IMPACT OF TRADE ON SERVICE SECTOR EMPLOYMENT: IMPLICATIONS FOR WOMEN AND MINORITIES

Trade data from 1977 and 1985 suggest that, on average, service industries with the greatest trade-related employment gains tend to be more skill-intensive and that such industries employ relatively more women and minorities than do service industries experiencing the least trade-related employment gains. Three important qualifiers temper these findings: (i) Compared to whites, minorities—particularly blacks—have lower probability of increased employment in trade-enhanced service industries. (ii) Unlike whites or Hispanics, skilled black workers are more likely to be employed in service industries experiencing the least trade-related employment gains. (iii) On an industry by industry basis, no consistent relationship appears to exist between skill intensity and level of trade-related employment. The latter finding supports the view that service industry comparative advantage is industry-specific .     

Mortgage Prepayment and Default Behavior with Embedded Forward Contract Risks in China’s Housing Market

Most condominiums in China are sold forward on a pre-sale market, where purchasers and developers transact on an underlying property that is not yet completed. During the pre-sale period home buyers face a significant forward contract risk. However, home buyers can borrow mortgages from banks so that they can effectively share the forward contract risk with banks. This explains the phenomenon of irregularly high early-stage default and prepayment rates observed in residential mortgage lending in China, where there are few, if any, financial incentives for mortgage borrowers to exercise either put or call options. Mortgages collateralized by forward housing assets are riskier than are those with underlying assets traded on the spot market. However, currently Chinese mortgage banks charge the same rate to all mortgage borrowers. This inefficiency in risk sharing between mortgage borrowers’ groups in the forward and spot housing markets leads to mispricing in secondary mortgage sales and mortgage-backed security trading.     

Legal protection of investors,corporate governance,and the cost of equity capital

This study examines the effect of firm-level corporate governance on the cost of equity capital in emerging markets and how the effect is influenced by country-level legal protection of investors. We find that firm-level corporate governance has a significantly negative effect on the cost of equity capital in these markets. In addition, this corporate governance effect is more pronounced in countries that provide relatively poor legal protection. Thus, in emerging markets, firm-level corporate governance and country-level shareholder protection seem to be substitutes for each other in reducing the cost of equity. Our results are consistent with the finding from McKinsey's surveys that institutional investors are willing to pay a higher premium for shares in firms with good corporate governance, especially when the firms are in countries where the legal protection of investors is weak.