the consequences of legal minimum wages in honduras summary minimum wage policies are implemented in most developing countries so understanding their consequences is critical to determine their effectiveness this paper quantifies the labor market and poverty effects of honduran minimum wages from 2005 to 2012 using 13 household surveys as repeated cross sections i estimate the net effects of minimum wage hikes using variation from annual reforms to multiple minimum wages a 60 increase and changes in the number of minimum wage categories evidence shows that employers are partially complying with minimum wage laws and respond to hikes by increasing their level of non compliance higher minimum wages reduce covered formal employment and increase uncovered informal employment formal sector wages increase but greater labor supply in the informal sector leads to a negative net effect on wages this last result is often empirically ambiguous although consistent with the dual sector minimum wage model i find no evidence that minimum wages reduce extreme or moderate poverty

state dependent pricing invoicing currency and exchange rate pass through abstract we analyze exchange rate pass through and volatility of import prices in a dynamic framework where firms are subject to menu costs and decide on price adjustments in response to exchange rate innovations the exchange rate pass through and import price volatility then depend on the invoicing currency in combination with functional forms of cost and demand functions in particular there is lower pass through less frequent price adjustments and lower price volatility when prices are set in the importer s currency than when prices are set in the exporter s currency

taxing capital not a bad idea after all we quantitatively characterize the optimal capital and labor income tax in an overlapping generations model with idiosyncratic uninsurable income shocks and permanent productivity difierences of households the optimal capital income tax rate is signiflcantly positive at 36 percent the optimal progressive labor income tax is roughly a at tax of 23 percent with a deduction of 7 200 relative to average household income of 42 000 the high optimal capital income tax is mainly driven by the life cycle structure of the model whereas the optimal progressivity of the labor income tax is attributable to the insurance and redistribution role of the tax system jel e62 h21 h24

optimal capital income taxation with incomplete markets borrowing constraints and constant discounting for a wide class of infinitely lived agent models chamley has shown that the optimal capital income tax rate is zero in the long run lucas has argued that for the u s economy there is a significant welfare gain from switching to this policy this paper shows that for the bewley class of models with incomplete insurance markets and borrowing constraints the optimal tax rate on capital income is positive even in the long run therefore cutting the capital income tax to zero may well lead to welfare losses

the minimum wage as a redistributive tool most analyses of the minimum wage focus on its unintended employment consequences the goal of a minimum wage is not of course to reduce employment but to redistribute earnings to low paid workers under what conditions can a minimum accomplish this are those conditions met in economies which otherwise rely extensively on markets to set wages such as the united states which in i994 rejected mandating health benefits that would have effectively raised the minimum or the united kingdom where in i995 the labour party promised a national minimum upon election who pays for the redistribution who benefits the redistributive effects of a minimum wage depend on the labour market and redistributive system in which it operates on the level of the minimum and on its enforcement at best an effective minimum wage will shift the earnings distribution in favour of the low paid and buttress the bottom tiers of the distribution from erosion at worst minimum wages reduce the share of earnings going to the low paid by displacing many from employment neither outcome is certain so that enacting a minimum is a risky but potentially profitable investment in redistribution it is the balancing of risk against gain that makes a minimum so controversial until the i980s i99os competitive labour markets in the united states and united kingdom produced rising real earnings for the low paid and falling earnings inequality so the risk of enacting a national minimum united kingdom or of raising substantially the national minimum united states seemed unnecessary why interfere with the competitive market when it produces socially desirable trends in earnings albeit a bit slower than one might accomplish with a legislated minimum two decades of falling real wages for lower decile workers in the united states and of rising earnings inequality in the united kingdom1 have however put the minimum back in play the job market is not doing much for lower paid workers in the united kingdom virtually all social groups accept the need for some redistribution though they differ on the best way to accomplish such in the united states pressures for tax cuts can be interpreted as a way for employees to gain real wage increases unavailable through the market the consensus favouring redistribution through the earned income tax credit disappeared in the midi 990s rush to reduce federal budget deficits this paper takes as its operating premise the goal of redistributing earnings

when is a lower exchange rate pass through associated with greater exchange rate exposure abstract we study the relationship between exchange rate pass through how exchange rates affect import prices and exchange rate exposure how exchange rates affect profits under flexible prices we note that the convexity of costs is an important determinant of both pass through and exposure and that an increase in the convexity of costs typically reduces both pass through and exposure hence the correlation between pass through and exposure should be positive across industries if cost functions differ across industries this effect can be mitigated by the negative correlation between pass through and exposure induced by changes in the price elasticity of demand

the effects of minimum wages on wage dispersion and employment evidence from the u k wages councils using data on wages council coverage from the united kingdom new earnings survey the authors examine the impact of mandated minimum wages on wage dispersion and employment in the united kingdom in the 1980s they find evidence that a dramatic decline in the toughness of the regulation imposed by the wages councils through the 1980s a decline that is in the level of the minimum wage relative to the average wage significantly contributed to widening wage dispersion over those years there is however no evidence of an increase in employment resulting from the weakening bite of the wages council minimum pay rates instead consistent with the conclusions of several recent u s studies the findings suggest that the minimum wage had either no effect or a positive effect on employment

exchange rates and cash flows in differentiated product industries a simulation approach how do exchange rate changes impact firms cash flows we extend a simulation method developed in industrial organization to answer this question we use prices quantities and product characteristics for differentiated products coupled with a discrete choice framework and an assumption of price competition to estimate marginal costs for all producers using a monte carlo approach we generate counterfactual prices and profits for different levels of exchange rates we illustrate the method using the market for bottled water our results stress that even in a relatively simple market such as this one different brands face very different exchange rate risks consider a firm that produces a good in france using mainly local inputs and sells it abroad in locations that have a floating exchange rate vis a vis the euro profits and in turn the value of the firm are potentially exposed to exchange rate changes if the euro appreciates profits when measured in euros are likely to decrease how large is the decrease in profits similarly what is the impact of such an exchange rate change on the profits of an import competing firm these are the questions that a large literature on exchange rate exposure attempts to answer

international competition and exchange rate shocks a cross country industry analysis of stock returns this article systematically examines the importance of exchange rate movements and industry competition for stock returns common shocks to industries across countries are more important than competitive shocks due to changes in exchange rates weekly exchange rate shocks explain almost nothing of the relative performance of industries using returns measured over longer horizons the importance of exchange rate shocks increases slightly and the importance of industry common shocks increases more substantially both industry and exchange rate shocks are more important for industries that produce internationally traded goods but the importance of these shocks is economically small for these industries as well economists journalists and politicians around the world argue that some of the industries in their country compete vigorously with the same industries in other countries and that exchange rate shocks affect their competitiveness in the united states it is routinely stated that some u s industries compete with japanese industries and that a depreciation of the yen is bad for these u s industries and good for the rival japanese industries if the yen falls trade tensions could intensify between the u s and japan as autos and machinery from japan gain a competitive edge 1 further the exchange rate literature shows that exchange rate shocks lead to persistent deviations from purchasing power parity 2 froot and klemperer 1989 and knetter 1989 1993 among others demonstrate that deviations from purchasing power parity lead to sharp changes in price markups and profit margins for exporters

who gets what from minimum wage hikes a re estimation of card and krueger s distributional analysis in myth and measurement the new economics of the minimum wage i ve studied the arguments and the evidence for and against a minimum wage increase i believe that the weight of the evidence is that a modest increase does not cost jobs and may even lure people into the job market but the most important thing is you can t make a living on 4 25 an hour president clinton state of the union address 1995

the surprising power of age dependent taxes this paper provides a new empirically driven application of the dynamic mirrleesian framework by studying a feasible and potentially powerful tax reform age dependent labour income taxation i show analytically how age dependence improves policy on both the intratemporal and intertemporal margins i use detailed numerical simulations calibrated with data from the u s panel study of income dynamics to generate robust policy implications age dependence 1 lowers marginal taxes on average and especially on high income young workers and 2 lowers average taxes on all young workers relative to older workers when private saving and borrowing are restricted finally i calculate and characterize the welfare gains from age dependence despite its simplicity age dependence generates a welfare gain equal to between 0 6 and 1 5 of aggregate annual consumption and it captures more than 60 of the gain from reform to the dynamic optimal policy the gains are due to substantial increases in both efficiency and equity when age dependence is restricted to be pareto improving the welfare gain is nearly as large

good jobs versus bad jobs this article develops a model of noncompetitive labor markets in which high wage good and low wage bad jobs coexist minimum wages and unemployment benefits shift the composition of employment toward high wage jobs because the composition of jobs in the laissez faire equilibrium is inefficiently biased toward low wage jobs these labor market regulations increase average labor productivity and may improve welfare

investment and the exchange rate an analysis with firm level panel data abstract this paper investigates the relationship between exchange rate fluctuations and the investment decisions of a sample of italian manufacturing firms the results support the view that a depreciation of the exchange rate has a positive effect on investment through the revenue channel and a negative effect through the cost channel the magnitude of these effects varies over time with changes in the firm s external orientation as measured by the share of foreign sales over total sales and the reliance on imported inputs consistent with the predictions of our theoretical framework the effect of exchange rate fluctuations on investment is stronger for firms with low monopoly power facing a high degree of import penetration in the domestic market and of a small size we also provide evidence that the degree of substitutability between domestically produced and imported inputs influences the effect through the expenditure side

optimal taxation in life cycle economies abstract we use a very standard life cycle growth model in which individuals have a labor leisure choice in each period of their lives to prove that an optimizing government will almost always find it optimal to tax or subsidize interest income the intuition for our result is straightforward in a life cycle model the individual s optimal consumption work plan is almost never constant and an optimizing government almost always taxes consumption goods and labor earnings at different rates over an individual s lifetime one way to achieve this goal is to use capital and labor income taxes that vary with age if tax rates cannot be conditioned on age a nonzero tax on capital income is also optimal as it can imperfectly mimic age conditioned consumption and labor income tax rates journal of economic literature classification numbers e62 h21

minimum wages and poverty the principal justification for minimum wage legislation resides in improving the economic condition of low wage workers most previous analyses of the distributional effects of minimum wages have been confined to simulation exercises employing rather restrictive assumptions that guarantee the conclusion that an increase in the minimum wage reduces poverty in contrast we adopt a more flexible reduced form approach that links increases in both federal and state minima to contemporaneous changes in poverty rates for the period 1983 96 we find indication of a poverty reducing effect of minimum wages among older junior high dropouts and among teenagers

multinational investment under uncertainty in the chemical processing industries this study uses a sample of chemical processing industries to evaluate the effect of two types of uncertainty on the decision to invest in an industry it analyzes the effects of relative price uncertainty through exchange rates and input prices and demand uncertainty on the probability of expansion in a particular country the study then focuses on the behavior of individual companies and distinguishes companies by whether or not they are multinationals in the production of the product the results confirm previous evidence that exchange rate uncertainty has a negative effect on capacity expansions by domestic corporations and no effect on investment by multinational corporations finally the study also shows that expansions of production capacity in this industry are more likely to occur in those countries where capacity utilization is higher

the foreign exchange exposure of japanese multinational corporations we find that about 25 percent of our sample of 171 japanese multinationals stock returns experienced economically significant positive exposure effects for the period january 1979 to december 1993 the extent to which a firm is exposed to exchange rate fluctuations can be explained by the level of its export ratio and by variables that are proxies for its hedging needs highly leveraged firms or firms with low liquidity tend to have smaller exposures foreign exposure is found to increase with firm size we also find that keiretsu multinationals are more exposed to exchange rate risk than nonkeiretsu firms it is conventional wisdom that exchange rate movements affect both the cash flows of a firm s operations and the discount rate employed to value these cash flows measuring foreign exchange exposure is now a central issue of international financial management and this issue has spawned a considerable amount of research existing empirical evidence on foreign exchange exposure however seems perplexing studies have so far documented a weak link between contemporaneous exchange rate fluctuations and stock returns of u s multinational firms 2 gendreau 1994 finds it difficult and unconvincing that the weak results imply that exchange rate changes have no effect on exporters stock returns bartov arnd bodnar 1994 attribute the observed insignificant relationship between exchange rate changes and st ock returns to probable problems associated with the previous studies samiple selection procedure or to mispricing caused by investors errors in estimat

redistributive taxation in a simple perfect foresight model abstract we investigate the redistributive potential of capital taxation in an intertemporal maximizing model of capital formation first even unanticipated redistributive capital taxation is severely limited in its effectiveness since it depresses wages second under any convergent redistributive tax policy which maximizes a paretian social objective the capital income tax will converge to zero independent of the factor supply elasticities these results are independent of workers holdings of capital

resolving the exposure puzzle the many facets of exchange rate exposure theory predicts sizeable exchange rate fx exposure for many firms however empirical research has not documented such exposures to examine this discrepancy we extend prior theoretical results to model a global firm s fx exposure and show empirically that firms pass through part of currency changes to customers and utilize both operational and financial hedges for a typical sample firm pass through and operational hedging each reduce exposure by 10 15 financial hedging with foreign debt and to a lesser extent fx derivatives decreases exposure by about 40 the combination of these factors reduces fx exposures to observed levels

the effects of industry structure on economic exposure abstract a firm is subject to economic exposure if changes in exchange rates affect the firm s value as measured by the present value of its future cash flows this paper shows that in many forms of competition including the most commonly studied case of monopoly the economic exposure of an exporting firm is simply proportional to the firm s net revenues based in foreign currency this simple result breaks down under some but not all forms of competition between the exporting firm and foreign firms in that case the exporting firm needs to know about the price elasticity of its product demand and its marginal cost in order to assess its exposure to exchange rates the key determinant of economic exposure therefore is the competitive structure of the industry in which a firm operates

efficiency with endogenous population growth in this paper we generalize the notion of pareto e ciency to make it applicable to environments with endogenous populations two di erent e ciency concepts are proposed p e ciency and a e ciency the two concepts di er in how they treat people that are not born we show how these concepts relate to the notion of pareto e ciency when fertility is

minimum wages and household poverty general equilibrium macro micro simulations for south africa summary the poverty reducing effects of minimum wages depend on its effectiveness in targeting the poor and the extent to which job losses and price increases offset income gains we develop a general equilibrium microsimulation model to simulate the economywide effects of minimum wages in south africa we find minimum wages lead to a marginal decline in poverty and overall inequality however job losses are more likely to affect the poorest among minimum wage workers while rising production costs reduce overall household welfare the policy is not an effective anti poverty tool in south africa given poor targeting and adverse price effects which are often unaccounted for in policy simulations

the effects of the minimum wage in brazil on the distribution of family incomes 1996 2001 abstract the brazilian economy has long relied on the minimum wage having first implemented a minimum in 1940 shortly after taking office in 2003 brazil s president raised the minimum wage by 20 and promised to double the value of the minimum wage before his term ends in 2006 the usual rationale for minimum wage increases is to bring about beneficial changes in the income distribution by raising incomes of poor and low income families the goal of this paper is to evaluate the efficacy of the minimum wage in brazil in bringing about these changes in the income distribution we examine data drawn from brazil s major metropolitan areas studying the years after brazil s hyper inflation ended the estimates provide no evidence that minimum wages in brazil lift family incomes at the lower points of the income distribution if anything some of the evidence points to adverse effects on lower income families

investment pass through and exchange rates a cross country comparison using detailed data from the united states canada the united kingdom and japan we examine the implications of exchange rates for time series of sectoral investment both theoretically and empirically we show that investment responsiveness to exchange rates varies over time positively in relation to sectoral reliance on export share and negatively with respect to the share of imported inputs in production important differences exist in investment endogeneity across high and low price over cost markup sectors with investment in low markup sectors often significantly more responsive to exchange rates cross country differences in investment response are only partially explained by industrial organization arguments

market structure and price cost margins in a paper that has become a standard reference in the structure conductperformance approach to industrial economics cowling and waterson 1976 developed a theoretical rationale for expecting industry profitability to be positively correlated with the level of concentration their model based on a simple algebraic description of oligopoly behaviour has been interpreted as providing a justification for the common empirical practice of cross industry regression analysis of price cost margins in terms of concentration levels in the present paper we show that on further examination this model implies a joint determination of margins and concentration this provides some interesting comparative static results of relevance to inter industry differences in concentration levels equally however it leads to various cautionary insights concerning the meaning of price cost margin versus concentration regressions

the impact of globalization on the poor in latin america this paper consists of four parts following an introduction section 2 analyzes and describes the main channels transmission mechanisms through which the process of globalization affects poverty directly and indirectly section 3 reviews the major effects of globalization on the latin american economy keeping in mind that few generalizations can be made with much assurance section 4 focuses on 13 case studies of the impact of globalization within different latin american settings undertaken under the auspices of a unu wider project directed by the authors these case studies reveal clearly how the effects of different manifestations of globalization on poverty tend to be context specific in general the main globalization channels appeared not to have been able to reduce overall poverty in the region between 1981 and 2004 growth was anemic and its pattern was not pro poor instead bringing about greater income inequality the transfer of technology tended to benefit the skilled workers and hurt the unskilled the one ray of hope in an otherwise bleak picture consists of the safety nets and social protection schemes implemented in an innovative fashion by some of the larger countries in the region

do minimum wages fight poverty i introduction one of the most compelling rationales for a national minimum wage floor is to raise the incomes of poor or near poor families with members in the workforce this general point however is often missed in the debates over the merits of a higher minimum wage in contrast to these oft stated distributional goals much of the focus in such debates has been on the employment effects of minimum wages especially among the teenage population in large part this focus is probably attributable to the extensive body of economic research on the effects of minimum wages on employment of low skilled workers however although negative employment effects represent a cost of minimum wages such costs do not necessarily imply that minimum wages constitute bad social policy in particular the employment losses associated with a higher minimum wage may be more than offset by positive effects on low income families especially if minimum wages are a significant factor in helping move families out of poverty 1 this is not to argue that research on employment effects of minimum wages is irrelevant but such research may be more important as a test of the theory of labor demand and as a method of learning how employers and individuals adjust to exogenous wage increases than as a method of assessing the wisdom of the policy in addition we do not mean to suggest that the short run effects of minimum wages on the incomes of poor families should be the sole criterion for evaluating such policies other studies have found evidence suggesting for example that minimum wage increases reduce school enrollment rates and training neumark and wascher 1996a hashimoto 1982 factors that may affect longer run earnings or earnings growth these deleterious longer run effects might offset the benefits of shorter run effects of minimum wages on family incomes nonetheless our perception is that potential increases in the incomes of poor families provide the main motivation for raising the minimum wage making it important to assess the evidence on whether minimum wage increases achieve this goal in this regard there are two questions that pertain to the influence of minimum wages on family incomes generally and on poverty in particular first there is the question of the effects of minimum wages on low wage workers that is do the wage gains received by employed workers more than offset the lost earnings suffered by those who lose or cannot find jobs 2 second there is the question of how minimum wages affect workers in different parts of the family income distribution because many roughly speaking a large minority of minimum wage workers are in relatively affluent families gramlich 1976 card and krueger 1995 burkhauser et al 1996 which workers gain and which lose will have an important influence on the effects of minimum wages on the distribution of family incomes in this article we present evidence on the effects of minimum wages on family incomes focusing in particular but not solely on the effectiveness of minimum wages in reducing poverty using matched march current population surveys cpss we estimate the effects of minimum wages on the probabilities of various transitions in the family income distribution such as transitions into and out of poverty given that federal changes in minimum wages may be confounded with other aggregate level shocks influencing family income we rely heavily on state level changes in minimum wages to identify minimum wage effects in a nutshell our empirical strategy is to compare rates of transition through the family income distribution in states in which minimum wages do and do not increase for example if poor families are more likely to escape from poverty when minimum wages increase in their states of residence we would infer that minimum wage hikes help families move out of poverty on the other hand if transitions in to poverty are more common when minimum wages increase we would infer that the disemployment effects of minimum wages play a dominant role among the low income population

exchange rate exposure abstract in this paper we examine the relationship between exchange rate movements and firm value we estimate the exchange rate exposure of publicly listed firms in a sample of eight non us industrialized and emerging markets we find that exchange rate movements do matter for a significant fraction of firms though which firms are affected and the direction of exposure depends on the specific exchange rate and varies over time suggesting that firms dynamically adjust their behavior in response to exchange rate risk exposure is correlated with firm size multinational status foreign sales international assets and competitiveness and trade at the industry level

minimum wages globalization and poverty in honduras summary we test whether minimum wage legislation is an effective poverty reduction tool in a poor country trying to stay competitive in the global economy in honduras increases in relatively high minimum wages lead to reductions in poverty especially extreme poverty however the impact is felt only in households with workers in large firms and felt more strongly among those with low wage workers increases in the minimum do not affect poverty in sectors where minimum wages are not enforced or do not apply hence minimum wages can be a poverty reduction tool in the formal sector which competes globally

optimal indirect and capital taxation we consider an environment in which agents skills are private information and follow arbitrary stochastic processes we prove that it is typically pareto optimal for an individual s marginal benefit of investing in capital to exceed his marginal cost of doing so this wedge is consistent with a positive tax on capital income we also prove that it is pareto optimal for the marginal rate of substitution between any two consumption goods to equal the marginal rate of transformation this lack of a wedge is consistent with uniform taxation of consumption goods within a period

the exchange rate exposure of u s multinationals this article examines the exposure of u s multinationals to foreign currency risk evidence is presented that the relationship between stock returns and exchange rates differs systematically across multinationals given these results the study focuses on the determinants of exchange rate exposure the comovements between stock returns and the value of the dollar is found to be positively related to the percentage of foreign operations of u s multinationals copyright 1990 by the university of chicago

taxation and saving a retrospective atkinson and sandmo 1980 evaluated the taxation of saving by embedding the static optimal tax framework within the two period overlapping generations model using this model they collected a series of important results for optimal taxes on labour and capital income under a variety of assumptions regarding the instruments and objectives of the government in particular the availability of national debt to spread burdens among different generations of individuals with clear intuition and presentation the study remains an important source for understanding the welfare implications of the taxation of saving

exchange rate exposure and foreign market competition evidence from japanese firms in this paper we focus on the impact of foreign competition on exposure or the responsiveness of profits to fluctuations in exchange rates we find that of the 15 four digit level japanese export industries in our sample 10 industries are better characterized as cournot competitors in foreign markets rather than colluding firms depending on the industry exposure elasticities range from 0 5 to 8 5 with an average of around 2 5 these elasticities on the whole are much higher than those found in earlier research collusive exporters tend to have higher elasticities than competitive exporters

optimal taxation of capital income in general equilibrium with infinite lives this paper analyzes the optimal tax on capital income in general equilibrium models of the second best agents have infinite lives and utility functions which are extensions from the koopmans form the population is heterogeneous the important property of the models is the equality between the social and the private discount rates in the long run i find that the optimal tax rate is zero in the long run for a special case of additively separable utility functions i then determine the tax rates along the dynamic path and conditions that are sufficient for the local stability of the steady state

estimating the impact of minimum wages on employment wages and non wage benefits the case of agriculture in south africa assessments of the impact of minimum wages on labor market outcomes in africa are relatively rare in part this is because the available data do not permit adequate treatment of econometric issues that arise in such assessments this paper however attempts to estimate the impact of introducing a minimum wage law in the agriculture sector in south africa based on 15 waves of the biannual labor force survey conducted between september 2000 and september 2007 the chosen sample includes six waves before the legislation s effective date march 2003 and nine afterwards to assess whether the changes experienced by farm workers are unique we identify a control group that has similar characteristics to the treatment group our econometric approach involves using two alternative specifications of a difference in differences model we test whether employers reduced employment and whether they responded at the intensive margin by reducing hours of work the results suggest a significant employment reduction in agriculture from the minimum wage and particularly a noticeable move away from employment of part time workers an increase in wages on average and a rise in non wage benefits compliance our analysis also indicates that firstly overall average of hours worked fell in the post law period suggesting that employers adjusted to some extent on the intensive margin secondly it appears that hours of work increased more in areas where wages were lower in the pre law period driven largely by the fall in part time employment

pass through and exposure firms differ in the extent to which they pass through changes in exchange rates into foreign currency prices and in their exposure to exchange rates the responsiveness of their profits to changes in exchange rates because pricing affects profitability a firm s pass through and exposure should be related this paper develops models of exporting firms under imperfect competition to study these related phenomena from these models we derive the optimal pass through decisions and the resulting exchange rate exposure the models are estimated on eight japanese export industries using both the price data pass through and financial data for exposure exchange rates can have a major inf luence on the pricing behavior and profitability of exporting and importing firms firms differ in the extent to which they pass through the change in exchange rates into the prices they charge in foreign markets they also differ in their exposure to exchange rates the responsiveness of their profits to changes in exchange rates previous papers have studied either pass through or exposure but none has studied these two phenomena together yet because pricing directly affects profitability the exposure of a firm s profits to exchange rates should be governed by many of the same firm and industry characteristics that determine pricing behavior this paper develops models of firm and industry behavior that are used to study these closely related phenomena together it also provides estimates of pass through and exposure behavior using data from japanese export industries to examine pass through behavior and exchange rate exposure we model a firm with sales to a foreign export market this exporting firm competes with a foreign firm in that export market the costs of the exporting firm are based primarily in the local domestic currency while the foreign firm

strategic foreign exchange management this paper argues that it is possible to advise firms on how to hedge against foreign exchange risks only if one has detailed knowledge of the competitive environment they work in to illustrate this we compare firms hedging requirements in a number of different standard industrial organizations models in particular the cournot model a model with conjectural variations price taking firms and monopolistic competition consider the situation of a firm producing in germany and selling an important part of its total output in the us obviously its profitability may be seriously compromised by an unexpected appreciation of the dm relatively to the the company can react to this uncertainty in two ways either it can assume that the conditions of the modigliani miller theorem are approximately fulfilled and that it best serves the interests of its shareholders by behaving in a risk neutral fashion alternatively the firm may for a variety of reasons behave as a risk averter itself and try to obtain some coverage against exchange rate risk when looking at the amount of insurance taken up by companies on conventional insurance markets one gets the impression that the latter alternative risk averse firms is for many practical cases a realistic assumption the activities of many companies are more easily understood if one admits that they exhibit a certain degree of risk aversion if one accepts this one may go on to ask just how companies should go about insuring themselves against unexpected exchange rate fluctuations more specifically one has to study how much exchange risk the firms should insure against and which exchange rates are of relevance in the example above of a german company selling in the us the answer might at first sight seem obvious the company should obtain coverage against dm fluctuations for an amount approximately equal to its anticipated revenues on brief reflection it immediately appears that this is surely an excessively simplistic answer first the amount of coverage required must be affected by the question of how the price of the product varies when the dm exchange rate shifts second it may be the case that the german company s main competitors are located in say france in this case fluctuations of the

minimum wage impacts on wages and hours worked of low income workers in ecuador abstract minimum wage policy aims to raise the real income of low wage workers low wage individuals may be adversely affected by minimum wages however although the empirical evidence on this point is not without controversy we analyzed the effects of the january 2012 increase in monthly minimum wages on the wages and hours worked of low wage workers in ecuador individuals could have chosen to enter occupations covered by minimum wage legislation or those that were not we applied a difference in differences estimation to account for potential self selection bias we also relied on exogenous variations in minimum wages by sector industry and occupation we constructed individual panel data from a household panel and performed estimates that also accounted for potential sample selection bias the results suggest a significant and positive effect on the wages of treated workers increasing them by 0 41 0 48 for each 1 increase in minimum wages relative to the earnings of control workers our results also suggest that effects varied by type of worker i women workers received lower wage increases and their hours worked were significantly and negatively affected both of which may suggest a failure of the minimum wage to reduce the gender wage gap at the bottom of the distribution and ii the hours worked by young workers were significantly and positively affected a result that is in agreement with results found elsewhere in the literature these results persisted after applying robustness checks to account for different control groups full vs part time jobs separate regressions for heterogeneous groups and tests for potential attrition and sample selection bias the range of effects observed across disparate groups of workers suggests areas in which policy change could be useful the income compression effect we found suggests that further studies should address the effects of minimum wage on the drop in income inequality observed in the data

exchange rates and prices the adjustment of relative prices to exchange rate movements is explained in an industrial organization approach given labor costs in the respective currencies exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium the extent of absolute and relative price adjustment is shown to depend on market integration product substitutability the relative number of domestic and foreign firms and the market structure the impact of exchange rates on prices is illustrated in a variety of approaches including the cournot a dixit and j stiglitz 1977 and s salop 1979 models some empirical evidence is offered in support of the theory copyright 1987 by american economic association

breaking the silos distributed knowledge and strategic responses to volatile exchange rates a model of effective decision making in a situation of distributed knowledge is developed drawing on three perspectives the sociocognitive perspective which focuses on framing issues the economic perspective which focuses on the role played by incentives in the integration of knowledge and decision making authority and the process perspective which stresses the role of integrating mechanisms and of processes that either hinder or foster risk awareness and flexibility the model is tested on a sample of managers from different functional areas of fortune 500 firms using strategic responses to exchange rate volatility as the context the results show that all three perspectives framing incentives and process are significant in explaining the effectiveness of strategic responses to volatile exchange rates the findings suggest that simultaneously addressing managerial mindsets incentives and process may be crucial to generating effective strategic responses across functions