does employment protection create its own political support this paper investigates the ability of employment protection to generate its own political support a version of the mortensen pissarides model is used for this purpose if wages are set through nash bargaining workers value employment protection because it strengthens their hand in wage negotiations workers in high productivity matches benefit most from higher wages as they expect to stay employed for longer by reducing turnover employment protection shifts the distribution of match specific productivity toward lower values thus stringent protection in the past actually reduces support for employment protection today introducing involuntary separations reverses this conclusion now workers value employment protection because it delays involuntary dismissals workers in low productivity matches gain most since they face the highest risk of dismissal the downward shift in the productivity distribution is now a shift towards supporters

a review of the recent empirical literature on displaced workers this article reviews the empirical literature on job displacement job displacement is widespread and strongly countercyclical tending to peak during economic downturns but concentrated in indus

debt swapping in developing countries a preliminary investigation debt swapping has begun to be used over recent years as one means of alleviating the global debt problem this article undertakes a preliminary investigation of the economics of debt swapping and attempts to identify and assess the principal advantages and disadvantages of such schemes the conclusion reached is that while the benefits outweigh the costs debt swapping will not do very much to tackle the fundamental issues involved in the debt problem an appendix examines the welfare effects of governmental regulation of debt swapping

should developing countries use currency depreciation as a tool of balance of payments adjustment a review of the theory and evidence and a guide for the policy maker the use of currency depreciation as a means of strengthening the balance of payments has long been a contentious issue amongst developing countries especially in their negotiations with the imf this article reviews the various ways in which depreciation might exert its impact a study of the empirical evidence suggests that it may be both an effective and cost effective instrument in many developing countries even though exceptions do exist compared with alternative balance of payments policies use of the exchange rate emerges as possessing many advantages it is concluded that greater emphasis should be placed on the exchange rate in the context of imf programmes than has perhaps been the case in recent years

what happens to wages after displacement faced with limited resources policymakers need to know when and where to target support for displaced workers the academic literature offers little support presenting wide ranging results with no consistent explanation for the observed differences in wages after workers are displaced in this paper we demonstrate that the heterogeneity found in the literature is consistent with varying market conditions the results suggest that support for displaced workers can be more efficiently allocated by considering the timing and location of displacement

lasting or latent scars swedish evidence on the long term effects of job displacement recently improved swedish register data have made it possible to remedy many weaknesses of previous research on displaced workers using linked employer employee data we identify all workers displaced in 1987 due to an establishment closure and follow them over both a predisplacement period of 4 years and a postdisplacement period stretching until 1999 we find that the displaced workers suffer both earnings losses and worsened labor market position not only during a transitory period of adjustment but also in the longer run these longer run effects seem to be driven by an increased sensitivity to subsequent macroeconomic shocks

exchange rate variations and export competitiveness in less developed countries under generalized floating this paper identifies two basic sources of effective exhange rate eer changes under the present system of generalized currency floating and formulates some eer based measures of relative export competitiveness in developing countries these measures are presented and analyzed in terms of their monthly movements and trends over the period from march 1973 to december 1979 for twenty three developing countries export profitability vis a vis import competing production is shown to have been affected by major currency realignments only to a moderate extent normal currency depreciation both small and large is found not to lead necessarily to a permanent improvement in export competitiveness the relationship between the type of exchange rate management and ability of the national authorities to adopt monetary and fiscal policies supportive of real exchange rate adjustment is also empirically examined

the dynamic interrelation between external finance and bank credit abstractthis article studies the interrelation among the volumes of bonds and stocks issued by non financial firms and levels of industrial loans outstanding in the united states these aggregates are co integrated and characterized by asymmetric volatility their co movements are driven by financial indicators such as the yield spread size of loan market and market volatility bond and stock issuance are positively correlated and even more so during the expansionary phase of the cycle loans outstanding and bond issuance are negatively correlated and their substitutability increases in periods of economic downturn highlighting the importance of bond markets to mitigate credit crunches

measuring the effect of subsidized training programs on movements in and out of employment despite over two decades of u s experience in operating large scale subsidized training programs for low income and unemployed workers the effects of these programs are still highly controversial the controversy arises from the difficulty of specifying the model of participant outcomes in the absence of training that is necessary in any nonexperimental program evaluation in this paper we suggest that some of these difficulties may be overcome by focusing on a very simple measure of outcomes namely the probability of employment we present a variety of estimates of the effect of training on the probability of employment for the 1976 cohort of adult male participants in the comprehensive employment and training act ceta program our methods range from a simple comparison of pre and post training employment probabilities between trainees and nonparticipants to a fully specified first order markov model of employment probabilities with individual heterogeneity there is consistent evidence across methods that ceta participation increased the probability of employment in the three years after training by from 2 to 5 percentage points classroom training programs appear to have had significantly larger effects than on the job programs although the estimated effects of both kinds of programs are positive we also find that movements in and out of employment for trainees and nonparticipants are reasonably well described by a first order process conditional on individual heterogeneity in the context of this model ceta participation appears to have increased both the probability of moving into employment and the probability of continuing employment

the risk in hedge fund strategies theory and evidence from trend followers hedge fund strategies typically generate option like returns linear factor models using benchmark asset indices have difficulty explaining them following the suggestions in glosten and jagannathan 1994 this article shows how to model hedge fund returns by focusing on the popular trend following strategy we use lookback straddles to model trend following strategies and show that they can explain trend following funds returns better than standard asset indices though standard straddles lead to similar empirical results lookback straddles are theoretically closer to the concept of trend following our model should be useful in the design of performance benchmarks for trend following funds

the gender gap in early career wage growth in the uk the gender pay gap on entry to the labour market is approximately zero but ten years after labour market entry there is a gender wage gap of almost 25 log points this article explores the reason for this gender gap in early career wage growth considering three main hypotheses human capital job shopping and psychological theories human capital factors can explain about 11 log points job shopping about 1 5 log points and the psychological theories up to 4 5 log points depending on the specification but a substantial unexplained gap remains women who have continuous full time employment have had no children and express no desire to have them earn about 8 log points less than equivalent men after 10 years in the labour market

the distribution of economic losses among displaced workers a replication this paper estimates the impact of unemployment on earnings following re employment for a large and representative sample of british men 1984 94 unemployment incidence is found to have only a temporary effect an average earnings setback of 10 on

causes and consequences of layoffs using probit analysis this article finds that differential treatment accounts for a substantial portion of the higher layoff rates of blacks in comparison to whites however women are found to be considerably less prone to layoffs than men with similar characteristics among those who obtained subsequent employment taking into account the possible selectivity bias in such a subsample white males are hurt more by layoffs than black males in terms of both short term and long term earnings growth women s earnings are not necessarily affected by layoff at all however whites and males are found to be more likely to be reemployed than blacks and females respectively

economic conditions and alcohol problems this study investigates the relationship between macroeconomic conditions and two alcohol related outcomes liquor consumption and highway vehicle fatalities fixed effect models are estimated for the 48 contiguous states over the 1975 1988 time period alcohol consumption and traffic deaths vary procyclically with a major portion of the effect of economic downturns attributed to reductions in incomes rather than employment the intake of hard liquor is the most sensitive to the state of the macroeconomy there is no evidence however that fluctuations in economic conditions have a disproportionate impact on the drunk driving of young adults

the economic consequences of labor mobility unlike most previous research on the relative changes in earnings of job stayers and job changers this study examines the variance in earnings changes rather than simply average changes men and women rather than only men and the five year period following job change rather than only the first year or two the author finds great variability in earnings changes both within and across race and gender groups notably men gained more from quits and except in the case of low wage workers lost less from layoffs than women also men suffered a much smaller penalty than women for repeated job changes for all groups the percentage difference between earnings before and after leaving a job generally persisted for several years

a structural model of us aggregate job flows this paper contributes to the analysis of jobs flows dynamics through the explicit modelling of job creations and job destructions we propose a simple matching model extended for endogenous separation and tractable heterogeneity the parameters of the model are estimated using a simulation based estimation method we then test the ability of trade externalities generated by the matching process to i propagate reallocation and aggregate disturbances in the whole labor market and ii generate the observed distribution of aggregate job flows the results clearly indicate that the model is able to match the dynamics of us aggregate job flows copyright 2002 john wiley sons ltd

earnings losses of displaced workers revisited recent literature reviews conclude that job displacement results in sustained earnings losses bruce c fallick 1996 lori g kletzer 1998 and that estimates of the size of those reductions vary with the type of data used in the analysis the industry within which displacement occurs and business cycle conditions the largest estimated losses were obtained using administrative data from pennsylvania during the 1970s and 1980s louis s jacobson robert j lalonde and daniel g sullivan 1993a the data covered a period of high unemployment in a heavily indus trialized state characterized by disproportionate job losses in manufacturing thus the ability to generalize those results to more favorable economic times and states with a greater reliance on service sector employment has been questioned to address these issues administrative data are used to similarly examine the impact of job displacement on earnings losses of workers in connecticut from 1993 to 2004 the work of jacobson lalonde and sullivan jls also provided important methodologi cal advancement by adapting analytical techniques developed for program evaluation james j heckman and v joseph hotz 1989 to the context of job displacement the same techniques fixed effects and time trend estimators as those used in the original jls publication are initially employed here then the methods are extended to include matching estimators developed since their publication both nearest neighbor estimators of average treatment on the treated att and differenced average treatment on the treated datt are adapted to the context of this study heckman hidehiko ichimura and petra todd 1997 heckman et al 1998 and rajeev h dehejia and sadek wahba 1999 2002 the results presented here for connecticut differ in some ways from those found in the work of jls using data from pennsylvania in the period immediately following job loss regardless of the technique employed earnings reductions for workers displaced through mass layoff range from 32 percent to 33 percent jls reported immediate losses of more than 40 percent six years later using the same estimators as jls earnings reductions in connecticut range from 13 percent to 15 percent they report sustained losses in pennsylvania of 25 percent the smaller long term impacts in connecticut demonstrate that under more ordinary economic times esti mated losses from administrative data lie within the range observed using other data sources this finding resolves a long standing conflict among the results of high quality studies that have used differing data sources to study earnings reductions following job loss 1 using two different matching estimators earnings losses six years after mass layoff are 12 percent the matching estimators compare those who experienced mass layoff to compari sons with the same ex ante probability of the event these smaller losses are consistent with the

zero r 2hedge funds and market neutrality factor models yield an r 2 insignificantly different from 0 for one third of hedge funds in a broad sample these funds illustrate the concept of market neutrality and feature lower volatilities higher sharpe ratios and higher alphas than other funds indicating that they provide a successful alternative investment however large portfolios of zero r 2 funds contain fully half the volatility of portfolios of other funds suggesting that they feature substantial systematic risk furthermore these funds display an increased probability of failure even after controlling for idiosyncratic volatility these results indicate the presence of an omitted factor that exposes investors to significant downside risk

evidence of preseparation earnings losses in the displaced worker survey this paper attempts to quantify preseparation earnings losses of workers displaced in mass layoffs using the displaced worker survey the largest and most representative sample of displaced workers using the 1986 displaced worker survey and random samples of the 1984 and 1985 current population survey as a comparison group it is found that workers lose on average 9 percent of their earnings prior to separation as a result of wage cuts this result is very similar to the preseparation losses found in other studies using different data sources one implication of this finding is that those studies that only take into consideration the post displacement losses of workers displaced in mass layoffs clearly underestimate the total costs suffered by these workers

the supply and demand for imports and exports in a simultaneous model previous studies on the behaviour of aggregate exports and imports have tended to ignore the simultaneous relationship between quantity and price this paper investigates the price responsiveness of export and import demand and supply in eight african countries the results indicate that export demand price elasticities are smaller when the sample is african the import supply and demand elasticities were found to be generally large the marshall lerner condition of balance of payment stability is found to be easily satisfied a positively sloped function of export supply is found to exist for a majority of countries in the sample the average time lag of export supply is found to be about a year the disequilibrium model is found to be more appropriate for import demand import supply and export supply

are market neutral hedge funds really market neutral one can consider the concept of market neutrality for hedge funds as having breadth and depth breadth resects the number of market risks to which a fund is neutral while depth resects the completeness of the neutrality of the fund to market risks we focus on market neutrality depth and propose ve different neutrality concepts mean neutrality nests the standard correlation based de nition of neutrality variance neutrality value at risk neutrality and tail neutrality all relate to the neutrality of the risk of the hedge fund to market risks finally complete neutrality corresponds to independence of the fund to market risks we suggest statistical tests for each neutrality concept and apply the tests to a combined database of monthly market neutral hedge fund returns from the hfr and tass hedge fund databases we nd that around one quarter of these funds exhibit some signi cant exposure to market risk

exchange rates trade liberalization and aid the sri lankan experience abstract in 1977 the sri lankan government embarked on an extensive program of liberalization an important element of which was devaluation to ensure a competitive real exchange rate the 1980s were however marked by an increasing divergence between the real and nominal exchange rates the depreciation of the latter not being matched by similar movements of the former this paper presents an econometric model of real exchange rate behavior in sri lanka among other things it is shown that increased aid inflows have made a significant contribution to the failure of the real exchange rate to match the depreciation in the nominal rate

equity market neutral hedge funds and the stock market an application of score driven copula models in this article we study the time varying market neutrality of equity market neutral hedge funds we use data from the hedge fund research equity market neutral index hfrx eh which represents

declining labor turnover and turbulence abstract the rate of job loss has been on a secular decline for the last four decades or longer changes in demographics or industry composition do not account for the trend this paper seeks to identify the possible sources of the decline using a simple search and matching model with two types of workers experienced and inexperienced where the former type faces a risk of skill loss during unemployment the calibrated model suggests that a higher risk of skill loss during unemployment results in a lower job separation rate because workers accept lower wages in exchange for job security various other potential hypotheses are also examined

economic environment and agricultural development the importance of macroeconomic policy abstract this article explores the ways in which the macroeconomic balance of the economy and related policies impinge on agriculture in developing countries and considers implications for the design of policies it argues that the extent of macroeconomic balance and the quality of the policies influencing that balance to a large extent define the scope for effective agricultural policies the avoidance of severe balance of payments deficits and rapid inflation are seen as a necessary condition for the promotion of agricultural growth they also have an important influence on the nature and range of agricultural policy options available to governments

are children really inferior goods evidence from displacement driven income shocks abstract this paper explores the causal link between income and fertility by analyzing women s fertility response to the large and permanent income shock generated by a husband s job displacement i find that the shock reduces total fertility suggesting that the causal effect of income on fertility is positive a model that incorporates the time cost of children and assortative matching of spouses can simultaneously explain this result and the negative cross sectional relationship i also find that a husband s displacement accelerates childbearing which is consistent with lifecycle models of fertility in which the incentive to delay is driven by expected earnings growth

the cost of job loss this article identifies an equilibrium theory of wage formation and endogenous quit turnover in a labour market with on the job search where risk averse workers accumulate human capital through learning by doing and lose skills while unemployed optimal contracting implies the wage paid increases with experience and tenure indirect inference using german data determines the deep parameters of the model the estimated model not only reproduces the large and persistent fall in wages and earnings following job loss a new structural decomposition finds foregone human capital accumulation while unemployed is the worker s major cost of job loss

long run wage and earnings losses of displaced workers displacement related losses are estimated using national longitudinal survey of youth data that span the years 1979 2000 the typical displaced worker faces losses of 34 065 during the period 4 years prior through 5 years following displacement proportionally this represents a 10 8 loss compared to earnings of similar nondisplaced workers over the period considerable variation in losses is reported across worker types union male and more mature workers suffer greater losses respectively than do their nonunion female and younger counterparts college graduates and high school dropouts are found to suffer lower losses compared to high school diploma holders and those who completed some college

is unemployment insurance addictive evidence from the benefit durations of repeat users the author finds evidence that the past occurrence of a spell of insured unemployment lengthens the duration of future spells descriptive statistics from canadian administrative data covering mid 1971 to early 1990 suggest that unemployment insurance ui claimants tend to spend a longer and longer time collecting benefits with each additional claim they make this finding contradicts the implication of static neoclassical models that successive ui spells should be of the same length the author hypothesizes that the stigma attached to receiving unemployment benefits erodes with each new ui claim an individual files

penalized or protected gender and the consequences of nonstandard and mismatched employment histories millions of workers are employed in positions that deviate from the full time standard employment relationship or work in jobs that are mismatched with their skills education or experience yet little is known about how employers evaluate workers who have experienced these employment arrangements limiting our knowledge about how part time work temporary agency employment and skills underutilization affect workers labor market opportunities drawing on original field and survey experiment data i examine three questions 1 what are the consequences of having a nonstandard or mismatched employment history for workers labor market opportunities 2 are the effects of nonstandard or mismatched employment histories different for men and women and 3 what are the mechanisms linking nonstandard or mismatched employment histories to labor market outcomes the field experiment shows that skills underutilization is as scarring for workers as a year of unemployment but that there are limited penalties for workers with histories of temporary agency employment additionally although men are penalized for part time employment histories women face no penalty for part time work the survey experiment reveals that employers perceptions of workers competence and commitment mediate these effects these findings shed light on the consequences of changing employment relations for the distribution of labor market opportunities in the new economy

the long run consumption effects of earnings shocks although prior studies of job displacement and disability have measured the impact of these shocks in terms of lost earnings no previous research has linked these permanent earnings shocks to the

are benefits from oil stocks diversification gone new evidence from a dynamic copula and high frequency data abstract oil is perceived as a good diversification tool for stock markets to fully understand this potential we propose a new empirical methodology that combines generalized autoregressive score copula functions with high frequency data and allows us to capture and forecast the conditional time varying joint distribution of the oil stocks pair accurately our realized garch with time varying copula yields statistically better forecasts of the dependence and quantiles of the distribution relative to competing models employing a recently proposed conditional diversification benefits measure that considers higher order moments and nonlinear dependence from tail events we document decreasing benefits from diversification over the past ten years the diversification benefits implied by our empirical model are moreover strongly varied over time these findings have important implications for asset allocation as the benefits of including oil in stock portfolios may not be as large as perceived

unemployment and subsequent earnings estimating scarring among british men 1984 94 this paper estimates the impact of unemployment on earnings following re employment for a large and representative sample of british men 1984 94 unemployment incidence is found to have only a temporary effect an average earnings setback of 10 on initial re engagement largely eroding over two years the effect of unemployment duration by contrast is permanent a one year spell adding a further penalty of 10 percentage points these wage penalties are least for young men and the low paid those most at risk of unemployment and greatest for prime age and highly paid men

the effects of unemployment and underemployment on employment opportunities results from a correspondence audit of the labor market for college graduates the authors use data from a resume audit to estimate the impact of unemployment and underemployment on the employment prospects of recent college graduates they find no statistical evidence linking unemployment spells of different durations to employment opportunities by contrast college graduates who are underemployed have callback rates that are 30 lower than those of applicants who are adequately employed the null effects associated with unemployment and the adverse effects associated with underemployment are robust across cities with relatively tight and loose labor market conditions internship experience obtained while completing one s degree substantially reduces the negative effects of underemployment the data support the proposition that employers view underemployment as a strong signal of lower expected productivity

exchange rate reform and its inflationary consequences an empirical analysis for china in examining china s exchange rate policy in the reforming years the study finds empirical evidence of its long run inflationary consequences but the effects appear not to be sizable in the short run while changes in the devaluation rate are positively correlated with the increase in the growth rate of inflation the inflation inertia is also modest the moderate inflationary cost of devaluations provides some explanation of the smooth transition of exchange rate policy regime in china and the authorities ability to put more weight on external competitiveness

are workers permanently scarred by job displacements this paper investigates whether workers suffer lasting scars following job displacements using david t ellwood s 1982 terminology scars represent persistent effects whereas blemishes are transitory adjustments which dissipate over time more precisely dislocated individuals are defined as scarred if they continue to earn less or to be unemployed more than their nondisplaced counterparts even after the conclusion of a several year adjustment period

hedge fund risk dynamics implications for performance appraisal accurate appraisal of hedge fund performance must recognize the freedom with which managers shift asset classes strategies and leverage in response to changing market conditions and arbitrage opportunities the standard measure of performance is the abnormal return defined by a hedge fund s exposure to risk factors if exposures are assumed constant when in fact they vary through time estimated abnormal returns may be incorrect we employ an optimal changepoint regression that allows risk exposures to shift and illustrate the impact on performance appraisal using a sample of live and dead funds during the period january 1994 through december 2005