existence of competitive equilibrium with incomplete markets abstract the existence of competitive equilibrium is proved for a model with incomplete futures markets the security returns in this model are denominated in terms of units which represent certain composite commodities specific to events

the structure of financial equilibrium with exogenous yields the case of incomplete markets1 this paper presents an analysis of the structure of competitive equilibrium in a model whose principal feature is incomplete financial markets formulated in the spirit of arrow specifically the overall payoffs or returns from financial instruments are assumed to be fixed or predetermined independently of the operation of the economy and these instruments are assumed to be fewer in number than required to span all potential spot markets for commodities our main result establishes that market incompleteness generates a corresponding degree of allocation indeterminateness suppose there are n 1 spot markets but only 0 m n linearly independent financial instruments so that the deficiency in financial markets is 0 n n m n then subject to some relatively innocuous technical qualifications the set of equilibrium allocations contains a smooth n dimensional submanifold we also indicate how real indeterminacy may increase when returns for example the market price and promised interest on an ordinary bond are treated as variables rather than parameters

option pricing with downward sloping demand curves the case of supply chain options this article investigates the role of option contracts in a supply chain when the demand curve is downward sloping we consider call put options that provide the retailer with the right to reorder return goods at a fixed price we show that the introduction of option contracts causes the wholesale price to increase and the volatility of the retail price to decrease in general options are not zero sum games conditions are derived under which the manufacturer prefers to use options when this happens the retailer is also better off if the uncertainty in the demand curve is low however if the uncertainty is sufficiently high then the introduction of option contracts alters the equilibrium prices in a way that hurts the retailer

existence of competitive equilibria for option markets abstract in a general equilibrium model with options h polemarchakis and bon il ku options and equilibrium working paper columbia university 1986 give an example of an economy where no competitive equilibrium exists their model is robust in the sense that slight changes of the parameters of the economy do not lead to the existence of an equilibrium the aim of this paper is to show that this nonexistence of equilibrium results from too little variation of the aggregate supply of commodities over the states of the world we show that the fraction of economies parameterized by endowments with equilibria converges to one with increasing variation in the total endowment in a precise sense

upgrading in global value chains lessons from latin american clusters it has been shown that clustering helps local enterprises in industrial districts overcome growth constraints and compete in distant markets in advanced and less developed countries nevertheless recent contributions have stressed that more attention needs to be paid to external linkages and to the role played by global buyers to foster upgrading at cluster levels in this study we contribute to this debate focusing on the analysis of the relationships existing between clustering global value chains upgrading and sectoral patterns of innovation in latin america we find that sectoral specificities matter and influence the mode and the extent of upgrading in clusters integrated in global value chains

option listing and stock returns abstract this article examines the effect of option introductions on the underlying stocks in addition to the price increase and volatility decrease that take place when new options are listed we obtain and explain the following new empirical results i an increase in the value of the market around the listing dates of new options ii an increase in the value of an industry index which excludes the optioned stocks iii the dissipation of the price and volatility effects in recent periods and iv the existence of an announcement effect in one subperiod of our sample and its dissipation in recent periods

changes in the financial market welfare and price effects and the basic theorems of value conservation this paper analyzes the impact on both welfare and equilibrium prices of changes in the financial market in a general equilibrium two period context previous papers have focussed on the securities effect tending to essentially ignore the equally important endowment effect that arises when market structure changes are implemented two forms of endowment neutrality and market structure changes which either preserve expand or shift allocational feasibility differentiate the main theorems which are based on arbitrary preferences and beliefs and substantially extend and modify extant results in particular earlier statements identified with value conservation are sharply moderated very roughly the paper yields the following implications for some of the more common changes in the market nonsynergistic corporate spinoffs and the opening of option markets have on balance strongly positive welfare effects nonsynergistic mergers tend to have strong negative welfare effects while the welfare effects of alternative risky debt structures tend to be ambiguous all of the preceding however may under plausible conditions be redistributive changes in the structure of the financial market have long been of interest to financial economists while such changes may take many forms it is perhaps surprising that only a few of the more common ones have been systematically studied foremost among these are changes which involve the firm s capital structure the relative amounts of debt and equity mergers and other special recapitalizations this paper analyzes the impact on both welfare and equilibrium prices of changes in the financial market in a two period context it differs from previous studies primarily in that it is based on a fully integrated general equilibrium approach similar to that employed in international trade analysis thus while the resulting mosaic contains previous studies as clearly recognizable fragments such as the classic paper of modigliani and miller 33 it also provides the necessary framework and tools for an evaluation of market structure changes of any type such as changes involving subordinated debt convertibles warrants mergers spinoffs and the opening of option markets

the effect of derivative assets on information acquisition and price behavior in a rational expectations equilibrium this article shows that introducing derivative assets increases incentives to collect information about asset payoffs the increase in information collection makes the price of the underlying asset more informative and causes the expected price to increase extending the model to a dynamic setting with multiple risky assets we find the introducing derivative assets for one asset increases the expected prices of positively correlated assets and reduces price reaction to future earnings announcements these findings are consistent with the bulk of the empirical evidence on the relationship between the introduction of derivative assets and the behavior of asset prices article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

asymmetric information and options in an extension of the kyle 1985 model of continuous insider trading it is shown that asymmetric information can make it impossible to price options by arbitrage even when an option would appear to be redundant its introduction into the market can cause the volatility of the underlying asset to become stochastic this eliminates the potential for dynamically replicating the option the change in the price process of the asset reflects a change in the information transmitted by volume and prices when the option is traded article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

generating skilled self employment in developing countries experimental evidence from uganda we study a government program in uganda designed to help the poor and unemployed become self employed artisans increase incomes and thus promote social stability young adults in uganda s conflict affected north were invited to form groups and submit grant proposals for vocational training and business start up funding was randomly assigned among screened and eligible groups treatment groups received unsupervised grants of 382 per member grant recipients invest some in skills training but most in tools and materials after four years half practice a skilled trade relative to the control group the program increases business assets by 57 work hours by 17 and earnings by 38 many also formalize their enterprises and hire labor we see no effect however on social cohesion antisocial behavior or protest effects are similar by gender but are qualitatively different for women because they begin poorer meaning the impact is larger relative to their starting point and because women s work and earnings stagnate without the program but take off with it the patterns we observe are consistent with credit constraints

programme evaluation with multiple treatments this paper reviews the main identification and estimation strategies for microeconometric policy evaluation particular emphasis is laid on evaluating policies consisting of multiple programmes which is of high relevance in practice for example active labour market policies may consist of different training programmes employment programmes and wage subsidies similarly sickness rehabilitation policies often offer different vocational as well as non vocational rehabilitation measures first the main identification strategies control for confounding variables difference in difference instrumental variable and regression discontinuity identification are discussed in the multiple programme setting thereafter the different nonparametric matching and weighting estimators of the average treatment effects and their properties are examined download discussion paper pdf 484 kb

the effectiveness of active labour market policies a meta analysis this paper provides a meta analysis of microeconometric evaluation studies on the effectiveness of active labor market policies the analysis is built upon a systematically assembled data set of causal impact estimates from 57 experimental and quasi experimental studies providing 654 estimates published between january 1990 and december 2017 we distinguish between the short and longer term impacts in our analysis at 6 12 24 and 36 months after program start after correcting for publication bias and country specific macroeconomic characteristics subsidized labor and public employment programs have negative short term impacts which gradually turn positive in the longer run schemes with enhanced services including job search assistance and training programs do not have these negative short term effects and stay positive from 6 until 36 months after program start

market resolution and valuation in incomplete markets the arrow debreu approach to general equilibrium in an economy has been recognized as one of the most general and conceptually elegant frameworks for the study of financial problems under uncertainty 2 9 equally well known is its elusiveness when it comes to ready application to practical problems like capital budgeting or empirical testing see 6 15 18 however some recent research see 1 3 6 12 16 18 and 19 has made a serious attempt to put the state preference theoretic model in an operational setting breeden and litzenberger 6 have developed an interesting approach to derive constructively the prices of elementary arrow debreu securities from the prices of call options on aggregate consumption banz and miller 3 use a similar technique to value capital budgeting projects based on values for state contingent claims computed from prices of call options written on the market portfolio the supershare securities proposed by hakansson 14 16 and related work by garman 13 ross 24 etc have also served to give the so called state contingent approach a practical flavor

transfer benefits from public works employment evidence for rural india current knowledge provides little guidance on one of the key questions in evaluating public employment schemes aimed at directly reducing poverty what are the net income gains to participating workers this paper offers an answer for rural public employment in two villages in the state of maharashtra in india a model of intrahousehold time allocation is proposed and estimates are made using household data over six years the empirical implementation indicates that the projects induce significant behavioral responses transfer benefits are large and are greatly underestimated using prevailing market wage rates for similar work to estimate forgone incomes copyright 1994 by royal economic society

matching the gold standard comparing experimental and nonexperimental evaluation techniques for a geographically targeted program abstract we compare nonexperimental impact estimates based on matching methods with those from a randomized evaluation to determine whether the nonexperimental approach can match the so called gold standard the social experiment we use was carried out to evaluate a geographically targeted conditional cash transfer antipoverty program in nicaragua the outcomes we assess include several components of household expenditure and a variety of children s health outcomes including breast feeding vaccinations and morbidity we find that using each of the following improves performance of matching for these outcomes 1 geographically proximate comparison samples 2 stringent common support requirements and 3 both geographic and household level matching variables even for a geographically targeted program in which the selection is at the geographic rather than at the individual or household level and in which it is not possible to find comparison individuals or households in the program locales m

mean variance theory in complete markets two paradigms in the pricing of risky assets are the complete markets model of arrow and debreu and mean variance pricing as embodied in the capital asset pricing model capm the former is primarily of theoretical interest in fact prior to the recent work of banz and miller 1978 and breeden and litzenberger 1978 there was little thought or hope of practical applications on the other hand the hegemony of the capm is due mostly to its apparent ease of applicability and to a lesser extent its empirical justification in a competitive market with no taxes transactions costs or institutional constraints on portfolio holdings the allocation of the available assets will be pareto optimal the end of period distribution of wealth or the consumption goods however will typically be pareto optimal only when there is available an arrow debreu security for each contingency since by definition a pareto superior reallocation is weakly preferred by all investors a complete set of arrow debreu markets should naturally arise provided they are not too costly to establish the complete markets model of arrow and debreu and the meanvariance capital asset pricing model capm are two paradigms of risky asset markets this paper provides an integration of these two theories we prove that the standard meanvariance separation theorem obtains in a complete market only if all investors have quadratic utility in addition the familiar capm pricing relation can hold for all assets in a complete market only if arbitrage opportunities exist on the positive side we show that the validity of this relation for the primary assets in a complete market is unaffected by the distribution of returns on the created financial assets

the changing global geography of low technology labor intensive industry clothing footwear and furniture summary a basic approach to the geographic investigation of low technology labor intensive industries is sketched out by invoking notions of industrial organization locational agglomeration and spatial divisions of labor the distribution of the clothing footwear and furniture industries across the contemporary world is described on the basis of detailed published statistics special emphasis is accorded to similarities and contrasts in the geography of production between more developed and less developed countries i show that no matter what the level of development agglomeration tends to be a pervasive though not universal feature of these three industries global trading patterns in the three industries are subjected to extended investigation i examine international flows of finished products as well as production sharing activities involving various kinds of subcontracting arrangements between high wage and low wage countries i then attempt to demonstrate in theory how spatial agglomeration and international commodity flows function as mutually reinforcing phenomena via the play of increasing returns effects the significance of low wage low technology industries for processes of economic development is also stressed in the conclusion i suggest that the global geography of production is tending more and more to assume the form of a far flung mosaic of competing and collaborating agglomerations at various levels of productive capability and development

equilibria with options existence and indeterminacy abstract this paper studies an economy in which trading takes place in spot commodity markets and incomplete futures markets for assets of various types there are real assets stocks or commodity futures options on real assets and a riskless nominal bond we show that for a generic set of economies parametrized by consumers endowments and structure of real assets there exists an equilibrium moreover we show that generically the set of equilibrium allocations of commodities contains a manifold of a high dimension even if the market structure is potentially complete i e the number of assets including options equals or exceeds the number of states of nature and the arrow debreu equilibrium can be achieved through sequential trading in spot and futures markets there are multiple inefficient equilibria without full rank of the asset payoff matrix

option volume and stock prices evidence on where informed traders trade this paper investigates the informational role of transactions volume in options markets we develop an asymmetric information model in which informed traders may trade in option or equity markets we show conditions under which informed traders trade options and we investigate the implications of this for the linkage between markets our model predicts an important informational role for the volume of particular types of option trades we empirically test our model s hypotheses with intraday option data our main empirical result is that negative and positive option volumes contain information about future stock prices the information content of trading activity is a subject of widespread interest if trades are correlated with private information then the outcome of the transaction process may portend future movements in price the extension of trading to different venues or to derivative instruments however means that this link between transactions and information need not be easily discernible if there are alternative markets in which informed traders can profit from their information then where informed traders choose to trade may have important implications not only for security p rice movements but for the behavior of related prices as well this suggests that transactions in derivative markets may be an important predictor of future security price movements in this paper we investigate the informational role of transactions volume in options markets for some readers this focus may seem puzzling an option is a derivative security so its price should be dictated unilaterally by the behavior of the stock price this unidirectional linkage is only true however in complete markets if information is impounded into prices by trading then the ability of informed traders to transact in options markets mearns

international good market segmentation and financial innovation abstract while international capital flows are now well liberalized markets for goods remain segmented to investigate how financial innovation may relieve the effects of this segmentation on risk sharing we examine a series of two country economies with internationally segmented good markets distinguished by the available financial securities sufficient conditions for efficiency include complete international financial markets together with liberalized international financial flows under these conditions heterogeneous agents from the same country may use securities as a substitute for the international shipment of goods this allows them to partially circumvent the segmentation allowing for efficient risk sharing

synthetic or real the equilibrium effects of credit default swaps on bond markets we provide a model of nonredundant credit default swaps cdss building on the observation that cdss have lower trading costs than bonds cds introduction involves a trade off it crowds out existing demand for the bond but improves the bond allocation by allowing long term investors to become levered basis traders and absorb more of the bond supply we characterize conditions under which cds introduction raises bond prices the model predicts a negative cds bond basis as well as turnover and price impact patterns that are consistent with empirical evidence we also show that a ban on naked cdss can raise borrowing costs

an intertemporal general equilibrium model of asset prices this paper develops a continuous time general equilibrium model of a simple but complete economy and uses it to examine the behavior of asset prices in this model asset prices and their stochastic properties are determined endogenously one principal result is a partial differential equation which asset prices must satisfy the solution of this equation gives the equilibrium price of any asset in terms of the underlying real variables in the economy in this paper we develop a general equilibrium asset pricing model for use in applied research an important feature of the model is its integration of real and financial markets among other things the model endogenously determines the stochastic process followed by the equilibrium price of any financial asset and shows how this process depends on the underlying real variables the model is fully consistent with rational expectations and maximizing behavior on the part of all agents our framework is general enough to include many of the fundamental forces affecting asset markets yet it is tractable enough to be specialized easily to produce specific testable results furthermore the model can be extended in a number of straightforward ways consequently it is well suited to a wide variety of applications for example in a companion paper cox ingersoll and ross 7 we use the model to develop a theory of the term structure of interest rates many studies have been concerned with various aspects of asset pricing under uncertainty the most relevant to our work are the important papers on intertemporal asset pricing by merton 19 and lucas 16 working in a continuous time framework merton derives a relationship among the equilibrium expected rates of return on assets he shows that when investment opportunities are changing randomly over time this relationship will include effects which have no analogue in a static one period model lucas considers an economy with homogeneous individuals and a single consumption good which is produced by a number of processes the random output of these processes is exogenously determined and perishable assets are defined as claims to all or a part of the output of a process and the equilibrium determines the asset prices our theory draws on some elements of both of these papers like merton we formulate our model in continuous time and make full use of the analytical tractability that this affords the economic structure of our model is somewhat similar to that of lucas however we include both endogenous production and

the effect of options on stock prices 1973 to 1995 i show that the effect of option introductions on underlying stock prices is best described by a two regime switching means model whose optimal switch date occurs in 1981 in accordance with previous studies i find positive abnormal returns for options listed during 1973 to 1980 by contrast i find negative abnormal returns for options listed in 1981 and later possible causes for this switch include the introduction of index options in 1982 the implementation of regulatory changes in 1981 and the possibility that options expedite the dissemination of negative information an increasingly important issue in the study of financial markets is the extent to which options interact with their underlying stocks although black and scholes 1973 view options as redundant securities ross 1976 theorizes that stock prices in incomplete markets are generally affected by the

sugarcane outgrowers in ethiopia forced to remain poor contract farming is often seen as a panacea to many of the challenges faced by agricultural production in developing countries given the large heterogeneity of contract farming arrangements it is debatable whether all kinds of contract farming arrangements offer benefits to participating smallholders we apply matching methods to analyze the effects of a public sugarcane outgrower scheme in ethiopia participation in the outgrower scheme significantly reduces the income and asset stocks of outgrowers who contributed irrigated land to the outgrower scheme while the effect was insignificant for outgrowers who contributed rain fed land we provide several explanations and discuss policy implications

can entrepreneurial activity be taught quasi experimental evidence from central america summary business training is a widely used development tool yet little is known about its impact we study the effects of such a business training program held in central america to deal with endogenous selection into the training program we use a regression discontinuity design exploiting the fact that a fixed number of applicants are taken into the training program based on a pre training score business training significantly increases the probability that an applicant to the workshop starts a business or expands an existing business results also suggest gender heterogeneity as well as the presence of financial constraints

options sunspots and the creation of uncertainty we present two examples in which the addition of an option market leads to sunspot equilibria despite the fact that no sunspot equilibria exist without the market these examples highlight limitations in two prevalent views of option markets it is often assumed that option markets help complete otherwise incomplete markets we demonstrate that they can instead increase the number of events agents wish to insure against as in black and scholes it is often assumed that option markets are redundant we demonstrate that an option market may not be redundant even when markets were complete before its introduction

trading in derivatives when the underlying is scarce abstract regulatory restrictions and market frictions can constrain the aggregate quantity of long and short positions in a security when these constraints bind we refer to the security as scarce and its price becomes distorted relative to its value in a frictionless market we show that an otherwise redundant derivative can reduce the price distortion of the underlying security by relaxing its scarcity we also show that it is especially important to analyze the underlying and derivative markets jointly when evaluating the impact of regulation such as short sales bans and position limits in derivatives that restricts trade

latin america s new economic model micro responses and economic restructuring abstract this paper introduces a special issue on the microeconomics of latin america under the new economic model nem the paper reviews the rationale and policies of the nem and analyzes the impact of the reforms at the macroeconomic sectoral and microeconomic levels at the firm level the contributions to this issue demonstrate that a considerable adjustment process is taking place as sectoral structural change indices demonstrate however this has not resulted in widespread shifts of resources between sectors nor has it resulted in significant improvement in overall employment productivity and growth the authors analyze the reasons for this disjuncture and suggest policy alternatives

does active labour market policy increase employment theoretical considerations and some empirical evidence from sweden does active labour market policy increase employment theoretical considerations and some empirical evidence from sweden

effectiveness of active labor market tools in conditional cash transfers programs evidence for argentina summary this paper examines the impact of the program seguro de capacitacion y empleo sce implemented to provide support in skills upgrading job seeking and job placement to eligible beneficiaries of the argentinian conditional cash transfer program plan jefes the sce is an example of a growing trend observed in latin america where labor activation components have been increasingly included into cash transfers programs to support beneficiaries in finding more stable income opportunities despite this growing trend not enough is known regarding the effectiveness of these components especially on job quality in this context this paper sheds light on whether the provision of a comprehensive package of active labor market measures contributes to a successful labor market integration of cash transfers beneficiaries taking advantage of the panel structure of the permanent household survey and exploiting the time variation in the assignment of the program as identification strategy we apply difference in difference estimators to measure the impact on a number of labor market indicators we find that the program affects positively the job quality of participants by increasing the probability of having a formal job and raising hourly wages moreover the intervention is associated with a lower probability of having a low paid job and working an excessive number of hours these effects are however not homogeneous across all groups of participants while the program is more successful among the younger beneficiaries it does not contribute to an improvement in the labor market conditions of female beneficiaries who in fact are the majority of sce participants our results suggest that reducing dependency on monetary transfers through programs such as the sce that are rich in activation components is beneficial for participants labor market trajectories and therefore it constitutes a satisfactory exit strategy to more universal cash transfer programs

jump starting self employment evidence among welfare participants in argentina one important concern of governments in developing countries is how to phase out large safety net programs the authors evaluate the short run effects of one possible exit strategy programs that promote self employment in argentina they provide evidence that a small fraction of beneficiaries were attracted by this program overall potential participants to self employment are more likely to be female household heads and more educated beneficiaries relative to the average jefes beneficiaries using nonexperimental methods the authors show that participation in the program does affect the labor supply of participants by reducing the probability of having an outside job especially for males and increasing the total number of hours worked but the intervention fails to produce on average income gains to participating individuals and households in the short run the fact that a small subset of former welfare beneficiaries are attracted to the program coupled with the fact that only a subset of participants younger and more educated beneficiaries and with previous self employment experience benefited from participation has important implications for this intervention to represent a viable exit strategy from welfare

how does public assistance affect family expenditures the case of urban china summary using recent national household survey data and a propensity score matching method this study examines the effects of urban china s primary public assistance program minimum living standard assistance mlsa on family expenditures an important yet understudied indicator of family material well being we find that families receiving mlsa prioritized human capital investment i e paying for education and health rather than making the ends meet e g paying for food clothing rent and utilities the policy implications of these findings are discussed

a general equilibrium analysis of option and stock market interactions the traditional pricing methodology in finance values derivative securities as redundant assets that have no impact on equilibrium prices and allocations this paper demonstrates that when the market is incomplete primary and derivative asset markets generically interact the valuation of derivative and primary security prices depend on the contractual characteristics of the derivative assets available in a version of the mossin mean variance model the authors analyze an equilibrium in which a call option derivative asset is traded and the equilibrium stock price primary asset increases when the options market is opened copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

stochastic equilibria with incomplete financial markets abstract we demonstrate the existence of equilibria with incomplete financial markets for stochastic economies whose information structure is given by an event tree restricting attention to purely financial securities those paying in units of account e g dollars financial markets may be incomplete some consumption streams may be impossible to obtain by any trading strategy securities may be individually precluded from trade at arbitrary states and dates sufficient conditions for the existence of stochastic equilibria are continuous convex strictly monotonic preferences and strictly positive aggregate endowments these conditions are weakened a corollary states that any regime of security prices precluding arbitrage can be embedded in an equilibrium

financial markets with trade on risk and return in this paper i develop a model in which risk averse investors possess private information regarding both a stock s expected payoff and its risk these investors trade in the stock and a derivative whose payoff is driven by the stock s risk in equilibrium the derivative is used to speculate on the stock s risk and to hedge against adverse fluctuations in the stock s risk i analyze the derivative price and variance risk premium that arise in this equilibrium and their predictive power for stock returns finally i examine the relationship between prices and trading volume in the stock and derivative received july 31 2017 editorial decision december 3 2018 by editor stijn van nieuwerburgh authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

approximate aggregation under uncertainty abstract for a collection of agents with von neumann morgenstern preferences a price independent income distribution and identical probability beliefs there exists a von neumann morgenstern approximate aggregator the risk tolerance of the approximate aggregator is equal to the sum of the individual agent risk tolerances at prices which yield constant risk free contingent consumption the application of the approximate aggregator to standard asset pricing models in finance is discussed briefly

incomplete markets and volatility abstract this paper shows that the precautionary motive combined with asset incompleteness is a major source of volatility and indeterminacy in financial markets price fluctuations originate from agents efforts to insure themselves through time by borrowing and lending instead of shifting income across states of nature by trading risky assets a high interest rate at a future date reduces the potential for future consumption smoothing via borrowing which leads to a strong precautionary motive and a low interest rate in the current period the negative feedback between future and current rates generates fluctuations this logic is developed in spec a cara normal exchange economy with many periods and endogenous interest rates when there is an intermediate level of market incompleteness and sufficient investor impatience fluctuations in the real interest rate can be large even though the aggregate endowment is constant spec has a unique equilibrium under a finite horizon on the other hand with a finite number of infinitely lived agents there exists a robust continuum of equilibria that are neither bubbles nor sunspots journal of economic literature classification numbers c61 d52 d58 g11 g12

assisting the transition from workfare to work a randomized experiment randomly sampled workfare participants in a welfare dependent region of argentina were given a voucher that entitled an employer to a sizable wage subsidy a second sample also received the option of skill training while a third sample formed the control group the authors analyze the effects of this scheme on participants employment and income using double difference and instrumental variables methods to deal with potential experimental biases including selective compliance with the randomized assignment the authors find that compared with the control group voucher recipients had a significantly higher probability of employment though their current incomes were no higher the impact was largely confined to women and younger workers labor supply effects appear to have been important however training had no significant impact the experiment was cost effective in reducing the government s welfare spending since take up of the subsidy by employers was low

the risk and price volatility of stock options in general equilibrium the traditional valuation formulas for options were derived in a complete market setting and were based on the no arbitrage principle if the asset structure is incomplete the presence of options affects the linear subspace spanned by the payoffs of the existing assets and the pricing of options and underlying primary assets becomes a simultaneous valuation problem we characterize the relationship between the prices of options and the prices of the stocks on which the options are written in a general equilibrium model where options are non redundant assets contrary to the predictions of the black scholes merton theory in our model investor preferences have an impact on the relationship between the prices of primary and derivative assets copyright 1995 by the editors of the scandinavian journal of economics

equilibrium in economies with incomplete financial markets abstract this paper analyses an exchange economy in the absence of arrow debreu complete markets it is assumed that trading takes place in the sequence of spot markets and futures markets for securities payable in units of account unlimited short selling in securities is allowed a general equilibrium in such an economy is a set of current and future prices contingent on uncertain events and a set of individual plans such that all markets are cleared the existence of such an equilibrium is proved under usual assumptions this is in contrast to the case of futures markets for contingent futures commodities where an equilibrium may not exist the optimality of equilibrium allocations is also discussed

economic performance through time prize lecture to the memory of alfred nobel december 9 1993 this abstract was borrowed from another version of this item

information trade and derivative securities hellwig s 1980 model is used to analyze the value of improving trading opportunities by more frequent trading in the underlying asset or by trading in a derivative asset with multiple trading sessions uninformed investors behave as rational trend followers while more informed investors follow a contrarian strategy as trading becomes continuous pareto efficiency is achieved with trading in an appropriate derivative security pareto efficiency may be achieved in only a single round of trading all derivative claims are then priced on black and scholes 1973 principles and in the absence of further supply shocks no trading will take place in subsequent trading rounds article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

how to promote clusters policy experiences from latin america abstract in this paper we propose to differentiate between three types of clusters when it comes to formulating cluster oriented policies in latin america survival clusters of micro and small scale enterprises owe their existence more to unfavorable macroeconomic conditions and less to entrepreneurial competence and dynamism their competitive potential is limited support measures should mainly aim at improving the conditions for survival since these clusters are important in creating employment opportunities the impetus should be to break through the low skills low investment vicious circle more advanced and differentiated mass producers have been flourishing in the import substitution era but are coming under enormous pressure with the transition to open economies in these clusters the main challenge is to create an environment that stimulates and supports learning innovation and constant upgrading clusters of transnational corporations are typically dominated by foreign firms not only at the final assembly stage but also in parts production these clusters often are showcases of best practice manufacturing this can be used to stimulate the upgrading of domestic firms notably by involving them in the supply chain of transnationals

estimating the benefit incidence of an antipoverty program by propensity score matching this brief summarizes the results of a gender impact evaluation study entitled estimating the benefit incidence of an antipoverty program by propensity score matching conducted between 1997 and 1998 in argentina the study observed that the average direct gain to the participant is found to be about half the gross wage over half of the beneficiaries are in the poorest decile nationally and 80 percent are in the poorest quintile the propensity score matching psm estimator is reasonably robust to a number of changes in methodology participants are more likely to be poor than non participants participants are less well educated live in poorer neighborhoods and are more likely to be members of neighborhood associations and political parties average gains are similar between men and women but are higher for younger workers funding for the study derives from the world bank research committee

real indeterminacy with financial assets abstract it is shown that in a two period general equilibrium securities model where assets pay in money the generic dimension of the set of equilibrium allocations in the incomplete market situation is s 1 where s is the number of assets hence the degree or real indeterminacy is independent of the number of assets this result requires beyond fewer assets than states that the number of traders be larger than the number of securities and that the asset return matrix be in general position the generic dimension for arbitrary returns matrix is also obtained it is argued in addition that the presence of real or mixed assets does not by itself lower the degree of indeterminacy

economic impact of direct marketing and contracts the case of safe vegetable chains in northern vietnam abstract the paper investigates the respective impacts on incomes of contractual arrangements direct sales and spot marketing for safe vegetable farmers in northern vietnam it is based on a survey of 137 peri urban vegetable farmers that was analyzed using different econometric methods to correct selection biases direct sales and contractual arrangements have a significant positive impact on income compared to spot marketing contracts have less impact on income compared to direct sales it is recommended that policies be formulated to stimulate direct dealings between farmers and consumers which enhance consumer confidence in terms of quality and translate into higher farmer income than anonymous exchanges or contracts

trading breaks and asymmetric information the option markets abstract we find that weekend holiday and overnight trading breaks generate excessive perceived risk in the option markets presumably due to asymmetric information which in turn encourages uninformed option traders to postpone trading this perceived risk subsides after two days accompanied by an increase in the option trading volume and the underlying index s actual price volatility these results shed light on the informational role of index options and suggest that the theoretical models results regarding information processing and price discovery in the presence of private information are not limited to single stocks but also apply to the market as a whole

the impact of the listing of options in the foreign exchange market abstract this paper documents the impact of the introduction of foreign currency options and options on foreign currency futures on the underlying securities we find that the volatility of exchange rates decreases following the listing of options for a majority of the currencies under consideration in addition we find that trading volume and open interest in currency futures increases after option introduction this evidence is consistent with the notion that derivative securities are important innovations for stabilizing and increasing liquidity in the market for the underlying assets

active labour market programmes in latin america and the caribbean evidence from a meta analysis abstractwe present a systematic review and meta analysis of impact evaluations of active labour market programmes almps in latin america and the caribbean lac we extract 296 impact estimates f

market risk and the concept of fundamental volatility measuring volatility across asset and derivative markets and testing for the impact of derivatives markets on financial markets this paper proposes an unobserved fundamental component of volatility as a measure of risk this concept of fundamental volatility may be more meaningful than the usual measures of volatility for market regulators fundamental volatility can be obtained using a stochastic volatility model which allows us to filter out the signal in the volatility information we decompose four ftse100 stock index related volatilities into transitory noise and unobserved fundamental volatility our analysis is applied to the question as to whether derivative markets destabilise asset markets we find that introducing european options reduces fundamental volatility while transitory noise in the underlying and futures markets does not show significant changes we conclude that for the ftse100 index introducing a new options market has stabilised both the underlying market and existing derivative markets

the impact of group based credit programs on poor households in bangladesh does the gender of participants matter this paper estimates the impact of participation by gender in the grameen bank and two other group based micro credit programs in bangladesh on labor supply schooling household expenditure and assets the empirical method uses a quasi experimental survey design to correct for the bias from unobserved individual and village level heterogeneity we find that program credit has a larger effect on the behavior of poor households in bangladesh when women are the program participants for example annual household consumption expenditure increases 18 taka for every 100 additional taka borrowed by women from these credit programs compared with 11 taka for men

equilibrium open interest abstract this paper analyses what determines an individual investor s risk sharing demand for options and aggregating across investors what the equilibrium demand for options we find that agents trade options to achieve their desired skewness specifically we find that portfolio holdings boil down to a three fund separation theorem that includes a so called skewness portfolio that agents like to attain our analysis indicates also however that the common risk sharing setup used for option demand and pricing is incompatible with a stylized fact about open interest across strikes

innovation performance and embeddedness in networks evidence from the ethiopian footwear cluster this study focuses on innovation in a cluster of informal shoemaking firms in ethiopia namely the mercato footwear cluster it examines how differently those firms are embedded in networks and how heterogeneous they are in absorptive capacity and how this heterogeneity affects their innovation performance business interactions with buyers suppliers and other producers are the major channels through which knowledge flows into the cluster these business networks are mainly built on trust and long term relationships and tend to be selective the study reveals that despite homogeneity in social background the firms in the cluster behave and perform differently based on econometric analysis we document a positive and strong effect of local network position and absorptive capacity on innovation performance

complete markets informed trading and equity option introductions this paper proposes and tests a new hypothesis concerning the price impact of option introductions on the underlying asset we argue that the leverage properties of options induce a higher level of informed trading in the aggregate market underlying plus derivative resulting in excess listing day price movements in the newly optioned equity using an alternative dataset our results suggest that this may be an explanation for the observed positive than negative excess listing day returns of us optioned stocks over the past thirty years

the impact of energy derivatives on the crude oil market we examine the effects of energy derivatives trading on the crude oil market there is a common public and regulatory perception that derivative securities increase volatility and can have a destabilizing effect on the underlying market consistent with this view we find an abnormal increase in volatility for three consecutive weeks following the introduction of nymex crude oil futures while there is also evidence of a longer term volatility increase this is likely due to exogenous factors such as the continuing deregulation of the energy markets subsequent introductions of crude oil options and derivatives on other energy commodities have no effect on crude oil volatility we also examine the effects of derivatives trading on the depth and liquidity of the crude oil market this analysis reveals a strong inverse relation between the open interest in crude oil futures and spot market volatility specifically when open interest is greater the volatility shock associated with a given unexpected increase in volume is much smaller

conditional cash transfers adult work incentives and poverty conditional cash transfer cct programs aim to alleviate poverty through monetary and in kind benefits as well as reduce future levels of poverty by encouraging investments in education health and nutrition the success of cct programs at reducing poverty depends on whether and the extent to which cash transfers affect adult work incentives the authors examine whether the progresa program of mexico affects adult participation in the labor market and overall adult leisure time and they link these effects to the impact of the program on poverty using the experimental design of progresa s evaluation sample the authors find that the program does not have any significant effect on adult labor force participation and leisure time their findings on adult work incentives are reinforced further by the result that progresa leads to a substantial reduction in poverty the poverty reduction effects are stronger for the poverty gap and severity of poverty measures

spanning and completeness in markets with contingent claims abstract we characterize financial markets that are complete or that contain portfolios which span all measurable functions of a particular asset payoffs either finite and infinite dimensional these results are then employed to describe the extent to which options trading is sufficient to complete markets to investigate the existence of efficient funds and to establish the extent of market completeness required to ensure the unanimity and irrelevance results of modern corporation finance

the impact of derivatives hedging on the stock market evidence from taiwan s covered warrants market abstract we examine the impact of derivatives hedging on the spot market using accurate hedge ratios of covered warrants traded in the taiwan stock exchange twse results present significant positive abnormal returns and trading volumes before the announcement of a warrant s issuance and the effect is stronger when the hedging demand is larger moreover a significantly positive relationship exists between stock return volatility and the price elasticity of hedging demand finally we observe a significantly negative price effect upon the underlying stock after a call warrant has expired in the money due to the liquidation of hedging portfolios

the impact of vocational training for the unemployed experimental evidence from turkey this brief summarizes the updates from the 2014 paper entitled the impact of vocational training for the unemployed experimental evidence from turkey conducted between between 2010 and 2011 in turkey a randomized experiment is used to evaluate a large scale active labor market policy turkey s vocational training programs for the unemployed a detailed follow up survey of a large sample with low attrition enables precise estimation of treatment impacts and their heterogeneity the average impact of training on employment is positive but close to zero and statistically insignificant which is much lower than either program officials or applicants expected over the first year after training the paper finds that training had statistically significant effects on the quality of employment and that the positive impacts are stronger when training is offered by private providers however longer term administrative data show that after three years these effects have also dissipated

on the measurement of poverty official statistics in the united states and the united kingdom show a rise in poverty between the 1970 s and the 1980 s but scepticism has been expressed with regard to these findings in particular the methods employed in the measurement of poverty have been the subject of criticism this paper re examines three basic issues in measuring poverty the choice of the poverty line the index of poverty and the relation between poverty and inequality one general theme running through the paper is that there is a diversity of judgments which enter the measurement of poverty and that it is necessary to recognize these explicitly in the procedures adopted there is likely to be disagreement about the choice of poverty line affecting both its level and its structure in this situation we may only be able to make comparisons and not to measure differences and the comparisons may lead only to a partial rather than a complete ordering the first section of the paper discusses the stochastic dominance conditions which allow such comparisons illustrating their application by reference to data for the united states the choice of poverty measure has been the subject of an extensive literature and a variety of measures have been proposed in the second section of the paper a different approach is suggested considering a class of measures satisfying certain general properties and seeking conditions under which all members of the class which includes many of those proposed give the same ranking those sceptical about measures of poverty often assert that poverty and inequality are being confounded the third section of the paper distinguishes four different viewpoints and relates them to theories of justice and views of social welfare

knowledge diffusion and modernization of rural industrial clusters a paper manufacturing village in northern vietnam summary this article tests the role of social learning in the modernization of a rural nonfarm industry using data from a paper manufacturing village that was transformed from a traditional handicraft industry into a modern industrial cluster knowledge diffusion through kinship networks is shown to have played a significant role in the dissemination of mechanized production by helping the followers to overcome subjective risk during the initial investment stage the financial support through kinship networks also had a demonstrably positive impact on the diffusion of the technology which removed financial constraints on the initial fixed investments

a comparison of clustered and dispersed firms in the small scale clothing industry of lima abstract this study provides empirical evidence on the strength and type of clustering advantages contrasting the performance of small clustered firms with several control groups of dispersed producers in the garment industry of lima peru repeated measurement facilitates an evaluation of the ability of clustered firms to respond to pressures arising from the swift trade liberalization carried out in peru after 1990 the evidence suggests that clustering advantages have been significant particularly for the smallest firms cost reductions and information spillovers are the dominant type of advantages these are however passive advantages of clustering they largely arise at the level of transactions in goods and services and to a lesser extent in the transformation of inputs into output while significant these advantages are insufficient for sustaining competitiveness in the liberalized markets the garment cluster runs the risk of entropic death if information spillovers remain limited in origin and diversity and if interfirm cooperation does not cross local borders