infonet-economy

We consider a closed economy where a risk neutral bank competes with a competitive bond market. Firms can finance a risky project either by a bank credit or by issuing a bond which is directly sold to risk averse investors who also hold safe deposits at the bank. We show that the bank tends to allocate more capital to lower quality projects but there are some interesting…

Sorting of people on the labor market not only assures the most productive use of valuable skills but also generates individual utility gains if people experience an optimal match between job characteristics and their preferences. Based on individual data on reported satisfaction with life it is possible to assess these latter gains from matching. We introduce a two-equation ordered…

This article examines the pricing and hedging of mandatory convertible bonds on the US market using daily market prices for a period of 498 trading days resulting in a sample of over 14,600 daily price observations. We explore the pricing and hedging performance based on a simple contingent claims model. On average, the pricing errors are lower than those found for standard…

We investigate empirically how industrialized countries and US states share consumption risk at horizons between 1 and 30 years. US federal states share about 50% of their permanent idiosyncratic risk through cross-state capital income flows. While insurance against transitory fluctuations in output is virtually complete, OECD countries do not share any of their permanent…

We apply the instrumental quantile regression estimator of Chernozhukov and Hansen (2004b and 2006) to examine the wage structure in the public and private sector in Germany. Assuming exogenous sector choice, we find a negative mean public sector wage premium and show that the wage distribution is more compressed in the public sector. Correcting for endogenous sector choice reverses…

Confidence intervals in econometric time series regressions suffer from notorious coveragenproblems. This is especially true when the dependence in the data is noticeable andnsample sizes are small to moderate, as is often the case in empirical studies. This papernsuggests using the studentized block bootstrap and discusses practical issues, such as thenchoice of the block size. A…

Stylized facts of empirical assets log-returns include the existence of semi heavy tailedndistributions and a non-linear spectrum of Hurst exponents. Empirical datanconsidered are daily prices from 10 large indices from 01/01/1990 to 12/31/2004. We propose a stylized model of price dynamics which is driven by expectations. The model is a multiplicative random process with a…

We analyse interethnic cooperation in an infinitely repeated prisoner’s dilemma when members of one group are unable to target punishment towards individual defectors from the other group. We first show that indiscriminate punishment may sustain cooperation in this setting. Our main result, however, is that the introduction of ingroup punishment in addition to outgroup punishment…

There is a large body of literature on the effect of educational resources on student performance, such as teacher qualification, class size, and physical resources in school. It is dominated by empirical studies which often find ambiguous effects of resource spending on student outcomes. The unique contribution of this paper is the provision of a framework to study educational…