Does the Choice between Wage Inequality and Unemployment Affect Productivity Growth?

Abstract. We present a non-scale continuous-time overlapping-generations growth model that provides an explanation for why economies with relative wage rigidity feature higher unemployment, but not slower productivity growth, than economies with flexible wages. The compression of the wage distribution associated with relative wage rigidity slows down human capital accumulation and growth ceteris paribus . But unemployment among the low-skilled workers strengthens the incentives to invest in human capital and, hence, growth. The two effects are offsetting, and growth is independent of the prevailing degree of relative wage rigidity. This knife-edge result is robust with respect to some modifications of the model.     

Book reviews

I am indebted to the Department of Economics at the University of Warwick for their hospitality while I was working on this review.     

Can pure play internet banking survive the credit crisis?

This paper positions the pure-play internet banking model (PPI) as a hybrid business model that combines features of both relationship and transaction banking. Although in terms of customer orientation PPI banks may partly resemble relationship banks, they lack their comparative advantage in generating borrower-specific information. Instead, the characteristic features of PPI banks are low costs and easy scalability. While the latter may enable PPI banks to quickly capture market share, it may also generate overexposure in risky markets. We present a case study on ING Direct, one of the leading global PPI banks and address the sustainability of the PPI business model by comparing the ING Direct foreign operations. The findings for ING Direct are validated using data for E-Trade Bank. We conclude that managing growth appears to be the prime challenge to PPI banks.     

The role of strategic enterprise risk management and organizational flexibility in easing new regulatory compliance

The impact of new regulatory requirements for internal control reporting on an organization's ability to maintain strategic flexibility has been debated in the popular press extensively. This paper tests theory from strategic management to examine the relationship between an organizations' pre-regulatory strength of strategic enterprise risk management (ERM) processes and their ability to react to new regulatory mandates. In the context of companies' adoption of SOX Section 404 internal control reporting requirements, we examine organizations' pre-SOX ERM processes, ERM supporting technologies, and organizational flexibility in order to better understand the antecedents to the difficulty encountered in meeting SOX 404 requirements. Using responses from 113 Chief Audit Executives (CAEs), we find that organizations with stronger strategic ERM processes and flexible organizational structures already in place incurred little difficulty in implementing SOX 404 mandates. On the other hand, organizations using weaker ERM processes, which focused on control compliance, experienced more difficulty. These findings provide key insights into the importance of strategic ERM in effectively complying with new regulatory controls in volatile environments.     

Supply network capacity planning for semiconductor manufacturing with uncertain demand and correlation in demand considerations

A semiconductor supply network involves many expensive steps, which have to be executed to serve global markets. The complexity of global capacity planning combined with the large capital expenditures to increase factory capacity makes it important to incorporate optimization methodologies for cost reduction and long-term planning. The typical view of a semiconductor supply network consists of layers for wafer fab, sort, assembly, test and demand centers. We present a two-stage stochastic integer-programming formulation to model a semiconductor supply network. The model makes strategic capacity decisions, (i.e., build factories or outsource) while accounting for the uncertainties in demand for multiple products. We use the model not only to analyze how variability in demand affects the make/buy decisions but also to investigate how the correlation between demands of different products affects these strategic decisions. Finally, we demonstrate the value of incorporating demand uncertainty into a decision-making scheme.     

Getting closer to whales—passenger expectations and experiences, and the management of swim with dwarf minke whale interactions in the Great Barrier Reef

Whale-watching tourism is a growth industry worldwide. In Australia, with whale-watchers approaching one million per annum there has been considerable effort to develop management regimes that protect the whales while enabling the development of a sustainable ecotourism industry. A mixture of National and State laws and regulations have governed the industry (Tourism based on free-ranging marine wildlife: opportunities and responsibilities, Wildlife Tourism Research Report No. 11, Status Assessment of Wildlife Tourism in Australia Series, CRC for Sustainable Tourism, Gold Coast, Queensland) but these have been mainly derived from experiences with humpback (Megaptera novaeangliae) whale watching from vessels at sea. In this article we describe the development and nature of new and rapidly growing swim-with-whales operations based on the dwarf minke whales (Balaenoptera acutorostrata) in the Great Barrier Reef of northern Queensland. The distinctly different quality of these operations raise interesting questions for long-term management (Towards sustainable management of the developing dwarf minke whale tourism industry in northern Queensland, CRC Reef Research Technical Report 27, James Cook University of North Queensland, 30pp (emended version of SC/50/WW1)).In the 1999–2000 seasons, 453 passengers (88.1% of respondents) swam with minke whales. Only 25% of visitors came specifically for the whale interactions and 43% learned of the whales on board the vessel. Passengers thus had low expectations about whales and encounters. A variety of factors, including the diving experience, particular dive sites, a range of wildlife species and socializing contributed to visitor satisfaction. Nonetheless, there was a significant correlation between visitor satisfaction and closeness of approaches by the whales, total number of whales seen and total time spent with whales. We discuss the key issues associated with swim-with-whales programs in the light of our findings. The cooperative engagement of tourism operators, researchers and government management agencies is a feature of this new industry.