We identify local and global factors across international bond markets that are poorly spanned by the cross-section of yields but have strong forecasting power for future bond excess returns. Local and global factors are jointly signicant predictors of bond returns, where the global factor is closely linked to US bond risk premia and international business cycles. Motivated by our results, we estimate a no-arbitrage ane term structure model for each country in which movements in risk premia are driven by one local and one global factor. Yield loadings for the two factors are estimated to be close to zero while shocks to risk premia account for a small fraction of yield variance. This suggests that the cross-section of yields conveys little information about the return-forecasting factors. We show that shocks to global risk premia cause osetting movements in expected returns and expected future short-term interest rates, leaving current yields little affected. Furthermore, correlations between international bond risk premia have increased over time, indicating an increase in integration between markets.
The most influential approach of corporate governance, the view of shareholders’ supremacy does not take into consideration that the key task of modern corporations is to generate and transfer firm-specific knowledge. It proposes that, in order to overcome the widespread corporate scandals, the interests of top management and directors should be increasingly aligned to shareholder’ interests by making the board more responsible to shareholders, and monitoring of top management by independent outside directors should be strengthened. Corporate governance reform needs to go in another direction altogether. Firm-specific knowledge investments are, like financial investments, not ex ante contractible, leaving investors open to exploitation by shareholders. Employees therefore refuse to make firm-specific investments. To gain a sustainable competitive advantage, there must be an incentive to undertake such firm-specific investments. Three proposals are advanced to deal with this dilemma: (1) The board should rely more on insiders. (2) The insiders should be elected by those employees of the firm who are making firm-specific knowledge investments. (3) The board should be chaired by a neutral person. These proposals have major advantages: they provide incentives for knowledge investors; they countervail the dominance of executives; they encourage intrinsic work motivation and loyalty to the firm by strengthening distributive and procedural justice, and they ensure diversity on the board while lowering transaction costs. These proposals for reforming the board may help to overcome the crisis corporate governance is in. At the same time, they provide a step in the direction of a more adequate theory of the firm as a basis for corporate governance.
We propose a dynamic model of neighbourhood watch schemes. While the state chooses punishment levels, apprehension of criminals depends on the watchfulness of citizens. We show that, contrary to standard intuition, crime levels can increase in punishments. This is because neighbourhood watch schemes can fall victim to their own success if recruitment of new members is driven by fear of crime - a finding that is in line with the empirical literature. We discuss the policy implications of this result and show how it extends to the more general problem of norm enforcement among interacting citizens.
In this paper, we analyze the completed highest education degree of two birth cohorts (1934-1943 and 1964-1973) in Switzerland, using data from the 1999 wave of the Swiss Household Panel. As expected, the fraction of tertiary graduates has increased over time, for women more so than for men. Also, the educational attainment depends strongly on the educational attainment of parents. We then decompose the overall trend into a parental background effect, a general expansion effect and a distribution effect. For women in particular, we find that a substantial fraction of the overall increase in participation in tertiary education can be explained by the fact that the gap in participation rates between women with lowly educated parents and women with highly educated parents has narrowed. We then investigate the role of financial constraints in explaining these trends. Although the number of individuals suffering financial hardship during youth has declined over time, logit models show that financial problems have become more important as an impediment for higher education.
A central aspect of historical research is to provide explanations for the causes and effects of events that occurred in the past, in particular the Second World War. History can be analyzed and explained from different perspectives. Two such perspectives are considered, the first being the traditional historiographic approach, in which the main emphasis is on the qualitative analysis of various kinds of historical sources and documents, and the second being what we call the financial market approach, a recent methodology for linking significant changes in historical market prices to simultaneously occurring geopolitical events. The fundamental characteristics of the two approaches are identified and compared in answering some important historical questions concerning the Second World War. The financial market approach, as reflected in the secondary market for government bonds, isnstudied for various countries. Both approaches rely heavily on interpretation – but inndifferent ways. They complement each other in a useful way.
Das vorliegende Papier schlägt eine neue Sicht auf Probleme der Corporate Governance vor. Es wird analysiert, wie der Unternehmenssektor bezüglich Governance vom politischen Bereich lernen kann. Demokratien haben einzigartige Institutionen der Führung und Kontrolle von Akteuren im öffentlichen Bereich geschaffen, welche neue Einsichten für die Governance von Unternehmen geben können. Drei Bereiche werden diskutiert und konkret auf den Kontext der Schweizer Corporate Governance angewendet: Gewaltenteilungnim Unternehmen, kompetitive Wahlen für Kernfunktionen in der Firma, und direktdemokratischenBeteiligungsrechte für Aktionäre.
In this paper, we develop the concept of a psychological tax contract that goes beyond thentraditional deterrence model and explains tax morale as a complicated interaction betweenntaxpayers and the government. Based on crowding theory, the impact of deterrence and rewardsnon tax morale is discussed. As a contractual relationship implies duties and rights for each contract partner, sticking to the fiscal exchange paradigm between citizens and the statenincreases tax compliance. Citizens are willing to honestly declare income even if they do not receive a full public good equivalent to their tax payments as long as the political process is perceived to be fair and legitimate. At the procedural level, a friendly treatment of taxpayers by the tax office in auditing processes increases tax compliance.
Why so many people pay their taxes, although fines and audit probability are low, has become a central question in the tax compliance literature. A homo economicus, with a more refined motivation structure, helps us to shed light on this puzzle. This paper provides empirical evidence for the relevance of conditional cooperation, using survey data from 30 West and East European countries. We find a high correlation betweennperceived tax evasion and tax morale. The results remain robust after exploitingnendogeneity and conducting several robustness tests. We also observe a strong positivencorrelation between institutional quality and tax morale.
