Employees outside company headquarters face greater risk of layoffs
Local community in a firm’s headquarters might not care much about layoffs in distant regions
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Employees working outside a firm’s headquarters could be more vulnerable to layoffs, shows a recent research paper by Andrea Bassanini, an economist with the OECD, and others. Analysing the behaviour of firms in France, they contend that firms are often sensitive to social pressure in the local environment where their headquarters are located. The responsiveness of firms also depends on the “selfishness” of local communities which might not care much about job-losses in other areas. Selfishness is measured using the share of charitable spending in the GDP of city/region with the firm’s headquarters. The authors conclude that there remains scope for further research on the topic, especially focusing on the behaviour of multi-national firms to test whether they tend to dismiss personnel more frequently in countries which are not their main areas of operation.
Surge pricing might have made it easier to find a cab on a rainy day. A working paper by Abel Brodeur and Kerry Nield, economists at the University of Ottawa and the Bank of Canada, has established these results on the basis of analysis of non-Uber and Uber cab rides in New York City between 2014 and 2016. The authors find that while Uber rides saw an increase of around 18% during rains, the figure was just 5% for normal cabs. Given the fact that demand for cabs would increase during rains, drivers would have made extra earnings by increasing supply. The difference in supply response is due to the fact that surge in Uber fares compensates drivers to work in adverse weather while non-Uber drivers did not stand to gain anything above their normal fares.
Insurgents in Afghanistan, i.e. the Taliban and other similar groups have shown remarkable ability to continuously learn and adapt from the tactics of the US-led coalition. For example, during the counter-insurgency operations in Afghanistan between 2006 and 2014, metal detectors were deployed in large numbers to detect improvised explosive devices (IEDs). The Taliban’s response was to develop IEDs that had little or no metal content. Consequently, the IEDs were just as likely to explode in 2014 as they were in 2006, concludes a recent research paper by Francesco Trebbi, professor at the University of British Columbia, and others. The paper argues that the situation in Afghanistan was akin to an “investment-based learning game over multiple periods” between the government and the insurgents. Given this experience, the authors argue that an effective counter-terrorism strategy must focus on community engagement and development-aid in addition to security-related methods.
Also Read: Insurgent Learning
India’s middle class doubled in size between 2004-05 and 2011-12, according to a recent study by Sandhya Krishnan, researcher at the Amsterdam Institute for Social Science Research, and Neeraj Hatekar, professor of economics at the University of Mumbai. The middle class is defined as those spending between $2 and $10 per day. The analysis is based on National Sample Survey Office (NSSO) data. The paper classifies the middle class into three categories—lower, middle and upper—with upper limits of daily expenditure being $4, $6 and $10, respectively. The paper also shows that the composition of India’s new middle class has become more egalitarian with a big increase in the share of lower middle class population among socio-economically backward groups such as scheduled castes and Muslims between 2005-04 and 2011-12.
Banco Popular, the fifth largest bank in Spain, was acquired by its bigger rival Banco Santander for a mere 1 Euro, as persistent non-performing assets with no resolution in sight led to complete wiping out of Banco Popular’s equity. The European Central Bank (ECB) forced the takeover, resulting in the first use of Europe’s newly adopted “bail-in” mechanism, in which equity holders (and holders of subordinated debt) bear the brunt of a bank’s failure rather than using taxpayers’ money to prop up the bank. It would be interesting to see whether this mechanism is able to address Europe’s banking woes. Given the fact that India’s public sector banks are owned by the government (with tax-payers’ money), this mechanism may not work in India.
Economics Digest runs weekly, and features interesting reads from the world of economics.