Financial openness,disclosure and bank risk-taking in MENA countries

In this paper, we analyze the risk-taking behavior of banks in emerging economies in a context of international capital mobility. Our paper highlights a new channel through which depositors can exercise pressure to control risk-taking. Depositors can reallocate their savings away from their home country to the more protective system of a developed economy. We recover a classical result according to which increased competition resulting from more international financial openness induces banks to take excessive risks. We find however that sufficiently high financial openness is necessary for a positive link between financial transparency and safe risk management. Finally, we test the relationship between disclosure, financial openness and bank risk-taking for a panel of 258 banks from the MENA region and Turkey.     

Does size asymmetry exacerbate the inefficiency of tax competition?

Many authors demonstrate that the tax gap resulting from tax competition increases with the size asymmetry of the competing countries. Consequently, increasing country-size disparities exacerbates the inefficiency of tax competition. The aim of this note is to show that this classical view has no general validity, if we consider that countries compete not only in taxes, but also in the provision of infrastructure. The simple model we develop for this purpose demonstrates that the effect of size disparity on efficiency depends crucially on the degree of international capital mobility.     

Why economic dynamics matter in assessing climate change damages: Illustration on extreme events

Extreme events are one of the main channels through which climate and socioeconomic systems interact, and it is likely that climate change will modify the probability distribution of the losses they generate. The long-term growth models used in climate change assessments, however, cannot capture the effects of such short-term shocks. To investigate this issue, a non-equilibrium dynamic model (NEDyM) is used to assess the macroeconomic consequences of extreme events. This exercise allowed us to define the economic amplification ratio, as the ratio of the overall production loss due to an event to its direct costs. This ratio could be used to improve the cost-benefit analysis of prevention measures. We found also that, unlike a Solow-like model, NEDyM exhibits a bifurcation in GDP losses: for each value of the capacity to fund reconstruction, GDP losses remain moderate if the intensity and frequency of extremes remain under a threshold value, beyond which GDP losses increase sharply. This bifurcation may partly explain why some poor countries that experience repeated natural disasters cannot develop. Applied to the specific issue of climate change, this model highlights the importance of short-term constraints in the assessment of long-term damages, and shows that changes in the distribution of extremes may entail significant GDP losses in absence of specific adaptation. It suggests, therefore, that to avoid inaccurately low assessments of damages, researchers must take into account the distribution of extremes instead of their average cost and make explicit assumptions on the organization of future economies.     

What Do Unions Do to Productivity? A Meta‐Analysis

The impact of unions on productivity is explored using meta-analysis and meta-regression analysis. It is shown that most of the variation in published results is due to specification differences between studies. After controlling for differences between studies, a negative association between unions and productivity is established for the United Kingdom, whereas a positive association is established for the United States in general and for U.S. manufacturing.     

Mean‐variance efficiency of the market portfolio and futures trading

We derived an intertemporal capital asset pricing model in which the mean‐variance efficiency of the market portfolio is neither a necessary nor a sufficient condition. We obtained this result by modeling a frictionless, continuously open financial market in which nonredundant futures contracts are available for trade, in addition to cash assets. Introducing such contracts modifies the way investors optimally allocate their wealth. Their portfolios then comprise the riskless asset, a perturbed mean‐variance‐efficient portfolio of cash assets, and a perturbed mean‐variance‐efficient portfolio of futures contracts. Furthermore, a (3 + K) mutual fund separation is obtained, with K being the number of economic state variables, in lieu of the usual (2 + K) fund separation. Mean‐variance efficiency of the market portfolio is a necessary condition only when cash assets are the sole traded assets. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:329–346, 2001     

The effect of information sources on technology adoption and modification decisions

This article focuses on adoption and modification decisions on improved maize storage technologies in southern Benin. Modification implies changing a technology to adapt to farmers' circumstances. A sample selection framework is used to account for selectivity bias as some farmers were not aware of the new technologies. Using this framework, the study investigates the effect of alternative information sources on adoption and modification decisions. Farmers are either informed by extension agents or by other farmers. The empirical results show that there are differences in adoption and modification decisions between these two groups.     

Does Agricultural Productivity Actually Matter for Food Security in a Landlocked Sub‐Saharan African Country? The Case of Burkina Faso

This paper makes use of a Computable General Equilibrium model to analyze the impact of two agricultural productivity trends on poor households’ food security in Burkina Faso: a negative trend that could arise from many different factors, including land degradation, climate change, and harmful agricultural practices; and a positive trend which may result from enhanced public investment in agriculture, notably in research and development, extension, irrigation, rural roads, rural electrification, and rural education. The results point to a high sensitivity of the poor's consumption to agricultural productivity as well as to stronger impacts on the urban poor than on the rural poor. The current situation is already characterized by severe food insecurity, such that a decline in agricultural productivity is likely to further plunge the urban poor into a deep food crisis. By contrast, positive agricultural productivity trends may help alleviate poverty and food insecurity. Agricultural productivity may indeed affect the poor's food consumption mainly through large changes in agricultural prices and real incomes. Cet article utilise un modèle d’Équilibre Général Calculable pour analyser l'impact des différentes tendances de la productivité agricole sur la sécurité alimentaire des ménages pauvres au Burkina Faso. D'une part, les tendances négatives peuvent résulter de plusieurs facteurs, y compris la dégradation des terres, le changement climatique, et les pratiques agricoles nuisibles. D'autre part, la tendance positive peut résulter de l'investissement public accru dans l'agriculture, notamment dans la recherche et développement, la vulgarisation, l'irrigation, les routes rurales, l′électrification rurale et l′éducation rurale. Les résultats montrent une sensibilité élevée de la consommation des pauvres à la productivité agricole, ainsi que des impacts plus forts sur les populations urbaines pauvres. La situation actuelle est déjà caractérisée par une insécurité alimentaire grave de sorte qu'une baisse de la productivité agricole est susceptible de plonger davantage les pauvres en milieu urbain dans une crise alimentaire profonde. En revanche, la tendance positive sur la productivité agricole peut contribuer à atténuer la pauvreté et l'insécurité alimentaire. La productivité agricole peut en effet affecter la consommation alimentaire des pauvres principalement par le biais de grandes variations des prix agricoles et des revenus réels.     

Bernoulli speculator and trading strategy risk

In a continuous‐time model of a complete information economy, we examine the case of a “pure” speculator who chooses to trade only on forward or futures contracts written on interest‐rate‐sensitive instruments. Assuming logarithmic utility, we assess whether his strategy exhibits the same structure as when he uses primitive assets only. It turns out that when interest rates follow stochastic processes, as in the model of Heath, Jarrow, and Morton (1992), where the instantaneous forward rate is driven by an arbitrary number of factors, the speculative trading strategy involving forwards exhibits an extra term vis‐a‐vis the one using futures or primitive assets. This extra term, different from a Merton–Breeden dynamic hedge, is novel and can be interpreted as a hedge against an “endogenous risk,” namely the interest‐rate risk brought about by the optimal trading strategy itself. Thus, only the strategy using futures (or the cash assets themselves) involves a single speculative term, even for the Bernoulli speculator. This result illustrates another major aspect of the marking to market feature that differentiates futures and forwards, and thus has some bearing on the issue of the optimal design of financial contracts. Real financial markets being, in fact, incomplete, the additional “endogenous” risk associated with forwards cannot be hedged perfectly. Since using futures eliminates the latter, risk‐averse agents will find them attractive in relation to forward contracts, other things being equal. © 2000 John Wiley & Sons, Inc. Jrl Fut Mark 20: 507–523, 2000     

Management Control as an Employee Resource: The Case of Front‐line Service Workers

ABSTRACT This paper argues that the conception of management control as an employee resource can enhance critical understandings of front‐line service work. The argument is developed first through a critique of the contemporary control literature and its prominent worker images of smiling docility and haggard exhaustion. Seeking to encourage accounts more sensitive to the subjectivity and agency of service workers, the paper calls for more research attention to the question of how these employees experience and evaluate management control in relation to their self‐defined interests. Analysis of the nature of contemporary service work suggests that one such perceived interest is likely to be interactive control, or the capacity of workers to control and influence those parties with whom they directly interact. Based on a close reading of the emerging empirical literature on services, the article explores various ways in which the bureaucratic, technical and normative regulation designed by management to control service workers is used in turn by workers to further their own control and influence over managers and customers.