Expected exponential utility maximization of insurers with a Linear Gaussian stochastic factor model

In this paper, we consider the problem of optimal investment by an insurer. The wealth of the insurer is described by a Cramér–Lundberg process. The insurer invests in a market consisting of a bank account and m risky assets. The mean returns and volatilities of the risky assets depend linearly on economic factors that are formulated as the solutions of linear stochastic differential equations. Moreover, the insurer preferences are exponential. With this setting, a Hamilton–Jacobi–Bellman equation that is derived via a dynamic programming approach has an explicit solution found by solving the matrix Riccati equation. Hence, the optimal strategy can be constructed explicitly. Finally, we present some numerical results related to the value function and the ruin probability using the optimal strategy.     

The determinants of price in 3G spectrum auctions

This article examined the empirical relationship between prices paid for national 3G wireless licenses when spectrums were sold by auction. The reduced-form modelling approach was based on the premise that auction design features can, and do, affect both final (revenue) and intermediate (viz., auction competitiveness and license assignment) auction outcomes. Importantly, the analysis recognizes, and explicitly allows for, the endogeneity of bidder entry and sample selection arising from an absence of bidding. Generally, these key features have only received attention in isolation. In particular, the study addressed the principal question of: which regulator chosen auction design variables determine prices paid in spectrum auctions? The analysis showed that flexible-package formats increased prices paid, and that higher reserve prices had a dampening effect. The article also showed that longer license terms and more competitive auctions (as measured by the bidders-to-licenses ratio) enhance prices paid.     

THE IMPORTANCE OF THE RETENTION RATIO IN A KALECKIAN MODEL WITH DEBT ACCUMULATION

By using a Kaleckian model with debt accumulation, Hein (2007; Metroeconomica, 56 (2), pp. 310–39) found that the long‐run equilibrium value of the debt–capital ratio is positive and stable only if interest rates are extremely high and if the short‐run equilibrium exhibits the ‘debt‐led’ growth regime. However, this conclusion crucially depends on the assumption that the retention ratio of firms is equal to unity. By relaxing this assumption, we show that there exists a positive and stable long‐run equilibrium even under the ‘debt‐burdened’ regime without any constraint on the nominal interest rate.     

Bank risk and non-interest income activities in the Indonesian banking industry

The recent trend of product diversification in the Indonesian banking industry underscores the importance of non-interest income activities. This study examines the relationship between product diversification and bank risk over the period of 2002–2008. Our analysis shows clear evidence that the effect of product diversification on bank risk depends highly on the bank's asset size. Specifically, the degree of product diversification is negatively associated with bank risk for small-sized banks. Conversely, the degree of product diversification is positively related to bank risk for large-sized banks. This finding suggests that deregulation encouraging banks to become more involved in non-traditional activities may have an adverse effect on the overall banking system where large-sized banks are playing a significant role in Indonesia.     

International Competition and Distributive Class Conflict in an Open Economy Kaleckian Model

This paper constructs an open economy Kaleckian model in which international competition affects the bargaining process between firms and workers, and investigates the effects of such bargaining on the macroeconomy. We show that the effects of a change in the bargaining power on aggregate demand depends not only on the demand regimes but also on which agents bears more of the burden arising from the international price competition. Moreover, if the real exchange rate has a small impact on the trade balance, the economy is stable, whereas if it has a larger impact on the trade balance, the economy is unstable.     

HOW MANY FIRMS SHOULD BE LEADERS? BENEFICIAL CONCENTRATION REVISITED*

This article investigates the relationship between the Herfindahl–Hirschman Index (HHI) and welfare in multiple‐leader Stackelberg models. We formulate two long‐run models of free entry of followers; in the first (second) model, leaders select their output before (after) the entry of the followers. We find that in both models, in contrast to the short‐run models, the Stackelberg model yields a larger welfare and HHI than the Cournot model does regardless of the number of leaders; that is, beneficial concentration always occurs.     

Impacts of Prime‐age Adult Mortality on Labour Supply: Evidence from Adolescents and Women in South Africa*

This paper examines the impact of prime‐age adult mortality on the transition made by adolescents from school to the labour market and on female adult labour force participation decisions in South Africa. We find, first, that deaths of prime‐age adults significantly increase both male and female adolescents’ labour force participation as they stop their schooling. Secondly, the death of prime‐age adults in general also decreases school enrolment ex ante. Thirdly, female adults tend to join the labour force following the death of prime‐age adult males. These findings imply that prime‐age adult mortality increases labour supply and disrupts human capital formation.     

Reflexive Organizing for Knowledge Sharing: An Ethnomethodological Study of Service Technicians

This study examines how organizing is done reflexively through practice in the context of knowledge sharing. Organizing concerns reduction of equivocality and sensemaking so that actions can be interpreted and coordinated. Reflexivity refers to the fact that this organizing is done through talk, and that talk is an action that requires organizing. To examine how this reflexive organizing is accomplished, detailed analysis of video‐recorded interactions among photocopier service technicians revealed various interactional methods to make actions of requesting and offering assistance understandable and relevant. To explain these methods, Goffman's concept of embedding is applied. By embedding other social situations in the current talk, one can project a certain sense of one's talk. This reflexive organizing clarifies that organizing is part of, not separate from, any practice and that knowledge sharing is accomplished not through a retrospective narrative but through reflexive construction of the situation in which talk is made possible.     

Robert C. Allen. Farm to Factory: A Reinterpretation of the Soviet Industrial Revolution. Princeton, N.J.: Princeton University Press, 2003. xv + 301 pp. ISBN 0-691-00696-2, $45.00 (cloth).

In this collection of concisely argued essays, Robert C. Allenreexamines several important questions familiar to anyone interestedin Soviet history: the hypothetical development of Russia inthe absence of the 1917 Bolshevik Revolution; the standing ofRussia’s and the Soviet Union’s economic and demographicdevelopment in relation to other countries; the controversysurrounding the strategy for economic development after therevolution; the reasons for Stalin’s rapid industrializationand the role of the agricultural sector in it; and     

Risk-Sensitive Asset Management in a Wishart-Autoregressive Factor Model with Jumps

Risk-sensitive asset management problems, both those with a finite horizon and those with an infinite horizon, are studied in a financial market model that has a Wishart autoregressive-type jump-diffusion factor, which is a positive-definite symmetric matrix-valued process. The model describes the stochasticity of the market covariance structure, the interest rates, and the risk-premium of the risky assets. We obtain explicit representations of the solutions to the problems.