Small Firms and Unemployment in a Two-sector Model

This paper presents a two-sector model of an economy – one sector consisting of large firms with institutionally determined wage (the Formal sector) and the other sector consisting of small firms (the Informal sector). The paper examines the effects of changes in benefits, entrepreneurial zeal, and the institutionally determined wage in the Formal sector on unemployment. It concludes with brief comments on the role of aggregate demand and supply policies in reducing unemployment in this economy.     

Risky debt,jump processes,and safety covenants

The usual assumptions in the continuous-time contingent claims pricing of risky debt are (1) the firm is in default only when the value of its remaining assets falls short of the currently due promised payment and (2) the firm value follows continuous diffusion-process dynamics. It is the joint relaxation of these two simplifying assumptions that motivate this paper in its study of the valuation of risky debt and safety covenants when the firm value follows (possibly) discontinuous sample paths. Explicit solutions are derived and compared to the work of Black and Cox (1976).     

Common pool resources and contextual factors: Evolution of a fishermen's cooperative in Calcutta

The CPR school has successfully rebutted Hardin's pessimistic Tragedy of the Commons model. However, in recent years, critics have focussed on the inward orientation and lack of contextual analysis characterising the writings of the CPR school.Oakerson [A Model for the analysis of common property problems. Working Paper R86-13. Workshop in Political Theory and Policy Analysis, Indiana University, 1986] and Ostrom [Governing the Commons. Cambridge, Cambridge University Press, 1990] have detailed the list of variables that have to be studied to understand the mechanics of collective action. However, these factors are internal to the community. Recent critics' point out that the actions of individual agents are also influenced by the alternatives embedded outside the system. These variables are collectively labelled contextual factors.In our paper, we have analysed the case of a fishermen's cooperative in the Calcutta Metropolitan District to show how the historic and economic context shapes targets of resource users and affects the feasibility of alternative courses to achieve the target by determining opportunity and transaction costs of actions. This indicates the importance of contextual factors in explaining the formation and evolution of the resource regime.     

Two-period cycles in a three-period overlapping generations model

We study the properties of two-period monetary cycles in simple pure exchange overlapping generations economies in which the households live for three periods. We demonstrate that these economies can support cycles under a much broader—and, arguably, more plausible—range of assumptions than the analogous two-period economies. We show that economies that fail the well-known Grandmont (Econometrica 53 (1985) 995) condition can have cycles, and that economies that satisfy the condition can fail to have cycles. In addition, we show that economies can have monetary cycles when they do not have conventional monetary steady states, and when aggregate demand for assets is not decreasing in the real return rate at a gross real rate of unity.     

The Feasibility of Establishing an International Financial Center in Shanghai

This article examines the feasibility of establishing an international financial center in Shanghai by 2020. It analyzes the national regulations and incentives that need to be implemented and evaluates whether the financial market liberalization measures undertaken so far by China meet the requirements for the success of this strategy. It concludes that elevating Shanghai to a primary international financial center providing multiple financial services to domestic and foreign clients is decades away under the sequential approach to liberalization. However, in the short run, Shanghai can emerge as a regional financial center catering essentially to the funding needs of Chinese businesses.     

International acquisitions and emerging market firms' performance—a structural contingency perspective

Entry modes have impact on firms' performance in international markets. Using an organizational structural contingency perspective, we assert that firms with mechanistic structure can enhance their performance in international markets if they choose acquisitions as an entry mode. Mechanistic structure limits organizations' learning capability, which can be managed through acquisitions but not through other entry modes such as joint ventures. For managing limitations associated with the poor knowledge absorption capability of mechanistically structured organizations, firms should not follow the standard integration procedures associated with acquisitions aiming to achieve economies of scale or scope. Rather, they should provide corporate parenting advantage to the newly acquired unit by (a) granting complete autonomy and (b) contributing required resources for future growth, thus treating the acquired business as a strategic business unit. Since mechanistic structures are more common in emerging markets, we explain our perspective using illustrative caselets from these markets.     

Inference in panel data models under attrition caused by unobservables

This paper concerns identification and estimation of a finite-dimensional parameter in a panel data-model under nonignorable sample attrition. Attrition can depend on second period variables which are unobserved for the attritors but an independent refreshment sample from the marginal distribution of the second period values is available. This paper shows that under a quasi-separability assumption, the model implies a set of conditional moment restrictions where the moments contain the attrition function as an unknown parameter. This formulation leads to (i) a simple proof of identification under strictly weaker conditions than those in the existing literature and, more importantly, (ii) a sieve-based root-n$n$ consistent estimate of the finite-dimensional parameter of interest. These methods are applicable to both linear and nonlinear panel data models with endogenous attrition and analogous methods are applicable to situations of endogenously missing data in a single cross-section. The theory is illustrated with a simulation exercise, using Current Population Survey data where a panel structure is introduced by the rotation group feature of the sampling process.