Model-Based and Nonparametric Approaches to Clustering for Data Compression in Actuarial Applications

Clustering is used by actuaries in a data compression process to make massive or nested stochastic simulations practical to run. A large data set of assets or liabilities is partitioned into a user-defined number of clusters, each of which is compressed to a single representative policy. The representative policies can then simulate the behavior of the entire portfolio over a large range of stochastic scenarios. Such processes are becoming increasingly important in understanding product behavior and assessing reserving requirements in a big-data environment. This article proposes a variety of clustering techniques that can be used for this purpose. Initialization methods for performing clustering compression are also compared, including principal components, factor analysis, and segmentation. A variety of methods for choosing a cluster's representative policy is considered. A real data set comprising variable annuity policies, provided by Milliman, is used to test the proposed methods. It is found that the compressed data sets produced by the new methods, namely, model-based clustering, Ward's minimum variance hierarchical clustering, and k-medoids clustering, can replicate the behavior of the uncompressed (seriatim) data more accurately than those obtained by the existing Milliman method. This is verified within sample by examining location variable totals of the representative policies versus the uncompressed data at the five levels of compression of interest. More crucially it is also verified out of sample by comparing the distributions of the present values of several variables after 20 years across 1000 simulated scenarios based on the compressed and seriatim data, using Kolmogorov-Smirnov goodness-of-fit tests and weighted sums of squared differences.     

Small‐scale commodity frontiers: The bioeconomy value chain of castor oil in Madagascar

The European Commission defines the bioeconomy as a “transition economy which seeks to increase efficiency, optimize use and decrease environmental impact through the reduction of waste and greenhouse gas emissions.” However, attempts to substitute or control nature through efficient bio‐based technology have not lived up to expectations and much of the industry still relies on globally sourced biomass to drive the bioeconomy. This article examines the social and political economic relations surrounding small‐scale production of the feedstock castor oil plant (castor, Ricinus communis) in the deep south of Madagascar. Theorizing the bioeconomy through the lens of a “small‐scale commodity frontier,” it builds from recent injunctions by Jason Moore to show how the appropriation of cheap nature (including paid and unpaid labour) is both historically and geographically co‐produced. The castor value chain is held up as a way to transform regional economies and a “silver bullet” to alleviate poverty and address food security in some of the most economically marginal areas of Madagascar. We adopt a regional and feminist political ecology approach to illustrate what is behind this discursive cloak of “development imaginaries,” making visible the social relations surrounding castor production and demonstrating the historical marginalization involved in producing the frontier.     

Tourist merchandise’ as a means of generating local benefits from ecotourism

Long term protection of national parks and nature reserves is very difficult unless economic benefits can be secured for local people. Ecotourism offers a possible income source, provided that there is a means of local revenue capture from the visitors. This article examines the sale of handicrafts and other ‘tourist merchandise’ as a possible means of generating local benefits. The article considers issues of supply and demand, new product development, marketing, and the sustainability of supply of materials used as inputs. It concludes that strong possibilities exist for market development and creation of new, sustainable, culturally acceptable products. Of particular interest are active linking of tourist merchandise production to agricultural or forestry projects that provide a sustainable supply of inputs, use of ‘craft as performance’ to promote product sale, and development of products that educate tourists about park resources and local cultures.     

Adjusting to skill shortages in Australian SMEs

Skill shortages are often portrayed as a major problem for advanced economies, yet there is surprisingly little empirical evidence about how firms adjust to skill shortages and their associated effects on firm performance. This article provides new evidence from the Business Longitudinal Database, an Australian data set with unusually rich information on the causes and consequences of skill shortages in small- and medium-sized enterprises. We document the range of alternative strategies that firms adopt when responding to skill shortages and show that certain types of adaptation are used in some cases and not in others, depending on the type of shortage encountered and other attributes of the firm. Further, we show that certain types of skill shortage are more likely to be long-lasting and difficult to resolve, while others are alleviated relatively quickly with minimal adjustment. Our findings yield lessons for the skill utilization strategies of firms and for the labour market policies of governments.     

Susceptibility to the ‘Dark Side’ of Goal-Setting: Does Moral Justification Influence the Effect of Goals on Unethical Behavior?

Setting goals in the workplace can motivate improved performance but it might also compromise ethical behavior. In this paper, we propose that individual differences in the dispositional tendency to morally justify behavior moderate the effects of specific performance goals on unethical behavior. We conducted an experimental study in which working participants, who were randomly assigned to a specific goal condition or to a condition with a vague goal that lacked a specific target (i.e., ‘do your best’), completed two tasks in which they had the opportunity to act unethically. In an ethical dilemma task, participants in the specific goal condition were more likely to advocate using unethical methods. However, in an anagram task, only those with high moral justification overstated their performance to a greater degree in the specific goal condition. As such, individuals may not be equally susceptible to the ‘dark side’ of goal-setting.     

Ethical aspects of e‐business: the use of codes of conduct

This paper examines the establishment and enforcement of codes of conduct governing the use of Internet technology as a means of providing a basis of trust in the e‐business context. The discussion draws on the findings of a survey of 80 UK organisations, and considers the relationship between factors such as organisation size, type, use of IT, the length of time with an Internet connection and the use of a code of conduct, as well as the specific areas of Internet technology covered by codes of conduct. The paper also investigates the extent of disciplinary cases associated with the misuse of Internet technology, as well as the ownership and responsibility for implementing codes of conduct. The survey results suggest that the use of codes of conduct varies significantly from organisation to organisation, and that those who initiate such codes are not those seen as being responsible for implementing them. The results also indicate that a growing number of employees are disciplined for misuse of facilities offered by Internet technology.     

Using competency‐based assessment centres to select judges – implications for equality and diversity

This article is concerned with two significant areas of HR practice – competency‐based recruitment and selection and equality and diversity. The article provides a critical appraisal of the implications for equality and diversity of using a competency approach to select judges in the UK. The study reveals the socially constructed and ambiguous nature of competencies in practice. It offers partial support to previous claims that competency‐based HR practices have the potential to be used more creatively and inclusively and thus have the potential to further equality and diversity objectives. However, the study also revealed dangers inherent in competency‐based HR practices that arise from the inescapable fact that human, organisational actors (i.e. the assessors) are necessarily required to interpret the competencies and evaluate which candidates meet them and which do not. Thus, whatever the rhetoric, there is the potential for bias, prejudice and discrimination.     

Inflation and economic growth: a multi-country empirical analysis

The world eocnomy is currently adjusting to a low inflation regime which has implicastions for the cross-country distribution of world growth opportunities. In contrast to previous related work which assumes unidirectional causality, this paper uses the Granger methodology to examine both the direction and pattern of causality between inflation and economic growth in 70 countries using annual data over the period 1960–89. Among the conclusions are that first, the relationship between inflation and growth is non-uniform across countries: 40% of countries studied reveal no causality, one-third exhibit unidirectional causality and about one-fifth of countries show bidirectional causality, second, a vast majority of countries which show either uni- or bi-directional causality beong to the industrial group, and third, the low world inflation regime will on balance redistribute real growth opportunities benefit away from the developing countries towards the industrialized countries.