learning and wage dynamics we develop a dynamic model of learning about worker ability in a competitive labor market the model produces three testable implications regarding wage dynamics 1 although the role of schooling in the labor market s inference process declines as performance observations accumulate the estimated effect of schooling on the level of wages is independent of labor market experience 2 timeinvariant variables correlated with ability but unobserved by employers such as certain test scores are increasingly correlated with wages as experience increases and 3 wage residuals are a martingale we present evidence from the nlsy that is broadly consistent with the model s predictions

the value of hiring through employee referrals using personnel data from nine large firms in three industries call centers trucking and high tech we empirically assess the benefit to firms of hiring through employee referrals compared to nonreferred applicants referred applicants are more likely to be hired and more likely to accept offers even though referrals and nonreferrals have similar skill characteristics referred workers tend to have similar productivity compared to nonreferred workers on most measures but referred workers have lower accident rates in trucking and produce more patents in high tech referred workers are substantially less likely to quit and earn slightly higher wages than nonreferred workers in call centers and trucking the two industries for which we can calculate worker level profits referred workers yield substantially higher profits per worker than nonreferred workers these profit differences are driven by lower turnover and lower recruiting costs for referrals jel codes j24 m51 j30 j63

migrants in a guest worker system a utility maximizing approach this paper examines the behavior of utility maximizing migrants in a system of guest worker migration their pattern of leisure and commodity consumption at home and abroad is analysed and related

inflation financial markets and long run real activity abstract empirical evidence suggests that real activity the volume of bank lending activity and the volume of trading in equity markets are strongly positively correlated at the same time inflation and financial market activity are strongly negatively correlated in the long run as are inflation and the real rate of return on equity inflation and real activity are also negatively correlated in the long run particularly for economies with relatively high rates of inflation we present a monetary growth model in which banks and secondary capital markets play a crucial allocative function we show that at least under certain configurations of parameters the predictions of the model are consistent with these and several other observations about inflation finance and long run real activity

foreign competition immigration and structural adjustment abstract the paper uses the ricardo viner r v model to investigate the relationship in a capital abundant economy between trade competition and immigration in doing so it derives new results for the r v model especially on the welfare implications of migration with and without an initial tariff

understanding the behavior of bank spreads in latin america abstract over the last decade many countries in latin america have eliminated interest rate ceilings reduced reserve requirements and stopped direct credit controls these market oriented reforms have encouraged financial deepening thereby producing considerable economic benefits to the countries nevertheless the persistence of high interest rate spreads has been a disquieting outcome of the reforms this paper explores the determinants of bank spreads in a systematic way for argentina bolivia chile colombia mexico peru and uruguay during the mid 1990s the analysis shows that high operating costs raise spreads as do high levels of non performing loans although the size of these effects differs across the countries in addition reserve requirements in a number of countries still act as a tax on banks that gets translated into a higher spread beyond bank specific variables uncertainty in the macroeconomic environment facing banks appears to increase interest spreads the combination of these microeconomic and macroeconomic factors is a cause for concern in latin america as spreads widen the cost of using the financial system becomes prohibitive to some potential borrowers in addition the results suggest that bank capital requirements may not prevent excessive risk taking by banks when bank spreads are high

the determinants of bank interest margins theory and empirical evidence this paper has developed a model of bank margins or spreads in which the bank is viewed as a risk averse dealer it was demonstrated that an interest spread or margin would always exist and that this was the result of transactions uncertainty faced by the bank moreover it was shown that this pure spread depended on four factors the degree of managerial risk aversion the size of transactions undertaken by the bank bank market structure and the variance of interest rates the model implied that liability and asset structures had to be analyzed together since they were directly interrelated through transactions uncertainty it was shown that because of this transactions uncertainty hedging behavior was perfectly rational within an expected utility maximizing framework extending the model from a structure with one kind of loan and deposit to loans and deposits with many maturities should lead to further interesting insights into margin determination especially as portfolio effects may become apparent

banking deregulation allocational consequences of relaxing entry barriers abstract we present an equilibrium analysis to predict the long run allocational consequences and risk implications of banking deregulation loan demand and deposit supply functions are derived from primitive assumptions about the preferences of individuals and banks are viewed as differentiated competitors in a spatial context we find that a relaxation of entry barriers into banking improves the welfare of borrowers and savers at the expense of bank stockholders equilibrium loan interest rates fall and equilibrium deposit interest rates rise as banking becomes more competitive despite this the equilibrium debt equity ratios of banks increase as entry barriers are relaxed we also examine the implications of capital standards and find that an increase in the minimum capital requirement benefits borrowers but hurts depositors

banking spreads in latin america i introduction financial intermediation in latin america is low by international standards financial systems in latin america are still largely bank based but after a short period of strong credit growth sparked by financial liberalization in the early 1990s bank lending has not yet recovered from the collapse following the banking crises of the mid 1990s as shown by singh et al 2005 as a result from figure 1 it is clear that bank lending as a percentage of gross domestic product gdp is low compared to industrialized countries and other emerging markets this lack of financial intermediation is seen as an important obstacle to growth there is a considerable body of evidence indicating that financial intermediation is not only correlated with growth but also a causal factor in explaining economic performance see e g levine 2004 the low levels of lending in latin america appear related to the prevalence of high intermediation costs in the region intermediation spreads in latin america are high compared to those in other banking markets this is true when measuring spreads as either ex ante bank spreads the difference between weighted averages of lending rates and bank funding costs figure 2 or ex post net interest margins defined as the bank s total interest income minus total interest expense divided by the sum of interest bearing assets figure 3 the high levels of spreads are not a recent phenomenon and unlikely to be a result of the ongoing process of bank consolidation as in other regions in the 1990s latin america saw a trend toward bank consolidation and concentration to a large extent as depicted in inter american development bank 2004 consolidation was driven by financial crises and subsequent regulatory tightening while this resulted in a marked reduction in the number of banks in most countries it does not seem to have yielded a decline in competition intensity partly because it was accompanied by a lowering of barriers of entry to foreign banks which is shown in gelos and roldos 2004 and inter american development bank 2004 in fact banking spreads have fallen somewhat over the past decade although the pace of the reduction has been slow figure 4 1 this paper takes a closer look at the determinants of bank interest margins in latin america using bank and country level data from 85 countries including 14 latin american economies we assess the role of bankand country specific factors in determining banking spreads using microdata from more than 2 200 banks taking an international perspective allows us to delineate the key dimensions in which latin america differs from other regions the paper differs from existing studies in further dimensions apart from the latin american specific focus in a cross country approach among other aspects we make use of new or expanded data sets including comprehensive information on reserve requirements and foreign ownership and investigate the relationship between competition and bank spreads using behavioral measures of bank competition suggested by the new industrial organization literature figure 1 omitted figure 2 omitted the results suggest that latin america has higher interest rate levels less efficient banks and larger reserve requirements than other regions and that these factors have a significant impact on spreads however latin american countries do not differ markedly from their peers in other aspects that are found important in determining the cost of financial intermediation such as inflation bank profit taxation average bank size or average equity as a percentage of total bank assets ii the determinants of spreads literature review the extensive literature on bank behavior suggests that at the country level the following factors are likely to influence the cost of credit creditor rights and the quality of the legal framework higher recovery rates and shorter times to repossess collateral in countries with better legal environments are expected to reduce bank spreads

layoffs and lemons over the business cycle abstract this paper develops a simple model in which unemployment arises from a combination of selection and bad luck during recessions the proportion of workers who are laid off due to low productivity declines during recessions diminishing the adverse signaling effect of an unemployment spell wage regressions estimated using the displaced workers supplement support this basic prediction of the model

collateral type of lender and relationship banking as determinants of credit risk abstract this paper analyses the determinants of the probability of default pd of bank loans we focus the discussion on the role of a limited set of variables collateral type of lender and bank borrower relationship while controlling for the other explanatory variables the study uses information on the more than three million loans entered into by spanish credit institutions over a complete business cycle 1988 2000 collected by the bank of spain s credit register central de informacion de riesgos we find that collateralised loans have a higher pd loans granted by savings banks are riskier and finally that a close bank borrower relationship increases the willingness to take more risk

a general equilibrium model of guest worker migration the source country perspective abstract this paper examines the problem of guest worker migration from an economy populated by identical utility maximizing individuals with finite working lives the decision to migrate the rate of saving while abroad as well as the length of a migrant s stay in the foreign country are all viewed as part of a solution to an intertemporal optimization problem in addition to studying the microeconomic aspects of temporary migration the paper analyses the determinants of the equilibrium flow of migrants the corresponding domestic wage and the level of welfare enjoyed by a typical worker effects of an emigration tax are also investigated

a time series cross section analysis of the determinants of australian trading bank loan deposit interest margins 1962 1981 abstract a theoretical model of the determination of trading bank interest margins based on the hedging theory of interest margin determination is tested on time series cross section data of australian trading banks generally the results are consistent with that theory that is there exists a stable non linear relationship between australian trading bank net loan deposit interest margins and measures of market power degree of absolute risk aversion and to interest rate uncertainty furthermore the shift from business sector to personal sector loan and deposit business is associated with increased bank interest margins

how foreign participation and market concentration impact bank spreads evidence from latin america increasing foreign participation and high concentration levels characterize the recent evolution of banking sectors market structures in developing countries the authors analyze the impact of these factors on latin american bank spreads during the late 1990s their results suggest that foreign banks were able to charge lower spreads relative to domestic banks this was more so for de novo foreign banks than for those that entered through acquisitions the overall level of foreign bank participation seemed to influence spreads indirectly primarily through its effect on administrative costs bank concentration was positively and directly related to both higher spreads and costs

involuntary layoffs in a model with asymmetric information concerning worker ability this paper examines the contract between a risk neutral firm and its risk averse employees assuming that worker ability is privately learned by the firm after a period of employment employers in an external spot labour market attempt to infer worker quality from the observable actions taken by the firm such as the number of workers it lays off the threat of spot market raids distorts the optimal contract layoffs may be involuntary and can exceed efficient levels a seniority layoff rule may be included in the contract to avoid the adverse selection problems that arise if layoffs are conducted on the basis of ability

liquidity provision banking and the allocation of interest rate risk abstract the paper studies the efficient allocation of technology induced interest rate risk and the implications of such risk for efficient liquidity provision complete immunization against interest rate risk is shown to be undesirable as it precludes the exploitation of favourable reinvestment opportunities under the assumptions of diamond dybvig 1983 interest induced valuation risks of long term assets should be born by early withdrawers reinvestment opportunity risks of short term assets by late withdrawers efficient liquidity provision thus entails no shifting of interest rate risk in the absence of additional moral hazard second best allocations can be implemented through unregulated competition among banks

the west german gastarbeiter system of immigration abstract the paper analyzes the west german immigration system as operated until early 1970s defining the essential features of this system the authors explain the cross sectional industrywise utilization of foreign guestworkers during 1964 65 to 1971 72 they also extend the analysis to explaining the sourcewise by country composition of foreign workers during this period

why are interest spreads so high in uganda using international comparisons and a unique bank level dataset on the ugandan banking system over the period 1999 to 2005 we explore the factors behind consistently high interest rate spreads and margins international comparisons show that the small size of ugandan banks persistently high t bill rates and institutional deficiencies explain large proportions of the high ugandan interest rate margins the ugandan bank panel confirms the importance of macroeconomic factors such as high inflation high t bill rates and exchange rate appreciation there is also evidence for the small market place and high costs of doing business explaining persistently high spreads and margins smaller banks and banks targeting the low end of the market incur higher costs and therefore higher margins spreads and margins also vary significantly with the sectoral loan portfolio composition of banks while there is little evidence for foreign bank entry privatization or changes in market structure explaining variation in spreads or margins over time

evidence on adverse selection and establishment size in the labor market a commonly suggested explanation for the finding that laid off workers have greater mean post displacement earnings losses than workers who lose theirjobs through plant closings is that the former are of lower quality than the latter but there is also an alternative explanation for this result laid off workers suffer larger earnings losses because as a group they have more to lose in the first place having been displaced from larger higher wage establishments an analysis of data from the national longitudinal survey of youth confirms this hypothesis accounting for establishment size removes virtually all of the difference in wage losses for the two groups of displaced workers an adverse selection framework has been employed by many authors to explain various phenomena in the labor market spence 1973 harris and holmstrom 1982 greenwald 1986 recently several authors gibbons and katz 1991 doiron 1995 grund 1997 have investigated whether the postjob loss experiences of two different types of displaced workers those who are laid off from their jobs and those who are displaced by a plant closing reflect adverse selection specifically do laid off workers exhibit larger post job loss wage

interest margins and bank regulation in central america and the caribbean abstract this paper examines empirically the determinants of bank interest margins in central america and the caribbean over the period 1998 2014 a particular focus is set on the impact of differences in the regulatory environment and market structure across countries in explaining the interest margins of individual banks our results suggest that bank market power operating costs credit risk and liquid asset holdings increase the margin between loan and deposit rates while increased income diversification and gdp growth are associated with lower loan deposit spreads when considering information on banking regulation we find strong evidence to support our main hypothesis that improvements in market quality and liberalization have a significant effect on interest margins more specifically reductions in entry requirements to banking higher involvement of foreign banks and increased financial statement transparency are associated with significant reductions in interest margins

duration dependence and labor market conditions evidence from a field experiment this article studies the role of employer behavior in generating negative duration dependence the adverse effect of a longer unemployment spell by sending fictitious resumes to real job postings in 100 u s cities our results indicate that the likelihood of receiving a callback for an interview significantly decreases with the length of a worker s unemployment spell with the majority of this decline occurring during the first eight months we explore how this effect varies with local labor market conditions and find that duration de pendence is stronger when the local labor market is tighter this result is consistent with the prediction of a broad class of screening models in which employers use the unemployment spell length as a signal of unobserved productivity and recognize that this signal is less informative in weak labor markets jel code j64

impact of bank competition on the interest rate pass through in the euro area this article analyses the impact of loan market competition on the interest rates applied by euro area banks to loans during the period 1994 2004 using a novel measure of competition called the boone indicator we find evidence that stronger competition implies significantly lower spreads between bank and market interest rates for most loan market products in line with expectations this result implies that stronger competition causes both lower bank interest rates and a stronger pass through of market rate changes into bank rates evidence of the latter is also presented by our error correction model ecm for bank rates further banks compensate income losses from increased loan market competition by offering lower deposit rates our findings with respect to the loan market rates have important monetary policy implications as they suggest that measures to promote competition in the european banking sector are likely to render the monetary policy transmission mechanism more effective

regulations market structure institutions and the cost of financial intermediation this paper examines the impact of bank regulations market structure and national institutions on bank net interest margins and overhead costs using data on over 1400 banks across 72 countries while controlling for bankspecific characteristics the data indicate that tighter regulations on bank entry and bank activities boost the cost of financial intermediation inflation also exerts a robust positive impact on bank margins and overhead costs while concentration is positively associated with net interest margins this relationship breaksdownwhencontrolling for regulatory impediments to competition and inflation furthermore bank regulations become insignificant when controlling for national indicators of economic freedom or property rights protection while these institutional indicators robustly explain cross bank net interest margins and overhead expenditures thus bank regulations cannot be viewed in isolation they reflect broad national approaches to private property and competition

lending by example direct and indirect effects of foreign banks in emerging markets using a novel dataset that allows us to trace the bank relationships of a sample of mostly unlisted firms we explore which borrowers are able to benefit from foreign bank presence in emerging markets our results suggest that the limits to financial integration are less tight than the static picture of firm bank relationships implies even though foreign banks are more likely to engage large and foreign owned firms after an acquisition a bank is 20 less likely to terminate a relationship with a firm if the acquirer is foreign rather than domestic most importantly within a credit market firms appear to have the same access to financial loans and ability to invest whether they borrow from a foreign bank or not while foreign banks benefit all firms by indirectly enhancing credit access

are bank capital ratios pro cyclical new evidence and perspectives this paper analyses how the new basel iii leverage ratio and risk weighted regulatory capital ratio behave over the cycle the analysis proposes a set up to test for the cyclical properties of bank capital ratios taking into account structural shifts in banks behaviour during the global financial crisis and its aftermath using a large data set covering international banks headquartered in 14 advanced economies for the period 1994 2012 we find that the basel iii leverage ratio is significantly more countercyclical than the risk weighted regulatory capital ratio it is a tighter constraint for banks in booms and a looser constraint in recessions

the determinants of bank interest rate margins an international study abstract this paper studies the determinants of bank net interest margins nims in six selected european countries and the us during the period 1988 1995 for a sample of 614 banks we apply the ho and saunders model ho t saunders a 1981 the determinants of bank interest margins theory and empirical evidence journal of financial and quantitative analyses 16 581 600 to a multicountry setting and decompose bank margins into a regulatory component a market structure component and a risk premium component the regulatory components in the form of interest rate restrictions on deposits reserve requirements and capital to asset ratios have a significant impact on banks nims the empirical results suggest an important policy trade off between assuring bank solvency high capital to asset ratios and lowering the cost of financial services to consumers low nims the more segmented or restricted the banking system both geographically and by activity the larger appears to be the monopoly power of existing banks and the higher their spreads macro interest rate volatility was found to have a significant impact on bank nims this suggests that macro policies consistent with reduced interest rate volatility could have a positive effect in reducing bank margins