The skill premium and economic growth with costly investment,complementarities and international technological-knowledge diffusion

We analyse the skill premium and the growth rate in an innovator-imitator general equilibrium growth model assuming (i) internal costly investment in both physical capital and R&D, (ii) complementarities between intermediate goods in production and (iii) technological-knowledge diffusion. We find that in the imitator country these three elements influence the economic growth rate and the skill premium. In the innovator country, while the growth rate is affected by costly investment and complementarities, the skill premium is not affected by any of our assumptions. It depends solely on the productive advantage of high-skilled over low-skilled labour, which suggests that the sustained increase in the skill premium observed in several developed countries over the last three decades may have been due to increases in such productive advantage.     

Corporate Transparency: A Perspective from Thomas Aquinas’ Summa Theologiae

This article analyzes the issue of organizational transparency through the lens of Thomas Aquinas’ ethics. It provides moral justification for current claims about corporate transparency and sheds light on the ethical values and virtues affecting information disclosure decisions. Transparency is conceptualized as an informational mechanism necessary for performing the virtues of truthfulness, justice, and prudence. This article extends the organizational transparency and corporate social responsibility literatures by providing an alternative moral justification grounded in virtue-based theory, which extends our understanding of the information disclosure decisions made by management.     

When corporate social responsibility (CSR) increases performance: exploring the role of intrinsic and extrinsic CSR attribution

This study investigates whether employees attribute different motives to their organization's corporate social responsibility (CSR) efforts and if these motives influence employee performance. Specifically, we investigate whether employees could distinguish between intrinsic and extrinsic CSR motives by surveying 229 employee–supervisor dyads from various industries (companies that have reputable CSR programs in Portugal), and the impact of these perceptions on in‐role and extra‐role performance of subordinates. We found that employee task performance increases when employees attribute both intrinsic and extrinsic motives for CSR. Moreover, when employees perceive that their organization invests in a CSR practice that is both intrinsic and extrinsic, they also tend to exert extra effort in their work. Theoretical and practical implications are also discussed alongside future research directions.     

Evaluating the Technical Provisions for Traditional Brazilian Annuity Plans: Continuous-Time Stochastic Approach Based on Solvency Principles

This article presents an approach for evaluating the liabilities of traditional Brazilian annuity plans, using a continuous-time stochastic approach based on modern solvency principles. The technical provisions are obtained by means of conditional expectation, under a real-world measure and considering the peculiar characteristics of each plan and the financial guarantees and profit participations (bonus and dividend plans) embedded in the annuity plans. We assume that policyholder behavior is not optimal, but we also illustrate a calculation of provision assuming optimal policyholder behavior to show the differences between both assumptions. In this article all explicit provisions formulas are derived, and several relevant conclusions about the values of these provisions are discussed.     

Shadow Banking,Risk Transfer,and Financial Stability

Shadow banking is the process by which banks raise funds from and transfer risks to entities outside the traditional commercial banking system. Many observers blamed the sudden expansion in 2007 of U.S. sub‐prime mortgage market disruptions into a global financial crisis on a “liquidity run” that originated in the shadow banking system and spread to commercial banks. In response, national and international regulators have called for tighter and new regulations on shadow banking products and participants. Preferring the term “market‐based finance” to the term “shadow banking,” the authors explore the primary financial instruments and participants that comprise the shadow banking system. The authors review the 2007–2009 period and explain how runs on shadow banks resulted in a liquidity crisis that spilled over to commercial banks, but also emphasize that the economic purpose of shadow banking is to enable commercial banks to raise funds from and transfer risks to non‐bank institutions. In that sense, the shadow banking system is a shock absorber for risks that arise within the commercial banking system and are transferred to a more diverse pool of non‐bank capital instead of remaining concentrated among commercial banks. The article also reviews post‐crisis regulatory initiatives aimed at shadow banking and concludes that most such regulations could result in a less stable financial system to the extent that higher regulatory costs on shadow banks like insurance companies and asset managers could discourage them from participating in shadow banking. And the net effect of this regulation, by limiting the amount of market‐based capital available for non‐bank risk transfer, may well be to increase the concentrations of risk in the banking and overall financial system.     

Public Debt,Economic Growth and Inflation in African Economies

We analyse the relationship between public debt, economic growth and inflation in a group of 52 African economies between 1950 and 2012. The results indicate that the limits of public debt are negatively related to economic growth and exhibit, from a given level of debt, an inverted U behaviour regarding the relationship between economic growth and public debt. Briefly, the high levels of public debt are coincident with reduced rates of economic growth and rising levels of inflation. Our results for three specific geographical areas resemble those of the overall analysis, despite some differences. In North African countries, the growth rates of the gross domestic product (GDP) and inflation also show an inverted U behaviour as the ratio of public debt/GDP increases. The highest rate of economic growth is recorded when the ratio of public debt/GDP is below 30% of GDP and corresponds to an average inflation rate of 5.33%. An identical behaviour of the GDP growth rates and inflation also appears in Sub‐Saharan countries until the third interval (60–90%). However, the highest growth rate of the GDP and GDP per capita is registered when the public debt/GDP ratio is in the second interval (30–60%). For the countries of the Southern Africa Development Community, the highest average rate of economic growth (6.8%) is similar to North African countries, when the ratio public debt/GDP is below 30% of GDP, with an average inflation rate of 11%. A number of robustness analyses were performed and the great majority of them confirm the general analysis.     

The valdez principles: Implications for corporate social responsibility

The Valdez Principles have been formulated to guide and evaluate corporate conduct towards the environment. While at first glance the code appears to impose enormous new responsibilities on firms, a closer analysis indicates that existing regulations and business practices already require businesses to meet many of the environmental goals sought by its proponents. Likely corporate response to the code is examined against this background and with reference to the experience with other voluntary codes of conduct. It would appear that compliance with the code will yield minimal benefits and non-compliance will impose minimum costs for the environmentally-responsible firm.Joao S. Neves is Associate Professor of Management at Trenton State College where he teaches various courses in Management. A graduate from the University of Pennsylvania, Dr. Neves has numerous publications in academic and trade journals. His interests include corporate social responsibility and he has contributed to many conferences. Rajib N. Sanyal teaches international management and human resource management at Trenton State College in Trenton, New Jersey. He obtained his Ph. D. from Georgia State University-Atlanta. His writings can be found in International Journal of Value-Based Management, Journal of International Business Studies, and Labor Studies Journal, among others.     

Numeric or weighted distribution? The effect of different channel performance metrics on market share

Abstract

Previous studies have found a convex relation between weighted measures of distribution and market share for consumer products in developed economies, while companies in emerging markets often use a non-weighted (numeric) distribution measure to manage their channel strategy. In contrast to the markets with high retail concentration, the numeric distribution could be best suited to a more fragmented retail market in which the percentage of physical distribution is important. We investigate the effects of expanding numeric versus expanding weighted distribution by studying stores in channels and regions characterized by structural differences in an emerging market. Our data come from retail audits in Brazil and include 91 soft drink manufacturers, 195 brands and 1,110 stock-keeping units. Our study highlights the importance of numeric distribution as a performance measure in this market. Additionally, we show that the effects of numeric and weighted distribution on market share vary by region and channel format.     

VALUE AT RISK: USES AND ABUSES

Value at risk (or "VAR") is a method of measuring the financial risk of an asset, portfolio, or exposure over some specified period of time. By facilitating the consistent measurement of risk across different assets and activities, VAR allows companies to monitor, report, and control their risks in a manner that efficiently relates risk control to desired and actual economic exposures.
Nevertheless, reliance on VAR can result in serious problems when improperly used, and would-be users of VAR are advised to consider the following three pieces of advice:

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   First, VAR is a tool for firms engaged in total value risk management. Companies concerned not with the value of a stock of assets and liabilities over a specific time horizon, but rather with the volatility of a flow of funds, are often better off eschewing VAR altogether in favor of a measure of cash flow volatility.
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   Second, VAR should be applied very carefully to companies that practice "selective" risk management those firms that choose to take certain risks as a part of their primary business. When VAR is reported in such situations without estimates of corresponding expected profits, the information conveyed by the VAR estimate can be extremely misleading.
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   Third, as a number of recent derivatives disasters are used to illustrate, no form of risk measurement including VAR–is a substitute for good management. Risk management as a process encompasses much more than just risk measurement. Indeed, risk measurement (whether using VAR or some of the alternatives proposed in this article) is pointless without a well-developed organizational infrastructure and IT system capable of supporting the complex and dynamic process of risk taking and risk control.

     

What Happened to Kapp’s Theory of Social Costs? A Case of Metatheoretical Dispute and Dissent in Economics

In the early 1970s Wilfred Beckerman and K. William Kapp engaged in a serious dispute. Although it focused on social costs, the dispute raised issues about the very foundations of economics. The differences in approach to social costs that this dispute exposed were so deep-rooted as to preclude (or at least hinder) any possibility of constructive dialogue. This article argues that the subsequent ‘conspiracy of silence’ against Kapp should be understood in terms of Kapp’s very different conception of economics as a social science. This issue is relevant to a broader discussion about the boundaries of pluralism in economics—how these boundaries are drawn and the conditions for a constructive dialogue among economists and with other social scientists.