adverse selection and statistical discrimination statistical discrimination occurs when a characteristic such as sex is used as an indicator of the risk group of an individual the theory of adverse selection is used to explain the occurrence of statistical discrimination a model of the market for collision insurance which is based on the theory of adverse selection is estimated on canadian data the results suggest that adverse selection occurs in this market simulations of the effect of prohibiting sexual discrimination in the 21 24 age group indicate that the premiums for single females would increase substantially and that a significant proportion would no longer purchase collision insurance

the welfare implications of moral hazard and adverse selection in competitive insurance markets i model a competitive insurance market with both moral hazard and adverse selection and analyze the effect on welfare when both problems are present simultaneously an examination of the interaction between these two problems leads to two hypotheses first the nature of the equilibrium contracts is such that each problem partially offsets the welfare loss associated with the other and second the degree to which this occurs increases as agents become more heterogeneous simulation results overwhelmingly support both hypotheses

modeling the co movements between crude oil and refined petroleum markets abstract in this paper we investigate two types of asymmetries i e the asymmetry in the lower and upper tail dependences and the asymmetry in the propagation of crisis bubble between crude oil market and refined petroleum markets based on copula models thirteen copula models with different types of dependence structures and time varying dependence parameters are considered we find that in general the malm copula fits our sample data best based on aic criterion we find that lower and upper tail dependences are both positive indicating that crude oil and refined product markets tend to move together using the asymmetric copulas we find asymmetry in tail dependence between crude oil and heating oil returns and that between crude oil and jet fuel returns interestingly upper tail dependence is significantly greater than the lower tail dependence for the pre crisis period while the result is reversed for the post crisis period finally although our data prefers the nonexchangeable malm copula the asymmetry in the propagation of crisis bubble between crude oil and refined product returns is very weak

persistence of interindustry wage differentials a reexamination using matched worker firm panel data we estimate interindustry wage differentials using new french longitudinal data that allow a tracking of workers and their firms over time we find that when measured on a cross sectional basis they primarily reflect the interindustry variations in unmeasured labor quality however interindustry wage differentials are only a minor component of interfirm wage differentials the average differential in wages paid to the same workers by different firms is about 20 30 in a given industry wage policies are more favorable to workers in large capital intensive firms

adverse selection repeated insurance contracts and announcement strategy in this note we present a strategy which relies on multi period contracts and on a self selection mechanism which induces the insured to announce his true risk in the first period thus eliminating inefficiency due to adverse selection

estimating value at risk of crude oil price and its spillover effect using the ged garch approach estimation has been carried out using garch type models based on the generalized error distribution ged for both the extreme downside and upside value at risks var of returns in the wti and brent crude oil spot markets furthermore according to a new concept of granger causality in risk a kernel based test is proposed to detect extreme risk spillover effect between the two oil markets results of an empirical study indicate that the ged garch based var approach appears more effective than the well recognized hsaf i e historical simulation with arma forecasts moreover this approach is also more realistic and comprehensive than the standard normal distribution based var model that is commonly used results reveal that there is significant two way risk spillover effect between wti and brent markets supplementary study indicates that at the 99 confidence level when negative market news arises that brings about a slump in oil price return historical information on risk in the wti market helps to forecast the brent market conversely it is not the case when positive news occurs and returns rise historical information on risk in the two markets can facilitate forecasts of future extreme market risks for each other these results are valuable for anyone who needs evaluation and forecasts of the risk situation in international crude oil markets

search theoretic models of the labor market a survey we survey the literature on search theoretic models of the labor market we show how this approach addresses many issues including the following why do workers sometimes choose to remain unemployed what determines the lengths of employment and unemployment spells how can there simultaneously exist unemployed workers and unfilled vacancies what determines aggregate unemployment and vacancies how can homogeneous workers earn different wages what are the tradeoffs firms face from different wages how do wages and turnover interact what determines efficient turnover we discuss various modeling choices concerning wage determination and the meeting process including recent models of directed search

hiring churn and the business cycle hires occur for two reasons to grow a business and to replace those who have left churn churn is an important part of employment dynamics allowing workers to move to their most productive use we present evidence on churn from the job openings and labor turnover survey jolts churn is procyclical during the 2007 09 recession four fifths of hiring reductions are associated with reduced churn not with reductions in job creation we estimate that the cost of reduced churn is about two fifths of a percentage point of gdp annually throughout the three and one half year period since the beginning of the recession

monopsonistic competition low wage labour markets and minimum wages an empirical analysis abstractthis article investigates the degree of monopsony power of employers in different industries against the background of a statutory minimum wage introduction in germany in january 2015 a semi structural estimation approach is employed based on a dynamic model of monopsonistic competition the empirical analysis relies on a linked employer employee data set which allows to control for observed heterogeneity both on the worker and on the firm side the results show important differences in monopsonistic competition among low wage industries while retailing the hotel and restaurant industry as well as agriculture can be described as monopsonistic labour markets this is not true for other services and manufacturing of food products from a policy point of view the introduction of a uniform minimum wage may therefore lead to different employment reactions in industries with a similar minimum wage bite

optimal multiperiod contracts and the gain from enduring relationships under private information informational asymmetries can play a key role in explaining the existence and nature of multiperiod contracts in an illustrative risk sharing model even relatively short two period contracts can be mutually beneficial if there is private information though one period contracts suffice otherwise further contracts which are pareto optimal relative to the environment and the information structure are defined and partially characterized an example illustrates how otherwise inefficient intertemporal tie ins can be used optimally to mitigate incentive problems the obvious borrowing lending schemes are not private information pareto optimal in these period by period actions are not sufficiently constrained discounting affects the form of the optimal contract but none of these qualitative conclusions

dynamics of oil price precious metal prices and exchange rate this study examines the co movements and information transmission among the spot prices of four precious metals gold silver platinum and palladium oil price and the us dollar euro exchange rate we find evidence of a weak long run equilibrium relationship but strong feedbacks in the short run the spot precious metal markets respond significantly but temporarily to a shock in any of the prices of the other metal prices and the exchange rate furthermore we discover some evidence of market overreactions in the palladium and platinum cases as well as in the exchange rate market in conclusion whether there are overreactions and re adjustments or not investors may diversify at least a portion of the risk away by investing in precious metals oil and the euro policy implications are provided

a copula garch approach for analyzing dynamic conditional dependency structure between liquefied petroleum gas freight rate product price arbitrage and crude oil price abstract global liquefied petroleum gas lpg trade shows an increasing trend but is under researched this paper focuses on the lpg market and aims to model the dependence dynamics among lpg freight rates crude oil price and propane location arbitrage conditional copula garch model is applied to estimate dependencies different types of copulas with both time invariant and time varying dependence structures are fitted and their suitability has been compared the findings suggest that firstly baltic lpg blpg freight rate and the arbitrage between propane far east and middle east prices have conditional time varying dependence and the dependence is higher in market downturns furthermore blpg and the arbitrage between far east and us propane prices have symmetric dependence and such a relationship has strengthened since 2013 secondly middle east propane price is found to have the strongest correlation with crude oil prices compared to far east and us propane prices indicating higher sensitivity to crude oil price changes last but not least the relationship between crude oil and blpg is relatively weak and mostly positive

the empirical role of the exchange rate on the crude oil price formation this paper adopts a novel empirical approach to the crude oil price formation for the purpose of understanding the price reactions of opec member countries to changes in the exchange rate of the us dollar against other major currencies and prices of other members the results are broadly consistent with the view of the absence of a unified opec determined price in the international crude market literature in addition the results also highlight a cross regional dimension of the crude oil market

monopsony power in the market for nurses estimates are presented of the inverse elasticity of supply of nursing services to the individual hospital a quantity which is a natural measure of employer market power the estimates corresponding to employment changes taking place over one year are quite high in the neighborhood of 0 79 and even for changes taking place over three years are substantial in the neighborhood of 0 26 the estimates do not significantly differ for hospitals in major metropolitan areas and do not depend very sensitively on the assumed form of the oligopsony equilibrium this abstract was borrowed from another version of this item

oil price fluctuations and u s dollar exchange rates adding oil prices to the monetary model of exchange rates we find that oil prices significantly explain movements in the value of the u s dollar usd against major currencies from the 1970s to 2008 our long run and forecasting results are remarkably consistent with an oil exchange rate relationship increases in real oil prices lead to a significant depreciation of the usd against net oil exporter currencies such as canada mexico and russia on the other hand the currencies of oil importers such as japan depreciate relative to the usd when the real oil price goes up

commodity currencies and commodity prices modelling static and time varying dependence abstractthis article employs the copula approach to study the relationship between exchange rates and commodity prices for large commodity exporters using data for the nominal exchange rates of four commodity currencies australian canadian and new zealand dollars and norwegian krone against the us dollar and the relevant country specific commodity price indices constructed on a daily basis we find 1 a positive dependence between the values of commodity currencies and commodity indices i e a commodity index increases when a respective currency appreciates and provides several explanations for this finding 2 no major asymmetries in the tail dependence for most pairs of exchange rates and commodity indices and 3 a pronounced increase in the time varying tail dependence following the global financial crisis

adverse selection private information and lowballing in insurance markets recent contributions to the adverse selection literature have focused on a multiperiod competitive environment in this setting a clean distinction arises between the predictions of competing models cooper and hayes extend the model of rothschild and stiglitz to multiple periods the result is a self selecting equilibrium characterized by price highballing or systematically overcharging new business kunreuther and pauly suggest that information asymmetries between competing insurance firms render such price quantity policies infeasible their model results in a pooling equilibrium that is characterized by price lowballing or systematically undercharging new business our evidence is consistent with the kunreuther and pauly model and reveals the persistence of adverse selection in the automobile insurance market copyright 1990 by the university of chicago

the economic value of co movement between oil price and exchange rate using copula based garch models article i nfo the us dollar is used as the primary currency of international crude oil trading as such the recent substantial depreciation in the us dollar has resulted in a corresponding increase in crude oil prices in addition oil price and exchange rate returns have been shown to be skewed and leptokurtic and to exhibit an asymmetric or tail dependence structure therefore this study proposes dynamic copula based garch models to explore the dependence structure between the oil price and the us dollar exchange rate more importantly an asset allocation strategy is implemented to evaluate economic value and confirm the efficiency of the copula based garch models in terms of out of sample forecasting performance a dynamic strategy based on the cgarch model with the student t copula exhibits greater economic benefits than static and other dynamic strategies in addition the positive feedback trading activities are statistically significant within the oil market but this information does not enhance the economic benefits from the perspective of an asset allocation decision finally a more risk averse investor generates a higher fee for switching from a static strategy to a dynamic strategy based on copula based garch models

categorizing risks in the insurance industry this paper analyzes the welfare implications of imperfectly categorizing risks in the insurance industry under conditions of asymmetric information firms initially unable to distinguish the risk type of individuals are provided with imperfect information concerning risk membership the paper then compares various wilson type equilibria to determine the welfare implications of firms imperfectly categorizing risks it is shown that only in the case where the initial equilibrium is of the nash no subsidy type is there a pareto type improvement in welfare

interaction between oil and us dollar exchange rate nonlinear causality time varying influence and structural breaks in volatility abstractthis article examines the nonlinear granger causality and time varying influence between crude oil prices and the us dollar usd exchange rate using the hiemstra and jones hp test the diks and panchenko dp test and the time varying parameter structural vector autoregression model by applying the iterated cumulative sums of squares icss algorithm and the dcc garch model the effects of structural breaks in volatility of the two markets are also investigated the empirical analysis indicates that first crude oil prices are the nonlinear granger cause of the usd exchange rate but not vice versa second the usd exchange rate exerts a stronger and more stable negative influence on crude oil prices in the short term and the influence gradually weakens after 2012 finally ignoring structural breaks can increase the negative volatility correlation between the oil and usd exchange rate markets which is particularly remarkable during the financial crisis

adverse selection and finite horizon insurance contracts abstract we use a particular contract to analyze three issues regarding adverse selection monopoly and the use of time within a finite horizon the description and existence of an epsilon equilibrium equilibrium the achievement of a nash equilibrium and the optimality of risk revelation among the results obtained we show that at equilibrium low risk individuals buy full insurance most of the time and high risk individuals always buy full insurance we also show that the equilibrium with risk revelation is a nash equilibrium these results are compared with those of the self selection mechanism stiglitz 1977 and of the equilibrium under moral hazard radner 1981

monopsony power and relative wages in the labor market for nurses this paper examines the thesis that monopsony power is an important determinant of wages in nursing labor markets using data from the 1985 93 current population surveys measures of relative nurse non nurse wage rates for 252 labor markets are constructed contrary to predictions from the monopsony model no positive relationship exists between relative nursing wages and hospital density or market size nor is support found for the presence of monopsony power based on evidence on union wage premiums slopes of experience profiles or the mix of rn to total hospital employment

differences in labor supply to monopsonistic firms and the gender pay gap an empirical analysis using linked employer employee data from germany this article investigates women s and men s labor supply to the firm within a semistructural approach based on a dynamic model of new monopsony using methods of survival analysis and a large linked employer employee data set for germany we find that labor supply elasticities are small 1 9 3 7 and that women s labor supply to the firm is less elastic than men s which is the reverse of gender differences in labor supply usually found at the level of the market our results imply that at least one third of the gender pay gap might be wage discrimination by profit maximizing monopsonistic employers

feedback traders and stock return autocorrelations evidence from a century of daily data the authors investigate whether the degree of autocorrelation shown by high frequency stock returns changes with volatility this may result from nontrading effects feedback trading strategies or variable risk aversion the authors results indicate that when volatility is low daily and hourly stock returns exhibit positive autocorrelation but when it is high returns exhibit negative serial correlation they also find an important asymmetry negative serial correlation is more likely after price declines this is consistent with price declines being more likely to induce positive feedback trading the authors also find no significant relation between margin requirements and the autocorrelation of returns copyright 1992 by royal economic society

risk dependence of covar and structural change between oil prices and exchange rates a time varying copula model abstract this paper analyses the dynamic dependence between wti crude oil and the exchange rates of the united states and china taking structural changes of dependence into account by using six time varying copula models upside and downside conditional values at risk covars are introduced specifically to measure the upward and downward risk dependences between oil prices and exchange rates the findings indicate a structural break point of dependence exists between daily or weekly crude oil and the us dollar index the dependence between crude oil and the rmb exchange rate is faintly positive with lower tail dependence while the dependence between crude oil and the us dollar index is significantly negative with lower upper and upper lower tail dependence finally the covars results show that there is significant risk spillover from crude oil to chinese and the us exchange rate markets furthermore the spillover effect is significantly asymmetry in chinese exchange rate market in response to rising and falling oil returns while the asymmetry of spillover effect for the us dollar index is not significant

the assignment of workers to jobs in an economy with coordination frictions this paper studies the assignment of heterogeneous workers to heterogeneous jobs owing to the anonymity of a large labor market workers use mixed strategies when applying for jobs this randomness generates coordination frictions two workers may apply for a particular job whereas an identical job gets no applications the model generates assortative matching with a positive but imperfect correlation between matched workers and firms types it predicts that a worker s wage is increasing in her job s productivity and a firm s profit is increasing in its employees productivity the model also yields a version of the welfare theorems

adverse selection and statistical discrimination an analysis of canadian automobile insurance abstract statistical discrimination occurs when a characteristic such as sex is used as an indicator of the risk group of an individual the theory of adverse selection is used to explain the occurrence of statistical discrimination a model of the market for collision insurance which is based on the theory of adverse selection is estimated on canadian data the results suggest that adverse selection occurs in this market simulations of the effect of prohibiting sexual discrimination in the 21 24 age group indicate that the premiums for single females would increase substantially and that a significant proportion would no longer purchase collision insurance

the union impact on hospital wages and fringe benefits this paper uses 1977 data from a national probability sample of 1 200 hospitals to estimate the effect of unions on wages and fringe benefits in four occupations registered nurses practical nurses secretaries and housekeepers the results show that unionization has a significant impact on wages that increases with the length of time collective bargaining has been in effect at the individual hospital the overall wage effect of unions is about 8 percent for both types of nurses and 11 to 12 percent for secretaries and housekeepers employed in hospitals the authors also estimate an equation for hospital wide fringe benefits which shows that such benefits are positively related to the percent of full time employees in the four occupations covered by union contracts

do employers have more monopsony power in slack labor markets this article confronts monopsony theory s predictions regarding workers wages with observed wage patterns over the business cycle using german administrative data for the years 1985 to 2010 and a

oil price dynamics and speculation a multivariate financial approach abstract this paper assesses empirically whether speculation affects oil price dynamics the growing presence of financial operators in the oil markets has led to the diffusion of trading techniques based on extrapolative expectations strategies of this kind foster feedback trading that may cause considerable departures of prices from their fundamental values we investigate this hypothesis using a modified capm following shiller 1984 and sentana and wadhwani 1992 first a univariate garch 1 1 m is estimated assuming the risk premium to be a function of the conditional oil price volatility the single factor model however is outperformed by the multifactor icapm merton 1973 which takes into account a larger investment opportunity set analysis is then carried out using a trivariate ccc garch m model with complex nonlinear conditional mean equations where oil price dynamics are associated with both stock market and exchange rate behavior we find strong evidence that oil price shifts are negatively related to stock price and exchange rate changes and that a complex web of time varying first and second order conditional moment interactions affects both the capm and feedback trading components of the model despite the difficulties we identify a significant role played by speculation in the oil market which is consistent with the observed large daily upward and downward shifts in prices a clear evidence that it is not a fundamental driven market thus from a policy point of view given the impact of volatile oil prices on global inflation and growth actions that monitor speculative activities on commodity markets more effectively are to be welcomed

the euro and european financial market dependence a time varying copula model is used to investigate the impact of the introduction of the euro on the dependence between 17 european stock markets during the period 1994 2003 the model is implemented with a gjr garch ma t model for the marginal distributions and the gaussian copula for the joint distribution which allows capturing time varying non linear relationships the results show that within the euro area market dependence increased after the introduction of the common currency only for large equity markets such as in france germany italy the netherlands and spain structural break tests indicate that the increase in financial market dependence started around the beginning of 1998 when euro membership was determined and the relevant information was announced the uk and sweden but not other european countries outside the euro area are found to exhibit an increase in equity market co movement which is consistent with the interpretation that these countries may be expected to join the euro in the future

commodity futures and market efficiency we propose a comprehensive treatment of the leverage effect i e the relationship between returns and volatility of a specific asset focusing on energy commodities futures namely brent and wti crude oils natural gas and heating oil after estimating the volatility process without assuming any specific form of its behavior we find the volatility to be long term dependent with the hurst exponent on a verge of stationarity and non stationarity to overcome such complication we utilize the detrended cross correlation and the detrending moving average cross correlation coefficients and we find the standard leverage effect for both crude oils and heating oil for natural gas we find the inverse leverage effect additionally we report that the strength of the leverage effects is scale dependent finally we also show that none of the effects between returns and volatility is detected as the long term cross correlated one these findings can be further utilized to enhance forecasting models and mainly in the risk management and portfolio diversification

are benefits from oil stocks diversification gone new evidence from a dynamic copula and high frequency data abstract oil is perceived as a good diversification tool for stock markets to fully understand this potential we propose a new empirical methodology that combines generalized autoregressive score copula functions with high frequency data and allows us to capture and forecast the conditional time varying joint distribution of the oil stocks pair accurately our realized garch with time varying copula yields statistically better forecasts of the dependence and quantiles of the distribution relative to competing models employing a recently proposed conditional diversification benefits measure that considers higher order moments and nonlinear dependence from tail events we document decreasing benefits from diversification over the past ten years the diversification benefits implied by our empirical model are moreover strongly varied over time these findings have important implications for asset allocation as the benefits of including oil in stock portfolios may not be as large as perceived

repeated insurance contracts and moral hazard abstract an attempt is made to account for the frequently observed phenomenon of insurance companies offering discounts to clients who possess a favorable record of past claims we argue that such discounts provide a mechanism which enables both insurer and insured to counteract the inefficiency which arises from moral hazard

market risk in commodity markets a var approach we put forward value at risk models relevant for commodity traders who have long and short trading positions in commodity markets in a 5 year out of sample study on aluminium copper nickel brent crude oil and wti crude oil daily cash prices and cocoa nearby futures contracts we assess the performance of the riskmetrics skewed student aparch and skewed student arch models while the skewed student aparch model performs best in all cases the skewed student arch model delivers good results and its estimation does not require non linear optimization procedures as such this new model could be relatively easily integrated in a spreadsheet like environment and used by market practitioners

the relationship between crude oil spot and futures prices cointegration linear and nonlinear causality the present study investigates the linear and nonlinear causal linkages between daily spot and futures prices for maturities of one two three and four months of west texas intermediate wti crude oil the data cover two periods october 1991 october 1999 and november 1999 october 2007 with the latter being significantly more turbulent apart from the conventional linear granger test we apply a new nonparametric test for nonlinear causality by diks and panchenko after controlling for cointegration in addition to the traditional pairwise analysis we test for causality while correcting for the effects of the other variables to check if any of the observed causality is strictly nonlinear in nature we also examine the nonlinear causal relationships of vecm filtered residuals finally we investigate the hypothesis of nonlinear non causality after controlling for conditional heteroskedasticity in the data using a garch bekk model whilst the linear causal relationships disappear after vecm cointegration filtering nonlinear causal linkages in some cases persist even after garch filtering in both periods this indicates that spot and futures returns may exhibit asymmetric garch effects and or statistically significant higher order conditional moments moreover the results imply that if nonlinear effects are accounted for neither market leads or lags the other consistently videlicet the pattern of leads and lags changes over time

an information diffusion based model of oil futures price abstract inspired by the increasing evidence of financialization speculation in commodity pricing this paper constitutes a first attempt to build an information diffusion based asset pricing framework for the oil futures market with gradual information dissemination slowly decaying uncertainty about the asset s future fundamentals generates persistent conditional volatility and a drift in asset return volatility based proxies for information flows are proposed to examine empirically the asset pricing implications the results confirm a significant intertemporal relationship between return on the price of oil futures information diffusion and volatility components an important implication of our study is that the slow diffusion of information generates predictability in price dynamics a forecasting model is then constructed and tested in relation to our theory it is found that the lagged series of the pricing factors possess significant predicting power for returns

is there monopsonistic discrimination against immigrants the authors investigate immigrants and natives labor supply to the firm within an estimation approach based on a dynamic monopsony framework applying duration models that account for unobserved worker heterogeneity to a large administrative employer employee data set for germany they find that immigrants supply labor less elastically to firms than do natives under monopsonistic wage setting the estimated elasticity differential predicts a 7 7 log points wage penalty for immigrants thereby accounting for the entire unexplained native immigrant wage differential of 5 8 to 8 2 log points when further distinguishing immigrant groups differing in their time spent in the german labor market their immigration cohort and their age at entry the authors find that the observed unexplained wage differential is larger for those groups that show a larger elasticity differential relative to natives these findings not only suggest that search frictions are a likely cause of employers more pronounced monopsony

monopsony power in migrant labor markets evidence from the united arab emirates by exploiting a reform in the united arab emirates that relaxed restrictions on employer transitions we provide new estimates of the monopsony power of firms over migrant workers our results show that the reform increased incumbent migrants earnings and firm retention this occurs despite an increase in employer transitions and is driven by a fall in country exits while the outcomes of incumbents improved the reform decreased demand for new migrants and lowered their earnings these results are consistent with a model of monopsony in which firms face upward sloping labor supply curves for both new recruits in source countries and incumbent migrants

unions and hospitals some unresolved issues abstract this article investigates the impact of unions on the wages of hospital workers our ols findings agree with previous ols studies unions increase registered nurses rns wages by five percent and by about eight to ten percent for other hospital workers by contrast we find after correcting for selectivity bias in hospital unionization status a direct union effect of about twenty percent on rn wages and in excess of thirty percent on wages of other hospital workers while the results based on selectivity bias adjustments make us uneasy we do not reject them out of hand we also find indirect union effects up to five percent by other unionized occupations within a hospital and up to ten percent by other unionized hospitals in the local labor market prospective reimbursement programs have a negative impact on the wages of hospital workers but are only significant for non unionized occupations our three empirical tests of monopsony all reject the view that monopsony is a factor in hospital wage setting even considering the large union effects based on selectivity bias adjustment we conclude that unions have been a minor contributor to hospital cost inflation

new market power models and sex differences in pay in the context of certain models it is possible to infer the elasticity of labor supply to the firm from the elasticity of the quit rate with respect to the wage we use this strategy to estimate the elasticity of labor supply for men and women workers at a chain of grocery stores identifying separation elasticities from differences in wages and separation rates across different job titles within the firm we estimate that women have lower elasticities so a robinson style monopsony model can explain reasonably well the lower relative pay of women in the retail grocery industry