The role of perceived justice in buyer-supplier relationships in times of economic crisis

This paper explores the importance of perceived organisational justice in times of crises, when supplier commitment has the potential to offset the negative impact of external pressures on business performance. We draw data from a survey of 117 suppliers of a major Greek grocery retailer. The grocery retail sector in Greece suffered considerably during the peak of the financial crisis, in 2016, providing a unique opportunity to explore the role of fairness in buyer-supplier relationships in times of crisis. The paper makes a distinct contribution by exploring the role that POJ plays in mitigating the impact of a financial crisis on suppliers’ performance, both operational and financial. Moreover, we explore the role of commitment as a mediator between POJ and performance, in the specific context of a financial crisis. Our findings indicate that organisational justice influences firm performance through commitment and that the financial crisis moderates the relationship.     

Heterogeneity in risk aversion and risk sharing regressions

Heterogeneity in risk attitudes, if not properly accounted for, may induce a bias on the income coefficient of standard consumption insurance regressions. We show that, extending the theoretical analysis and empirical findings in Schulhofer‐Wohl (Journal of Political Economy, 2011, 119, 925–958), the sign of the bias is ambiguous, and depends on cycle‐related variables and on the covariances of both aggregate and idiosyncratic risk with individual risk aversion.     

Stress testing credit risk: The Great Depression scenario

By employing Moody’s corporate default and rating transition data spanning the last 90 years we explore how much capital banks should hold against their corporate loan portfolios to withstand historical stress scenarios. Specifically, we will focus on the worst case scenario over the observation period, the Great Depression. We find that migration risk and the length of the investment horizon are critical factors when determining bank capital needs in a crisis. We show that capital may need to rise more than three times when the horizon is increased from 1 year, as required by current and future regulation, to 3 years. Increases are still important but of a lower magnitude when migration risk is introduced in the analysis. Further, we find that the new bank capital requirements under the so-called Basel 3 agreement would enable banks to absorb Great Depression-style losses. But, such losses would dent regulatory capital considerably and far beyond the capital buffers that have been proposed to ensure that banks survive crisis periods without government support.     

Recent French relative export performance: Is there a competitiveness problem?

French economic activity is significantly affected by economic activity in the rest of the world. In recent years, the export performance of France relative to its own past and relative to a major trading partner, Germany, deteriorated. That deterioration seems related to the trend growth of exports (both by geographical destination and by product composition). Using a structural generalized dynamic factor model, this study shows that faced with an increase in unit labor costs or in its terms of trade, France adjusts relatively less via price and wage changes, and more via employment changes. French exports benefit relatively less than German exports from positive shocks either in a geographical or in the Standard International Trade Classification product classification. Given that the convergence of the French guaranteed minimum wage (SMIC) operated between 2003 and 2006 resulted in a significant increase in unit labor costs, the study supports the view that the foreign sector difficulties might be structural. The importance of trade flows as well as the policy constraints imposed by the euro area, highlights the relevance of structural reforms that increase markets flexibility. In addition, the analysis stresses the importance of policy measures that increase productivity, and the desirability of avoiding SMIC adjustments unrelated to productivity.     

Environmental protection mechanisms and technological dynamics

The paper proposes a new financial mechanism that could be implemented to protect the environment of a tourist region. For this purpose, we investigate the potential consequences of two financial activities, issued by the local government (G) of a region R, which work like contracts between G and, respectively, visitors of R and firms operating in R. According to these contracts, agents who decide to visit R (firms that decide to adopt an environmental friendly technology) have to buy an option that entitle them to get a partial or total reimbursement if environmental quality in R turns out to be sufficiently low (high), namely, below (above) a given predetermined threshold level.     

Heaven's Swing Door: Endogenous Skills,Migration Networks,and the Effectiveness of Quality‐Selective Immigration Policies

A growing number of OECD countries are leaning toward the adoption of selective immigration policies, which are expected to raise the quality (or education level) of migrants. This view neglects two important dynamic effects: the role of migration networks, which could reduce the quality of migrants, and the responsiveness of education decisions to the prospect of migration. We propose a model of self‐selection into migration with endogenous education choices, which predicts that migration networks and the quality of migrants can be positively associated when destination countries adopt sufficiently selective immigration policies. Empirical evidence, presented as background motivation, suggests that this is indeed the case.     

The role of institutions and immigrant networks in firms’ offshoring decisions

The offshoring of production by firms has expanded dramatically in recent decades, increasing their potential for economic growth. What determines the location of offshore production? How do countries’ policies and characteristics affect a firm's decision about where to offshore? Do firms choose specific countries because of the countries’ policies or because they know them better? In this paper, we use a rich dataset on Danish firms to analyze how decisions to offshore production depend on the institutional characteristics of the country and firm-specific bilateral networks. We find that institutions that reduce credit risk and corruption increase the probability that firms will offshore there, while those that increase regulation in the labour market decrease this probability. We also show that a firm's probability of offshoring increases with the share of its employees who are immigrants from that country of origin. Finally, our analysis reveals that the negative impact of institutions that hinder offshoring is attenuated by a strong bilateral network of foreign workers.