Management Buyouts and Human Resource Management

This paper reports the findings from a survey of the effects of management buyouts on human resource management (HRM). Buyouts resulted in increased employment, the adoption of new reward systems, and expanded employee involvement. These developments support the resource‐based view that buyouts develop internal assets over agency theory predictions that managers will adopt a cost reduction approach. The type of buyout influences the subsequent development of HRM. Buyouts report more commitment‐orientated employment policies where employees own shares, and where the buyout pursues a ‘buy and build’ corporate strategy and adopts a business strategy of enhancing customer service and developing markets.     

Correlated Equilibrium in Stochastic Games

We study the existence of uniform correlated equilibrium payoffs in stochastic games. The correlation devices that we use are either autonomous (they base their choice of signal on previous signals, but not on previous states or actions) or stationary (their choice is independent of any data and is drawn according to the same probability distribution at every stage). We prove that any n-player stochastic game admits an autonomous correlated equilibrium payoff. When the game is positive and recursive, a stationary correlated equilibrium payoff exists. Journal of Economic Literature Classification Numbers: C72, C73.     

Deterministic multi-player Dynkin games

A multi-player Dynkin game is a sequential game in which at every stage one of the players is chosen, and that player can decide whether to continue the game or to stop it, in which case all players receive some terminal payoff.We study a variant of this model, where the order by which players are chosen is deterministic, and the probability that the game terminates once the chosen player decides to stop may be strictly less than 1.We prove that a subgame-perfect ε-equilibrium in Markovian strategies exists. If the game is not degenerate this ε-equilibrium is actually in pure strategies.     

Structural holes, innovation and the distribution of ideas

We model knowledge diffusion in a population of agents situated on a network, interacting only over direct ties. Some agents are by nature traders, others are by nature “givers”: traders demand a quid pro quo for information transfer; givers do not. We are interested in efficiency of diffusion and explore the interplay between the structure of the population (proportion of traders), the network structure (clustering, path length and degree distribution), and the scarcity of knowledge. We find that at the global level, trading (as opposed to giving) reduces efficiency. At the individual level, highly connected agents do well when knowledge is scarce, agents in clustered neighbourhoods do well when it is abundant. The latter finding is connected to the debate on structural holes and social capital.     

Continuous-time games of timing

We address the question of existence of equilibrium in general timing games with complete information. Under weak assumptions, any two-player timing game has a Markov subgame perfect -equilibrium, for each >0. This result is tight. For some classes of games (symmetric games, games with cumulative payoffs), stronger existence results are established.     

Credit constraints and the persistence of unemployment

In this paper, we argue that credit market imperfections impact not only the level of unemployment, but also its persistence. For this purpose, we first develop a theoretical model based on the equilibrium matching framework of Mortensen and Pissarides (1999) and Pissarides (2000) where we introduce credit constraints. We show these credit constraints not only increase steady-state unemployment, but also slow down the transitional dynamics. We then provide an empirical illustration based on a country panel dataset of 20 OECD countries. Our results suggest that credit market imperfections significantly increase the persistence of unemployment.     

Policymakers' horizon and the sustainability of international cooperation

This paper examines the impact of policymakers' horizon on the sustainability of international cooperation. We describe a prisoners' dilemma game between two infinitely-lived countries run by policymakers. We show that re-election incentives can act as a discipline device, making it easier to sustain cooperation between policymakers with finite but potentially renewable mandates than between infinitely-lived policymakers. We also show that, when voting suffers from a recency bias, policymakers may have incentives to “collude” to get re-elected and term limits may help international cooperation.     

International portfolio diversification is better than you think

Using aggregate data on bilateral cross-border equity holdings, we investigate whether investors correctly hedge their over-exposure to domestic risk (the well-known equity home bias) by investing in foreign stock markets that have low correlation with their home stock market. To deal with the endogeneity of stock return correlations, we instrument current correlations with past correlations. Controlling for many determinants of international portfolios, we find that, all else equal, investors do tilt their foreign holdings towards countries, which offer better diversification opportunities. The diversification motive that we uncover is stronger for source countries exhibiting a higher level of home bias.     

An Update on EU Financial Reforms

In the context of a transatlantic comparison,the first thing to be mentioned is the difference between the time sequence of financial reforms in the European Union and its equivalent in the United States.The financial crisis started simultaneously on both sides of the Atlantic, with the initial disruption of some financial market segments in August 2007 and the major panic episode of September through October 2008.But they are not at the same stage of policy reaction and especially regulatory reform now....