a model of liquidity hoarding and term premia in inter bank markets financial crises are associated with reduced volumes and extreme levels of rates for term inter bank loans reflected in one month and three month libor we explain such stress by modeling leveraged banks precautionary demand for liquidity asset shocks impair a bank s ability to roll over debt because of agency problems associated with high leverage in turn banks hoard liquidity and decrease term lending as their rollover risk increases over the term of the loan high levels of short term leverage and illiquidity of assets lead to low volumes and high rates for term borrowing in extremis inter bank markets can completely freeze

heterogeneous wage effects of apprenticeship training the relatively small average wage effects of employer and occupation changes after apprenticeship training mask large differences between occupation groups and apprentices with different schooling backgrounds people who change employer and occupation within industrial occupations enjoy large wage advantages whereas apprentices in commerce and trading occupations as well as in construction and crafts occupations face wage losses from an occupation change the differences between the firms that provide the apprenticeship training are found to be small or insignificant in this paper we reconcile the differences between previous findings by comparing and replicating the empirical estimation strategies used this demonstrates that selectivity in occupations and changes unobserved heterogeneity between occupations and sample selection do matter

network models and financial stability abstract systemic risk is a key concern for central banks charged with safeguarding overall financial stability in this paper we investigate how systemic risk is affected by the structure of the financial system we construct banking systems that are composed of a number of banks that are connected by interbank linkages we then vary the key parameters that define the structure of the financial system including its level of capitalisation the degree to which banks are connected the size of interbank exposures and the degree of concentration of the system and analyse the influence of these parameters on the likelihood of knock on defaults first we find that the better capitalised banks are the more resilient is the banking system against contagious defaults and this effect is non linear second the effect of the degree of connectivity is non monotonic i e initially a small increase in connectivity increases the contagion effect but after a certain threshold value connectivity improves the ability of a banking system to absorb shocks third the size of interbank liabilities tends to increase the risk of knock on default even if banks hold capital against such exposures fourth more concentrated banking systems are shown to be prone to larger systemic risk all else equal in an extension to the main analysis we study how liquidity effects interact with banking structure to produce a greater chance of systemic breakdown we finally consider how the risk of contagion might depend on the degree of asymmetry tiering inherent in the structure of the banking system a number of our results have important implications for public policy which this paper also draws out

sulfur dioxide control by electric utilities what are the gains from trade title iv of the 1990 clean air act amendments caaa established a market for transferable sulfur dioxide so2 emission allowances among electric utilities this market offers firms facing high marginal abatement costs the opportunity to purchase the right to emit so2 from firms with lower costs and this is expected to yield cost savings compared to a command and control approach to environmental regulation this paper uses econometrically estimated marginal abatement cost functions for power plants affected by title iv of the caaa to evaluate the performance of the so2 allowance market specifically we investigate whether the much heralded fall in the cost of abating so2 compared to original estimates can be attributed to allowance trading we demonstrate that for plants that use low sulfur coal to reduce so2 emissions technical change and the fall in prices of low sulfur coal have lowered marginal abatement cost curves by over 50 percent since 1985 the flexibility to take advantage of these chan

macroeconomics after the crisis time to deal with the pretense of knowledge syndrome the recent financial crisis has damaged the reputation of macroeconomics largely for its inability to predict the impending financial and economic crisis to be honest this inability to predict does not concern me much it is almost tautological that severe crises are essentially unpredictable for otherwise they would not cause such a high degree of distress what does concern me about my discipline is that its current core by which i mainly mean the so called dynamic stochastic general equilibrium approach has become so mesmerized with its own internal logic that it has begun to confuse the precision it has achieved about its own world with the precision that it has about the real one this is dangerous for both methodological and policy reasons to be fair to our field an enormous amount of work at the intersection of macroeconomics and corporate finance has been chasing many of the issues that played a central role during the current crisis including liquidity evaporation collateral shortages bubbles crises panics fire sales risk shifting contagion and the like however much of this literature belongs to the periphery of macroeconomics rather than to its core i will discuss the distinction between the core and the periphery of macroeconomics as well as the futile nature of the integrationist movement that is the process of gradually bringing the insights of the periphery into the dynamic stochastic general equilibrium structure i argue that the complexity of macroeconomic interactions limits the knowledge we can ever attain and that we need to place this fact at the center of our analysis we should consider what this complexity does to the actions and reactions of the economic agent and seek analytical tools and macroeconomic policies that are robust to the enormous uncertainty to which we are confined

job matching and on the job training conventional analysis predicts that workers pay part of their on the job training costs by accepting a lower starting wage and subsequently realize a return to this investment in the form of greater wage growth missing from the conventional treatment of on the job training is a discussion of the process by which heterogeneous workers are matched to jobs requiring varying amounts of training this matching process constitutes a key feature of the on the job training model presented in this article and tested with a unique data set containing extensive information concerning on the job training employer search wages and wage and productivity growth

the interbank market after august 2007 what has changed and why after the onset of the financial crisis spreads between interbank interest rates on unsecured and secured deposits for the major world currencies became exceptionally large and volatile first we find that the phenomenon was mainly driven by aggregate rather than bank specific factors notably risk aversion and accounting practices by contrast funding liquidity capital shortage and central bank interventions were not important determinants second prior to august 2007 the spread was broadly insensitive to key borrower characteristics whereas afterward it became somewhat more reactive to measures of creditworthiness third conditions for big borrowers became relatively more favorable during the crisis suggesting that moral hazard risks related to the too big to fail argument have increased these results are discussed in the light of theories on the interbank market during a crisis

why are german employers associations declining arguments and evidence considerable progress has been made during the past two decades in conceptualizing dynamics within german employers associations in particular explanations for declines in density and the impact on the economy the verification has not kept pace with theorization however this article provides empirics the analysis confirms earlier conclusions that the interests of large and small employers have increasingly diverged since the mid 1980s in contrast to the conventional wisdom however the authors find that organized labor has not contributed to the cost pressures that have prompted many smalland medium sized enterprises to leave employers associations the article also explores employers associations response to a more challenging environment in light of the varieties of capitalism literature the decision of several german employers associations to offer different classes of membership has qualitatively expanded subnational variety within the german variety of capitalism

the economics of youth training in germany the german ideal may be termed the long view which must eventually lead the german nation to and maintain it in a foremost place as an industrial world power the british method may be regarded as more philanthropic than patriotic the ideal is admirable but the bulk of the nation s workers are not catered for by this ideal and on the bulk of the workers much of the material prosperity of a nation must depend

the interbank network across the global financial crisis evidence from italy abstract this study examines the effects of the global financial crisis gfc on interbank market connectivity using network analysis more specifically using data on italian banks bilateral interbank positions between 1998 and 2013 we analyze the impact of the following events on each bank s network centrality the liquidity crisis in august 2007 the collapse of lehman brothers in september 2008 eurosystem s long term refinancing operations ltros between 2009 and 2012 the sovereign debt crisis in july 2011 and the announcement of outright monetary transactions omt in 2012 the results show that the 2007 liquidity crisis and especially the collapse of lehman brothers are associated with a marked reduction of the relative interconnectedness of the italian banking sector i e a shift in the distribution of banks centrality to the left away from the most connected bank in the following years the system progressively recovered its initial patterns of integration among banks which coincided with the main eurosystem s monetary policy interventions however the average outcome conceals different results across banks depending on their characteristics and initial positions within the system

an empirical study of the mexican banking system s network and its implications for systemic risk abstract with the aim to measure and monitor systemic risk we present some topological metrics for the interbank exposures and the payments system networks the evolution of such networks is analyzed we draw important conclusions from the systemic risk s perspective and propose a measure of interconnectedness additionally we suggest non topological measures to describe individual behavior of banks in both networks the main findings of this paper are the structures of the payments and exposures networks are different in terms of connectivity the topology of the exposures network changed after the collapse of lehman brothers whereas the structure of the payments network does not the proposed measure of interconnectedness can be used to determine the importance of a bank in terms of connectivity finally we found that interconnectedness of a bank is not necessarily related with its assets size but it is linked to the contagion it might cause

dividing the costs and returns to general training data from the national longitudinal survey of youth indicate that the employer often pays the explicit costs of not only on site training but also off site general training although few of these costs appear to be passed on to workers in the form of a lower wage while in training completed spells of general training paid for by previous employers have a larger wage effect than completed spells of general training paid for by the current employer a model where contract enforcement considerations cause employers to share the costs and returns to purely general training can explain these findings

job duration seniority and earnings an important stylized fact about labor markets is that workers with longer seniority with their current employer have higher earnings than other workers with the same total labor market experience this study shows that workers in longer jobs earn more throughout than workers in a series of shorter jobs and that the measured positive cross sectional return seniority is largely a statistical artifact due to the correlation of seniority with an omitted variable representing the quality of the worker the job or the worker employer match the implication is tha t earnings do not in fact rise very much with seniority copyright 1987 by american economic association

why do firms train theory and evidence this paper offers a theory of training whereby workers do not pay for the general training they receive the superior information of the current employer regarding its employees abilities relative to other firms creates ex post monopsony power and encourages this employer to provide and pay for training even if these skills are general the model can lead to multiple equlibria in one equilibrium quits are endogenously high and as a result employers have limited monopsony power and provide little training while in another equilibrium quits are low and training is high using microdata on german apprentices we show that the predictions of our model receive some support from the data

risk and global economic architecture why full financial integration may be undesirable integration of global financial markets was supposed to lead to greater financial stability as risks were spread around the world the finan cial crisis has thrown doubt on this conclusion a failure in one part of the global economic system caused a global meltdown the recent crisis has shown that in the absence of appro priate government intervention privately profit able transactions may lead to systemic risk this paper provides a general analytic framework within which we can analyze the optimal degree and form of financial integration within this general framework full integration is not in general optimal indeed faced with a choice between two polar regimes full integration or autarky in the simplified model autarky may be superior

investment in general training the role of information and labour mobility following the seminal work of becker i964 it is widely accepted in the literature that firms will be unwilling to finance training which workers may use in other firms this paper takes issue with this prediction and suggests that firms will frequently share in the cost of such general training 1 becker argues that a firm which pays for the training of workers in skills of potential use to other firms will lose these workers since other firms bear none of the costs of general training they can attract a worker with such training by outbidding the firm which trained him recognising this absence of property rights over an investment in general training firms will refuse to provide it hence if general training is to take place the trainee will have to pay for it if potential trainees are unwilling or unable to pay general training will not take place a shortage in general training is likely to emerge this may be especially pronounced in developing countries 2 in contrast the outlook for

liaisons dangereuses increasing connectivity risk sharing and systemic risk the recent financial crisis poses the challenge to understand how systemic risk arises endogenously and what architecture can make the financial system more resilient to global crises this paper shows that a financial network can be most resilient for intermediate levels of risk diversification and not when this is maximal as generally thought so far this finding holds in the presence of the financial accelerator i e when negative variations in the financial robustness of an agent tend to persist in time because they have adverse effects on the agent s subsequent performance through the reaction of the agent s counterparties 2012 elsevier b v all rights reserved

asset commonality debt maturity and systemic risk we develop a model in which asset commonality and short term debt of banks interact to generate excessive systemic risk banks swap assets to diversify their individual risk two asset structures arise in a clustered structure groups of banks hold common asset portfolios and default together in an unclustered structure defaults are more dispersed portfolio quality of individual banks is opaque but can be inferred by creditors from aggregate signals about bank solvency when bank debt is short term creditors do not roll over in response to adverse signals and all banks are ine ciently liquidated this information contagion is more likely under clustered asset structures in contrast when bank debt is long term welfare is the same under both asset structures

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

too interconnected to fail financial network of us cds market topological fragility and systemic risk a small segment of credit default swaps cds on residential mortgage backed securities rmbs stand implicated in the 2007 financial crisis the dominance of a few big players in the chains of insurance and reinsurance for cds credit risk mitigation for banks assets has led to the idea of too interconnected to fail titf resulting as in the case of aig of a tax payer bailout we provide an empirical reconstruction of the us cds network based on the fdic call reports for off balance sheet bank data for the 4th quarter in 2007 and 2008 the propagation of financial contagion in networks with dense clustering which reflects high concentration or localization of exposures between few participants will be identified as one that is titf those that dominate in terms of network centrality and connectivity are called super spreaders management of systemic risk from bank failure in uncorrelated random networks is different to those with clustering as systemic risk of highly connected financial firms in the cds or any other financial markets is not priced into their holding of capital and collateral we design a super spreader tax based on eigenvector centrality of the banks which can mitigate potential socialized losses

training systems and labor mobility a comparison between germany and sweden the mobility effect of general and specific training is a key issue in the debate on the design of educational systems using data from two retrospective life history surveys we compare general school based vocational training and specific apprenticeship training with regard to inter firm inter occupational and inter industrial mobility the results show that workers with school based degrees display greater occupational mobility while no difference in firm and industrial mobility can be discerned this suggests that apprenticeships do not eliminate job search at labor market entry that they reduce occupational mobility and that responsiveness to structural change is similar under both training systems

geography of savings in the german occupational pension system burger c geography of savings in the german occupational pension system regional studies the german pension reform of 2001 significantly decreased the level of public pensions for future generations and created instead voluntary supplementary plans this paper analyses the regional structure of savings amounts in the case of occupational pensions using a unique commercial dataset containing the records of 286 000 employees joining between the years 2002 and 2009 the analysis applies different location definitions in explaining financial behaviour the differences in the relationship between metropolitan and non metropolitan east and west and north and south are explained with the geographical nature of decision contexts implications are drawn on human behaviour and geography

financial networks contagion commitment and private sector bailouts i develop a model of financial networks in which linkages not only spread contagion but also induce private sector bailouts where liquid banks bail out illiquid banks because of the threat of contagion introducing this bailout possibility i show that linkages may be optimal ex ante because they allow banks to obtain some mutual insurance even though formal commitments are impossible however in some cases e g when liquidity is concentrated among a small group of banks the whole network may collapse i also characterize the optimal network size and apply the results to joint liability arrangements and payment systems linkages among agents in financial markets are a concern because of the risk of financial contagion that is the risk that a small shock to one agent will spread to other agents in a domino effect whether we should worry about these linkages is an open question the main goal of this paper is to show that a network in which agents are closely interlinked may be optimal both because of and despite the potential for contagion another goal is to characterize optimal networks that is whether and how agents should be linked to one another the basic intuition is as follows linkages present the threat of contagion to prevent collapse of the whole network agents who are lucky ex post may be willing to bail out those who are not in this way agents obtain the benefits of mutual insurance even though they cannot precommit to making payments

rollover risk and market freezes the debt capacity of an asset is the maximum amount that can be borrowed using the asset as collateral we model a sudden collapse in the debt capacity of good collateral we assume short term debt that must be frequently rolled over a small transaction cost of selling collateral in the event of default and a small probability of meeting a buy to hold investor we then show that a small change in the asset s fundamental value can be associated with a catastrophic drop in the debt capacity the kind of market freeze observed during the crisis of 2007 to 2008 one of the many striking features of the crisis of 2007 to 2008 was the sudden freeze in the market for the rollover of short term debt from an in stitutional perspective the inability to borrow overnight against high quality but long term assets was a market failure that effectively led to the demise of a substantial part of investment banking in the united states more broadly it led to the collapse in the united states the united kingdom and other countries of banks and other financial institutions that had relied on signifi cant maturity mismatch between assets and liabilities and in particular on the rollover of short term wholesale debt in the asset backed commercial paper abcp and overnight sale and repurchase repo markets in this paper we are interested in developing a model of a sudden collapse in the ability to borrow short term against long lived assets in the absence of obvious problems of asymmetric information or fears about the value of col lateral we refer to this phenomenon as a market freeze more precisely a market freeze occurs when the debt capacity the maximum amount of collat eralized borrowing that can be supported by an asset is a small fraction of the fundamental value the economic value measured by the net present value npv of the stream of future returns an extreme form of a market freeze occurs when the fundamental value is close to the maximum possible value of the asset whereas the debt capacity is close to the minimum possible value of the asset

the paradox of globalization labor relations in germany and beyond what is the impact of globalization on labor in the advanced industrial countries one body of work holds that globalization pushes all countries toward neoliberalism another argues that the impact of globalization will vary according to prevailing institutional arrangements and predicts continued divergence between the so called liberal and coordinated market economies in an analysis of the german case that combines case study and formal modeling methods we refute the first neoliberal convergence theory showing that globalization in some ways empowers unions by rendering employers extremely vulnerable to industrial unrest furthermore we suggest some revisions to the second varieties of capitalism perspective we show that in germany employers increased vulnerability to conflict has shored up centralized bargaining arrangements in the short run but at the same time has also set in motion feedback effects that are deeply destabilizing to the system in the longer term

general productivity growth in a theory of quits and layoffs an efficient matching model of quits and layoffs is developed to account for several empirical regularities differences between quits and layoffs over the life and business cycles and across demographic groups are generated by differential rates of general productivity growth the standard approach to quits and layoffs based on wage rigidity is shown to be incapable of accounting for many of the empirical regularities although a formal test rejects a structural prediction of the efficient turnover model the specification does well in predicting both the level of and time series variation in the fraction of separations labeled quits