This paper examines the impact of the 2005 hurricane season, particularly Hurricane Katrina, on the pricing of CAT bonds. We examine whether highly rated CAT bonds demonstrate a different relationship than subinvestment bonds between objective risk measures and the spread. The theoretical framework for this relationship is based on the Lance Financial (LFC) model, introduced by Lane (Rationale and results with the LFC cat bond pricing model, Discussion paper, Lane Financial LLC, Wilmette, 2003). The empirical results of treed Bayesian estimation confirm that the severity component of the spread has an increased impact, indicating a shift in investor perception during the pricing process. The impact of the conditional expected loss also significantly increases, but it contributes through its interaction with the attachment probability rather than through its variance. Finally, we show that the influence of conditional expected loss is also increased by investment-grade ratings, because investors who demand highly rated bonds may be more concerned about possible losses than junk bond investors.

This article examines whether the chances of job placements improve if the unemployed are counselled by caseworkers who belong to the same social group, defined by gender, age, education and nationality. Based on an unusually informative dataset, which links Swiss unemployed to their caseworkers, we find positive employment effects of about 3 percentage points if the caseworker and his unemployed client belong to the same social group. Coincidence in a single characteristic, e.g., same gender of caseworker and unemployed, does not lead to detectable effects on employment. These results, obtained by statistical matching methods, are confirmed by several robustness checks.

This paper examines whether the chances of job placements improve if unemployed persons are counselled by caseworkers who belong to the same social group, defined by gender, age, education, and nationality. Based on an unusually informative dataset, which links Swiss unemployed to their caseworkers, we find positive employment effects of about 4 percentage points if caseworker and unemployed belong to the same social group. Coincidence in a single characteristic, e.g. same gender of caseworker and unemployed, does not lead to detectable effects on employment. These results, obtained by statistical matching methods, are confirmed by several robustness checks.

We apply a consistent sexual partnership formation model which hinges on the assumption that one gender's choices drives the process (male or female dominant model). The other gender's behaviour is imputed. The model is fitted to UK sexual behaviour data and applied to a simple incidence model of HSV-2. With a male dominant model (which assumes accurate male reports on numbers of partners) the modelled incidences of HSV-2 are 77% higher for men and 50% higher for women than with a female dominant model (which assumes accurate female reports). Although highly stylized, our simple incidence model sheds light on the inconsistent

This paper studies how the dynamics of democratization influence the design of constitutions and political institutions. The process of democratization is shown to be determined by inequality in economic and political power, as well as the dynamics of economic development, while, at the same time, democratic structures shape the economic environment. We show that different scenarios of political development can arise and lead to different constitutional designs. These shape in particular the relative importance of efficiency and redistribution in the activities of the public sector, depending on the relative power and interests of different groups during the transition. Constitutions written under a strong capitalistic elite are characterized by little redistribution and a small size of the government. The reverse holds for strongly landed and less entrenched elites. The various implications of the model are shown to be in line with empirical and historical evidence.

This paper proposes a novel approach to portfolio revision. The current literature on portfolio optimization uses a somewhat naïve approach, where portfolio weights are always completely revised after a predefined fixed period. However, one shortcoming of this procedure is that it ignores parameter uncertainty in the estimated portfolio weights, as well as the biasedness of the in-sample portfolio mean and variance as estimates of the expected portfolio return and out-of-sample variance. To rectify this problem, we propose a Jackknife procedure to determine the optimal revision intensity, i.e. the percent of wealth that should be shifted to the new, in-sample optimal portfolio. We find that our approach leads to highly stable portfolio allocations over time, and can significantly reduce the turnover of several well established portfolio strategies. Moreover, the observed turnover reductions lead to statistically and economically significant performance gains in the presence of transaction costs.

Not available in German. We estimate Frisch labor supply functions for married women using information on desired hours, under the assumptions that these are based on a smooth convex approximation of the budget constraint. The minimum distance appproach used allows for correlated random effects both in the wage and in the taste-shifter equations, and for an unbalanced panel. We use a subsample of the German Socio-economic Panel for the years 1985-1989.

In impoverished societies a shock to the household's resources often results in a decision to reduce the contemporaneous investment on children's education. Although such shocks may be transitory in nature they could lead to permanent long run effects in terms of reduced human capital for future generations thus further enhancing a state of deprivation. This paper models the long-run effects of productivity shocks using a micro-economic founded life-cycle model where investment uncertainty faced by heterogeneous households plays a crucial role with regards to optimal educational choices for their primary school age children. The dynamics in the structural model provide the basis for identification and estimation of endogenous human capital formation allowing for household's heterogeneity, a concept often missing from empirically implemented macro-models of growth. The empirical section illustrates the modelling strategy and estimation procedure using data from Tanzania (The Kagera Health and Development Survey, 1991-1994). The results suggest that primary school age orphans that attend school regularly can experience gains in human capital (i.e., productive capacity within the household) that are 6.2% higher than similar orphans in a non-schooling regime. Howerver, when one or both parents are present to bring up the children, the gains that result from attending school are small when we compared these to the human capital gains that result from intergenerational transfers,i.e., gains purely from knowledge transfers between generations.

In this study the effects of various types of rehabilitation programmes on labour market out-comes are estimated. A main feature of this study is that it jointly evaluates multiple treat-ments by nonparametric matching estimators. The study is based on a large sample of per-sons in western Sweden who are long-term sick and could participate in rehabilitation pro-grammes. Our results suggest that work-place training is superior to the other rehabilitation programmes with respect to labour market outcomes, but compared to non-participation no positive effects are found. (doi:10.1002/jae.757) Download appendix: (pdf, 147 kb)

The issue of potentially endogenous control variables in causal studies based on the assumption of no selection bias conditional on observables (conditional independence assumption, CIA) is discussed. The paper shows that the standard formulation of the CIA obscures the endogeneity problem. It suggests a CIA based on potential variables together with explicit exogeneity conditions, which allows a separate assessment of the endogeneity bias and the plausibility of the CIA. (doi:10.1016/j.spl.2007.05.019)

Not available in German. This paper advocates the use of a nonparametric bounds analysis to check the robustness of the results of applied evaluation studies to the problem of a lack of common support. The typical responses by researchers of either ignoring it, or obtaining estimates only for the subpopulation within the common support, can both be misleading: Ignoring the problem may result in biases because the comparison group may not be comparable. Deleting observations at best yields an estimator that is consistent for the common support. When treatment effects are heterogeneous inside and outside the common support this estimator does is inconsistent. Furthermore, useful information is ignored, because the response of the treated to the treatment can be estimated even outside the common support. This information can be used to derive bounds with width depending on the configuration of the data. The application to an evaluation study of Swiss active labour market policies shows that the relevance of the bounds for changing the interpretation of the results depends very much on the particular data configuration. Download Discussion Paper: (pdf, 264 kb)

This paper advocates the use a nonparametric bound analysis to check the robustness of the results of applied evaluation studies to the problem of a lack of common support. The typical responses by researchers of either ignoring it, or obtaining estimates only for the subpopulation within the common support, can both be misleading: Ignoring the problem may result in biases because the comparison group may not be comparable. Deleting observations at best yields an estimator that is consistent for the common support. When treatment effects are hetereogenous inside and outside the common support this estimator is inconsistent. Furthermore, useful information is ignored, because the response of the treated to the treatment can be estimated even outside the common support. This information can be used to derive bounds with width depending on the configuration of the data. The application to an evaluation study of Swiss active labour market policies shows that the relevance of the bounds for changing the interpretation of the results depends very much on the particular data configuration.

This article compares the inverse-probability-of-selection-weighting estimation principle with the matching principle and derives conditions for weighting and matching to identify the same and the true distribution, respectively. This comparison improves the understanding of the relation of these estimation principles and allows constructing new estimators.

This paper compares the inverse-probability-of-selection-weighting estimation principle with the matching principle and derives conditions for weighting and matching to identify the same and the true distribution, respectively. This comparison improves the understanding of the relation of these estimation principles and allows constructing new estimators.

This paper approaches the problem of an econometric evaluation of dynamic programme sequences from an potential outcome perspective. The identifying power of several different assumptions about the connection between the dynamic selection process and the potential outcomes of different programme sequences is discussed. The assumptions invoke different types of randomisation compatible with different selection regimes. Parametric forms are not involved. When participation in the sequences is decided every period depending on the success in the past, the resulting endogeneity problem destroys nonparametric identification for many parameters of interest, so that several dynamic versions of the average treatment effects on the treated parameter are not identified. However, some interesting dynamic forms of the average treatment effect are still identified. We also present a bounds analysis to learn from the data as much as possible, even when parts of the identifying assumptions are violated.

This article uses regime-switching models of the threshold type to analyze the adjustment process of rental prices for three U.K. commercial real estate sectors over the period 1974-2008. The nonlinear models outperform their linear counterparts in in-sample fit. Their out-of-sample forecasting ability is better whenever the corresponding linear models contain a significant amount of neglected nonlinearity. Regime switches are triggered when the growth rates of rental price exceed certain threshold levels. For the industrial and retail sectors such regime switches occur in situations of strong excess demand, for the office sector they occur when there is strong excess supply.