Investor protection, risk sharing and inequality

This paper studies the relationship between investor protection, financial risk sharing and income inequality. In the presence of market frictions, better protection makes investors more willing to take on entrepreneurial risk while lending to firms. This implies lower cost of external finance and better risk sharing between financiers and entrepreneurs. Investor protection, by boosting the market for risk sharing plays the twofold role of encouraging agents to undertake risky enterprises and providing them with insurance. By increasing the number of risky projects, it raises income inequality. By extending insurance to more agents, it reduces it. As a result, the relationship between the size of the market for risk sharing and income inequality is hump-shaped. Empirical evidence from a cross-section of sixty-eight countries, and a panel of fifty countries over the period 1976-2000, supports the predictions of the model.

Investor protection and income inequality: risk sharing vs risk taking

This paper studies the relationship between investor protection, entrepreneurial risk taking and income inequality. In the presence of market frictions, better protection makes investors more willing to take on entrepreneurial risk when lending to firms, thereby improving the degree of risk sharing between financiers and entrepreneurs. On the other hand, by increasing risk sharing, investor protection also induces more firms to undertake risky projects. By increasing entrepreneurial risk taking, it raises income dispersion. By reducing the risk faced by entrepreneurs, it reduces income volatility. As a result, investor protection raises income inequality to the extent that it fosters risk taking, while it reduces it for a given level of risk taking. Empirical evidence from a panel of forty-five countries spanning the period 1976-2000 supports the predictions of the model.

Enhancing MPLS QoS routing algorithms by using the network protection degree paradigm

IP based networks still do not have the required degree of reliability required by new multimedia services, achieving such reliability will be crucial in the success or failure of the new Internet generation. Most of existing schemes for QoS routing do not take into consideration parameters concerning the quality of the protection, such as packet loss or restoration time. In this paper, we define a new paradigm to develop new protection strategies for building reliable MPLS networks, based on what we have called the network protection degree (NPD). This NPD consists of an a priori evaluation, the failure sensibility degree (FSD), which provides the failure probability and an a posteriori evaluation, the failure impact degree (FID), to determine the impact on the network in case of failure. Having mathematical formulated these components, we point out the most relevant components. Experimental results demonstrate the benefits of the utilization of the NPD, when used to enhance some current QoS routing algorithms to offer a certain degree of protection

Minimum interference routing with fast protection

One of the most effective techniques offering QoS routing is minimum interference routing. However, it is complex in terms of computation time and is not oriented toward improving the network protection level. In order to include better levels of protection, new minimum interference routing algorithms are necessary. Minimizing the failure recovery time is also a complex process involving different failure recovery phases. Some of these phases depend completely on correct routing selection, such as minimizing the failure notification time. The level of protection also involves other aspects, such as the amount of resources used. In this case shared backup techniques should be considered. Therefore, minimum interference techniques should also be modified in order to include sharing resources for protection in their objectives. These aspects are reviewed and analyzed in this article, and a new proposal combining minimum interference with fast protection using shared segment backups is introduced. Results show that our proposed method improves both minimization of the request rejection ratio and the percentage of bandwidth allocated to backup paths in networks with low and medium protection requirements

QoS online routing and MPLS multilevel protection: a survey

A survey of MPLS protection methods and their utilization in combination with online routing methods is presented in this article. Usually, fault management methods pre-establish backup paths to recover traffic after a failure. In addition, MPLS allows the creation of different backup types, and hence MPLS is a suitable method to support traffic-engineered networks. In this article, an introduction of several label switch path backup types and their pros and cons are pointed out. The creation of an LSP involves a routing phase, which should include QoS aspects. In a similar way, to achieve a reliable network the LSP backups must also be routed by a QoS routing method. When LSP creation requests arrive one by one (a dynamic network scenario), online routing methods are applied. The relationship between MPLS fault management and QoS online routing methods is unavoidable, in particular during the creation of LSP backups. Both aspects are discussed in this article. Several ideas on how these actual technologies could be applied together are presented and compared

Adding QoS protection in order to enhance MPLS QoS routing

In this paper, a method for enhancing current QoS routing methods by means of QoS protection is presented. In an MPLS network, the segments (links) to be protected are predefined and an LSP request involves, apart from establishing a working path, creating a specific type of backup path (local, reverse or global). Different QoS parameters, such as network load balancing, resource optimization and minimization of LSP request rejection should be considered. QoS protection is defined as a function of QoS parameters, such as packet loss, restoration time, and resource optimization. A framework to add QoS protection to many of the current QoS routing algorithms is introduced. A backup decision module to select the most suitable protection method is formulated and different case studies are analyzed

Partial disjoint path for multi-layer protection in GMPLS networks

In this paper, different recovery methods applied at different network layers and time scales are used in order to enhance the network reliability. Each layer deploys its own fault management methods. However, current recovery methods are applied to only a specific layer. New protection schemes, based on the proposed partial disjoint path algorithm, are defined in order to avoid protection duplications in a multi-layer scenario. The new protection schemes also encompass shared segment backup computation and shared risk link group identification. A complete set of experiments proves the efficiency of the proposed methods in relation with previous ones, in terms of resources used to protect the network, the failure recovery time and the request rejection ratio

Enhanced multi-layer protection in multi-service GMPLS networks

This paper focuses on QoS routing with protection in an MPLS network over an optical layer. In this multi-layer scenario each layer deploys its own fault management methods. A partially protected optical layer is proposed and the rest of the network is protected at the MPLS layer. New protection schemes that avoid protection duplications are proposed. Moreover, this paper also introduces a new traffic classification based on the level of reliability. The failure impact is evaluated in terms of recovery time depending on the traffic class. The proposed schemes also include a novel variation of minimum interference routing and shared segment backup computation. A complete set of experiments proves that the proposed schemes are more efficient as compared to the previous ones, in terms of resources used to protect the network, failure impact and the request rejection ratio

Assessing the Political Viability of Labour Market Reform: The Case of Employment Protection

We analyze the political support for employment protection legislation. Unlike my previous work on the same topic, this paper pays a lot of attention to the role of obsolescence in the growth process. In voting in favour of employment protection, incumbent employees trade off lower living standards (because employment protection maintains workers in less productive activities) against longer job duration. The support for employment protection will then depend on the value of the latter relative to the cost of the former. We highlight two key deeterminants of this trade-off: first, the workers' bargaining power, second, the economy's growth rate-more precisely its rate of creative destruction.

Employment Protection, International Specialization, and Innovation

We develop a model to analyse the implications of firing costs on incentives for R&D and international specialization. The Key idea is paying the firing cost, the country with a rigid labor market will tend to produce relatively secure goods, at a late stage of their product life cycle. Under international trade, an international product cycle emerges where, roughly, new goods are first produced in the low firing cost country will specialize in 'secondary innovations', that is, improvements in existing goods, while the low firing cost country will more specialize in 'primary innovation', that is, invention of new goods.

Assesing the political viability of labour market reform: The case of employment protection

We analyze the political support for employment protection legislation.Unlike my previous work on the same topic, this paper pays a lot ofattention to the role of obsolescence in the growth process.In voting in favour of employment protection, incumbent employeestrade off lower living standards (because employment protectionmaintains workers in less productive activities) against longer jobduration. The support for employment protection will then depend onthe value of the latter relative to the cost of the former. Wehighlight two key deeterminants of this trade-off: first, the workers'bargaining power, second, the economy's growth rate-more preciselyits rate of creative destruction.

Effects of employment protection and product market regulations on the Italian labor market

Labor market regulations have often being blamed for high and persistentunemployment in Europe, but evidence on their impact remains mixed. Morerecently, attention has turned to the impact of product market regulationson employment growth. This paper analyzes how labor and product marketregulations interact to affect turnover and employment. We present a matchingmodel which illustrates how barriers to entry in the product market mitigatethe impact of labor market deregulation. We, then, use the Italian SocialSecurity employer-employee panel to study the interaction between barriersto entry and dismissal costs. We exploit the fact that costs for unjustdismissals in Italy increased for firms below 15 employees relative to biggerfirms after 1990. We find that the increase in dismissal costs after 1990decreased accessions and separations in small relative to big firms,especially for women. Moreover, consistent with our model, we find evidencethat the increase in dismissal costs had smaller effects on turnover for womenin sectors faced with strict product market regulations.

The political economy of employment protection

This paper develops a model of job creation and job destruction in agrowing economy with embodied technical progress, that we use toanalyze the political support for employment protection legislationssuch as the ones that are observed in most European countries.We analyze the possibility of Condorcet cycles due to the fact thatworkers about to become unemployed prefer both an increase and areduction in firing costs over the status quo. Despite this problem, we show the existence of local, and sometimes global majority winners.In voting in favour of employment protection, incumbent employeestrade off lower living standards (because employment protectionmaintains workers in less productive activities) against longer job duration. We show that the gains from, and consequently the politicalsupport for employment protection (as defined by maximunjob tenure) are larger, the lower the rate of creative destruction and the largerthe worker's bargaining power. Numerical simulations suggest a hump-shaped response of firing costs to these variables, as well as negative impact of exogeneous turnover on employment protection.