Recruitment in Recovery

Burgess (1993) finds that job finding rates for the unemployed do not move proportionately to changes in the overall hiring rate. Burgess hints at employed job seekers that start looking in tight conditions and crowd out the unemployed. But he leaves the search behaviour of firms unaddressed. Russo et al. (2000) and Russo et al. (2001), however, shows that firms switch their preferred recruitment channel in changing labour market conditions. We introduce recruitment channels in a search model and find an additional mechanism through which the unemployed obtain less than their `fair share' of the job offers. We then test our model's predictions using panel data from the Netherlands and find support for this hypothesis.employer search, job search, recruitment channels, tightness

Institutions and the Allocation of Entrepreneurial Talent between Productive and Destructive Activities

Entrepreneurship is generally regarded as a force of change, innovation and development in modern economies. Entrepreneurs bring new and better products to markets, restore allocative efficiency through arbitrage and reinvest their profits. However, as Baumol (1990), Mehlum et al. (2003) and Acemoglu (1995) have argued, the same energy and talent can also be allocated to unproductive ends and reduce total welfare. In this paper we present a model that analyzes the allocation of a given entrepreneurial talent over destructive and productive activities. We show that in this model two stable equilibria can emerge. As Baumol (1990) hypothesized, institutions determine the pay-offs to both types of entrepreneurial activity and hence drive this allocation. But we also show that the distribution of initial wealth and entrepreneurial talent plays a decisive role. This analysis provides a different perspective on the importance of high quality institutions in developing countries and sheds light on the situation in conflict and post-conflict countries, where both informal and formal institutions arguably have broken down. Under such circumstances, our analysis shows that micro credits can support the transition to a productive equilibrium, because they help to overcome credit contraints without creating incentives for destructive entrepreneurship.growth, development, entrepreneurship, innovation, occupational choice

The Allocation of Entrepreneurial Talent and Destructive Entrepreneurship

Entrepreneurship is generally regarded as a force of change, innovation, and development in modern economies. Entrepreneurs bring new and better products to markets, restore allocative efficiency through arbitrage and reinvest their profits. However,destructive entrepreneurship, allocation of talent, development, institutions

Skill-Biased Technical Change: Theoretical Concepts, Empirical Problems and a Survey of the Evidence

The structure of wages and employment has shifted against the low-skilled in many OECD countries over the last decade. Many authors have attributed this shift to the impact of new technologies, and or technical change in general. This paper investigates and structures the growing body of literature on skill-biased technical change (SBTC) by first presenting a model in which SBTC is formalised and decomposed into factor and sector biases of technical change. We show that as we go down to the job level the scope for pure within unit-skill bias decreases and between-unit effects explain the within-unit effects detected at higher aggregation levels. Second, we address some potential sources of skill bias, which are learning, R&D, human capital formation, organisational change and the introduction of new general purpose technologies. Finally we present some conceptual and practical problems we encounter when studying SBTC empirically. We conclude with a survey of selected empirical literature on the subject and discuss the results in light of the empirical and theoretical problems pointed out above.labour economics ;

MINIMUM VARIANCE HEDGING AND THE ENCOMPASSING PRINCIPLE: ASSESSING THE EFFECTIVENESS OF FUTURES HEDGES

An empirical methodology is developed for statistically testing the hedging effectiveness among competing futures contracts. The presented methodology is based on the encompassing principle, widely used in the forecasting literature, and applied here to minimum variance hedging regressions. Intuitively, the test is based on an alternative futures contract's ability to reduce residual basis risk by offering either diversification or a smaller absolute level of basis risk than a preferred futures contract. The methodology is also easily extended to cases involving multiple hedging instruments and general hedge ratio models. The methodology is demonstrated by evaluating the hedging effectiveness of Chicago Board of Trade's (CBOT) corn futures versus the Minneapolis Grain Exchange's National Corn Index (NCI) futures. The results indicate that the NCI futures encompass the CBOT futures for hedging country-level corn price risk in North Central Iowa; but, the NCI and CBOT futures are complementary in hedging terminal-level corn price risk at the U.S. Gulf.encompassing, hedging effectiveness, corn futures, Agribusiness,

Is the Local Basis Really Local?

Conventional wisdom suggests the local cash - futures basis is determined from local supply and demand conditions. However, it may be the case that local elevators look to other locations, such as terminal locations, and adjust for transportation differentials when determining the basis for their particular market. If so, certain grain marketing locations (e.g., export and interior terminal locations) may play an important role in discovering and ultimately determining the basis for other local markets. This hypothesis is examined for the #2 yellow corn basis at various export terminal (Gulf; Toledo), river terminal (Illinois River; Omaha) and interior (S. Central Illinois; N. Central Iowa; Denver) locations. Specifically, if the basis calculated at one market location is found to lead the basis at another market location, then this suggests that the leading market plays a role in determining the basis for the other market. The findings suggest that corn basis calculated at the export terminal markets of Toledo and the U.S. Gulf, as well as the Illinois River, may indeed provide valuable information in determining the basis for other river terminal and interior locations.Marketing,

MODELING CONTRACT FORM: AN EXAMINATION OF CASH SETTLED FUTURES

This research presents an intuitive interpretation and expression for pricing cash settled futures contracts. In particular, the choice of the averaging period for the underlying cash index is evaluated. For example, the averaging period for the Lean Hog futures contract is two days, whereas it is thirty days for the F ed funds contract. Does the choice of the averaging period make a difference? Under certain assumptions, the behavior of the futures price prior to entering the expiration or averaging interval is independent of the length of the interval for storable commodities, but it is not for non-storable commodities.Marketing,

Price Discovery in Private Cash Forward Markets - The Case of Lumber

Cash forward contracting is a common, and often preferred, means of managing price risk for agribusinesses. Despite this, little is known about the performance of cash forward markets, in particular the role they play in price discovery. The lumber market provides a unique case for examining this issue. The Bloch Lumber Company maintains an active cash forward market for many lumber products, and publishes benchmark forward prices on their website and disseminates these prices to data vendors. Focusing on 2x4 random lengths lumber and 7/16 oriented strand board, this research examines the lead-lag relationships between the three-month forward prices published by Bloch Lumber and representative spot prices. Results suggest that at least for 2x4 random lengths lumber, the forward prices published by Bloch Lumber lead the spot price. However, spot prices do not lead the forward prices for 2x4 random lengths lumber, but do for oriented strand board. While these results suggest that the Bloch Lumber forward cash prices are contributing to price discovery, the dominant market for price discovery may be an existing spot or futures market.Marketing,

Contribution to Price Discovery in the Forest Product Market: Futures, Forwards, and Spot Markets

This research examines the lead-lag relationships between futures prices, prices from a cash forward market, and spot prices for two forest product markets. Results suggest that for 2x4 lumber, the forward market provides some level of price discovery, but futures play a dominant price discovery role for oriented strand board.Marketing,

THE INFORMATION CONTENT OF IMPLIED VOLATILITY FROM OPTIONS ON AGRICULTURAL FUTURES CONTRACTS

Agricultural risk managers need forecasts of price volatility that are accurate and meaningful. This is especially true given the greater emphasis on firm level risk measurement and management (e.g., Value-at-Risk and Enterprise Risk Management). Implied volatility is known to provide a readily available, market based forecast of volatility. Because of this, it is often considered to be the "best" available (e.g., optimal) volatility forecast. However, many studies have provided evidence contrary to this claim for many markets (Figlewski). This research examines the forecasting performance of implied volatility derived from the Black-1976 option pricing model in predicting 1-week volatility of nearby live cattle futures prices. Unlike many studies of implied volatility, this research takes a practical approach to evaluating implied volatility, namely from the perspective of an agribusiness risk manager who uses implied volatility in risk management applications, and thus needs to understand its forecasting performance. This research also uses a methodology that avoids overlapping forecast horizons. As well, the methodology focuses on forecast errors that can reduce interpretive issues that can arise from traditional forecast evaluation procedures. Results suggest that implied volatility derived from nearby options contracts on live cattle futures is a biased and inefficient forecast of 1-week nearby futures price volatility, but encompasses all information provided by a time series forecast (i.e., GARCH). As well, our results suggest that implied volatility has improved as a forecast of 1-week volatility over time. These results provide practical information to risk managers on the bias, efficiency, and information content of implied volatility from live cattle options markets, and provide practical suggestions on how to adjust the bias and inefficiency that is found in this forecasting framework.Marketing,