Band 7, Heft 2

This paper analyzes the dynamics of the youth labor market in Tunisia using unique labor force survey data from 2005 to 2007 that include a longitudinal component. We show that sustained economic growth can reduce the youth unemployment rate by 15 percentage points over the next few years. Tourism is the sector with the highest potential to create jobs for the youth. Yet, the public sector remains the main provider of employment for the graduates, in particular for women. In the face of high turnover in the private sector, young graduates appear to be willing to experience long unemployment spells as they queue for high skill jobs in the public administration.

There is general agreement that skill-enhancing school reforms in the Middle East and North Africa (MENA) region are necessary for economic, political and social reasons. Using student-level data from Jordan and Tunisia, this study assesses the relationship between skills and the following school incentive and accountability measures: pedagogical autonomy, school competition, freedom to hire and fire teachers, publicly posting data, and parent involvement in school affairs. Quantile regression analyses of mathematics, science, and reading skills of 15-year-old students suggest that students in schools with incentive and accountability measures do not have higher skills than students in school without the measures; this suggests that schools with incentive and accountability measures are no more efficient than other schools that have not adopted the measures. In terms of equity, the reforms are not associated with higher skills for the less skilled; a notable exception is parent involvement in Tunisia, which is associated with higher science and reading skills among low-skilled students. The main policy implication is that school incentive- and accountability-based reform should not be pursued until researchers have identified the effective design properties of each incentive and accountability measure.

An operational hedging technique is proposed to shift some of the foreign exchange risk from the importer to the exporter when the currency of invoicing is the base currency of the exporter. This technique, which may be resorted to when financial hedging is not feasible or expensive, requires an arrangement for the conversion of cash flows at a range of exchange rates calculated as some weighted average of the rates used under a risk sharing arrangement and a currency collar. The problem of negotiating the dimensions of the arrangement when the exporter and importer have different degrees of risk tolerance can be resolved by fine tuning the weights in such a way as to eliminate the sensitivity of the base currency value of the cash flow to the value of the risk sharing threshold parameter. The theory is subsequently illustrated by using monthly observations on the exchange rate between the Kuwaiti dinar and the British pound.

Using a large dataset of ownership concentration from the MENA region during the period between 2004 and 2008, we document that ownership concentration does not have a significant impact on firm performance. It is, rather, the way concentrated firms govern themselves that determine their performance. We argue that concentrated ownership firms, being aware of the agency problems embedded in their ownership structure, appoint one of the big-four auditors as their external auditor to signal to the market that they are disclosing reliable information. Our results also show a significantly positive relationship between ownership concentration and the choice of auditor. We further show that for a given level of ownership concentration, appointing one of the big-four auditors leads to superior firm performance.

The arbitrage pricing theory and the intertemporal capital asset pricing model do not identify the risk factors that drive expected stock returns. Two approaches have emerged from the literature to fill the gap: macroeconomic models and fundamental models. A common view is that macroeconomic models have sounder economic rationale than fundamental models, but the latter fit the data better than the former. However, many papers in the U.S. have recently shown that even in empirical work, macroeconomic models perform better than fundamental models. This paper addresses this issue in the Tunisian stock market. We found no evidence that fundamental models explain average returns better than macroeconomic models in Tunisia. On the contrary, a macroeconomic model that contains as factors the term structure, private bank lending and retail sales generate the best empirical results. The empirical evidence here and in the U.S. implies that the common practice of using exclusively fundamental models in many areas of financial research is inappropriate. Macroeconomic models should be considered in the empirical asset pricing literature in addition to, or instead of, fundamental models.