Please only answer the first question!

The OECD is a club of the most advanced economic nations in the world – based on living standards and per capita income more than absolute size. Newer members include Turkey, Mexico and Hungary. China and India are not yet members despite their vast populations. Currently the OECD has 32 members.

The 2009 OECD Employment Outlook discusses prospects for unemployment and possible policy responses. The evolution of unemployment depends on (a) the size of the shock, (b) the flexibility of the economy to respond and (c) the extent of support by government. In the worst previous postwar recession of 1973-76, OECD unemployment increased by half. By 2009, the OECD reckoned that unemployment would rise by 80 per cent - from 5.5 per cent to 10 per cent of the labour force - during 2007-10.

This analysis reflected the magnitude of the initial shock. Clearly, this would affect different countries differently. One way in which to assess which economies were most vulnerable is to estimate their capacity to absorb shocks through flexible labour markets that match potential workers and job opportunities more quickly. This is likely to depend on wage flexibility, labour market mobility, attitudes of trade unions and the extent of labour market regulation.

The figure below shows a measure of labour market flexibility based on labour market history during 2000-05. It plots the annual fraction of workers hired to new jobs or leaving existing jobs (by choice or dismissal) during the year. It shows that in Turkey, Denmark and the United States, half of all workers are changing jobs annually. In contrast, the countries with the lowest labour market mobility are Greece, Italy and Austria.

Annual fraction of workers hired or fired, 2000-05 (%)


Source : OECD Employment Outlook, 2009  
Econ 1110 Section D Case # 1 Winter 2018 3

Countries with greater job stability are probably slower to experience initial unemployment but, when unemployment does increase, they are also less successful at helping people out of unemployment back into work. Since there is considerable cross-country evidence that those in longer-term unemployment find it ever more difficult to reconnect with the labour market, in the medium run this fiscal burden of unemployment benefits is likely to be greater in countries with less flexible labour markets.

Governments provide two kinds of support. The first is measurable by the generosity of unemployment benefit, which has two dimensions – the replacement rate (the ratio of benefit to previous wages in work) and the number of years for which benefit is available. The table below documents considerable differences across countries.

In Norway and Belgium, with strong traditions of social democracy, unemployment benefit is generous both because it is high relative to wages in work and because it continues for at least 5 years after a spell of unemployment begins. French unemployment benefit is initially as generous but less so after year 2. The UK is considerably less generous in replacement rate, but entitlement continues undiminished over the 5 year period. In countries such as Japan, Greece and the USA, unemployment benefit is almost worthless after the first year in unemployment.

Duration of unemployment Year 1 Year 2 Year 5   Replacement rate (%) Norway 72 72 72 Belgium 65 63 63 France 67 64 31 UK 28 28 28 Japan 45 3 3 Greece 33 5 1 USA 28 0 0 Source: OECD Employment Outlook, 2009

The second aspect of state support for the unemployed are active labour market policies that enhance incentives, confidence and the ability of the unemployed to look for jobs. Even if the post-crash recession reflected a sharp fall in demand – for output and then for labour – it is important not to neglect supply-side policies that maintain the maximum labour market flexibility.

With the benefit of hindsight, the most puzzling features of the labour market since the financial crash have been (a) the relatively small increase in unemployment and (b) the disappointing performance of labour productivity. For example, UK unemployment was still only 8 per cent in late 2012. The US has also avoided double-digit unemployment and appeared to have resumed steady if modest output growth. Two explanations consistent with facts (a) and (b) are that (i) firms engaged in more labour hoarding in recession than in previous cyclical recessions, and (ii) that many workers who would otherwise have become unemployed took up part-time working or self-employment. The rise of the Internet allowed many people to embark on small businesses in the service sector.

Econ 1110 Section D Case # 1 Winter 2018 4

With long-term demographic trends also implying that pension schemes would face greater and greater financial strains, and with governments removing subsidies to pension contributions in an effort to retain fiscal solvency, it is also possible that some older workers simply retired while the going was good, rather than face a period of unemployment when rehiring of older workers was likely to be a tough prospect.


Questions on case study 23.2

1. The case study highlights the difference between two types of unemployment, namely frictional and structural unemployment. Explain these two types with examples from the case study.

2. With reference to the case study, explain how higher labour market flexibility can be less costly to both the unemployed and the economy.

3. Unemployment tends to fall during economic booms and rise in periods of economic recession. This type of unemployment is known as cyclical or demand-deficient unemployment. Explain what supply–side policies are and how they can be implemented to reduce unemployment.

Case 4.21 Arthur Anderson: a Fallen Giant

1. With regard to the destruction of the documents, was there a difference between what was legally obstruction of justice and what was ethical in terms of understanding what was happening at Enron? When the U.S. Supreme Court reversed the Andersen decision, the Wall Street Journal noted that the Andersen case was a bad legal case and a poor prosecutorial decision on the part of the Bush administration. Why do you think the prosecutors took the case forward? What changes under SOX would make the case easier to pursue today?

2. David Duncan was active in his church, a father of three young daughters, and a respected alumnus of Texas A&M. Mr. Duncan’s pastor talked with the New York Times following Enron’s collapse and Duncan’s indictment, and discussed with the reporter what a truly decent human being Duncan was. What can we learn about the nature of   those who commit these missteps? What can you add to your credo as a result of Duncan’s experience? Was the multimillion-dollar compensation he received a factor in his decision-making processes? Can you develop a decision tree on Duncan’s thought processes from the time of the first SPE until the shredding? Using the models you learned in Units 1 and 2, what can you see that he missed in his analysis?

3. In 2000, a full two years before WorldCom’s collapse, Steven Brabbs, WorldCom’s director of international finance and control, who was based in London, raised objections when he discovered after he had completed his division’s books for the year that $33.6 million in line costs had been dropped from his books through a journal entry. He was told that the changes were made pursuant to orders from CFO Scott Sullivan. He next suggested that the treatment be cleared with Arthur Andersen. When there was no response to his suggestion that the external auditor be consulted, Mr. Brabbs again raised his bjections in a meeting with internal financial executives a few months later. Following the meeting, Mr. Brabbs was chastised by WorldCom’s controller for raising the issue again. The following quarter, Mr. Brabbs received orders from WorldCom headquarters to make another similar change, but to do so at his level rather than having it done from corporate headquarters via journal entry. Unwilling to have the entries generate from his division, he created another entity and transferred the costs to it. He voiced his concerns again and was told that there was no choice because the accounting was a“Scott Sullivan directive.” Mr. Brabbs also had a meeting with Arthur Andersen auditors to discuss his concerns. Following the meeting he received e-mail from WorldCom’s controller, David Myers, which directed that Mr. Brabbs was“not [to] have any more meetings with AA for any reason.” When WorldCom’s internal audit staff began to raise questions about the reserves and the capitalization of ordinary expenses, they were prohibited from doing further work and, for the most part, worked nights and weekends to untangle the accounting nightmare they had first discovered with a simple question about receipts for some   capitalized expenses. CFO Scott Sullivan asked the audit staff to wait at least another quarter before continuing with their investigation. Andersen auditors reported any internal audit inquiries to Sullivan and did not follow through on questions and concerns raised. What controls were missing? Why the reporting lines to Sullivan?

4. One of the tragic ironies to emerge from the collapse of Arthur Andersen, following its audit work for Sunbeam, WorldCom, and Enron, was that it had survived the 1980s savings-and-loan scandals unscathed. In Final Accounting: Ambition, Greed and the Fall of Arthur Andersen, the following poignant description appears: “The savings and-loan crisis, when it came, ensnared almost every one of the Big 8. But Arthur Andersen skated away virtually clean, because it had made the decision, years earlier[,] to resign all of its clients in the industry. S&Ls for years had taken advantage of a loophole that allowed them to boost earnings by recording the value of deferred taxes. Arthur Andersen accountants thought the rule was misleading and tried to convince their clients to change their accounting. When they refused, Andersen did what it felt it had to: It resigned all of its accounts rather than stand behind accounting that it felt to be wrong.” What takes a company from the gold standard to indictment and conviction?  

Related samples t-test:

Test whether semester GPA significantly changes during a semester abroad program. Use a related (dependent) samples t-test and alpha = .05 with a nondirectional test. The data are presented below.

Answer the following questions. You can use SPSS, but if you do this problem “by hand” be sure to show your work.

1.       What are the null & alternative hypotheses?
2.       What are the degrees of freedom?
3.       What is the critical value of t?
4.       What is the observed value of t?
5.       What is your decision about the null hypothesis/why?
6.        If appropriate, calculate Cohen’s d and report its value.
7.       Write the t statistic using appropriate APA style.
8.       How would you interpret your findings?    

          Before program                             During program

                   2.94                                        3.03

                   2.22                                        1.79

                   3.12                                        3.13

                   1.99                                        2.97

                   3.43                                        3.75

                   3.08                                        3.11

                   2.81                                        2.98

                   3.72                                        3.92

                   2.18                                         2.03

                   3.60                                        3.52

Name: Date: Exp 1: Observations of Chemical Changes Lab Section: Data Tables: Part 1: Chemicals Well No. Observations of the Reaction A. NaHCO3 + HCl B. HCl + BTB C. NH3 + BTB D. HCl + blue dye E. Blue dye + NaOCl with the 1 drop of HCl F. NaOCl + KI with 1 drop of starch G. KI + Pb(NO3)2 H. NaOH + phenolphthalein I. HCl + phenolphthalein J. NaOH + AgNO3 K. AgNO3 + NH3 after exposure to bright light L. NH3 and CuSO4 Part F: Testing of Various Foods with the NaOCl + KI solution Foods Presence or Absence of Starch Part 2: Household Chemicals with Bromthymol Blue Use the empty pipet in the Auxiliary Supplies Bag to test several (at least 3) household items including household cleaning products with bromothymol blue. Rinse the pipet well before using it on the next household chemical. When finished with this experiment rinse the pipet well and return it to the Auxiliary Bag for use in future experiments. Name the items tested and record their results. Household Chemicals Well No. Observations of the Reaction Conclusion: Questions and Problems: A. Suppose a household product label says it contains sodium hydrogen carbonate (sodium bicarbonate, NaHCO3). How would you test this material for the presence of sodium bicarbonate? B. Looking at the household chemicals you tested with bromthymol blue, what can you deduce from the test results for each of the household chemicals? C. You found a sample of a solution that you think might be vinegar which is acidic. You are verifying that it is indeed vinegar and you add a few drops of phenolphthalein. The sample turns pink. What does that tell you about this sample? D. You suspect dissolved silver ions in a solution. How would you test this solution to confirm the p