The Commission's Recommendations on Housing Finance

The Commission proposes radical changes in the structure of institutions supplying residential mortgage funds. By massive broadening of their asset and liability powers, the thrifts are to become quasi-banks. The resulting housing credit gap is to be filled by multipurpose lenders, notably pension funds, and by greater use of mortgage securities backed by conventional as well as FHA and VA loans. For these changes, the Commission relies on the magic of deregulation, initiated partly in the Depository Institutions Act of 1982. A mortgage investment tax credit is proposed to cushion adverse effects on housing, but its adoption is highly unlikely. The Commission's expectations of structural reform through deregulation are overdrawn. Hence, its approach would probably reduce resource allocation to housing. The assertion that the new system would be more efficient is not supported by the meager analysis offered in the Report . Likewise, the claim of greater cyclical stability of mortgage lending remains unsubstantiated. The Commission also recommends curtailment of federal programs supporting the private housing sector: restricting FHA to high-risk loans and phasing down the GNMA guaranty of mortgage securities. But the proposals for FNMA and FHLMC stop short of cutting their umbilical cords of government.     

Productivity growth and the depletion of technological opportunities

Griliches recently observed that the rise in energy and materials prices and the possible exhaustion of the sources of technological progress are the main candidate explanations of the productivity slowdown. The present paper examines these possibilities by studying information on the rate of return to R and D, where the hypothesis of technological exhaustion is most likely to appear. Annual data are used to decipher differences in timing. The evidence does not support technological exhaustion, but instead indicates that even the R and D facet of productivity growth was thrown off by macroeconomic events associated with the oil shocks. These findings support the energy price-macroeconomic disturbance diagnosis of the productivity slowdown.The refereeing process of this paper was handled through E. Appelbaum.     

Unemployment, Factor Substitution and Capital Formation

Abstract. We incorporate a wage-bargaining structure in a dynamic general equilibrium model and show how this feature changes short- and long-run properties of equilibria compared with a perfectly competitive setting. We discuss how employment, capital and income shares respond to wage-setting shocks and show that adjustment dynamics depend decisively on the magnitude of the elasticity of substitution between labour and capital. Values of the elasticity below unity add persistence, tend to preserve stability and lead to empirically plausible adjustment patterns. By contrast, values above unity introduce additional volatility, thereby making steady states potentially unstable.     

Interurban differences in the innovative nature of production

Several authors have suggested that large cities concentrate on innovative commodities and allow the production of more standardized goods to filter down to lower wage smaller cities. This paper provides an empirical test of this hypothesis. The innovativeness of production within a given SMSA is measured by the proportion of professional, technical and kindred workers. Evidence for specific two-digit manufacturing industries indicates that such innovation workers are generally more prevalent in larger cities. Substantial improvements in transportation and communications in recent years have not greatly altered the tendency for professionals to be concentrated in large urban areas.     

Competitive drivers and international plant configuration strategies: a product‐level test

We analyze the determinants of the decision to invest abroad and the choice of spatial configurations of overseas plants for 120 Japanese firms active in 36 well‐defined electronic product markets. We find that key competitive drivers at the firm and industry levels have a critical impact on the choice between alternative international plant configurations. Regional configurations focused on Asia are chosen by firms with weaker competitiveness for products with established manufacturing technologies. Plant configurations focused on the United States and the European Union are chosen by technology‐intensive firms facing competitive threats in foreign markets. Global configurations are chosen by firms with a strong competitive position in the Japanese and world market for their core product businesses and are more common in the case of strong oligopolistic rivalry between Japanese firms. Copyright © 2005 John Wiley & Sons, Ltd.     

Disconnected Amid the Networks and Chains: Employee Detachment from Company and Union after Offshoring

Much has been written about the relocation of services jobs away from OECD nations by offshoring. But what happens to those who remain employed at workplaces where offshoring has been carried out? Based on survey and interview data of UK insurance and banking staff, this article explores employees' subjective understandings of the impacts of offshoring. The article brings together literature on Global Commodity Chains and Labour Process Theory, as it expands the focus of research on offshoring from macro/meso discussions of globalization and firm strategy into more micro‐level analysis of employee interpretations of workplace change. The data indicate a collapse in morale and work dignity for UK financial services workers and suggest that offshoring is not associated with a rise in skill levels of surviving jobs. Many staff reported a climate of detachment and cynicism after offshoring. Detachment and disaffection applies to employees' feelings towards their employer and their union, and is discussed as a paradoxical by‐product of the growing incorporation of services work into Global Commodity Chains or Global Production Networks.     

Are non-risk based capital requirements for insurance companies binding?

We investigate whether insurers base their solvency margins on risk factors even when operating under a supervisory regime where minimum solvency requirements do not fully take such risk factors into account. To do this, we use a dataset of about 350 Dutch insurers from all major lines of business during the pre-Solvency II period 1995–2005. We find that the levels of insurers’ actual solvency margins are related to their risk characteristics and not to regulatory solvency requirements. Consequently, the vast majority of insurers hold much more capital than required, i.e. non-risk based capital requirements generally are not binding. Requirements are found to affect solvency adjustment behaviour, though. More specifically, below-target capital ratios are raised most rapidly by those insurers whose targets are relatively close to the regulatory minimum. One implication from our results is that, because insurers already follow a risk-based approach, the transition to the new European regulatory framework, Solvency II, is likely to be smooth.     

Momentum or contrarian investment strategies: Evidence from Dutch institutional investors

This paper analyses investment strategies of three types of Dutch institutional investors - pension funds, life insurers and non-life insurers - over the period 1999-2005. We use balance sheet and cash flow data, including purchases and sales of equity, fixed income and real estate. We trace asset reallocations back to both active trading and revaluations and link investment decisions to firm-specific characteristics and macroeconomic variables. Overall, our results indicate that all three investor types tend to be contrarian traders, i.e. they buy past losers and sell past winners. Especially pension funds showed this behaviour in the most turbulent part of the sample - the crash of 2002 and early 2003 - implying that these institutions have a stabilising impact on financial markets when this is needed most. Life insurers tend to be contrarian traders when they have a high proportion of unit-linked policies, while non-life insurers are contrarian when they have a more risky business model.     

Efficient deployment of large mobile networks

The telecommunications industry has reached a phase of evolution where mobile communication networks are deployed in the growth market countries. New deployments are performed on an unforeseen scale involving installation of hundreds of base stations a day. The sheer volume of deployments in countries with less mature public infrastructure creates new operational challenges. One large issue at the start of the study was lengthy telecommunication implementation lead time (TILT). The cost of deployment is directly proportional to TILT. In this paper, the constraints of these large deployments were searched, listed and analyzed using the grounded analysis of a case study in India.