Progress Towards to Equity Market Integration in Eastern Europe

The advent of the European Union has decreased the diversification benefits available from country based equity market indices in the region. This paper measures the increase in stock integration between the three largest new EU members (Hungary, the Czech Republic and Poland who joined in May 2004) and the Euro-zone. A potentially gradual transition in correlations is accommodated in a single VAR model by embedding smooth transition conditional correlation models with fat tails, spillovers, volatility clustering, and asymmetric volatility effects. At the country market index level all three Eastern European markets show a considerable increase in correlations in 2006. At the industry level the dates and transition periods for the correlations differ, and the correlations are lower although also increasing. The results show that sectoral indices in Eastern European markets may provide larger diversification opportunities than the aggregate market. JEL classifications: C32; C51; F36; G15 Keywords: Multivariate GARCH; Smooth Transition Conditional Correlation; Stock Return Comovement; Sectoral correlations; New EU Members

The Benefits of building barrier-free: a contingent valuation of accessibilty as an attribute of housing

Estimating the social benefits of barrier-free building has always required indirect solutions, such as calculating the savings in social services, hospitalisation or adaptations made possible by the increase in accessibility. This research uses the Contingent Valuation Method to gain a direct appraisal of the benefits from barrier-free housing. When comparing two similar dwellings, with the only difference being their accessibility conditions, the 1,007 randomly chosen households that answered the direct survey would pay, on average 12.5 per cent more for being barrier-free. None of the different appraisals made on accessibility costs reaches 5 per cent. This confirms the social profitability of building without barriers and shows the potential size of the private market for those housing developers that meet the demand. Accessibility is a general concern, an economic good or attribute that most households value, irrespective of the physical conditions of their members.

Creación de alternativas productivas al modelo de la soja RR a partir de los criterios definidos por la población de Basavilbaso, Argentina

El consumo desmesurado de energía por parte de los países del Norte lleva a la creación de una deuda ecológica en los países del Sur. Ésta se debe, entre otros factores, al modelo agrario introducido con la “Nueva Revolución Verde”. En Argentina los monocultivos de sojaRR están potenciando la pérdida de la soberanía alimentaria en todo el país. Al mismo tiempo, las políticas energéticas europeas van a provocar una subida en la demanda de materias primas para la producción de biocombustible, lo que llevará a un aumento de la superficie de sojaRR en Argentina. El objetivo de este estudio es la creación de alternativas productivas mediante la implicación de la población de un municipio argentino. A través de la metodología de análisis social “CLIP” se han identificado los diferentes actores implicados en el modelo agrario que a lo largo del trabajo plantean propuestas de cambio para el sector agropecuario de su municipio. El resultado ha sido el planteamiento de cuatro grandes alternativas: la agricultura orgánica, la rotación de actividades, las producciones avícolas y apícolas y la diversificación de cultivos energéticos. Viendo que la tipología de consumo del Norte afecta directamente en la vida de los países del Sur, en todas las alternativas propuestas en este caso de estudio, se acaba por apostar por la creación de redes productivas y comerciales locales que potencien los beneficios en los países productores sin abandonar las posibilidades del mercado internacional.

A New open economy macroeconomic model with endogenous portfolio diversification and firms entry

This paper provides a new benchmark for the analysis of the international diversi…cation puzzle in a tractable new open economy macroeconomic model. Building on Cole and Obstfeld (1991) and Heathcote and Perri (2009), this model speci…es an equilibrium model of perfect risk sharing in incomplete markets, with endogenous portfolios and number of varieties. Equity home bias may not be a puzzle but a perfectly optimal allocation for hedging risk. In contrast to previous work, the model shows that: (i) optimal international portfolio diversi…cation is driven by home bias in capital goods, independently of home bias in consumption, and by the share of income accruing to labour. The model explains reasonably well the recent patterns of portfolio allocations in developed economies; and (ii) optimal portfolio shares are independent of market dynamics.

Who benefits from parental leave in Spain? : a life course analysis

This paper analyses the extent to which individual and workplacecharacteristics and regional policies influence the use and duration ofparental leave in Spain. The research is based on a sample of 125,165people, and 6,959 parental leaves stemming from the ‘Sample ofWorking Life Histories’ (SWLH), 2006. The SWLH consists of administrative register data which include information from threedifferent sources: Social Security, Municipality and Income TaxRegisters. We adopt a simultaneous equations approach to analyse theuse (logistic regression) and duration (event history analysis) ofparental leave, which allows us to control for endogeneity and censoredobservations. We argue that the Spanish parental leave scheme increases gender and social inequalities insofar as reinforces genderrole specialization, and only encourages the reconciling of work andfamily life among workers with a good position in the labour market(educated employees with high and stable working status).

Do welfare benefits affect womens' choices of adult care giving?

The efficacy of social care, publicly and universally provided, has been contested from two different points of view. First, advocates of targeting social policy criticized the Matthew’s effect of universal provision and; second, theories arguing in favour of heterogeneous rationalities between men and women and, even different preferences among women, predict that universal provision of services is limiting women’s choices more than home allowances. The author tests both hypotheses and concludes that, at least in the case of adult care, women’s choices are significantly affected by women’s social positions and by the availability of public services. Furthermore, targeting through means-test eligibility criteria has no significant effect on inequality but, confirming the redistributive paradox, reduces women’s options.

Free Flows, Limited Diversification: Explaining the Fall and Rise of Stock Market Correlations, 1890-2001

Using a new dataset on capital account openness, we investigate why equity return correlations changed over the last century. Based on a new, long-run dataset on capital account regulations in a group of 16 countries over the period 1890-2001, we show that correlations increase as financial markets are liberalized. These findings are robust to controlling for both the Forbes-Rigobon bias and global averages in equity return correlations. We test the robustness of our conclusions, and show that greater synchronization of fundamentals is not the main cause of increasing correlations. These results imply that the home bias puzzle may be smaller than traditionally claimed.

Award errors and permanent disability benefits in Spain

There is a controversial debate about the effects of permanent disability benefits on labormarket behavior. In this paper we estimate equations for deserving and receiving disabilitybenefits to evaluate the award error as the difference in the probability of receiving anddeserving using survey data from Spain. Our results indicate that individuals aged between55 and 59, self-employers or working in an agricultural sector have a probability of receiving a benefit without deserving it significantly higher than the rest of individuals. We also find evidence of gender discrimination since male have a significantly higher probability of receiving a benefit without deserving it. This seems to confirm that disability benefits are being used as an instrument for exiting the labor market for some individuals approaching the early retirement or those who do not have right to retire early. Taking into account that awarding process depends on Social Security Provincial Department, this means that some departments are applying loosely the disability requirements for granting disability benefits.

The benefits of limited feedback in organizations

In most firms, managers periodically assess workers' performance. Evidence suggeststhat managers withhold information during these reviews, and some observersargue that this necessarily reduces surplus. This paper assesses the validity of thisargument when workers have career concerns. Disclosure has two effects: it exposesthe worker to uncertainty about future effort levels, but allows him to use current effortto influence his employer's beliefs about future effort. The surplus-maximizingdisclosure policy reveals output realizations in the center of the distribution, butnot in the tails. Thus, it is efficient for firms to reveal some but not all performanceinformation.

Unemployment vs. mismatch of talents: Reconsidering unemployment benefits

We develop an equilibrium search-matching model with risk-neutral agentsand two-sided ex-ante heterogeneity. Unemployment insurance has thestandard effect of reducing employment, but also helps workers to get a suitable job. The predictions of our simple modelare consistent with the contrasting performance of the labor market in Europeand US in terms of unemployment, productivity growth and wage inequality.To show this, we construct two fictitious economies with calibratedparameters which only differ by the degree of unemployment insurance andassume that they are hit by a common technological shock which enhancesthe importance of mismatch. This shock reduces the proportion of jobs whichworkers regards as acceptable in the economy with unemployment insurance(Europe). As a result, unemployment doubles in this economy.In the laissez-faire economy (US), unemployment remains constant,but wage inequality increases more and productivity grows less due to largermismatch. The model can be used to address a number of normative issues.

The provision on non-audit services by auditors: Let the market evolve and decide

The provision of non-audit services by auditors to their auditclients reduces total costs, increases technical competence and motivates more intense competition. Furthermore, theseservices do not necessarily damage auditor independence nor the quality of non-audit services. This assessment leads to recommending that legislative policy should aim at facilitating the development and use of the safeguardsprovided by the free action of market forces. Regulation should thus aim to enable the parties-audit firms, self-regulatory bodies and audit clients-to discover through competitive market interaction both the most efficient mix of services and the corresponding quality safeguards, adjusting for the costs and benefits of each possibility. Particular emphasis is placed on the role played by fee income diversification and the enhancement, through disclosurerules, of market incentives to diversify.

Hybrid risk adjustment for pharmaceutical benefits

This paper analyses the application of hybrid risk adjustment versus either prospective orconcurrent risk adjustment formulae in the context of funding pharmaceutical benefits for thepopulation of an integrated healthcare delivery organization in Catalonia during years 2002 and2003. We apply a mixed formula and find that a hybrid risk adjustment model increasesincentives for efficiency in the provision of low risk individuals at health organizations not only asa whole but also at each internal department compared to only prospective models by reducingwithin-group variation of drug expenditures.

The great diversification and its undoing

We investigate the hypothesis that macroeconomic fluctuations are primitively theresults of many microeconomic shocks, and show that it has significant explanatorypower for the evolution of macroeconomic volatility. We define ?fundamental? volatilityas the volatility that would arise from an economy made entirely of idiosyncratic microeconomicshocks, occurring primitively at the level of sectors or firms. In its empiricalconstruction, motivated by a simple model, the sales share of different sectors vary overtime (in a way we directly measure), while the volatility of those sectors remains constant.We find that fundamental volatility accounts for the swings in macroeconomicvolatility in the US and the other major world economies in the past half century. Itaccounts for the ?great moderation? and its undoing. Controlling for our measure offundamental volatility, there is no break in output volatility. The initial great moderationis due to a decreasing share of manufacturing between 1975 and 1985. The recentrise of macroeconomic volatility is due to the increase of the size of the financial sector.We provide a model to think quantitatively about the large comovement generated byidiosyncratic shocks. As the origin of aggregate shocks can be traced to identifiablemicroeconomic shocks, we may better understand the origins of aggregate fluctuations.

Socio-economic benefits of using space technologies to monitor and respond to earthquakes

Earthquakes represent a major hazard for populations around the world, causing frequent loss of life,human suffering and enormous damage to homes, other buildings and infrastructure. The Technology Resources forEarthquake Monitoring and Response (TREMOR) Team of 36 space professionals analysed this problem over thecourse of the International Space University Summer Session Program and published their recommendations in the formof a report. The TREMOR Team proposes a series of space- and ground-based systems to provide improved capabilityto manage earthquakes. The first proposed system is a prototype earthquake early-warning system that improves theexisting knowledge of earthquake precursors and addresses the potential of these phenomena. Thus, the system willat first enable the definitive assessment of whether reliable earthquake early warning is possible through precursormonitoring. Should the answer be affirmative, the system itself would then form the basis of an operational earlywarningsystem. To achieve these goals, the authors propose a multi-variable approach in which the system will combine,integrate and process precursor data from space- and ground-based seismic monitoring systems (already existing andnew proposed systems) and data from a variety of related sources (e.g. historical databases, space weather data, faultmaps). The second proposed system, the prototype earthquake simulation and response system, coordinates the maincomponents of the response phase to reduce the time delays of response operations, increase the level of precisionin the data collected, facilitate communication amongst teams, enhance rescue and aid capabilities and so forth. It isbased in part on an earthquake simulator that will provide pre-event (if early warning is proven feasible) and post-eventdamage assessment and detailed data of the affected areas to corresponding disaster management actors by means of ageographic information system (GIS) interface. This is coupled with proposed mobile satellite communication hubs toprovide links between response teams. Business- and policy-based implementation strategies for these proposals, suchas the establishment of a non-governmental organisation to develop and operate the systems, are included.