Diversification and Performance in Banking: The Israeli Case

This paper analyzes performance and portfolio choice of banks investments across business units using methodologies developed mainly for equity investments. The backgrounds to the paper are major recent developments in the financial services industry, mainly consolidation in the banking industry that raised the issue of efficiency gains due to diversification. The paper focuses on banks in Israel as an extended case study, using the fact that Israeli banks have operated as (limited) universal banks for a long time. The results suggest that there are gains to diversification and that risk adjusted performance is mostly consistent with optimal portfolio choice. Most of the previous research in this area has been done in the US. These studies necessarily focused on hypothetical combinations of different business activities because of the legal limits on US banks. Thus this paper adds to the literature both by examining actual combinations and looking at another country.     

Measuring Attitudes Towards Inequality

Individuals' attitudes to inequality aversion are measured using survey data, based on the leaky-bucket experiment, for several groups of students in Australia and Israel. Three forms of social welfare function are estimated. It is found that measures of inequality aversion can be obtained with some precision and that these estimates are substantially lower than the values typically used by those measuring inequality and examining optimal tax structures. Furthermore, a welfare function based on the Gini inequality measure is generally found to give a better fit than forms based on constant relative or constant absolute inequality aversion.
JEL Classification : C 91; D 63     

The safety impact of land use changes resulting from bypass road constructions

This paper analyzes the effect of bypass construction on road safety, specifically crash rates on bypass segments and in bypassed communities. It further investigates the effect of bypass construction on those communities’ economic development through changes in the number and spatial distribution of businesses and residential development, and examines whether these changes affect the road-safety level. Finally, it evaluates the effect on road safety of various traffic arrangements implemented in such communities. Drawing on an extensive data collection, the study focuses on Arab cities in the Galilee region of Israel, using cross-sectional and longitudinal analysis.The results show that bypass construction does not necessarily reduce overall crash frequencies or crash rates. It merely shifts road crashes from the highways (the bypass roads) to inner roads (bypassed) and from there to local traffic, with no significant reduction. The findings indicate a large variance in the effects of bypass constructions on safety.     

Return Migration: Theory and Empirical Evidence from the UK

In this article, we discuss forms of migration that are non‐permanent. We focus on temporary migrations where the decision to return is taken by the immigrant. These migrations are likely to be frequent, and we provide some evidence for the UK. We then develop a simple model that rationalizes the decision of a migrant to return to his/her home country, despite a persistently higher wage in the host country. We consider three motives for a temporary migration: (i) differences in relative prices between host and home country, (ii) complementarities between consumption and the location where consumption takes place, and (iii) the possibility of accumulating human capital abroad, which enhances the immigrant's earnings potential back home. For the last return motive, we discuss extensions that allow for immigrant heterogeneity, and develop implications for selective in‐ and out‐migration.     

Innovation in corporate law

In most countries large business enterprises today are organized as corporations. The corporation with its key attributes of independent personality, limited liability and free tradeability of shares has played a key role in most developed market economies since the 19th century and has made major inroads in emerging markets. We suggest that the resilience of the corporate form is a function of the adaptability of the legal framework to a changing environment. We analyze a country's capacity to innovate using the rate of statutory legal change, the flexibility of corporate law, and institutional change as indicators. Our findings suggest that origin countries are more innovative than transplant countries. Journal of Comparative Economics 31 (4) (2003) 676–694.