Earnings inequality and the informal economy

We analyse the extent and evolution of informality and inequality in the Serbian labour market between 2002 and 2007, using data from the Living Standard Measurement Surveys. Two surprising results emerge. First, the level of informal employment has risen significantly over the period, despite strong economic growth and the introduction of a range of market‐oriented reforms. Secondly, the level of inequality in earnings seems to have remained more or less constant over the period, in contrast to the experience of other countries at a similar stage of transition. We show that informal employees earn significantly less than those in the formal sector, controlling for a range of other variables, and informality plays an increasingly important role in explaining earnings inequality.     

Das auch noch? Deflation als Folge der Finanzkrise

Zusammenfassung  Der weltweite Nachfrageeinbruch im Gefolge der Finanzkrise l?sst befürchten, dass die Preise auf breiter Front sinken. Dem scheint die Geldpolitik jedoch mit verschiedenen Instrumenten begegnen zu k?nnen. Welche M?glichkeiten haben die Zentralbanken über die traditionelle Geldpolitik hinaus? Was lehrt uns das japanische Beispiel? Welche makro?konomische Strategie ist jetzt angebracht? Prof. Dr. Peter Kalmbach, 69, war bis 2005 Hochschullehrer für Wirtschaftswissenschaft mit dem Schwerpunkt Verteilungstheorie und Verteilungspolitik an der Universit?t Bremen.     

“I don’t Care that People don’t Like What I Do” – Business Codes Viewed as Invisible or Visible Restrictions

Research about codes of corporate ethics has hitherto taken a hypothetical, correct meaning of codes for granted. The article problematises the dichotomous categories intrinsic and subjective meanings of codes. I address the question if professionals in finance accept codes of business. The particular mentality of stockbrokers and traders constructs the way they judge restrictions such as company codes of ethics. While neglecting dimensions of ethics beyond known rules, brokers and traders distrust good ethics as a possible end in itself. Many professionals in the financial market perceive efforts to integrate ethical reasoning in work as only means for maximising business opportunities.     

RESPONDING TO DISRUPTIONS IN THE SUPPLY NETWORK‐FROM DORMANT TO ACTION

Managing risks in supply networks is a complex task; more so in those supply networks where the core competence lies in dealing with natural disasters, complex emergencies, and large‐scale attacks—namely those of humanitarian, and military organizations where the price of failure can be counted in terms of the loss of life rather than, simply, reduced profits. This conceptual article examines the capabilities of these supply networks to manage such disruptions, based on their resource configuration in a dormant preparation state. The article concludes by presenting how different types of supply networks can manage large‐scale disruptions.     

Self-regulation and moral awareness among entrepreneurs

Moral awareness underpins moral reasoning and ethical decision making. This mixed methods study investigates a critical feature of these phenomena among entrepreneurs, namely the influence of social cognitive self-regulation on moral awareness. Results suggest that entrepreneurs with stronger self-regulatory characteristics are more morally aware and relate such awareness to maintaining personal integrity and building inter-personal trust. In contrast, entrepreneurs with weaker self-regulatory characteristics appear less morally aware overall, and focus primarily on moral issues relating to failure and loss. I conclude the paper by discussing the implications for future research and practice.     

Worktime Demands and Work-Family Interference: Does Worktime Control Buffer the Adverse Effects of High Demands?

This study examined whether worktime control buffered the impact of worktime demands on work–family interference (WFI), using data from 2,377 workers from various sectors of industry in The Netherlands. We distinguished among three types of worktime demands: time spent on work according to one’s contract (contractual hours), the number of hours spent on overtime work (overtime hours), and the number of hours spent on commuting (commuting hours). Regarding worktime control, a distinction was made between having control over days off and vacations (leave control) and having control over starting and finishing times (flextime). These three worktime demands were expected to have separate as well as joint effects on WFI, whereas worktime control should buffer these adverse effects of worktime demands on WFI. Stepwise regression analyses showed that working high numbers of contractual and overtime hours was indeed associated with high WFI. Further, worktime control indeed made a difference in terms of WFI: whereas leave control contributed directly to lower WFI, flextime buffered the adverse effects of long contractual workhours. Our results suggest that very long working days should be prevented, and that worktime control may be a powerful tool to help workers maintaining a good work–family balance.     

CONSTANT PROPORTION PORTFOLIO INSURANCE IN THE PRESENCE OF JUMPS IN ASSET PRICES

Constant proportion portfolio insurance (CPPI) allows an investor to limit downside risk while retaining some upside potential by maintaining an exposure to risky assets equal to a constant multiple of the cushion , the difference between the current portfolio value and the guaranteed amount. Whereas in diffusion models with continuous trading, this strategy has no downside risk, in real markets this risk is nonnegligible and grows with the multiplier value. We study the behavior of CPPI strategies in models where the price of the underlying portfolio may experience downward jumps. Our framework leads to analytically tractable expressions for the probability of hitting the floor, the expected loss, and the distribution of losses. This allows to measure the gap risk but also leads to a criterion for adjusting the multiplier based on the investor's risk aversion. Finally, we study the problem of hedging the downside risk of a CPPI strategy using options. The results are applied to a jump-diffusion model with parameters estimated from returns series of various assets and indices.     

Agricultural extension system reform and agent time allocation in China

We conducted a nationally representative survey to measure the impact of China's institutional reforms in public agricultural extension on the time allocation of its one million agricultural extension agents. We found that Chinese agents spent much less time than their titles would suggest on providing agricultural extension services, and that agents whose base salaries were funded fully or partially by commercial activities spent substantially less time serving farmers. The institutional incentives associated with the source of funding have a much larger effect on agent time allocation than do the levels of funding. We conclude that the recent government policy to separate commercial activities from extension services is a step in the right direction and should be expanded. The results also suggest that, at least for agricultural extension, the goal of many national governments and international donors to develop locally financing institutions to sustain development projects may be misguided.     

The impact of the institutional environment on the value relevance of fair values

Most prior studies attribute valuation discounts on certain fair valued assets to measurement error or bias. We argue that institutional differences across countries (e.g., information environment or market sophistication) affect investors’ ability to process and impound fair value information in their valuation. We predict that the impact of the institutional environment on value relevance is particularly pronounced for reported fair values of assets designated at fair value through profit or loss (hereafter, “FVO assets”), for which investor experience is lowest and complexity is highest. Using a global sample of IFRS banks, we find that FVO assets are generally less value relevant than held-for-trading assets (HFT) and available-for-sale assets (AFS). By partitioning countries into market- and bank-based economies to proxy for institutional differences, we find that the valuation discount on FVO assets is more pronounced in bank-based economies. Additional tests suggest that this valuation discount is attenuated by a richer firm-level information environment and the presence of institutional investors with fair value experience.     

Are consumers' perceptions of price–quality relationships well calibrated?

Past research has shown that, to varying degrees, consumers tend to believe price is an indicator of quality, even though there is in fact often very little correlation between objective measures of price and quality (PQ). Moreover, consumers have been observed to be poorly calibrated in their knowledge of precisely which categories exhibit the strongest association between PQ for products. Given the profound changes that have occurred in consumer markets, such as the rise of the Internet and the flood of product quality information now readily available online, the present work seeks to update this line of research. Specifically, it seeks to determine if changes in the marketplace have affected (1) consumers' perceptions of the PQ relationship; and (2) consumers' PQ calibration. Data from two sources were collected and compared: (1) Subjective ratings of the PQ relation for various common products, collected using a questionnaire format in a survey of 313 US consumers; and (2) Objective estimates of the actual PQ association of the same products, gathered from independent third‐party information providers who report both prices and rank‐ordered quality measures for each. Results indicate that consumers today (1) continue to perceive a modest positive relationship between PQ (more so for durables, less for non‐durables); and (2) are modestly calibrated for durable products. But they are much less well calibrated in the realm of non‐durables, where consumers expect a positive link between price and quality in precisely those product categories in which the relationship is actually negative. Relative to past research, the calibration of consumers has apparently ‘flipped’ from non‐durables to durables today. Potential explanations for this result include (1) the rise of the Internet as an information source for quality ratings of durables; (2) a higher level of perceived risk for durable goods purchases; (3) a greater tendency for durables to exhibit a positive correlation between actual quality and price; and (4) the rising quality level of private label brands, which may render prior price–quality perceptions for non‐durables outdated or obsolete.