THE IMPACT OF TFP GROWTH ON STEADY‐STATE UNEMPLOYMENT*

Theoretical predictions of the impact of total factor productivity (TFP) growth on unemployment are ambiguous, and depend on the extent to which new technology is embodied in new jobs. We evaluate a model with embodied and disembodied technology, capitalization, and creative destruction effects. In econometric estimates with a panel of industrial countries we find a large negative impact of TFP growth on unemployment, which implies that embodied technology and creative destruction play no role in the steady‐state dynamics of unemployment. Capitalization effects explain some of the estimated impact but a part remains unexplained.     

Insider Trading, Investment, and Liquidity: A Welfare Analysis

We compare equilibrium trading outcomes with and without participation by an informed insider, assuming inflexible ex ante aggregate investment choices by agents. Noise trading arises from aggregate uncertainty regarding other agents' intertemporal consumption preferences. The welfare levels of outsiders can thus be ascertained. The allocations without insider trading are not ex ante Pareto efficient, because our model differs from standard ones with negative exponential utility functions and normal returns. We characterize the circumstances under which the revelation of payoff-relevant information via prices—arising from insider trading—benefits outsiders with stochastic liquidity needs, by improving risk-sharing among them.     

Did globalization reduce unionization? Evidence from US manufacturing

How do globalized economic conditions affect labor market institutions such as unionism? We draw on recent theoretical and empirical work to explore a wider set of hypotheses regarding the decline in unionization. Using a comprehensive data set of US three-digit manufacturing industries from 1973 to 1994, we test the hypothesis that domestic and international competition directly reduces unionization. Using instrumental variable regressions, we demonstrate the relevance of product market competition variables for unionization. However, we are unable to account for the unionization decline over this period. This could reflect the lagged and complex effects of competition on unionization.     

The Productivity Slowdown, Sectoral Reallocations and the Growth of Atypical Employment Arrangements

This paper explores the recent shifts in employment arrangements away from long-term employment contracts and internal labor markets towards outside contracting of labor in OECD countries. It examines the driving forces behind this phenomenon, focusing on the relationship with another important trend of the last few decades, namely the labor productivity slowdown. A comparison of U.S. and European institutional arrangements shows how very different labor markets have recently displayed similar patterns in the use of contracted out labor. This paper explains these similarities and reconciles them with very different patterns in hiring, firing, and quitting behavior observed in the two regions.     

New ESG rating drivers in the cross-section of European stock returns

We assess the performance of two quantitative signals based on ESG scores across a large, multi-national cross-section of European stock returns. We test whether the cost of equity capital is more influenced by the upward momentum (measured over time) of the ESG scores of the firms issuing stocks or by their stability (identified as the volatility of the scores over time), measured around a changing mean level. We find that short-term ESG momentum over 1 month has a significant impact on the cross-section of stock returns, lowering the anticipated cost of capital and leading to positive average abnormal returns. This suggests that short-term ESG momentum may represent a novel, priced systematic risk factor. Furthermore, we find strong evidence that an ESG volatility spread strategy which buys low ESG score volatility stocks and sells high volatility ones, generates a substantial alpha and affects the ex-ante cost of capital. Both quantitative ESG signals result in portfolio sorting and long-short strategies that enhance the overall sustainability profile of the issuing firms without compromising the raw average of their ESG scores.     

The minority game unpacked:

We conduct an experiment on a minority-of-three game in which each player is a team composed of three subjects. Each team can freely discuss its strategies in the game and decisions must be made via majority rule. Team discussions are recorded and their content analyzed to detect evidence of strategy co-evolution among teams playing together. Our main results show no evidence supporting the mixed strategy Nash equilibrium solution, and provide evidence more consistent with reinforcement learning models than with belief-based models. Exhibiting level-2 rationality (i.e., reasoning about others’ beliefs) is positively and significantly correlated with higher than average earnings in the game. In addition, teams that are more successful tend to become more self-centered over time, paying more attention to their own past successes than to the behavior of other teams. Finally, we find evidence of mutual adaptation over time, as teams that are more strategic induce competing teams to be more self-centered instead. Our results contribute to the understanding of coordination dynamics resting on heterogeneity and co-evolution of decision rules. In addition, they provide support at the decision process level to the validity of modeling behavior using reinforcement learning models.     

The Role of CEO’s Personal Incentives in Driving Corporate Social Responsibility

In this study, we explore the role of Chief Executive Officers’ (CEOs’) incentives, split between monetary (based on both bonus compensation and changes in the value of the CEO’s portfolio of stocks and options) and non-monetary (career concerns, incoming/departing CEOs, and power and entrenchment), in relation to corporate social responsibility (CSR). We base our analysis on a sample of 597 US firms over the period 2005–2009. We find that both monetary and non-monetary incentives have an effect on CSR decisions. Specifically, monetary incentives designed to align the CEO’s and shareholders’ interests have a negative effect on CSR and non-monetary incentives have a positive effect on CSR. The study has important implications for the design of executive remuneration (compensation) plans, as we show that there are many levers that can affect the CEO’s decisions with regard to CSR. Our evidence also confirms the prominent role of the CEO in relation to CSR decisions, while also recognizing the complexity of factors affecting CSR. Finally, we propose a research design that takes into account endogeneity issues arising when examining compensation variables.     

COMPARATIVE EFFICIENCY OF AGRICULTURAL COOPERATIVES AND CONVENTIONAL FIRMS IN A SAMPLE OF QUASI‐TWIN COMPANIES

The resilience of cooperatives and their positive contribution to employment in times of crisis is well established. However, their overall economic performance relative to conventional firms is still controversial, casting doubt on the ability of this alternative organizational form to govern the fundamental drivers of productivity. To shed new light on the issue, we study the comparative technical efficiency of agricultural cooperatives (ACs) and conventional firms (CFs), drawing on a unique data set comprising all wine‐producing companies in Sardinia (Italy) from 2004 to 2009. Due to the similarity of the habitats in which the firms operate and the careful measurement of several key inputs, the observed units are ‘twins’ in all non‐organizational respects, providing an ideal setting for comparison. Having generated efficiency scores through Data Envelopment Analysis (DEA), we regressed the scores on external covariates and ownership type using a pooled truncated maximum likelihood formulation. Our findings, which survive correction for spatial correlations, indicate that cooperatives are less technically efficient than their capitalist counterparts and struggle more to adapt to extreme weather fluctuations. Both results are particularly worrying in light of the main challenges facing the wine industry in the near future: liberalization of EU planting rights and climate change.