Book reviews

Book reviewed in this article: The Decline of Trade Union Organisation, P.B. Beaumont Improving Industrial Relations – the Advisory Role of ACAS, Eric Armstrong and Rosemary Lucas The State of the Unions, Barrie Sherman The Trade Unions and the Labour Party, Andrew J. Taylor New Technology at Work, Arthur Francis Dictionnaire Canadiert des Relations du Travail, Gérard Dion Socialist Enterprise: Reclaiming the Economy, Diana Gilhespy, Ken Jones, Tony Manwaring, Henry Neuburger, Adam Sharpies     

Income risk and farm consumption behavior

Using panel data from Illinois grain farmers, a direct test of the relationship between income risk and farm consumption behavior is conducted. The estimation results indicate that income risk significantly affects farm consumption and the results are robust using alternative risk measures. This finding casts doubt on the relevance of the conventional life-cycle permanent income hypothesis, which implies that risk has no effect on consumption.     

The Impact of Trade Liberalization on the International Oilseed Complex

One approach to trade liberalization is the zero-for-zero sectoral approach which involves agreements to eliminate export subsidies, import tariffs, and export taxes in a sector. This article provides an assessment of the impact of border trade liberalization on oilseeds and oilseed products trade. The analysis suggests that under all of the scenarios examined, North American oilseed crushers and oilseed producers gain from trade liberalization. The exact size and the distribution of these gains depends on the number of countries that participate in trade liberalization. The results suggest that the United States and Canada would gain from the adoption of the zero-for-zero proposal.     

South Asia's Export Structure in a Comparative Perspective

World-wide cross-country regressions are used to examine South Asia's export structure through the lens of Heckscher‐Ohlin trade theory. By comparison with other regions, South Asia's exports are unusually concentrated on labour-intensive manufactures. This distinctive export structure is shown to be the result mainly of South Asia's distinctive combination of resources: by comparison with other regions, it has a low level of education and few natural resources, relative to its supply of labour. This basic economic fact must be recognized in the design of trade and development strategy for South Asia over the next few decades.     

Cross-ownership as a structural explanation for over- and underestimation of default probability

Based on the work of Suzuki, we consider a generalization of Merton’s asset valuation approach in which two firms are linked by cross-ownership of equity and liabilities. Suzuki’s results then provide no arbitrage prices of firm values, which are derivatives of exogenous asset values. In contrast to the Merton model, the assumption of lognormally distributed assets does not result in lognormally distributed firm values, which also affects the corresponding probabilities of default. In a simulation study we see that, depending on the type of cross-ownership, the lognormal model can lead to both over- and underestimation of the actual probability of default of a firm under cross-ownership. In the limit, i.e. if the levels of cross-ownership tend to their maximum possible value, these findings can be shown theoretically as well. Furthermore, we consider the default probability of a firm in general, i.e. without a distributional assumption, and show that the lognormal model is often able to yield only a limited range of probabilities of default, while the actual probabilities may take any value between 0 and 1.     

Breaking the letter vs. spirit of the law: How the interpretation of contract violations affects trust and the management of relationships

Contract violations are ubiquitous. There has been little attention, however, dedicated to understanding the mechanisms involved in making sense of and addressing such occurrences. Two experimental studies investigated how people interpret contract violations and how these interpretations affect trust and the management of relationships. By drawing on the distinction between violations of the letter versus spirit of the law, we show that letter violations are more difficult to overcome than spirit violations, due to higher perceived intentionality. These effects generalized across different populations, levels of contracting experience, types of contracting contexts, levels of ambiguity within the contract, and degrees of contract complexity. The results yield important implications for understanding contract violations, trust, and organizational responses as a relationship management capability. Copyright © 2014 John Wiley & Sons, Ltd.     

Political hazards and firms' geographic concentration

Research summary : We examine the relationship between the geographic concentration of a firm's sales and the firm's vulnerability to expropriation hazards. Although expanding outside the home location can initially increase a firm's exposure to government expropriation, we find that this effect reverses when a firm's sales outside its home location have reached a point at which it has sufficient resources to better influence government actions and to pose a credible threat to exit the market in which it is being targeted. We supplement this main result by identifying two moderating factors: the firm's level of political capital and the effectiveness of institutional constraints on government behavior. We find support for these hypotheses from survey data on privately owned enterprises in China. Managerial summary : This research advises firm managers that certain market activities might knock their firms' economic interests out of alignment with the government's political interests, and thus, influence the political hazards they face, particularly in emerging markets such as China, which has attracted strong interest of many firms with respect to entering the market. Here, all else being equal, the firms' geographic concentration exposes them to different levels of state expropriation—but not in a simple linear fashion as suggested by the conventional wisdom of local protectionism or that of the bargaining advantage generated by the threat of relocation: Those who are “stuck in the middle” ended up paying twice or even three times as much unauthorized levies as the purely local or the most expansive firms. Copyright © 2015 John Wiley & Sons, Ltd.     

Versicherungstechnische Gesichtspunkte auf die finanziellen Fragen der Lebensversicherung

Kapitel I. Bibliographisches

Die versicherungstechnische Litteratur hat sich verhältnismässig wenig mit den aktuariell-finanziellen Fragen befasst. Bemerkenswert ist es deshalb, dass die meisten von den bis jetzt abgehaltenen neun internationalen Aktuarkongressen die eine oder die andere Frage aus oben erwähntem Gebiet in ihrem Programm aufgenommen haben. So z. B. beschäftigte sich der erste Kongress, der 1895 in Brüssel tagte, mit dem Gegenstand: “Des mesures qui pourraient être prises par les institutions qui contractent des engagements à long terme, pour se premunir contre les conséquences des variations du taux d intérêt.” Der Kongress im Jahre 1900 in Paris hatte in seinem Programm das Thema: “Méthodes à employer pour evaluer les titres mobiliers compris dans l'actif d'une Société quelconque.” Bei dem New Yorker Kongress 1903 wurde die Prage über “The Probable Future Course of the Rate of Interest” erörtert. Dem Wiener Kongress 1909 war die Frage über “Kapitalsanlagen der Versicherungsgesellschaften mit besonderer Berücksichtigung der modernen Entwickelung” zur Behandlung vorgelegt. Das Programm des Londoner Kongresses 1927 enthielt das Thema “Currency Depreciation as affecting Life Assurance Contracts”.     

Modelling and forecasting liquidity supply using semiparametric factor dynamics

We model the dynamics of ask and bid curves in a limit order book market using a dynamic semiparametric factor model. The shape of the curves is captured by a factor structure which is estimated nonparametrically. Corresponding factor loadings are modelled jointly with best bid and best ask quotes using a vector error correction specification. Applying the framework to four stocks traded at the Australian Stock Exchange (ASX) in 2002, we show that the suggested model captures the spatial and temporal dependencies of the limit order book. We find spill-over effects between both sides of the market and provide evidence for short-term quote predictability. Relating the shape of the curves to variables reflecting the current state of the market, we show that the recent liquidity demand has the strongest impact. In an extensive forecasting analysis we show that the model is successful in forecasting the liquidity supply over various time horizons during a trading day. Moreover, it is shown that the model's forecasting power can be used to improve optimal order execution strategies.