Distributional assumptions and a test of the dual labor market hypothesis

Recent application of the switching regression model to allocate workers into the primary and secondary labor markets is considered to be the best solution to the classification problem of the empirical testing of the dual labor market theory. In such models, normality of the error terms is assumed. This paper adopts the switching regression model to test the dual labor market theory by assuming different distributions of the error terms. The test results strongly support the dual labor market theory regardless of the assumption one makes about the error terms. However, the results indicate that different distribution can lead to different percentage distributions of workers in the two segments. In particular, the normal distribution generates more workers in the primary segment than the non-normal distributions. Therefore, care must be taken not to generalize the type of industries or occupations that fall under the primary and secondary segments. First version received: October 2000/Final version received: March 2002 RID="*" ID="*"  I would like to thank Kevin Lang, Robert Marshall, and two anonymous referees for their helpful comments. I am grateful for comments received from the session participants of the Western Economic Association International Conference, San Francisco, CA, June 28–July 2, 1996, and the Midwest Economic Association Conference, Kansas City, 1997. I thank George Bonney, the Chief Statistician of Fox Chase Cancer Center, Philadelphia for his comments. Any remaining errors are my responsibility. I gratefully acknowledge financial support from Penn State Research and Development Grant, 1995.     

Household Adoption of Water-Efficient Equipment: The Role of Socio-Economic Factors,Environmental Attitudes and Policy

Using survey data of around 10,000 households from 10 OECD countries, we identify the driving factors of household adoption of water-efficient equipment by estimating Probit models of a household’s probability to invest in such equipment. The results indicate that environmental attitudes and ownership status are strong predictors of adoption of water-efficient equipment. In terms of policy, we find that households that were both metered and charged for their water individually had a much higher probability to invest in water-efficient equipment compared to households that paid a flat fee.     

Raising Capital in an Insurance Oligopoly Market

We consider an oligopoly market where firms offer insurance coverage against a risk characterised by aggregate uncertainty. Firms behave as if they were risk averse for a standard reason of costly external finance. The model consists in a two-stage game where firms choose their internal capital level at stage one and compete on price at stage two. We characterise the subgame perfect Nash equilibria of this game and focus attention on the strategic impact of insurers capital choice. We discuss the model with regard to the insurance industry specificities and regulation.     

IMF Bank-Restructuring Efficiency Outcomes: Evidence from East Asia

We report new findings on bank efficiency in East Asian countries for the pre- and post-IMF restructuring periods. We find that bank efficiency has improved, but only to the pre-IMF intervention level, and that restructured banks are not more efficient than their unrestructured counterparts. Different restructuring measures have different effects. Bank closures are economically justified, but mergers show short-term efficiency losses. Recapitalization and reprivatization of badly performing banks lead to efficiency improvement, but also increase government ownership. Ease of entry that has allowed for more foreign bank participation results in slightly improved performance of badly performing banks.

Optimal dividend policy and growth option

We analyse the interaction between the dividend policy and the decision on investment in a growth opportunity of a liquidity constrained firm. This leads us to study a mixed singular control/optimal stopping problem for a diffusion that we solve quasi-explicitly by establishing a connection with an optimal stopping problem. We characterize situations where it is optimal to postpone the distribution of dividends in order to invest at a subsequent date in the growth opportunity. We show that uncertainty and liquidity shocks have an ambiguous effect on the investment decision.      

Co-creation of value — towards an expanded paradigm of value creation

Co-creation is the process by which products, services, and experiences are developed jointly by companies and their stakeholders, opening up a whole new world of value. Firms must stop thinking of individuals as mere passive recipients of value, to whom they have traditionally delivered goods, services, and experiences. Instead, firms must seek to engage people as active co-creators of value everywhere in the system.     

Teaming up to Innovate: The Importance of a Joint Knowledge Base

Companies are increasingly discovering the potential of collaborating with others to create innovative products — often across industries — by combining their specializations in a unique way. A pre-condition for the success of these ventures is to build a common knowledge base, usually by duplicating selected parts of the partner’s knowledge. In this article, a case study and a quantitative study seek to elaborate on the unanswered question: Which building blocks constitute a common knowledge base?