Evolution of Education Premiums in Cambodia: 1997–2007

This paper evaluates education premiums in Cambodia over the past decade using data from the 1997, 2003–2004 and 2007 Socio‐economic Surveys of Households. The Cambodian labor market has undergone a transformation over the past decade. In 1997, the earnings of workers employed for wages exhibited limited association with education and skills. The picture was dramatically different by 2003 and more so by 2007. The profitability of education had increased sharply, especially for women. There is evidence that the human capital model is now applicable to both men and women, resulting in a wider distribution of earnings. Instrumental variables estimates of the return to an additional year of schooling for male wage earners are found to be higher than the corresponding OLS estimates, but only in the private sector.     

Moral hazard,insurance claims,and repeated insurance contracts

Abstract The paper develops a simple model of repeated automobile insurance contracts, providing a framework for analyzing changes in aggregate insurance data in periods of changes that affect driver incentives. Experience rating of premiums gives drivers an incentive to exert effort to avoid accidents (ex ante moral hazard), and an incentive to hide accidents (ex post moral hazard). The empirical analysis, using data from the competitive insurance markets in Ontario and Alberta over a period of major legislative changes in Ontario, suggests that much of the recent decline in accidents in Ontario was due to an increased incentive to hide accidents.     

Managerial optimism and search

This paper proposes and tests a model of the influence of managerial dispositional optimism on the propensity to search. The model developed in this article was tested using a business simulation exercise and survey method. Results show support for the positive influence of optimism on search; in addition, the relationship appears curvilinear.     

EU Banks Rating Assignments: Is There Heterogeneity between New and Old Member Countries?

We model EU countries' bank ratings using financial variables and allowing for intercept and slope heterogeneity. Our aim is to assess whether “old” and “new” EU countries are rated differently and to determine whether “new” ones are assigned lower ratings, ceteris paribus, than “old” ones. We find that country‐specific factors (in the form of heterogeneous intercepts) are a crucial determinant of ratings. Whilst “new” EU countries typically have lower ratings than “old” ones, after controlling for financial variables we also discover that all countries have significantly different intercepts, confirming our prior belief. This intercept heterogeneity suggests that each country's rating is assigned uniquely, after controlling for differences in financial factors, which may reflect differences in country risk and the legal and regulatory framework that banks face (such as foreclosure laws). In addition, we find that ratings may respond differently to the liquidity and operating expenses to operating income variables across countries. Typically ratings are more responsive to the former and less sensitive to the latter for “new” EU countries compared with “old” EU countries.     

A note on spurious significance in regressions involving <Emphasis Type="BoldItalic">I</Emphasis>(0) and <Emphasis Type="BoldItalic">I</Emphasis>(1) variables

We demonstrate that t ratios (the F statistic) for I(1) regressors in a model with an I(0) dependent variable will generally be oversized. This indicates that spurious significance occurs in a situation where it was not previously identified. We also compare the asymptotic rejection rates of t ratios for various combinations of I(1) and I(0) variables in the two-variable linear regression model. These rejection rates systematically increase with the degree of autocorrelation, yielding spurious significance, when both variables are either positively or negatively autocorrelated. In contrast, when one variable is negatively autocorrelated and the other is positively autocorrelated the rejection rates systematically fall and are undersized.     

Endowment Differences and the Composition of Intra‐Industry Trade

The empirical relationship between differences in endowments and different types of trade is investigated in this paper. Although net trade (NT) and vertical intra‐industry trade (IIT) are both broadly viewed as reflecting endowment differences, we suggest that there will be systematic differences in the way their shares of trade adjust as endowment differences become larger. Empirical evidence for European Union trade with its 52 major trading partners confirms this. The share of horizontal IIT (net trade) decreases (increases) for all increases in absolute endowment differences, but the share of vertical IIT can both increase and decrease with increases in endowment differences.     

Dark Fiber Valuation

Valuation of dark fiber has recently generated controversy, sparked particularly by the large sums booked for swaps of dark fiber between companies. One of the issues raised is valuation: i.e., what is the value of an asset that generates no revenue now and may do so at some unknown point in the future but only after investment, in an uncertain business climate, and where prices are dropping? The picture is further complicated because the result of investing to bring the asset to market (i.e. lighting the fiber) changes the supply and demand conditions of the market itself and hence invalidates price predictions. A realistic and consistent valuation methodology is necessary for increasingly cautious companies, auditors, and investors. In this paper we describe such a valuation methodology for dark fibre based on real options. Publicly available bandwidth price services start to make this practical by providing market price information. For dark fibre valuation the real option to be valued are the lighting decisions. We specifically include the effect on the market of adding new capacity by using the price-elasticity of demand within the stochastic price process itself, conditional on lighting decisions. Prices are generally volatile and decreasing with time. The evolution of lighting costs and maintenance are included in the valuation. The real options technique used here is novel in that it combines economic and market factors explicitly with mathematical finance to arrive at a valuation and optimal decisions. We found that the optimal lighting riming and capacity decisions to depend on many of the factors included in the analysis with no simple triggers: the details really matter.     

Elite Compacts in Africa: The Role of Area‐based Management in the New Governmentality of the Durban City‐region

Through reflection on the practical post‐apartheid (re)alignment of competing rationalities across the Greater Durban urban region, this essay teases out the interface between traditional and modern settlement management systems, and explores how governance cleavages are being renegotiated and mediated. It is suggested that, in building an integrated method of operating across the fragmented city‐regional scale and navigating the competing interests involved, the practice of African urbanism is being defined. Without making any claims for what may or may not be uniquely African city‐regional dynamics at the boundaries of tradition and modernity, what is clear from the Durban case is that both conventional city‐regional literature and new city‐regional ideas have glossed over the complexity of finding solutions to tensions between poor communities, urban managers, elected local authorities and the traditional rural elites of the functional city‐regions of Africa.