Self-Enforcing Labour Contracts and the Dynamics Puzzle

To properly account for the dynamics of key macroeconomic variables, researchers incorporate various internal-propagation mechanisms in their models. In general, these mechanisms implicitly rely on the assumption of a perfect equality between the real wage and the marginal product of labour. The author proposes a theoretical validation of a micro-founded internal-propagation mechanism: he builds a model that features a limited-commitment economy, and derives endogenous self-enforcing labour contracts that produce a different linkage between the real wage and the marginal product of labour. The risk-sharing between the entrepreneur and the worker, both faced with enforcement problems, provides an admissible explanation of the prolonged comovements observed between consumption and labour. Since these co-movements are at the core of the persistence of the impulse response of output to exogenous technology shocks, this persistence can, in turn, be rationalized with the endogenous real rigidity emerging from the economy. The author shows that, in this framework, the persistence ultimately depends on the initial bargaining power and the magnitude of the risk-sharing.Business fluctuations and cycles; Economic models; Labour markets

The design of licensing contracts: Chemicals, Pharmaceuticals, and Electrical Engineering in Imperial Germany

We investigate a sample of 180 technology licensing contracts closed by German chemical, pharmaceutical, and electrical engineering companies between 1880 and 1913. Our empirical results suggest that strategic behaviour seems to be relevant for the design of licensing contracts, whereas inventor moral hazard and risk aversion of licensor or licensee seem to be irrelevant. Moreover, our results suggest that uncertainty regarding the profitability of licensed technology influenced the design of licensing contracts. More specifically, profit sharing agreements or producer milestones were typically included into licensing contracts.Economic History, Germany, pre-1913, Licensing contracts, Technology transfer

Financial market integration in the EU: A practical inventory of benefits and hurdles in the Single Market

It is 25 years since the European Union (EU) agreed to complete the European Single Market (SM) in goods, ser- vices, people, and capital. While many barriers to the free movement of capital across borders have been removed, some important practical hurdles are still in place. The euro crisis has shown that the European finan- cial sector in particular remains vulnerable and fragmented and this poses serious risks to the stability of both national economies and the euro area as a whole. In 2015, the European Commission therefore set out a list of measures to establish an integrated capital market in the EU by 2019. The first part of this policy paper analyzes the channels through which financial integration affects growth, stabil- ity, and convergence in the EU, including capital allocation, production specialization, diversification of risk, and access to investment opportunities. The second part takes stock of persisting administrative and legal hurdles that impede full market integration. In particular, this paper distinguishes between a firm-level perspective, inves- tors, and banks in its analysis. The final part provides some specific recommendations to improve the internal market for capital in the EU

Insuring the uninsurable : brokers and incomplete insurance contracts

How do markets spread risk when events are unknown or unknowable and where not anticipated in an insurance contract? While the policyholder can "hold up" the insurer for extra contractual payments, the continuing gains from trade on a single contract are often too small to yield useful coverage. By acting as a repository of the reputations of the parties, we show the brokers provide a coordinating mechanism to leverage the collective hold up power of policyholders. This extends both the degree of implicit and explicit coverage. The role is reflected in the terms of broker engagement, specifically in the ownership by the broker of the renewal rights. Finally, we argue that brokers can be motivated to play this role when they receive commissions that are contingent on insurer profits. This last feature questions a recent, well publicized, attack on broker compensation by New York attorney general, Elliot Spitzer. Klassifikation: G22, G24, L1

Human Wellbeing in the 21st Century: Meeting Challenges, Seizing Opportunities

A report from the Bellagio Initiative: In 2011, over a period of six months, a number of leading figures came together in an ambitious exploration of the major challenges to and opportunities for protecting and promoting human wellbeing in the twenty-first century. A diverse group of policymakers, academics, opinion leaders, social entrepreneurs, activists, donors and practitioners from over 30 countries took part in a series of deliberations collectively called the 'Bellagio Initiative'. Its aim: to generate discussions and stimulate innovative thinking on how philanthropies and international development organisations might find ways to move forward together to better protect and promote human wellbeing in the twenty-first century

What makes ISAF s/tick: An investigation of the politics of coalition burden-sharing

This paper is interested in conceptualising the often raised issue of over- and under-contributing in coalition operations; that of how and why members of complex coalitions2 may be punching above and below their weight, respectively. To this end, the first section presents a parsimonious baseline assumption regarding what variables may fundamentally inform coalition burden-sharing, to subsequently discuss how much each of these are found to play a role in the Afghanistan context. The second section elaborates on this by assessing the perception and the interpretation of threats by coalition member countries, related to Afghanistan, as this pertains to prioritising other variables within the scheme outlined in the previous section. The third and fourth sections then proceed to examine and further enrich the existing literature on coalition burden-sharing, and provide further insights regarding the operations of the International Security Assistance Force–Afghanistan, and regarding ISAF member-country decisionmaking; the objective here is to generate further refined assumptions, that can permit a preliminary assessment of the phenomenon of uneven burden-sharing in ISAF, complementing the initial baseline expectations

"Risk, Transaction Costs, and Geographic Distribution of Share Tenancy: A Case of Pre-War Japan"

This paper investigates determinants of geographic distribution of share tenancy and analyzes its efficiency implications in pre-war Iwate prefecture, Japan. The distribution of share tenancy was attributable to risk represented by yield variability, which in turn was affected by seasonal winds called Yamase and topographic features. That risk raised transaction costs of adopting a fixed-rent tenancy associated with the common custom of rent reduction in Japan that mitigated the problem of risksharing. Estimation results suggest that risk, wealth, and strength of community ties were the main determinants of contract choice.

Risk, Transaction Costs, and Geographic Distribution of Share Tenancy: A Case of Pre-War Japan

This paper investigates determinants of geographic distribution of share tenancy and analyzes its efficiency implications in pre-war Iwate prefecture, Japan. The distribution of share tenancy was attributable to risk represented by yield variability, which in turn was affected by seasonal winds called Yamase and topographic features. That risk raised transaction costs of adopting a fixed-rent tenancy associated with the common custom of rent reduction in Japan that mitigated the problem of risksharing. Estimation results suggest that risk, wealth, and strength of community ties were the main determinants of contract choice.