market microstructure of the pink sheets abstract we study the microstructure of the pink sheets and assess the ability of existing theory to capture salient features of this relatively unstructured and unregulated market clustering patterns in quotes quoted spreads and trade prices indicate that market participants have selected price dependent tick sizes for different stocks clustering intensity varies across stocks as a function of proxies for information availability similarly the bid ask spread varies as a function of volatility and liquidity these results suggest 1 microstructure research has established robust predictions of market attributes and 2 unstructured markets are able to develop at least some effective behavioral norms endogenously

performance diversity and national identity evidence from association football the increasing national diversity of coworkers has no consensus on its impact on performance using a team s predominant nationality as a proxy for national diversity and national identity there is robust evidence that it affects team and individual performance detailed worker level data from a highly globalized industry association football show a nonlinear relationship between performance and the predominant nationality of a team s roster as the number of members from the predominant nationality increases performance declines however beyond a threshold level performance rises it follows that performance benefits from national diversity when the predominant nationality is small and from national identity when it is large jel m14 z21 z22 j15

labor protection laws and bank loan contracting abstractthis paper examines the impact of labor regulations that restrict firms flexibility to adjust labor resources on the cost of corporate bank loans using within country variation in employment protection legislation across 25 countries i find that increases in employment protection lead to higher loan spreads tighter nonprice loan contract terms and more diffuse loan ownership structure the effects of labor regulations are greater in industries with a higher rate of labor turnover and among borrowers with a higher probability of default these results suggest that rigidities imposed by labor regulations have a significant impact on firms cost of capital

peer pressure and partnerships partnerships and profit sharing are often claimed to motivate workers by giving them a share of the pie but in organizations of any significant size the free rider effects would seem to choke off

migration diversity and economic growth when migrants move from one country to another they carry a new range of skills and perspectives which nurture technological innovation and stimulate economic growth at the same time increased heterogeneity may undermine social cohesion create coordination and communication barriers and adversely affect economic development in this article we investigate the extent to which cultural diversity affects economic growth and whether this relation depends on the level of development of a country we use novel data on bilateral migration stocks that is the number of people living and working outside the countries of their birth over the period 1960 2010 and compute indices of fractionalization and polarization in so doing we explore the effect of immigration on development through its effect on the composition of the destination country we find that overall both indices have a distinct positive impact on real gdp per capita and that the effect of diversity seems to be more consistent in developing countries

cooperation and competition in intergenerational experiments in the field and the laboratory there is economic pressure towards the postponement of the retirement age but employers are still reluctant to employ older workers we investigate the comparative behavior of juniors and seniors in experiments conducted both onsite with the employees of two large firms and in a conventional laboratory environment with students and retirees we show that seniors are no more risk averse than juniors and are typically more cooperative both juniors and working seniors respond strongly to competition the implication is that it may be beneficial to define additional incentives near the end of the career to motivate and retain older workers

face to face communication in organizations communication is integral to organizations and yet field evidence on the relation between communication and worker productivity remains scarce we argue that a core role of communication is to transmit information that helps co workers do their job better we build a simple model in which workers choose the amount of communication by trading off this benefit against the time cost incurred by the sender and use it to derive a set of empirical predictions we then exploit a natural experiment in an organization where problems arrive and must be sequentially dealt with by two workers for exogenous reasons the first worker can sometimes communicate face to face with their colleague consistently with the predictions of our model we find that 1 the second worker works faster at the cost of the first worker having less time to deal with incoming problems when face to face communication is possible 2 this effect is stronger when the second worker is busier and for homogenous and closely located teams and 3 the career incentives of workers determine how much they communicate with their colleagues we also find that workers partially internalise social outcomes in their communication decisions our findings illustrate how workers in teams adjust the amount of mutual communication to its costs and benefits

collateral loan quality and bank risk abstract most commercial loans are made on a secured basis yet little is known about the relationship between collateral and credit risk several theoretical studies find that when borrowers have private information about risk the lowest risk borrowers tend to pledge collateral in contrast conventional wisdom holds that when risk is observable the highest risk borrowers tend to pledge collateral an additional issue is whether secured loans as opposed to secured borrowers tend to be safer or riskier than unsecured loans empirical evidence presented here strongly suggests that collateral is most often associated with riskier borrowers riskier loans and riskier banks

why people choose negative expected return assets an empirical examination of a utility theoretic explanation using a theoretical extension of the friedman and savage 1948 utility function developed in bhattacharyya 2003 we predict that for assets with negative expected returns such as state lottery games expected return will be a declining and convex function of skewness that is lottery players trade off expected return for skewness using two samples of lottery game data we find that our theoretical conclusions are supported by the empirical results the findings obtained here not only contribute to the literature on why individuals may participate in unfair gambles the framework could be extended to an analysis of the stock market where higher returns cannot be solely explained by risk variance

cities and cultures we investigate whether cultural diversity across us cities measured as the variety of native languages spoken by city residents is associated with any effect on their productivity diversity of cultures may imply diversity of production skills of abilities and of occupations that enhances the productive performance of a city on the other hand transaction costs and frictions across groups may hurt productivity similarly diversity in available goods and services can increase utility but distaste for or hostility to different cultural groups may decrease it using census data from 1970 to 1990 we find that wages and employment density of us born workers were systematically higher ceteris paribus in cities with richer linguistic diversity these positive correlations reveal a net positive effect of diversity on productivity that survives robustness checks and instrumental variable estimation this effect is found to be stronger for highly educated workers and for white workers we also show that better assimilated non native speakers i e those who speak english well and have been in the us for more than five years are most beneficial to the productivity of us born workers

determinants of patent rights a cross national study abstract this paper presents an index of patent rights for 110 countries for the period 1960 1990 the index is used to examine what factors or characteristics of economies determine how strongly patent rights will be protected the evidence does indicate that more developed economies tend to provide stronger protection but the underlying factors which influence patent protection levels are the country s level of research and development r d activity market environment and international integration which are correlated with its level of development the results qualify however that r d activity influences patent protection levels after a nation s research sector reaches a critical size an implication of this is that to raise patent protection levels in weakly protecting countries it is important to foster a significant research base in those countries and thereby create incentives for protecting patent rights

information or regulation what drives the international activities of commercial banks information costs and regulatory barriers distinguish international financial markets from national ones using panel data on bilateral assets and liabilities of commercial banks i empirically determine the impact of information costs and regulations and i isolate intra eu financial linkages i confirm that information costs and regulations are important factors influencing international asset choices of banks but their relative importance differs among countries

racial realism a review essay on john skrentny s after civil rights in his valuable contribution after civil rights john skrentny shows that in many sectors of the labor market race is used in ways that were unanticipated when the 1964 civil rights act was enacted with separate chapters on the professions and business the public sector media and entertainment and the low skill market he demonstrates that the new racial realism is widespread generally has some justification from social scientific research and is usually inconsistent with judicial decisions i review the racially realistic practices racial matching increasing diversity racial signaling and racial characteristics and discuss their implications for labor economics and for policy

cumulative prospect theory option returns and the variance premium the variance premium and the pricing of out of the money otm equity index options are major challenges to standard asset pricing models we develop a tractable equilibrium model with cumulative prospect theory cpt preferences that can overcome both challenges the key insight is that the variance premium can be written as the expected return on a portfolio of otm call and put options and the probability weighting feature of cpt can explain the puzzlingly low returns observed for these options using gmm on a sample of u s index option returns between 1996 and 2010 we show that the cpt model ts well observed option prices and therefore the variance premium in a dynamic setting probability weighting and time varying equity return volatility combine to match the observed time series pattern of the variance premium

the effects of coworker heterogeneity on firm level output assessing the impacts of cultural and language diversity in the national hockey league this paper uses data from the national hockey league nhl to consider the potential gains to firms from employing culturally diverse work teams it finds that the presence of foreign workers does increase firm level performance nhl teams that employed a higher proportion of european players performed better however the results also indicate that teams perform better when their european players come from the same country rather than being spread across many european countries when teams have players from a wide array of european countries integration costs associated with language and cultural differences may start to over ride any gains from diversity

do national patent laws stimulate domestic innovation in a global patenting environment a cross country analysis of pharmaceutical patent protection 1978 2002 this paper evaluates the effects of patent protection on phar maceutical innovations for 26 countries that established pharmaceutical patent laws during 1978 2002 controlling for country characteristics through matched sampling techniques to establish two proper comparison sets among 92 sampled countries and through country pair fixed effects regressions this study yields robust results national patent protection alone does not stimulate domestic innovation as estimated by changes in citation weighted u s patent awards domestic r d and pharmaceutical industry exports however domestic innovation accelerates in countries with higher levels of economic development educational attainment and economic freedom additionally there appears to be an optimal level of intellectual property rights regulation above which further enhancement reduces innovative activities

exporting creative and cultural products birthplace diversity matters this paper analyses the effect of birthplace diversity on exports of creative and cultural goods for 19 oecd countries over the period 1990 2010 by matching unesco s creative and cultural exports classification to trade and migration data we find a strong positive effect of birthplace diversity on the export of creative products in particular a 10 increase in the birthplace diversity index implies a 4 increase in creative goods exports these results are robust across several specifications and shed light on a potential new channel through which migrants can contribute to the host country s export performance it is interesting to note that only diversity of secondary and tertiary educated immigrants contributes to an increase in exports of creative and cultural goods an instrumental variables approach addresses the potential endogeneity problems and confirms our results

patents and cumulative innovation causal evidence from the courts cumulative innovation is central to economic growth do patent rights facilitate or impede such follow on innovation this paper studies the effect of removing patent protection through court invalidation on the subsequent research related to the focal patent as measured by later citations we exploit random allocation of judges at the u s court of appeal for the federal circuit to control for the endogeneity of patent invalidation we find that patent invalidation leads to a 50 percent increase in subsequent citations to the focal patent on average but the impact is highly heterogeneous patent rights appear to block follow on innovation only in the technology fields of computers electronics and medical instruments moreover the effect is entirely driven by invalidation of patents owned by large patentees that triggers entry of small innovators suggesting that patents may impede the democratization of innovation

state capacity conflict and development the absence of state capacities to raise revenue and to support markets is a key factor in explaining the persistence of weak states this paper reports on an ongoing project to investigate the incentive to invest in such capacities the paper sets out a simple analytical structure in which state capacities are modeled as forward looking investments by government the approach highlights some determinants of state building including the risk of external or internal conflict the degree of political instability and dependence on natural resources throughout we link these state capacity investments to patterns of development and growth

the idiosyncratic volatility puzzle time trend or speculative episodes campbell lettau malkiel and xu 2001 document a positive trend in idiosyncratic volatility during the 1962 1997 period we show that by 2003 volatility falls back to pre 1990s levels furthermore we show that the increase and subsequent reversal is concentrated among firms with low stock prices and high retail ownership this evidence suggests that the increase in idiosyncratic volatility through the 1990s was not a time trend but rather an episodic phenomenon at least partially associated with retail investors results from cross sectional regressions conditional trend estimation stock split events and attention grabbing events are consistent with a retail trading effect the author 2009 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please email journals permissions oxfordjournals org oxford university press

international patent protection 1960 2005 abstract this note provides an update to the index of patent protection published in this journal in 1997 the original paper presented the index for 1960 1990 for 110 countries the index has now been updated to 2005 and extended to 122 countries the adoption of stronger patent laws and the composition of patent rights vary across countries by level of economic development

intellectual property rights reform and the cost of corporate debt abstract this paper investigates the role of intellectual property rights ipr protection on the cost of bank loans for firms in 48 countries using substantial reforms of patent rights as a source of identifying variation the paper provides strong evidence that borrowers from countries that underwent ipr reform experience significant reductions in the cost of bank debt importantly the effects of ipr reform on loan rates are significantly larger in industries that are more ip intensive additional analysis shows that in the wake of reforms borrowers obtain larger size loans which indicates that improvements in ipr are associated with greater credit availability ipr reform also increases foreign lenders participation in loan syndicates overall these findings suggest that legal protection afforded to intellectual property has a significant impact on the cost of corporate borrowing and the ability of innovative firms to raise debt capital

foreign banks trends and impact over the past two decades foreign banks have become much more important in domestic financial intermediation heightening the need to understand their behavior we introduce a new comprehensive database made publicly available on bank ownership including the home country of foreign banks for 5 324 banks in 137 countries over the period 1995 2009 we document large increases in foreign bank presence in many countries but with substantial heterogeneity in terms of host and banks home countries bilateral investment patterns and bank characteristics in terms of impact we document that the relation between private credit and foreign bank presence importantly depends on host country and banks characteristics specifically foreign banks only seem to have a negative impact on credit in low income countries in countries where they have a limited market share where enforcing contracts is costly and where credit information is limited available and when they come from distant home countries this shows that accounting for heterogeneity including bilateral ownership is crucial to better understand the implications of foreign bank ownership

segregation and the quality of government in a cross section of countries we provide a new compilation of data on ethnic linguistic and religious composition at the subnational level for a large number of countries using these data we measure segregation of groups within the country to overcome the endogeneity problem that arises because of mobility and endogenous in ternal borders we construct an instrument for segregation we find that more ethnically and lin guistically segregated countries i e those where groups live more spatially separately have a lower quality of government there is no relationship between religious segregation and governance trust is an important channel of influence it is lower in more segregated countries jel hi 1 h77 j15 017 z12 z13 racial and religious conflicts are often associated with poor politicoeconomic performance especially in developing countries economists have recently turned their attention to ethnolinguistic fractionalization as an explanation of differences in the pace of development starting with an influential paper by william easterly and ross levine 1997 since then many others have shown that fractionalization is negatively correlated with a host of policy outcomes and the quality of government 1 however many ethnically diverse countries the united states for instance are quite successful what makes different countries more or less capable of handling

patent rights and innovative activity evidence from national and firm level data global standards of patent protection have been strengthened and harmonized in recent years despite the heated policy debates and theoretical controversies empirical studies of the consequences for innovative activity are scant this paper contributes to the debate by providing an empirical analysis of the effects of patent strength on different aspects of innovative activity namely firm level research and development r d domestic patenting and foreign patenting the analysis employs an updated index of patent rights the results show the complexity of evaluating the effects of patent reform on innovative activity since the effects vary nonlinearly depending on the initial level of patent strength and vary by a country s level of economic development overall for developing economies patent strength negatively affects domestic patent filings and insignificantly affects r d and foreign patent filings for developed economies patent strength positively affects r d and domestic patent filings and negatively affects foreign patent filings after some critical level of patent protection is reached journal of international business studies 2007 38 878 900 doi 10 1057 palgrave jibs 8400306

150 years of patent protection this paper examines three sets of explanations for variations in the strength of patent protection across sixty countries and a 150 year period wealthier nations are more likely to have patent systems to allow patentees a longer time to put their patents into practice and to ratify treaties assuring equal treatment of other nations but they are also likely to charge higher fees and limit patent protection in some important ways countries with democratic political institutions are consistently more likely to have patent protection appear to be determined by historical factors the origin of a country s commercial law appears particularly important in explaining the presence of restrictions on patentees privileges and discriminatory provisions against foreign patentees this abstract was borrowed from another version of this item

globalisation and the market for team mates the globalisation of firms is explored at theoretical and empirical levels the idea is that a global firm is a multi cultural team the existence of a global firm is somewhat puzzling combining workers who have different cultures legal systems and languages imposes costs on the firm that would not be present were all workers to conform to one standard in order to offset the costs of cross cultural dealing there must be complementarities between the workers that are sufficiently important to overcome the costs the search for the best practice is analysed and empirical support from an examination of trading patterns is provided

are workers willing to pay to join a better team using data from the major league baseball free agent market this study is the first to show that the productivity expected of the team a worker will join produces a significant negative compensating wage differential the younger workers in the sample drive this result trading 25 of their wages to join teams with an expected productivity one standard deviation higher this investment can be recouped if a reasonable increase in human capital occurs these results are robust to contract length wage simultaneity and indicate that investment in human capital motivates the observed tradeoff suggesting a new pathway through which human capital accumulation can affect wages reliable measures of workers own past productivity and the productivity expected of a worker s future team provide key advantages to identifying these effects jel j31 j24 m54

the value of relationships evidence from a supply shock to kenyan rose exports this paper provides evidence on the importance of reputation in the context of the kenyan rose export sector a model of reputation and relational contracting is developed and tested a seller s reputation is defined by buyer s beliefs about seller s reliability we show that i due to lack of enforcement the volume of trade is constrained by the value of the relationship ii the value of the relationship increases with the age of the relationship and iii during an exogenous negative supply shock deliveries are an inverted u shaped function of relationship s age models exclusively focusing on enforcement or insurance considerations cannot account for the evidence jel d86 f14 l14 o13 o19 q17 imperfect contract enforcement is a pervasive feature of real life commercial transactions in the absence of formal contract enforcement trading parties rely on informal mechanisms to guarantee contractual performance e g johnson mcmillan and woodruff 2002 greif 2005 fafchamps 2010 among those mechanisms long term relationships based on trust or reputation are perhaps the most widely studied and have received substantial theoretical attention the theoretical literature has developed a variety of models that capture salient features of real life relationships e g enforcement problems e g macleod and malcomson 1989 baker gibbons and murphy 1994 baker gibbons and murphy 2002 levin

enjoying the quiet life corporate governance and managerial preferences much of our understanding of corporations builds on the idea that managers when they are not closely monitored will pursue goals that are not in shareholders interests but what goals would managers pursue this paper uses variation in corporate governance generated by state adoption of antitakeover laws to empirically map out managerial preferences we use plant level data and exploit a unique feature of corporate law that allows us to deal with possible biases associated with the timing of the laws we find that when managers are insulated from takeovers worker wages especially those of white collar workers rise the destruction of old plants falls but the creation of new plants also falls finally overall productivity and profitability decline in response to these laws our results suggest that active empire building may not be the norm and that managers may instead prefer to enjoy the quiet life

the impact of ethnic diversity in bureaucracies evidence from the nigerian civil service the authors document the correlation between the workplace diversity of bureaucracies and public services delivered the authors do so in the context of the federal civil service in nigeria the most important government bureaucracy operating in a highly ethnically fractionalized society in which ethnicity is a salient form of identity the authors provide novel evidence extending the empirical literature along all three margins in the context of nigeria the authors document the relationship between public service delivery and the ethnic diversity of civil service organizations the impact of bureaucratic diversity on public service delivery in this context is not obvious the analysis begins to shed light on whether the positive channels through which diversity operates as stressed in the management literature for example increased skill complementary of workers in the production function dominate the negative channels through which diversity may operate as stressed in the macro literature for example divisions in preferences free riding on other groups contributions ineffective social sanctions etc understanding the role of diversity in government bureaucracies is important because as the state capacity literature has emphasized the effective functioning of government bureaucracy matters for poverty inequality and economic growth the authors build on that analysis to examine the relevance of a key feature of nigerian society that it is highly ethnically fractionalized

the benefits of lending relationships evidence from small business data this paper empirically examines how ties between a firm and its creditors affect the availability and cost of funds to the firm we analyze data collected in a survey of small firms by the small business administration the primary benefit of building close ties with an institutional creditor is that the availability of financing increases we find smaller effects on the price of credit attempts to widen the circle of relationships by borrowing from multiple lenders increases the price and reduces the availability of credit in sum relationships are valuable and appear to operate more through quantities rather than prices

otc trades and liquidity in the european carbon market more than meets the eye this study investigates whether the previously reported price impact of otc trades in the eu ets can be attributed to their distinctively larger size liquidity related or to their discretionary f

maxing out globally individualism investor attention and the cross section of expected stock returns we examine the role of cultural difference in the pricing of positive extreme returns max for 47 000 stocks from 42 countries from 1990 to 2012 we find that investors overpay for stocks with high max and that max premium the spread from long short strategy based on low and high max stocks is both statistically and economically significant worldwide the negative relation between idiosyncratic volatility and expected returns or idiosyncratic volatility puzzle exists only for stocks with high max implying that the puzzle may arise from the overpayment for stocks with high max and the subsequent return reversal consistent with the expectation that overpayment will be stronger for overconfident investors the max premium is larger in countries with high individualism index idv than it is in countries with low idv furthermore we find the max premium to be larger and the difference in the max premium between high and low idv countries to be more pronounced when vix and volatility are high our fi

the growing importance of social skills in the labor market the labor market increasingly rewards social skills between 1980 and 2012 jobs requiring high levels of social interaction grew by nearly 12 percentage points as a share of the u s labor force math intensive but less social jobs including many stem occupations shrank by 3 3 percentage points over the same period employment and wage growth were particularly strong for jobs requiring high levels of both math skill and social skills to understand these patterns i develop a model of team production where workers trade tasks to exploit their comparative advantage in the model social skills reduce coordination costs allowing workers to specialize and work together more efficiently the model generates predictions about sorting and the relative returns to skill across occupations which i investigate using data from the nlsy79 and the nlsy97 using a comparable set of skill measures and covariates across survey waves i find that the labor market return to social skills was much greater in the 2000s than in the mid 1980s and 1990s

neighborhood effects on speculative behavior abstract speculative behavior plays a key role in numerous markets but little is known about its causes we test for neighborhood effects on speculative behavior using daily lottery sales data from 20 states in the u s in a sample of 160 000 retailers lottery sales in a census block increase by 0 26 on average for each 1 increase in neighboring blocks we test whether this correlation is attributable to contextual effects correlated effects or endogenous effects our analysis suggests that social interaction is an important cause of speculative behavior

cultural differences and capability transfer in cross border acquisitions the mediating roles of capability complementarity absorptive capacity and social integration this paper presents an integrative model of the impact of cultural differences on capability transfer in cross border acquisitions we propose that cultural differences affect the post acquisition capability transfer through their impact on social integration potential absorptive capacity and capability complementarity two dynamic variables the use of social integration mechanisms and the degree of operational integration of the acquired unit are proposed to moderate the effects of cultural differences on social integration and potential absorptive capacity the implications for acquisition research and practice are discussed

do investors overpay for stocks with lottery like payoffs an examination of the returns of otc stocks abstract we study returns on over the counter stocks and find that these returns are extremely negative on average the distribution of otc stock returns is highly positively skewed while many of the stocks in our sample become worthless a few do extremely well we investigate whether this negative return premium can be rationalized by investors preference for positively skewed payoffs we show that the equilibrium model of barberis and huang 2008 provides a plausible explanation for the negative returns we also show that otc stocks that once traded on the regular exchanges perform much better than stocks that originate in the otc markets