally kept the retail price below cost to support economic development objectives, and subsidies have covered PLN's losses. Opponents of private power argue that without subsidies private suppliers would have to raise the retail price to unacceptable levels—according to PLN, almost 50% more per kilowatt-hour than its own price. The paper assesses PLN's claim by quantifying hidden subsidies, and demonstrates that, if these were properly taken into account, the average retail price per kilowatt-hour for 1980–93 should have been 46% higher than it was.     

Does Union Membership Really Reduce Job Satisfaction?

We investigate the effect of union membership on job satisfaction. Using linked employer–employee data from the 1998 British Workplace Employee Relations Survey, we analyse the relationship between the membership decision and overall job satisfaction and satisfaction with pay. In this paper we account for the endogenous selection induced by the sorting of workers into unionized jobs. Controlling for both individual and establishment heterogeneity and explicitly modelling the effect of union status, we find that the marked difference in job satisfaction between unionized and non‐unionized workers disappears, suggesting that a selection effect, rather than a causal effect, characterizes the relationship.     

Is the Optimism in CEO’s Letters to Shareholders Sincere? Impression Management Versus Communicative Action During the Economic Crisis

In this study, we explore the sincerity of the rhetorical tone of 664 annual letters to shareholders (CEO letters). Prior studies adopt Impression Management theory to predict that firms obfuscate failures and emphasize successes to unfairly enhance their image and maintain organizational legitimacy. Yuthas et al. (J Bus Ethics 41:141–157, 2002) challenged such a view, showing that firms reporting earnings surprises engage in ethical discourse with shareholders. We adopt the methodology of Yuthas et al. (J Bus Ethics 41:141–157, 2002) to explore the association between firm performance and the rhetorical features of CEO letters in a large sample of Fortune 500 firms in the wake of the global economic crisis. In contrast to most prior research, we find that optimistic tone is congruent with both past and future performance. We conclude that under tough macroeconomic conditions, incentives to distort public information strategically are low. Rather, firms tend to engage in communicative action aimed at dialoguing with shareholders through sincere disclosure. However, in our conclusions, we warn about the impact of accounting and rhetorical manipulation on the congruence between optimistic tone and financial performance.     

Route-charging policies for a central European cross-border upper airspace

The introduction of the Central European Air Traffic Services Upper Area Control Centre controlling the upper airspace of several European countries allows different route-charging policies. The impact of three charging scenarios on aircraft operators is examined. It is found that, without a compensatory mechanism, the policy of having different unit rates for each air navigation service provider would adversely affect regional and region-based carriers because the unit rate of the new provider would be significantly lower than the unit rates of the national providers controlling the lower airspaces.