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This chapter argues that because of important cross-national differences in domestic political and economic institutions, the severity of Rodrik's globalization dilemma varies across countries. In particular, the degree to which globalization increases demands for protection depends on how, and the extent to which, shocks in international commercial markets are transmitted to domestic labor markets. The chapter is organized as follows. The first section discusses some of the new challenges to corporatism and how corporatist institutions have evolved in response to them. The second section theoretically examines how trade affects labor market volatility in both competitive and corporatist systems—a topic that gets relatively little attention in the literature. It then turns to the empirical relationships between trade, employment, and labor market volatility. The final section reviews the broader literature on the comparative economic performance of national labor markets throughout the OECD, focusing primarily on the issue of wage inequality.

This chapter examines the cross-sectional relationship between stock market returns and volatility and a host of macroeconomic fundamentals. The exploration is motivated by financial economic theory, which suggests that the volatility of real activity should be related to stock market volatility. In addition, and crucially, the empirical approach exploits cross-sectional variation in fundamental and stock market volatilities, to uncover links that would likely be lost in a pure time series analysis.

This chapter develops a regime-switching modeling framework and applies it to 30-year-long firm-level data in order to address three main questions: whether global stock return volatility displays well-defined volatility regimes; the extent to which equity market volatility is accounted for by global, country- or sector-specific factors; and what implication this has for national equity market correlations and international risk diversification. The chapter is organized as follows. Section 1 lays out the econometric methodology, whereas Section 2 discusses the data. Section 3 provides the empirical characterization of the single and joint dynamics of country and industry portfolios, and of the global factor. Section 4 presents variance decomposition results on the relative contribution of each factor to overall stock return volatility. Section 5 provides an economic interpretation of our model characterization of the volatility states, linking it to the existing literature on the determinants of stock market volatility. Section 6 examines the within-state portfolio correlations and examines the respective implications for global risk diversification. Section 7 concludes.

Simple models of a population of heterogeneous agents (traders) open the way to next-generation finance. These models offer something significant in return to the scientific community: they are generic models of a complex system. This chapter discusses such models. It analyzes a minimal market model in order to address the question concerning the origins of market volatility. It focuses on the most basic model available, which reflects at least some major aspects of financial trading and yet also reproduces the stylized facts observed in real financial market data. In particular, it investigates the direct application of the El Farol bar problem to a financial market.

This chapter, which examines the feedback between market volatility and traders' perception of risk, spells out the precise mechanism through which endogenous risk manifests itself, and suggests ways of mitigating it. It considers a variety of markets, explaining the implied volatility skew for options, the procyclical impact of Basel II bank capital requirements, and the optimal design for derivatives clearing and lenders of last resort. Two commentaries are also included at the end of the chapter.

This chapter analyzes the relationship between corporate irresponsibility and traditional stockholders, and discusses a study which reports that there are approximately 50,000 people engaged in day trading every single day. These investors have a profound effect on stock prices and market volatility, trade solely on rumor and volume, and care nothing for, and know nothing about, the corporations in which they invest. The chapter discusses the idea that modern finance theory supports the thinking of day traders, at least to some degree. The theory holds that corporate stock is nothing other than a measure of its risk in relation to that of other stock, and that the way to handle this risk is to develop a diversified portfolio of securities. The chapter also analyzes the role of the equity markets in detail.

Bostonians were anxious about social disorder prevalent in their city and thought the city's accomplishments and beauties were being exaggerated. To curb that, they enforced statutes that curtailed activities potentially rich in group enactments of emotion, such as preaching on the Common. The character of the revival as an occasion for carefully regulated public expression of emotion emerged out of Bostonians' experiences in several overlapping spheres of urban life where the issue of excitement and its regulation was conspicuous. As the economy collapsed in 1857, the Bostinians agreed that the economy had been overexcited and insufficiently regulated. The history of market volatility in the nineteenth century informed their attention to trading and investment. The crash disordered people's lives in its effect on the availability of food, shelter, and clothing. With the collapse of credit, very little money was in circulation, and consequently, there was very little commerce. The social role of the businessman was a most difficult performance as they were expected to excite the economy through investment and trade, through speculation on markets futures, and through the assumption of risk.

This chapter discusses Bermuda's maritime economy as it settled into established trades and maritime activities. The island developed distinctive characteristics that set it apart within the larger British Atlantic world, on which it now almost entirely depended. Bermudians pursued a diverse array of maritime enterprises to better exploit Atlantic opportunities and cope with frequent imperial wars, piracy, rapid regional economic expansion, and market volatility. By connecting Anglo-American regions with each other and making their island an intelligence center, Bermudian tramp traders in small, fast sloops served larger imperial goals as they pursued profit for their own ends. The chapter examines how Bermuda's shipping and shipbuilding served to integrate British American shipping and commerce as a whole, and how the island became an important but almost invisible central hub of intercolonial commerce and communication.