IMF Support and Inter-Regime Exchange Rate Volatility

It is widely agreed that when moving from fixed to floating exchange rates the increase in exchange rate volatility is not matched by an equivalent rise in the volatility of fundamentals. We argue and demonstrate that in inter-regime comparisons one has to account for ‘missing variables’ that compensate for the fundamental variables’ volatility under fixed exchange rates. Previous studies have often used foreign exchange reserves, but without much success. We argue why reserves are not a reliable measure, while IMF credit support is. Our empirical analysis identifies IMF support as a crucial and significant compensating variable.     

Contests with rank-order spillovers

This paper presents a unified framework for characterizing symmetric equilibrium in simultaneous move, two-player, rank-order contests with complete information, in which each player??s strategy generates direct or indirect affine ??spillover?? effects that depend on the rank-order of her decision variable. These effects arise in natural interpretations of a number of important economic environments, as well as in classic contests adapted to recent experimental and behavioral models where individuals exhibit inequality aversion or regret. We provide the closed-form solution for the symmetric Nash equilibria of this class of games, and show how it can be used to directly solve for equilibrium behavior in auctions, pricing games, tournaments, R&D races, models of litigation, and a host of other contests.     

On dead dogs and unwritten jokes: Life in the university today

What does it mean to work and write in a UK university today? While many seem concerned about the heavy pressures that academics face in terms of producing articles for research assessment purposes, we wonder whether it might not make more sense to turn our attention inward for a moment to raise some uncomfortable questions about our own complicity. What is our usual response to this system so many of us seem to regard as absurd? One response is to shrug our shoulders and crack a joke. This might elicit knowing guffaws from our colleagues, and a momentary breathing space, before it is time to return to the grind of daily academic work. Another response might be to openly bemoan the strictures on our alleged academic freedom. If so, ‘doth the academic protest too much?’ – are we perhaps guilty of paradoxically clinging to the very thing we claim to abhor? As two relatively recently appointed lecturers in a UK business school, we explore these questions through our own impressions and experiences.     

Measurement Properties of Constraints to Sport Participation: A Psychometric Examination with Adolescents

Constraint are a major focus of theoretical and empirical study in leisure research. However, analyses of psychometric properties of constraints measures are rare. This study assessed the factor structure and invariance of a leisure constraints measure applied to sport participation among middle school adolescents (ages 11 to 15 years old) using panel data over two time periods nine months apart (N = 2,029). We compared the validity of three baseline models: a theoretical 3-factor model, a 7-factor model, and a second-order factor model. The 7-factor model exhibited a more appropriate measurement model based on fit indices and statistical comparisons. Using the 7-factor model, construct validity and invariance of the model over time (Time 1 and Time 2) was examined by gender, grade level, race/ethnicity, and socioeconomic status. The model was found to be invariant at the factor loading and intercept levels, while there was some evidence of non-invariance at further constrained levels. In general, the 7-factor model appeared to be psychometrically stable and applicable over a range of demographic subgroups, lending evidence to its use as a measure in leisure or sport participation constraint studies that involve socio-demographic comparisons. The findings suggest that while the theoretical structure may be effective in simplifying constraint categories, a more detailed specification using subfactors of the dimensions is better for measurement.     

The all-pay auction with complete information

Summary In a (first price) all-pay auction, bidders simultaneously submit bids for an item. All players forfeit their bids, and the high bidder receives the item. This auction is widely used in economics to model rent seeking, R&D races, political contests, and job promotion tournaments. We fully characterize equilibrium for this class of games, and show that the set of equilibria is much larger than has been recognized in the literature. When there are more than two players, for instance, we show that even when the auction is symmetric there exists a continuum of asymmetric equilibria. Moreover, for economically important configurations of valuations, there is no revenue equivalence across the equilibria; asymmetric equilibria imply higher expected revenues than the symmetric equilibrium.We are grateful to Jacques Crémer, Chuangyin Dang, Jürgen Dennert, Chaim Fershtman, Martin Hellwig, Arthur Robson, Heinrich Ursprung, Eric van Damme, Ton Vorst, and the referees for helpful comments. We benefitted from presentations at the World Congress of the Econometric Society in Barcelona, the European Meeting on the Economics of Information at Tilburg University, the Midwest Mathematical Economics Meetings at the University of Illinois, and seminars at Texas A&M University, The Pennsylvania State University, Tilburg University and the University of Montreal. Baye is grateful for support from the CentER for Economic Research at Tilburg University and the Tinbergen Institute where earlier versions of this paper were completed. Kovenock acknowledges support from Erasmus Universiteit Rotterdam, the Tinbergen Institute, the Center for Economic Studies at the University of Munich, the Institut d'Analisi Economica CSIC at the Universitat Autonoma de Barcelona, the Krannert School of Management, and the Jay N. Ross Young Faculty Scholar Award.     

Who Will We Recruit? Targeting Deep‐ and Surface‐Level Diversity with Human Resource Policy Advertising

Research on targeted recruitment has focused on targeting applicants with surface‐level attributes such as underrepresented demographic groups. The present study extends targeted recruitment research by examining how advertising human resource policies might be useful for targeting both surface‐ and deep‐level attributes. Specifically, the current study uses an experimental design to examine the impact of work‐family, diversity, and employee development policies on the job‐pursuit intentions of working adults in the United States. We examined surface‐ (demographic characteristics; e.g., race) and deep‐level differences (attitudes or values; e.g., diversity values) as predictors of whether participants intend to pursue jobs with firms advertising these human resource (HR) policies. Deep‐level differences consistently predicted job‐pursuit intentions for all three HR policies, but only marginal support was obtained for surface‐level variables as predictors. Findings suggest that targeted recruitment based on deep‐level attributes may be more successful than targeted recruitment based on surface‐level factors.     

Systemic risk and diversification across European banks and insurers

The mutual and cross company exposures to fat-tail distributed risks determine the potential impact of a financial crisis on banks and insurers. We examine the systemic interdependencies within and across the European banking and insurance sectors during times of stress by means of extreme value analysis. While insurers exhibit a slightly higher interdependency in comparison with banks, the interdependency across the two sectors turns out to be considerably lower. This suggests that downside risk can be lowered through financial conglomeration.     

Interest payments and the stability of the government budget deficit in an open and growing economy

Summary This article discusses the basic determinants of stability and instability of the accumulation of public debt in an open and growing economy. Unlike most previous studies which start from the basically short term IS-LM framework, this analysis centers on the long-term dynamics arising from the government budget restraint, the balance of payments restraint and the interaction between growth and income distribution. Several policy regimes for the government's budget are taken into consideration and specific attention is paid to the question of whether monetary and fiscal policy can effectively ensure the stability of the system.Comments by W. Driehuis, S.K. Kuipers and H. Thoben are gratefully acknowledged.     

Unions, progressive taxes, and education subsidies

Progressive income taxes moderate distortionary wage demands by trade unions and thereby reduce unemployment, and at the same time underlie disincentives to acquire skills and decrease labour productivity. Governments can respond by combining progressive taxes with subsidies to investment in human capital. A system of generous education subsidies and steep progressive tax rates is more likely to emerge, the greater the market power of trade unions and the better the ability of governments to influence private education decisions. Empirical analysis for several OECD countries provides results consistent with these propositions. A policy mix of high education subsidies and relatively progressive income taxes is found in countries where union membership is significant.