International evidence on fiscal solvency: Is fiscal policy “responsible”?

We conduct a cross-country empirical analysis of fiscal solvency based on dynamic stochastic general equilibrium conditions. The results show evidence of fiscal solvency, in the form of a robust positive conditional response of the primary balance to changes in public debt, in panels for emerging and industrial economies and in a combined panel. Emerging economies show a stronger response and hence converge to lower mean debt-output ratios, as observed in the data. The results are weaker for countries with debt ratios exceeding panel means and medians. Hence, we can separate countries where fiscal solvency holds from those where it remains in doubt.     

Massachusetts Health Care Reform: The View From One Year Out

One of the most important developments in health policy in recent years was the health reform plan enacted by Massachusetts in April 2006. This sweeping bill reformed insurance markets, subsidized insurance coverage for a large swath of the population, introduced a new purchasing mechanism (the "Connector"), and mandated insurance coverage for almost all citizens. In this article, I review the history of health reform in Massachusetts, highlighting the unique features that came together to make reform a reality in this state. I then turn to a discussion of the major issues that have been faced in the first year of implementing this reform and the compromises made to maintain a broad consensus of support in the state. I also discuss the lessons learned and contrast the Massachusetts approach with alternatives, most notably plans that rely more strongly on the employer-based insurance system to expand insurance coverage in the United States.     

Bond risk premia and realized jump risk

We find that augmenting a regression of excess bond returns on the term structure of forward rates with an estimate of the mean realized jump size almost doubles the R² of the forecasting regression. The return predictability from augmenting with the jump mean easily dominates that offered by augmenting with options-implied volatility and realized volatility from high-frequency data. In out-of-sample forecasting exercises, inclusion of the jump mean can reduce the root mean square prediction error by up to 40%. The incremental return predictability captured by the realized jump mean largely accounts for the countercyclical movements in bond risk premia. This result is consistent with the setting of an incomplete market in which the conditional distribution of excess bond returns is affected by a jump risk factor that does not lie in the span of the term structure of yields.     

A hierarchical agency model of deposit insurance

This paper develops a hierarchical agency model of deposit insurance. The main purpose of the analysis is to propose a micro-founded model of deposit insurance schemes and study their effects on the behavior of depositors and the monitoring problem for a bank. This paper also characterizes a risk-based premium in equilibrium, and conducts a comparative statics analysis of depositors’ optimal actions. The results supply the basic theoretical foundation for designing deposit insurance schemes. Our findings are consistent with the empirical research on depositor behavior.     

Banks and Microbanks

We combine two datasets to examine whether the presence of banks affects the profitability and outreach of microfinance institutions. We find evidence that competition matters. Greater bank penetration in the overall economy is associated with microbanks pushing toward poorer markets, as reflected in smaller average loans sizes and greater outreach to women. The evidence is particularly strong for microbanks relying on commercial-funding and using traditional bilateral lending contracts (rather than group lending methods favored by microfinance NGOs). We consider plausible alternative explanations for the correlations, including relationships that run through the nature of the regulatory environment and the structure of the banking environment, but we fail to find strong support for these alternative hypotheses.     

Strength in numbers or guilt by association? Intragroup effects of female chief executive announcements

We predict that the media reports on female CEOs as a coherent group, whereas male CEOs are treated as individuals by the media. We also suggest that the resulting investors' perceptions of group entitativity of female‐led firms may not only influence the succession event–performance relationship at the focal firm, but may also have a significant effect on the value of other female‐led companies. Results of a text analysis and an event study of appointments of female CEOs to Fortune 1000 firms provide support for these predictions. Copyright © 2013 John Wiley & Sons, Ltd.     

Food for thought: Robots,jobs and skills in food and drink processing in Norway and the UK

There is intense debate surrounding digitalisation and its implications for work. However, empirical research within established workplaces, especially international comparative studies, remains limited. This article uses cross-country research to further analysis of the relative importance of different institutions, actors and power relations in shaping digitalisation and worker outcomes. Through a multi-level approach, it compares the use of industrial robots in the food and drink processing sector in Norway and the UK. Drawing on qualitative research, it explores the pace of digitalisation, the process of implementation and job and skills outcomes. The study finds strong national differences in the pace of digitalisation, and the role of unions in the process of implementation. In Norway, union power at workplace and national level, embedded in institutional arrangements, underpins more advanced use of technology and improved outcomes for workers.     

The impact of credit scoring on consumer lending

We study the adoption of automated credit scoring at a large auto finance company and the changes it enabled in lending practices. Credit scoring appears to have increased profits by roughly a thousand dollars per loan. We identify two distinct benefits of risk classification: the ability to screen high‐risk borrowers and the ability to target more generous loans to lower‐risk borrowers. We show that these had effects of similar magnitude. We also document that credit scoring compressed profitability across dealerships, and provide evidence consistent with the view that credit scoring may have substituted for varying qualities of local information.     

Using Market Structure to Regulate a Vertically Integrated Monopolist

A natural monopolist whose cost is private information produces a good which is combined with another good that can be produced by the monopolist or by other firms. The agency that regulates the monopolist can impose any of several different market structures in the industry: integrated monopoly, vertical separation with free entry downstream, or liberalization downstream (both integrated and independent production). When several firms produce downstream, a Cournot quantity-setting game with free entry determines the market price. We derive the optimal contracts to offer the monopolist under all three market structures and examine the influence of downstream cost differences on access prices.We then study the optimal regulatory policy where the regulator can condition the downstream market structure on the monopolist's cost report to the regulator. The optimal regulatory policy awards a monopoly to a low-cost upstream firm, but requires free entry downstream if the monopolist reports high upstream costs. Thus, the choice of market structure is an additional tool to limit rent extraction by the monopolist. Simulation analysis reveals the possibility of significant welfare gains from this additional regulatory tool.