segregation exclusion and compensating transfers under a dynamic setting anas 2002 has shown that there exist equilibria with exclusion and the payments of economic transfers where whites and blacks are better off than in the case without them anas model is static so it does not consider important dynamics aspect of this phenomenon hence we have developed a dynamic general equilibrium model of segregation our main findings are there exists a path of transfers such as there is a dynamic equilibrium where whites and blacks are better off with exclusion and transfers and higher levels of prejudices imply lower levels of aggregated utility finally the effects of a prejudice shock can last between 2 and 30 years hence policymakers must pay attention to sudden positive prejudice shocks in order to implement policies to reduce their consequences

debt taxes and banks understanding the impact on banks capital structures of tax biases toward debt finance is critical to assessing policy responses to socially excessive bank leverage but there is no empirical evidence of its extent guided by some simple theory this paper explores this impact for a large panel of banks in 82 countries on average the tax sensitivity of banks leverage proves significant and about as large as for nonfinancial firms somewhat counterintuitively but as the theory suggests taxation has little impact on the use of hybrids banks holding smaller equity buffers and larger banks are noticeably less sensitive to tax

moral hazard and optimal subsidiary structure for financial institutions banks and related financial institutions often have two separate subsidiaries that make loans of similar type but differing risk for example a bank and a finance company or a good bank bad bank structure such bipartite structures may prevent risk shifting in which banks misuse their flexibility in choosing and monitoring loans to exploit their debt holders by insulating safer loans from riskier loans a bipartite structure reduces risk shifting incentives in the safer subsidiary bipartite structures are more likely to dominate unitary structures as the downside from riskier loans is higher or as expected profits from the efficient loan mix are lower

investment horizon risk and compensation in the banking industry this paper examines the relation between the investment horizon of banks and their ceo compensation and its consequences for risk and performance we find that banks with short term investment intensity pay more cash bonus exhibit higher risk and perform more poorly than banks with longer term investment intensity this evidence is broadly consistent with the view that short term means of compensation encouraged a short term investment focus which in turn led to both higher risk and resulted in poorer performance culminating in the sub prime crisis the inverse risk performance relation suggests pay schemes were incongruent with shareholders interest moreover pay arrangements used in banks prior to the subprime crisis exposed banks to the ex post settling up problem the clawback problem

unemployment during a recession and later earnings does the neighbourhood unemployment rate modify the association experience of unemployment is known to predict poorer future success in the labour market it is less well known how much this depends on the characteristics of the local social environment this paper builds on the supposition that the unemployment rate in the neighbourhood modifies the social processes linking personal unemployment to later labour market outcomes data from the helsinki metropolitan area in finland during and after a deep recession in the 1990s are used to analyse the effect of personal unemployment on later earnings by neighbourhood unemployment rate results indicate that the neighbourhood unemployment rate modifies the effect of personal unemployment a higher neighbourhood unemployment rate predicts lower later earnings especially for males a similar effect is not found in the case of employed residents

does neighborhood income mix affect earnings of adults new evidence from sweden this paper contributes to the literature on obtaining unbiased estimates of neighborhood effects explored in the context of a centralized social welfare state we employ a longitudinal database comprised of all working age adults in metropolitan sweden 1991 1999 to investigate the degree to which neighborhood income mix relates to subsequent labor incomes of adults and how this relationship varies by gender and employment status we control for unobserved time invariant individual characteristics by estimating a first difference equation of changes in average incomes between the 1991 1995 and 1996 1999 periods we further control for unobserved time varying characteristics through an analysis of non movers these methods substantially reduce the magnitude of the apparent effect of neighborhood shares of low middle and high income males nevertheless statistically and substantively significant neighborhood effects persist though relationships are nonlinear and vary by gender and employment status males who are not fully employed appear most sensitive to neighborhood economic mix in all contexts

racial discrimination in the labor market theory and empirics we review theories of race discrimination in the labor market taste based models can generate wage and unemployment duration differentials when combined with either random or directed search even when strong prejudice is not widespread but no existing model explains the unemployment rate differential models of statistical discrimination based on differential observability of productivity across races can explain the pattern and magnitudes of wage differentials but do not address employment and unemployment at their current state of development models of statistical discrimination based on rational stereotypes have little empirical content it is plausible that models combining elements of the search models with statistical discrimination could fit the data we suggest possible avenues to be pursued and comment briefly on the implication of existing theory for public policy jel j15 j31 j64 j71

black residential centralization and the spatial mismatch hypothesis abstract black residential centralization is found to be an important determinant of black employment status when estimated across metropolitan areas mas to avoid neighborhood selection the effects are greatest in large mas for the young and elderly and for individuals with less than a college education instrumental variable iv estimates support ordinary least squares ols results black residential centralization can account for 48 62 of the black white employment differential among 18 30 year olds living in large mas when estimated together black residential centralization job centralization and segregation all have large effects but the effects of black centralization and job centralization are considerably larger

the long term role of non traditional banking in profitability and risk profiles evidence from a panel of u s banking institutions abstract the goal of this empirical study is to identify empirically and on a panel basis how non traditional bank activities affect directly the profitability and risk profiles of the financial institutions involved in such activities through a dataset that covers 1725 u s financial institutions involved in non traditional bank activities spanning the period 2000 2013 and the methodology of panel cointegration the empirical findings document that non traditional bank activities exert a positive effect on both the profitability and the insolvency risk the results could be important for regulators given they could serve as a pre warning signal that sends a clear message to regulators about the potential systemic risk that exists within the financial markets

financial contracting under imperfect enforcement we develop a model ofnancial contracting under imperfect enforcement financial contracts are designed to keep entrepreneurs from diverting project returns but enforce ment is probabilistic and penalties are limited the model rationalizes the prevalence of straight debt and common stock and its predictions are consistent with a host of empirical capital structure regularities across countries acrossrms and across time

non linear target adjustment in corporate liquidity management an endogenous thresholds approach we provide new empirical evidence on nonlinear liquidity management in dutch firms our results reveal that liquidity adjustment from below the target is significantly faster than from above we find no evidence for bands of inaction around the target

incentive effects of the u s welfare system a review the author would like to acknowledge support for prior work on this topic from the u s department of health and human services and helpful comments from three anonymous referees rebecca blank howard chernick john fitzgerald irwin garfinkel peter gottschalk edward gramlich david greenberg judith gueron james heckman v joseph hotz robert hutchens michael keane frank levy larry mead michael murray robert plotnick anuradha rangarajan philip robins howard rolston jeffrey smith and daniel weinberg all opinions and errors are those of the author alone

banking a new monetarist approach we develop a model where i banks take deposits and make investments ii their liabilities facilitate third party transactions other models have i or ii not both although we argue they are intimately connected we show that they both emerge from limited commitment we describe an environment characterize desirable allocations and interpret the outcomes as banking arrangements banks are essential without them the set of feasible allocations is inferior as a technical contribution we characterize dynamically optimal credit allocations with frictions show they involve backloading and analyse how this interacts with banking we also confront the theory with economic history copyright 2013 oxford university press

oiling the palms restructuring of settlement schemes in malaysia and the new international trade regulations abstract the felda resettlement program in malaysia is internationally recognized as a success story in terms of cultivated area number of settlers and scope of vertical integration in the malaysian palm oil industry since the mid 1980s however a series of reorganizations of work and property rights in the settlement schemes have taken place it is argued here that the recent adjustments of felda are in accordance with the new rules for international regulation of agricultural production and trade in the wto international trade regulations increasingly influence the direction of socioeconomic and institutional struggles over rural reform programs in developing countries

is the correlation in welfare participation across generations spurious abstract this paper asks whether the observed correlation in welfare participation across generations reflects causal links or unobservables that are correlated across generations if the correlation is spurious then reducing one generations welfare participations will have no effect on the next generation the panel study of income dynamics is used to estimate two types of models that explicitly take account of correlated unobservables these models indicate that correlated unobservables are important in explaining the intergenerational correlation in welfare participation among blacks but not non blacks however the correlation across generations continues to be significant for blacks even after taking account of the correlated unobservables

job search and unemployment duration implications for the spatial mismatch hypothesis abstract this paper analyzes the relationship between unemployment duration and the spatial distribution of employment it builds on the spatial mismatch literature by analyzing the role of access in a job search framework a unique measure of access is created using municipal level employment growth and a matrix of commuting times for the pittsburgh metropolitan area individuals with more access to employment are found to have shorter unemployment spells the effect of access on unemployment duration is found to be sensitive to the specification of access

the political economy of stabilization commitment capacity and public response abstract political pressures are generally recognized as important in determining success or failure of economic stabilization and adjustment programs but there has been little comparative analysis of the politics of stabilization this study examines the factors affecting i political leaders commitment to stabilization measures often called political will ii governmental ability to implement stabilization measures and iii the responses of key interest groups and the public at large to those measures the study also discusses political implications of the design of programs and the attempted speed of stabilization and sketches the tactics available to governments to manage political risk including partial compensation persuasion diversion or obfuscation and containment of protest the discussion is based on case studies of stabilization efforts in five fairly poor small highly trade dependent countries ghana in the late 1960s and early 1970s and zambia kenya sri lanka and jamaica in the late 1970s and early 1980s a subsidiary theme within the broader discussion is the ways in which the political economy of stabilization may differ in such countries as compared to larger semi industrialized economies

customer discrimination and employment outcomes for minority workers this paper investigates the effects of customer discrimination on the employment and earnings of minorities particularly blacks data are used from a new survey of employers in four large metropolitan areas in the united states our results show that the racial composition of an establishment s customers has sizable effects on the race of who gets hired particularly in jobs that involve direct contact with customers and in sales or service occupations race of customers also affects wages with employees in establishments that have mostly black customers earning less than those in establishments with mostly white customers

moving to opportunity in boston early results of a randomized mobility experiment this paper examines the short run impacts of a change in residential neighborhood on the well being of low income families using evidence from a program in which eligibility for a housing voucher was determined by random lottery we examine the experiences of households at the boston site of moving to opportunity mto a demonstration program in five cities families in high poverty public housing projects applied to mto and were assigned by lottery to one of three groups experimental offered mobility counseling and a section 8 subsidy valid only in a census tract with a poverty rate of less than 10 percent section 8 comparison offered a geographically unrestricted section 8 subsidy or control offered no new assistance but continued to be eligible for public housing our quantitative analyses of program impacts uses data on 540 families from a baseline survey at program enrollment a follow up survey administered l to 3 5 years after random assignment and state administrative data on earnings and welfare receipt 48 percent of the experimental group and 62 percent of the section 8 comparison group moved through the mto program one to three years after program entry families in both treatment groups were more likely to be residing in neighborhoods with low poverty rates and high education levels than were families in the control group however while members of the experimental group were much more likely to be residing in suburban communities than were those in the section 8 group the lower program take up rate among the experimental group resulted in more families remaining in the most distressed communities households in both treatment groups experienced improvements in multiple measures of well being relative to the control group including increased safety improved health among household heads and fewer behavior problems among boys experimental group children were also less likely to be a victim of a personal crime to be injured or to experience an asthma attack there are no significant impacts of either mto treatment on the employment earnings or welfare receipt of household heads in the first three years after random assignment

the long run consequences of living in a poor neighborhood author s oreopoulos philip abstract many social scientists presume that the quality of the neigborhood to which children are exposed affects a variety of long run social outcomes i examine the effect on the long run labor market outcomes of adults who were assigned when young to substantially different public housing projects in toronto administrative data are matched to public housing addresses to track children from the program for over 15 years the main finding is that neighborhood quality plays little role in determining a youth s adult earnings education attainment or welfare participation but does affect exposure to crime while living in contrasting housing projects cannot explain large variances in labor market outcomes family differences as measured by sibling outcome correlations account for up to 30 percent of the total variance in the data

who is affected by neighbourhood income mix gender age family employment and income differences this paper analyses the degree to which the mixture of low middle and high income males in the neighbourhood affects the subsequent earnings of individuals and aims to test explicitly the degre

information reliability and a theory of financial intermediation this paper is an analysis of when it will be beneficial for agents engaged in the production of information to form coalitions the model is cast in a financial market framework thus leading to an identification of conditions sufficient for the existence of financial intermediaries intermediation is shown to improve welfare if informational asymmetries are present and the information generated to rectify these asymmetries is potentially unreliable the usual appeal to transactions costs to explain intermediation is not needed

commutes quits and moves abstract this paper analyzes the effects of commuting distance on quit and move propensities in metropolitan areas with conventional wage and housing price gradients most workers ordinarily move in order to lengthen commutes and quit in order to shorten them however quits and moves by workers whose residential choices are constrained by segregation should be relatively insensitive to commutes descriptive statistics and simultaneous probit estimates of move and quit propensities for white and black employees of a single firm confirm these predictions they demonstrate that long commutes encourage white quits and discourage white moves commute increases of one standard deviation would increase white quit propensities and reduce white move propensities by approximately 10 in contrast commutes by black employees have no significant effects on their quit and move propensities

the structure of multiple credit relationships evidence from u s firms when firms borrow from multiple concentrated creditors such as banks they appear to differentiate their allocation of borrowing in this paper we put forward hypotheses for this borrowing pattern based on incomplete contract theories and test them using a sample of small u s firms we find that firms with more valuable and more homogeneous assets differentiate borrowing more sharply across concentrated creditors moreover borrowing differentiation is inversely related to restructuring costs and positively related to firms informational transparency the results suggest that the structure of credit relationships is used to discipline creditors and entrepreneurs especially during corporate reorganizations

covenants and collateral as incentives to monitor although monitoring borrowers is thought to be a major function of financial institutions the presence of other claimants reduces an institutional lender s incentives to do this thus loan contracts must be structured to enhance the lender s incentives to monitor covenants make a loan s effective maturity and the ability to collateralize makes a loan s effective priority contingent on monitoring by the lender thus both covenants and collateral can be motivated as contractual devices that increase a lender s incentive to monitor these results are consistent with a number of stylized facts about the use of covenants and collateral in institutional lending modern finance theory suggests that financial intermediaries such as commercial banks insurance companies and finance companies monitor and control their borrowers on behalf of other investors 1 this article investigates how the loans made by these institutions can be structured so as to best enhance the institutions role as delegated monitors covenants and collateral are common features of loans made by financial institutions but these features are somewhat difficult to justify consider loan covenants clauses in a loan contract that require the borrower to take or refrain from various actions berlin and mester 1992 magee and sridhar 1994 and park 1994 show that by giving institutions the right to renegotiate or call loans when covenants are violated covenants serve as tripwires that enhance the flexibility and efficiency of financial contracting also as documented in smith and warner 1979 control rights from covenants reduce borrower adverse selection or moral hazard nevertheless by allowing institutions to demand repayment based on any information contractible or not

job information networks neighborhood effects and inequality this paper explores the theoretical and empirical literature to examine the use by different social groups of informal sources of information provided by friends relatives and acquaintances during job search and its consequences for the job market it also addresses the role of network structure and size the resource endowments of contacts and nature of the links between contacts to explain differences in the effects of job information networks in doing so the paper also turns to the sociology literature on job information networks and provides an economic perspective on such sociological concepts as strong versus weak ties inbreeding distance from structural holes etc the paper distinguishes between models of exogenous job information networks that is where individuals obtain job related information through a given social structure and endogenous job information networks which are social networks that result from individuals uncoordinated actions the paper pays special attention to such issues as physical and social proximity and sharing of information and discusses them in the context of the recent social interactions and neighborhood effects literature finally the paper outlines a model that integrates job information networks where interactions occur in business cycle frequencies with the dynamics of human capital formation which include the joint effects of parental community and neighborhood human capital and are set in life cycle frequencies for the purpose of organizing suggestions for future research and examining earned income inequality

race space and unemployment duration abstract this paper employs a special geo coded tabulation of the us panel study of income dynamics psid to examine the link between racial differences in residential location or residential segregation and racial disparities in unemployment durations for a sample of 1098 workers whose employment was terminated during the years 1990 through 1992 we estimate continuous time duration models explaining unemployment durations for recently unemployed individuals as a function of personal and household characteristics affecting worker productivity residential location characteristics at the time of job termination and measures of job accessibility we find that residential segregation affects racial differences in unemployment durations by exacerbating racial differences in job accessibility and neighborhood peer effects

bank competition and firm creation we investigate the effects of competition in the financial sector on the creation of firms in the nonfinancial sector explicitly allowing for heterogeneous effects across borrowers characterized by different degrees of asymmetric information we find evidence of a bell shaped relationship between bank competition and firm creation in addition consistently with theories arguing that competition may reduce the availability of credit to informationally opaque firms we find that bank competition results less favorable to the emergence of new firms in industrial sectors where informational asymmetries are more important

the paradox of pledgeability abstract we develop a model in which collateral serves to protect creditors from the claims of other creditors we find that paradoxically borrowers rely most on collateral when pledgeability is high this is when taking on new debt is easy which dilutes existing creditors creditors thus require collateral for protection against possible dilution by collateralized debt there is a collateral rat race but collateralized borrowing has a cost it encumbers assets constraining future borrowing and investment there is a collateral overhang our results suggest that policies aimed at increasing the supply of collateral can backfire triggering an inefficient collateral rat race likewise upholding the absolute priority of secured debt can exacerbate the rat race

the economic institution of international barter starting with the international debt crisis in the 1980s international barter increased substantially more recently barter has emerged in russia and south east asia this paper examines how barter can help highly indebted countries to finance imports if they cannot use standard credit arrangements we argue that payment in goods is easier to enforce than payment in money however debtors may pay with inferior quality products we rank goods with respect to these incentive properties and derive the economic institution of commodity money which explains the trade pattern in barter our theoretical predictions are consistent with data on barter contracts

in kind finance a theory of trade credit it is typically less profitable for an opportunistic borrower to divert inputs than to divert cash therefore suppliers may lend more liberally than banks this simple argument is at the core of our contract theoretic model of trade credit in competitive markets the model implies that trade credit and bank credit can be either complements or substitutes among other things the model explains why trade credit has short maturity why trade credit is more prevalent in less developed credit markets and why accounts payable of large unrated firms are more countercyclical than those of small firms

do neighborhoods affect hours worked evidence from longitudinal data using a confidential version of the nlsy79 we estimate large effects of neighborhood social characteristics and job proximity on labor market activity a variety of neighborhood social characteristics are associated with less market work social characteristics have nonlinear effects with the greatest impact in the worst neighborhoods social characteristics are also more important for less educated workers exploiting the panel aspects of our data we find that estimates that do not account for neighborhood selection on the basis of time invariant and time varying unobserved individual characteristics substantially overstate the social effects of neighborhoods but understate the effects of job access

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

debtor in possession financing and bankruptcy resolution empirical evidence abstract debtor in possession dip financing is unique secured financing available to firms filing for chapter 11 opponents of dip financing argue that it leads to overinvestment alternatively dip financing can allow funding for positive net present value projects that increase the likelihood of reorganization and reduce time in bankruptcy using a large sample of bankruptcy filings we find little evidence of systematic overinvestment dip financed firms are more likely to emerge from chapter 11 than non dip financed firms dip financed firms have a shorter reorganization period they are quicker to emerge and also quicker to liquidate the reorganization period is even shorter when prior lenders provide the dip financing

property rights protection corporate transparency and growth in countries with secure property rights corporate transparency improves investment efficiency and increases growth by alleviating information asymmetry however in countries with insecure property rights greater transparency can increase the risk of government expropriation therefore some firms that would benefit most from transparency cannot take full advantage of it as they set sub optimal transparency levels using data from 59 industries in 69 countries we find that in countries with weak property rights protection industries that would benefit the most from transparency exhibit worse investment efficiency and grow more slowly than industries that can efficiently operate at minimal levels of transparency

leverage across firms banks and countries we present new stylized facts on bank and rm leverage during the period 2000 2009 using internationally comparable micro level data from many countries we document the following patterns a there was an increase in leverage for investment banks prior to the sub prime crisis b there was no visible increase in leverage for the typical commercial bank and non nancial rm c o balance sheet items constitute a big fraction of assets especially for large commercial banks in the us whereas investment banks do not report these items d the leverage ratio is procyclical for investment banks and for large commercial banks in the us e banks in emerging markets with tighter bank regulation and stronger investor protection experienced signicantly less deleveraging during the crisis the results suggest that excessive risk taking before the crisis was not easily detectable because the risk involved the quality rather than the quantity of assets

cash holdings and credit risk intuition suggests that rms with higher cash holdings are safer and should have lower credit spreads yet empirically the correlation between cash and spreads is robustly positive and higher for lower credit ratings this puzzling nding can be explained by the precautionary motive for saving cash in our model endogenously determined optimal cash reserves are positively related to credit risk resulting in a spurious positive correlation between cash and spreads by contrast spreads are negatively related to the exogenous component of cash holdings independent of credit risk factors similarly although rms with higher cash reserves are less likely to default over short horizons longer term endogenously determined liquidity may be positively related to the probability of default our empirical analysis conrms these predictions suggesting that endogenous precautionary savings are central to understanding the eects of cash on credit risk

how do asset encumbrance and debt regulations affect bank capital and bond risk abstract we study how optimal bank capital and bond risk are influenced by asset encumbrance depositor preference and bail in resolution frameworks due to changes in optimal capital structure the net effect on bond debt risk and valuation is small the effects on shareholder value and public sector liability value are significant a gap between optimal and required capital represents a cost to shareholders and increases the risk of regulatory arbitrage the features of bank debt financing we analyze here may explain the stable cross sectional variation in bank capital documented in literature based on a small sample of european banks we find support for the central model predictions

bank liquidity providing in a real synergy management under a cap based valuation since banks often lend via commitments their lending and deposit taking may be two manifestations of one primitive function the provision of liquidity on demand we explore this function under a cap based valuation we find that i the strike price of the cap based valuation increases the bank s liquid asset holdings by increasing its loan rate and loan commitment rate with the strategic rate adjustment complements and decreases the bank s external finance need by increasing its deposit rate when the bank realizes a less risky state of the world and ii the number of caplet days decreases the bank s liquid asset holdings by decreasing its loan rate and loan commitment rate with the strategic rate adjustment complements and the strategic timing substitutes and increases the bank s external finance need by decreasing its deposit rate with the strategic timing substitutes when the bank realizes a more risky state our findings provide alternative explanations concerning the bank s liquidity funct

ethnic enclaves and the economic success of immigrants evidence from a natural experiment recent immigrants tend to locate in ethnic enclaves within metropolitan areas the economic consequence of living in such enclaves is still an unresolved issue we use an immigrant policy initiative in sweden when government authorities distributed refugee immigrants across locales in a way that may be considered exogenous this policy initiative provides a unique natural experiment which allows us to estimate the causal effect on labor market outcomes of living in enclaves we find substantive evidence of sorting across locations when sorting is taken into account living in enclaves improves labor market outcomes for instance the earnings gain associated with a standard deviation increase in ethnic concentration is in the order of four to five percent

the intergenerational transmission of welfare receipt a nonparametric bounds analysis using a nonparametric bounding method and data from the panel study of income dynamics i examine the effect that growing up in a household that receives aid to families with dependent children af

intertemporal diversification in financial intermediation abstract this paper examines the incentive problem between a bank and depositors or deposit insurer limited liability makes risk shifting lucrative we show how intertemporal diversification of lending decisions i e bank s loan portfolio consists of overlapping long term loans and is thus gradually renewed may solve the incentive problem of risk shifting a new or expanding bank sets a high equity level and acquires depositors confidence subsequently it can allow its equity to depreciate to a permanently lower level depositors can control the bank by monitoring equity and realized credit losses ex post they do not have to monitor bank s lending choices ex ante maturity mismatch illiquidity of long term loans and liquidity of deposits is optimal the analysis can be extended more generally to the borrower lender relationship

determinants of corporate cash holdings evidence from the emerging market of turkey this study analyses the factors that might explain the level of corporate cash holdings in a broad sample of turkish listed nonfinancial firms over the period 1997 to 2011 the empirical results reveal that on average turkish firms hold 9 1 of their total assets as cash and cash equivalents there is a steadily increasing trend in cash holding across the years both the system gmm and the difference gmm regression results are consistent almost exactly the same variables are significant and going in the same direction the findings indicate that the previous year s cash holding is positive and significant determinant at the current year s cash level suggesting that these firms have a targeted cash level furthermore the results reveal that cash flow and growth opportunities have positive and significant impact on the cash level however the amount of capital expenditures liquid assets used as cash substitute the degree of tangibility of assets financial debt ratio and leverage have negative and s

the impact of income inequality on economic residential segregation the case of malmo 1991 2010 as in other western countries in sweden there is a widespread conviction that residential segregation influences the opportunities for residents social mobility and therefore is a cause of income

corporate liquidity and capital structure we solve for a firm s optimal cash holding policy within a continuous time contingent claims framework using dividends short term borrowing and equity issues as controls assuming mean reversion of earnings optimal cash is non monotone in business conditions and increasing in the level of long term debt the model matches closely a wide range of empirical benchmarks and predicts cash and leverage dynamics in line with the empirical literature firm value is quite insensitive to changes in the level of long term debt the model has interesting implications for asset substitution hedging and pecking order growth opportunities do not greatly affect cash holding policy

ownership structure governance and innovation abstract this paper tests the impact of firms ownership structure on innovation in a context featuring pronounced ownership concentration and conflicts between large and minority shareholders using data for 20 000 italian manufacturers and accounting for the possible endogeneity of ownership levels we find that ownership concentration negatively affects innovation especially by reducing r d effort conflicts between large and minority shareholders appear to be a determinant of this effect moreover risk aversion induced by lack of diversification exacerbates large shareholders reluctance to innovate family owners support innovation more than financial institutions but the benefits of financial institutions increase with their equity stakes

immigrating to opportunity estimating the effect of school quality using a natural experiment on ethiopians in israel in may 1991 fifteen thousand ethiopian jews were brought to israel in an overnight airlift and sorted in a haphazard and essentially random fashion to absorption centers across the country this quasi random assignment produced a natural experiment whereby the initial schooling environment of ethiopian children can be considered exogenous to their family background and parental decisions we examine the extent to which the initial elementary school environment affected the high school outcomes of ethiopian children using administrative panel data on the educational career of each child in israel through much of the 1990s the results show that the early schooling environment has an important effect on high school dropout rates repetition rates and the passing rate on matriculation exams necessary to enter college the results are robust to using alternative measures of the schooling environment and to the inclusion of community fixed effects which suggests that aspects of the elementary school itself are important for high school success

reservation wages and their labor market effects for black and white male youth this paper presents an empirical analysis of self reported reservation wages for unemployed young black and white males the results show that young blacks seek wages which are comparable to those of young whites in absolute terms but which are higher relative to what is available on the demand side of the market these relatively higher reservation wages of young blacks contribute to their unemployment durations and somewhat to their subsequently received wages changes in reservation wages may thus help to explain the trends in wages and employment of young blacks in recent years

valuation and systemic risk consequences of bank opacity abstract we examine the effects of opacity on bank valuation and synchronicity in bank equity returns over the years 2000 2006 prior to the 2007 financial crisis as expected investments in opaque assets are more profitable than investments in transparent assets and taking profitability into account have larger valuation discounts relative to transparent assets the valuation discounts on opaque asset investments decline over the 2000 2006 period only to be followed by a sharp reversal in 2007 the decline is coincident with a rise in bank equity share prices decrease in transparent asset holdings by banks and greater return synchronicity evidence consistent with a feedback effect

identification of endogenous social effects the reflection problem this paper examines the reflection problem that arises when a researcher observing the distribution of behaviour in a population tries to infer whether the average behaviour in some group influences the behaviour of the individuals that comprise the group it is found that inference is not possible unless the researcher has prior information specifying the compisition of reference groups if this information is available the prospects for inference depend critically on the population relationship between the variables defining reference groups and those directly affecting outcomes inference is difficult to implossible if these variables are functionally dependent or are statistically independent the prospects are better if the variables defining reference groups and those directly affecting outcomes are moderately related in the population

intra metropolitan shifts in labor demand and the adjustment of local markets abstract i offer new evidence on the adjustment of local labor markets to geographic shifts in labor demand within us metropolitan areas using a unique data set in which metropolitan subregions are geographically matched across the 1970 1980 and 1980 1990 decades the evidence uncovered paints the following picture workers especially those with less education make incomplete adjustments within metropolitan areas in response to intra metropolitan demand shifts although blacks may not make especially limited adjustments they have disproportionately suffered deleterious effects from job movements because the demand shifts have tended to be away from their places of residence

the paradox of liquidity the more liquid a firm s assets the greater their value in a short notice liquidation it is generally thought that a firm should find it easier to raise external finance against more liquid assets this paper focuses on the dark side of liquidity greater asset liquidity reduces the firm s ability to commit to a specific course of action as a result greater asset liquidity can in some circumstances reduce the firm s capacity to raise external finance firms with excessively liquid assets are in the best position to finance illiquid projects this leads us to a theory of financial intermediation and disintermediation based on the liquidity of assets

the spatial mismatch hypothesis what has the evidence shown this paper reviews 20 years worth of empirical evidence on the spatial mismatch hypothesis after briefly surveying the relevant models from urban and labour economics and recent trends in employment and population suburbanisation the empirical evidence on spatial effects is examined this literature includes evidence on the effects of residential segregation residential suburbanisation and employment suburbanisation and direct measures of access such as travel times the most recent evidence suggests that spatial mismatch is relevant for explaining black white employment differences though the magnitudes of these effects remain unclear

stock market reaction to financial statement certification by bank holding company ceos in 2002 the sec mandated that the ceos of large publicly traded firms certify the accuracy of their company financial statements the sec s certi fication order provides a natural experiment that gives insight into the question of whether banks are opaque we find that the bhcs subject to the sec s order experienced positive and significant average abnormal returns from certification characteristics associated with greater opaqueness liquid asset holdings information intensive lending and split credit ratings are systematically associated with the size of abnormal returns

transit mobility jobs access and low income labour participation in us metropolitan areas summary while policy makers assert that increased public transit mobility can positively affect employment status for low income persons there is little empirical evidence to support this theory it is generally assumed that public transit can effectively link unemployed car less persons with appropriate job locations hence the call for more public transit services to assist moving welfare recipients to gainful employment thus far the available evidence is anecdotal while general patterns of transit access in relationship to labour participation remain relatively unexplored this analysis examines whether increased transit access is associated with the case status employment status of temporary assistance for needy families tanf recipients in the atlanta georgia baltimore maryland dallas texas denver colorado milwaukee wisconsin and portland oregon metropolitan areas individual tanf recipient location data transit route stop data and employment location data were used in limited dependent variable regression analyses to predict the employment status of tanf recipients the results of this analysis indicate that access to fixed route transit and employment concentrations had virtually no association with the employment outcomes of tanf recipients in the six selected metropolitan areas

search in cities the aim of this paper is to expose the recent developments of urban search models which incorporate a land market into a search matching framework using these models we will be able to explain why unemployment rates vary within a city how city structure affects workers labor market outcomes how unemployment benefits and the job destruction rate affect the growth of cities and why workers living far away from job centers search less intensively and experience higher unemployment rates than those residing closer to jobs we are also able to explain why as compared to whites black workers spend more time commuting to work but travel less miles and search for jobs over a smaller area

financial sector in flux financial sector in flux is an understatement several years after the 2008 09 banking crisis we are still confronted with a weak financial sector and as i will argue a limited understanding of the functioning of the financial system and causes of financial instability we also seem very uncertain about the desired structure of the industry which complicates the design and implementation of effective remedies in europe problems seem even more acute the deadly embrace of weak governments and struggling domestic financial institutions endangers economic growth for many years to come my reading is that fundamental changes related to information technology and the proliferation of financial markets have created a financial landscape that is highly opportunistic transaction driven and prone to destabilizing herding behavior in particular information technology has deepened markets and created trading opportunities that allow for excessive changeability via transactions that undermine the stability of highly leveraged institutions such as banks such a transaction oriented landscape is subjected to the boom and bust nature of financial markets and hence is more opportunistic than the more stable longer term oriented relationship focus that existed before i will argue that this has created a very fluid financial landscape that is beyond the control of supervisors contains enormous systemic risk and hence is fundamentally unstable i will also argue that market forces market discipline in particular may well be ineffective in containing instability actually my point will be that market forces are often at the root of financial instability structural remedies via a fundamental redesign of the financial system might be needed to restore stability

liquidity shortages and banking crises we show in this article that bank failures can be contagious unlike earlier work where contagion stems from depositor panics or contractual links between banks we argue that bank failures can shrink the common pool of liquidity creating or exacerbating aggregate liquidity shortages this could lead to a contagion of failures and a total meltdown of the system given the costs of a meltdown there is a possible role for government intervention unfortunately liquidity and solvency problems interact and can cause each other making it hard to determine the cause of a crisis we propose a robust sequence of intervention banks are often found at the center of systemic financial crises the causes of these crises have long been debated do they stem from depositor panics or do they arise because bank balance sheets are exposed to common factors if it is the latter then is there any sense in which bank failures can be contagious can anything be done to prevent these crises or stop them from propagating once they begin our purpose in this paper is to reexamine whether bank failures can start and propagate systemic crises even if we assume that depositors do not panic that is even if depositors actions are coordinated and they do not run simply because they fear others will run our focus is not because we think that panics are empirically unimportant the jury is still out on that instead we show that contagion can stem from an underlying real general equilibrium problem rather than just from lack of coordination among depositors from a policy perspective attempts to reassure investors through confidence building measures will not work if panic and lack of coordination are not the reasons for a crisis we begin in this paper with a model of a bank that we developed in diamond and rajan 2001 assets in this model are illiquid they cannot be borrowed against or sold for the full value of resources they will generate in their best use because the human capital necessary to generate that full value cannot

racial differences in residential and job mobility evidence concerning the spatial mismatch hypothesis abstract the spatial mismatch hypothesis asserts that job decentralization adversely impacts the labor market outcomes of african americans this paper tests whether race and job access have an independent effect on the probability of a joint residential move and job change no evidence is found to indicate that race directly influences the joint probability the paper finds however that poor job access has an independent negative effect on the probability of a joint residential move and job change because african american residences are heavily concentrated in american central cities these results suggest that african american workers may not be able to fully adjust as new jobs are created in the suburbs

neighbourhood income sorting and the effects of neighbourhood income mix on income a holistic empirical exploration an econometric model is specified in which an individual s income and the income mix of the neighbourhood in which the individual resides are endogenous thus providing a holistic model of phenomena that previously have been fragmented into neighbourhood effects and neighbourhood selection literatures to overcome the biases from selection and endogeneity the parameters of this model are estimated using instrumental variables in a fixed effect panel analysis employing annual data on 90 438 working age males in stockholm over the 1995 2006 period evidence is found of both neighbourhood effects and neighbourhood selection but more importantly it is found that the magnitudes of these effects are substantially altered when taking selection and endogeneity biases into account compared with when only controlling for selection when taking endogeneity into account the apparent impact of neighbourhood income mix on individual income is magnified and the effect of individual income on the percentage of high income in the neighbourhood is magnified

racial prejudice and labour market penalties during economic downturns do economic downturns encourage racist attitudes does this in turn lead to worse labour market outcome for minorities we assess these important questions using british attitude and labour force data the attitude data show that racial prejudice is countercyclical with the effect driven by large increases for high skilled middle aged working men a 1 point increase in unemployment is estimated to increase self reported racial prejudice by 4 points correspondingly the labour force data show that racial employment and wage gaps are counter cyclical with the largest effects also observed for high skilled men especially in the manufacturing and construction industries a 1 point increase in unemployment is estimated to increase the wage gap by 3 these results are entirely consistent with the theoretical literature which proposes that racial prejudice and discrimination are the result of labour market competition among individuals with similar traits and that the effects of this competition are exacerbated during periods of economic downturn

smoothing with liquid and illiquid assets abstract a quantitative examination of the demand for liquid assets arising from consumption smoothing motives reveals that such demand is very low consumers faced with income streams calibrated to match income and unemployment data and returns and transactions costs calibrated to match us treasury bill data almost exclusively buy and hold illiquid long term assets even though the return premium on long term assets is quite small this is because with standard preferences savings are highly persistent even when risky income is not in the calibrated model the first order autocorrelation of savings is an order of magnitude larger than that of income

regulation with growth the political economy of palm oil in malaysia abstract the study of the palm oil industry in malaysia demonstrates that with a proper mix of public regulation and investment a state may achieve national control over an industry and promote the interests of poorer citizens while promoting overall growth and international competitiveness of the industry the introduction summarizes the literature on public interventions in agricultural markets section 2 describes the palm oil industry and its growth in malaysia sections 3 and 4 discuss policies in investment and in regulation and marketing respectively the conclusion further articulates the thesis