new evidence on implicit contracts from linked employer employee data we improve the precision of the implicit contract model test proposed by beaudry and dinardo 1991 our dataset allows us to define the exact industry and plant of a particular employment relationship link local labor market characteristics to individual level wages and control for composition effects we find evidence in favor of the spot market model of wage setting in the whole sample but there is significant variation across industries and education levels in particular the spot market matters most for low skill workers while the implicit contract model with one sided limited commitment applies better to high skill workers

stochastic modeling of financial electricity contracts abstract we discuss the modeling of electricity contracts traded in many deregulated power markets these forward futures type contracts deliver either physically or financially electricity over a specified time period and is frequently referred to as swaps since they in effect represent an exchange of fixed for floating electricity price we propose to use the heath jarrow morton approach to model swap prices since the notion of a spot price is not easily defined in these markets for general stochastic dynamical models we connect the spot price the instantaneous delivery forward price and the swap price and analyze two different ways to apply the heath jarrow morton approach to swap pricing either one specifies a dynamics for the non existing instantaneous delivery forwards and derives the implied swap dynamics or one models directly on the swaps the former is shown to lead to quite complicated stochastic models for the swap price even when the forward dynamics is simple the latter has some theoretical problems due to a no arbitrage condition that has to be satisfied for swaps with overlapping delivery periods to overcome this problem a practical modeling approach is analyzed the market is supposed only to consist of non overlapping swaps and these are modelled directly a thorough empirical study is performed using data collected from nord pool our investigations demonstrate that it is possible to state reasonable models for the swap price dynamics which is analytically tractable for risk management and option pricing purposes however this is an area of further research

worker response to a menu of implicit contracts the literature on implicit contracts between workers and firms suggests that workers face a variety of such contracts allowing each to choose the optimal trade off between earnings level and earnings stability this study tests some implications of that theory through an examination of the risk behavior of individual heads of households the data source is the university of michigan panel study of income dynamics which includes a measure of the worker s taste for risk avoidance additionally several predictions derived from arrow s postulate of increasing relative risk aversion are examined the results confirm a tendency of risk averse individuals to choose jobs offering lower wages and lower financial risk the results also provide indirect support for arrow s postulate the paper s findings suggest that studies of the earnings effects of discrimination may possibly understate those effects just as studies of the value of a human life may understate that value

investments holdup and the form of market contracts the authors analyze incomplete contracts to induce efficient investment with exogenous switching costs fixed price contracts are efficient generate some rigidity in prices are renegotiated intermittently by possibly small amounts and when inflation is positive generate asymmetric responses to shocks all consistent with evidence on prices and wages with two sided specific investments efficiency requires prices to have sufficient escalator clauses to avoid renegotiation as observed in many long term contracts a third case with one sided specific investments can generate take or pay contracts and explain why firms sometimes pay for specific investments that appear to benefit employees directly

pricing forward contracts in power markets by the certainty equivalence principle explaining the sign of the market risk premium in this paper we provide a framework that explains how the market risk premium defined as the difference between forward prices and spot forecasts depends on the risk preferences of market players and the interaction between buyers and sellers in commodities markets this premium is an important indicator of the behavior of buyers and sellers and their views on the market spanning between short term and long term horizons we show that under certain assumptions it is possible to derive explicit solutions that link levels of risk aversion and market power with market prices of risk and the market risk premium we apply our model to the german electricity market and show that the market risk premium exhibits a term structure which can be explained by the combination of two factors firstly the levels of risk aversion of buyers and sellers and secondly how the market power of producers relative to that of buyers affects forward prices with different delivery periods

personnel policies at the union bank of australia evidence from the 1888 1900 entry cohorts this article uses personnel payroll and other records from the union bank of australia to examine internal labor markets it is shown that employment was characterized by limited ports of entry impersonal rules for pay and promotion well defined career ladders shielding from the external labor market and a long term employment relationship in addition tenure within the bank was rewarded considerably more than experience elsewhere and compensation increased considerably after 25 30 years tenure these facts are partially consistent with the human capital matching and contract theory models but cannot be fully explained by any one model

spot and derivative pricing in the eex power market using spot and futures price data from the german eex power market we test the adequacy of various one factor and two factor models for electricity spot prices the models are compared along two different dimensions 1 we assess their ability to explain the major data characteristics and 2 the forecasting accuracy for expected future spot prices is analyzed we find that the regime switching models clearly outperform its competitors in almost all respects the best results are obtained using a two regime model with a gaussian distribution in the spike regime furthermore for short and medium term periods our results underpin the frequently stated hypothesis that electricity futures quotes are consistently greater than the expected future spot a situation which is denoted as contango

a theory of wage dynamics a dynamic equilibrium model of long term implicit labour contracts under incomplete but symmetric information is developed workers are assumed to be risk averse and of unknown ability or productivity risk neutral firms learn as do workers about each worker s productivity by observing the worker s output over time it is shown that equilibrium contracts provide for wages which never decline with age and increase only when the worker s market value increases above his current wage in addition to characterizing the equilibrium wage contract we also derive some of its implications for the behaviour of aggregate wages across various groups of workers these implications explain some findings in the recent empirical literature on ageearnings profiles in particular our model can explain why earnings may be positively related to experience even after controlling for productivity as some empirical studies have indicated

the effect of implicit contracts on the movement of wages over the business cycle evidence from micro data in this paper we address the question of whether wages are affected by labor market conditions in a manner more consistent with a contract approach than with a standard spot market model from a simple implicit contract model we derive implications about the links between wages and past labor market conditions using individual data from the current population survey and the panel study of income dynamics we find that an implicit contract model with costless mobility describes these links better than either a simple spot market model or an implicit contract model with costly mobility

micro foundations for wage flexibility wage insurance at the firm level to what extent do firms insulate their workers wages from fluctuations in product markets which firm and worker attributes are associated with wage flexibility at the micro level we first rely on guiso pistaferri and schivardi 2005 to estimate dynamic models of sales and wages finding that in portugal workers wages respond to permanent shocks on firm performance as opposed to transitory shocks we then explore the factors associated with wage flexibility finding that collective bargaining and minimum wages are associated with higher wage insurance by the firm while the threat of firm bankruptcy reduces it managers receive less protection against permanent shocks than other workers

wages implicit contracts and the business cyle evidence from canadian micro data evidence of macroeconomic conditions impacting the earnings of men in canada in a manner consistent with an implicit contracting framework is found using data from eleven cross sectional surveys spanning the years 1981 1992 the estimates are similar to those found by beaudry and dinardo 1991 using u s data their analysis is extended to incestigate whether the effects of macroeconomic conditions differ by age evidence is found that the wages of young men and men near retirement are most sensitive to changes in the macroeconomic conditions over their job tenure this abstract was borrowed from another version of this item

enforcement of implicit employment contracts through unionization in a world in which employment contracts are incomplete it is costly for a firm to establish credibility for honoring implicit terms of employment agreements by monitoring the employment relationships between the firm and its workers the labor union may provide the workforce with valuable information regarding the firm s adherence to these implicit agreements thus the union provides a signaling mechanism that allows workers to coordinate their actions in order to discipline the firm for a breach of the implicit contract this mechanism enhances the firm s credibility when forming employment contracts and facilitates increased employment levels

interpreting panel data on job tenure tenure responses in the panel study of income dynamics psid and the national longitudinal surveys are often inconsistent with calendar time these inconsistencies pose special problems in the psid because job changes cannot be identified directly so researchers must infer them from error ridden tenure data we use alternative rules for partitioning psid data into jobs and then estimate several wage and mobility models to assess the sensitivity of parameter estimates to the partitioning method we also assess the importance of replacing raw tenure data with imputed measures that are internally consistent

labor market dynamics under long term wage contracting abstract recent research seeking to explain the strong cyclicality of us unemployment emphasizes the role of wage rigidity this paper proposes a micro founded model of wage rigidity an equilibrium business cycle model of job search where risk neutral firms post optimal long term contracts to attract risk averse workers equilibrium contracts feature wage smoothing limited by the inability of parties to commit to contracts the model is consistent with aggregate wage data if neither worker nor firm can commit producing too rigid wages otherwise wage rigidity does not lead to a substantial increase in the cyclical volatility of unemployment

milk in the data food security impacts from a livestock field experiment in zambia summary smallholder livestock ownership has potential to enhance food security by raising incomes of the poor and by increasing the availability of nutrient dense foods this paper exploits the staggered rollout of livestock distribution by heifer international in zambia to identify the effects of livestock using statistically similar treatment and control groups in a balanced panel of households results indicate that livestock ownership improves dietary diversity through both direct consumption of animal products produced on farm and through increased consumption expenditures further results indicate that expanded livestock ownership alters the local food economy to influence food consumption by households lacking farm animals

the unemployment volatility puzzle is wage stickiness the answer i discuss the failure of the canonical search and matching model to match the cyclical volatility in the job finding rate i show that job creation in the model is influenced by wages in new matches i summarize microeconometric evidence and find that wages in new matches are volatile and consistent with the model s key predictions therefore explanations of the unemployment volatility puzzle have to preserve the cyclical volatility of wages i discuss a modification of the model based on fixed matching costs that can increase cyclical unemployment volatility and is consistent with wage flexibility in new matches

risk premiums in the german day ahead electricity market this paper conducts an empirical analysis of risk premiums in the german day ahead electricity wholesale market we compare hourly price data of the european energy exchange eex auction and of the continuous over the counter otc market which takes place prior to the eex auction data provided by the energy exchange austria exaa has been used as a snapshot of the otc market two hours prior to the eex auction ex post analysis found market participants are willing to pay both significant positive and negative premiums for hourly contracts the largest positive premiums were paid for high demand evening peak hours on weekdays during winter months by contrast night hours on weekends featuring lowest demand levels display negative premiums additionally ex ante analysis found a strong positive correlation between the expected tightness of the system and positive premiums for this purpose a tightness factor has been introduced that includes expectations of fundamental factors such as power plant availability wind power production and demand hence findings by longstaff and wang 2004 can be supported that power traders in liberalised markets behave like risk averse rational economic agents

evaluation of the trading development in the iberian energy derivatives market the efficiency of the iberian energy derivatives market in its first five and a half years is assessed in terms of volume open interest and price the continuous market shows steady liquidity growth its volume is strongly correlated to that of the over the counter otc market the amount of market makers the enrolment of financial agents and generation companies belonging to the integrated group of last resort suppliers and the otc cleared volume in its clearing house the hedging efficiency measured through the ratio between the final open interest and the cleared volume shows the lowest values for the spanish base load futures as they are the most liquid contracts the ex post forward risk premium has diminished due to the learning curve and the effect of the fixed price retributing the indigenous coal fired generation this market is quite less developed than the european leaders headquartered in norway and germany enrolment of more traders mainly international energy companies financial agents energy intensive industries and renewable generation companies is desired market monitoring reports by the market operator providing post trade transparency otc data access by the energy regulator and assessment of the regulatory risk can contribute to efficiency gains

electricity wholesale market prices in europe convergence abstract this paper tests the hypothesis that the ongoing restructuring process in the european electricity sector has led to a common european market for electricity based on a principal component analysis pca of wholesale electricity prices in 2002 2006 we reject the assumption of full market integration for several pairs of countries the weaker hypothesis of bilateral convergence is accepted based on unit root tests kpss and adf and a convergence test based on filtered pairwise price relations this indicates that the efforts to develop a single european market for electricity were so far only partially successful we show that the daily auction prices of scarce cross border transmission capacities are insufficient to explain the persistence of international price differentials empirically our findings confirm the insufficiency of explicit capacity auctions as stated in the theoretical literature

time zero efficiency of european power derivatives markets abstract we study time zero efficiency of electricity derivatives markets by time zero efficiency is meant a sequence of prices of derivatives contracts having the same underlying asset but different times to maturity which implies that prices comply with a set of efficiency conditions that prevent profitable time zero arbitrage opportunities we investigate whether statistical tests based on the law of one price and trading rules based on price differentials and no arbitrage violations are useful for assessing time zero efficiency we apply tests and trading rules to daily data of three european power markets germany france and spain in the case of the german market after considering liquidity availability and transaction costs results are not inconsistent with time zero efficiency however in the case of the french and spanish markets limitations in liquidity and representativeness are challenges that prevent definite conclusions liquidity in french and spanish markets should improve by using pricing and marketing incentives these incentives should attract more participants into the electricity derivatives exchanges and should encourage them to settle otc trades in clearinghouses publication of statistics on prices volumes and open interest per type of participant should be promoted

integration and shock transmissions across european electricity forward markets abstract new results are presented relating to the integration of the french german british dutch and spanish power markets at day ahead week ahead one month ahead and two month ahead lead times overall there is evidence of market integration increasing over time despite an underlying inefficiency in each market with respect to the forward and spot price convergence the spatial analysis on a financial dimension is undertaken using causality tests cointegration and impulse response techniques for both price levels and volatilities in general we find less influence of the size and proximity of neighbouring markets than other studies more integration at baseload than peak and surprisingly less integration in forwards than spot prices

the effect of implicit contracts on the movement of wages over the business cycle evidence from the national longitudinal surveys a 1991 study by paul beaudry and john dinardo found evidence of internal labor markets that augment incumbent workers wages when the external labor market is tight when unemployment is low and shield their wages when it is slack current wages they found depend on the tightest labor market conditions observed since a worker was hired not current labor market tightness or labor market tightness at the time of hiring this paper replicates and extends that research using data from six cohorts of the national longitudinal surveys that together span more than three decades as well as an estimation framework more robust than that in the original study the author finds strong support for beaudry and dinardo s key prediction supplementary regressions confirm other implications of the theory as well recently at least the effect of implicit contracting on wages has been similar for men and women

self enforcing wage contracts we examine long term wage contracts between a risk neutral firm and a risk averse worker when both can costlessly renege and buy or sell labour at a random spot market wage a self enforcing contract is one in which neither party ever has an incentive to renege in the optimum self enforcing contract wages are sticky they are less variable than spot market wages and positively serially correlated they are updated by a simple rule around each spot wage is a time invariant interval and the contract wage changes each period by the smallest amount necessary to bring it into the current interval