Risk Aversion

The implementation of e-government is a burgeoning phenomenon across the globe. It improves and enhances the infrastructures and services provided to the citizens. However, a review of the IS literature reveals that research on the implementation of e-government is rather limited, which could be due to the general misconception of the public sectors as rigid and risk-averse establishments. The shortage of studies on e-government's implementation presents a knowledge gap that needs to be plugged. This gap is significantly amplified by the increasing number of e-government initiatives being implemented by governments in recent years. This paper describes and analyzes South Korea's Supreme Court Registry Office, which has implemented e-government. The case study discusses practical implications and suggests future research areas. Findings of the study include the alignment of technology and business processes, integration of resources into core business activities, integrating stakeholders' trust and commitment, and better understanding of the role of organizational learning, which can enhance the adoption and institutionalization of e-government initiatives.

This paper focuses on the effects of nonbinding recommendations on bargaining outcomes. Recommendations are theorized to have two effects: they can create a focal point for final bargaining positions, and they can decrease outcome uncertainty should dispute persist. While the focal point effect may help lower dispute rates, the uncertainty reduction effect is predicted to do the opposite for risk-averse bargainers. Which of these effects dominates is of critical importance in the optimal design of alternative dispute resolution (ADR) procedures, which are becoming increasingly utilized to help resolve disputes in a variety of settings. We theoretically examine the effects of recommendations on the bargaining contract zone. Our theoretical framework, which allows bargainers ’ final positions to influence a binding outcome should negotiations fail, provides for a more stringent test of focal points than previously considered. We also present data from controlled laboratory bargaining ...

We survey over 100 financial planners to assess their reasoning mode, intertemporal choices, risk aversion and preferences, and framing focus. Using the Cognitive Reflection Test, we find that financial planners are more analytical than the general population. ...

This paper provides a formalization of managerial herd behavior that is based on the principle of safety in numbers. The explanation is completely independent of the information signalling approach to herd behavior (Scharfstein and Stein, 1990, Banerjee, 1992), and fully captures popular explanations of the phenomenon. The key assumptions are that managers are individually risk averse, and that their remuneration be partly based on relative performance. JEL classification: DO; L2 Keywords: Herd behavior 0167-2681/95/$09.50 0 1995 Elsevier Science B.V. All rights reserved SSDI 0167-2681(95)

Empirically, co-skewness of asset returns seems to explain a substantial part of the cross-sectional variation of mean return not explained by beta. This finding is typically interpreted in terms of a risk averse representative investor with a cubic utility function. This paper questions this interpretation. We show that the empirical tests fail to impose risk aversion and the implied utility function takes an inverse S-shape. Unfortunately, the first-order conditions are not sufficient to guarantee that the market portfolio is the global maximum for this utility function, and our results suggest that the market portfolio is more likely to represent the global minimum. In addition, if we do impose risk aversion, then co-skewness has minimal explanatory power.

For cost-benefit analysis, health technologies with multiple effects should be valued in a single scenario by a holistic willingness-to-pay (WTP) measure. Recent studies instead used decomposed scenarios in which respondents report their WTP for each individual effect. Evidence can be found that the sum of such decomposed WTPs overestimates the holistic WTP, i.e. the holistic WTP is sub-additive. This sum of decomposed WTPs can lead to wrong conclusions on the efficiency of health technologies. This is also relevant in decision making about new technologies that are valued separately in different surveys. To date, no utility-theoretical and empirically validated aggregation function for decomposed WTPs exists. Within an expected utility model, this paper identifies as a reason for subadditivity-beside risk aversion with respect to wealth-a negative influence of better health on the marginal utility of wealth, i.e. marginal utility of wealth is smaller in better health states. Assuming mutual utility independence of health and wealth, a theoretically founded aggregation function covering these two impacts is derived. In a contingent valuation study, 92 patients with diabetes were asked to state their WTP for reductions of the risk of several diabetic complications in decomposed as well as in holistic scenarios. The patients had preferences with a significant negative influence of health on the marginal utility of wealth. Sub-additivity occurred and theoretically founded aggregation could considerably lower the degree of overestimation. These results suggest that the theoretically founded aggregation function might reduce problems of sub-additivity that can be economically relevant. Further empirical testing of the approach is indicated.

This study investigated the relationship between aversive conditioning, heart rate variability suppression, behavioral activation system/behavioral inhibition system and risk-avoidance on the Iowa gambling task (IGT) in a nonclinical sample (29 male, 29 female, mean age = 20.7). A laboratory based Pavlovian aversive conditioning paradigm was used where a 1500 Hz tone (CS?) was followed by a burst of loud white noise (US), and a 850 Hz (CS-) tone was never followed by the US. In a subsequent extinction phase where the CS? and CS-were presented without the US, conditioned skin conductance responses to the CS? indicated aversive conditioning. The results showed that the participants who did not show aversive conditioning (N = 26) exhibited significantly less risk-avoidance compared to participants who did show aversive conditioning (N = 32). Regression analysis showed that among the study variables, only aversive conditioning contributed significantly to explaining variance in risk-avoidance. These results may have implications for understanding risk-taking in gambling in general, and may be a starting point understanding the role of aversive conditioning in the development and maintenance of gambling problems.

We conducted field experiments to investigate how wealth, political history, occupation, and other demographic variables (from a comprehensive earlier household survey) are correlated with risk, time discounting and trust in Vietnam. Our experiments suggest risk and time preferences depend on the stage of economic development. In wealthier villages, people are less loss-averse and more patient. Our research also shows people who participate in ROSCAs (rotating credit associations) are more patient than non-participant, but those who participate in bidding ROSCAs are less patient and more risk averse than those who participate in fixed ROSCAs. Results from a trust game demonstrate both positive and negative effects of communism. Villagers in the South tend to invest more in low-income partners without expecting repayment. On the other hand, people in the north are more trustworthy but do not pass on more money to the poor. Our findings also suggest market activities, like starting a small trade business, are correlated with trust and trustworthiness. We also contribute to experimental methodology by using choices that separate different aspects of risk aversion and time preferences in behavioral economics specifications.

This paper develops an economic model that captures consumer shopping channel choices based on shopping channel characteristics and consumer risk profiles-risk-neutral or risk-averse. Analyses of results show that after making purchases through one channel, electronic or traditional, risk-averse consumers tend to be more loyal customers than risk-neutral consumers. Further, the two types of consumers may exhibit split channel behavior-risk-neutral consumers prefer one channel and risk-averse consumers prefer the other. However, risk-neutral consumers are not always more likely to prefer electronic channel than risk-averse consumers. Implications for retailer pricing strategies are discussed. D

This paper considers whether countries might mutually agree a policy of open borders, allowing free movement of workers across countries. For the countries to agree, the short run costs must outweighed by the long term benefits that result from better labor market flexibility and income smoothing. We show that such policies are less likely to be adopted when workers are less risk averse workers and when countries trade more. More surprisingly, we find that some congestion costs can help. This reverses the conventional wisdom that congestion costs tend to inhibit free migration policies.

This paper studies the impact of ambiguity and ambiguity aversion on equilibrium asset prices and portfolio holdings in competitive financial markets. It argues that attitudes toward ambiguity are heterogeneous across the population, just as attitudes toward risk are heterogeneous across the population, but that heterogeneity of attitudes toward ambiguity has different implications than heterogeneity of attitudes toward risk. In particular, when some state probabilities are not known, agents who are sufficiently ambiguity averse find open sets of prices for which they refuse to hold an ambiguous portfolio. This suggests a different cross-section of portfolio choices, a wider range of state price/probability ratios and different rankings of state price/probability ratios than would be predicted if state probabilities were known. Experiments confirm all of these suggestions. Our findings contradict the claim that investors who have cognitive biases do not affect prices because they are infra-marginal: ambiguity averse investors have an indirect effect on prices because they change the per-capita amount of risk that is to be shared among the marginal investors. Our experimental data also suggest a positive correlation between risk aversion and ambiguity aversion that might explain the "value effect" in historical data.

This paper shows that supervision with soft information is valuable whenever supervisors and supervisees collude under asymmetric information and proceeds then to derive an Equivalence Principle between organizational forms of supervisory and productive activities. We consider an organization with an agent privately informed on his productivity and a risk averse supervisor getting signals on the agent's type. In a centralized organization, the principal can communicate and contract with both the supervisor and the agent. However, these two agents can collude against the principal. In a decentralized organization, the principal only communicates and contracts with the supervisor who in turn sub-contracts with the agent. We show that the two organizations achieve the same outcome. We discuss this equivalence and provide various comparative statics results to assess the efficiency of supervisory structures.

We postulate that the growing participation of institutional investors in capital markets along with their particular o~jective function might help to explain the home equity bias puzzle. We model an institutional investor as a risk averse investor that has access to international financial marckets and tries to maximize expected utility resulting from the difference between final wealth and an exogenously given index formed exlusively by domestic securities (the benchmark index); we show that for some values of the covariances and betas, this objective will induce a home bias. We study the effects of this optimal strategy on a simple one-period equilibrium and obtain a multibeta CAPM; as a novelty, one of the betas is refered to the excess return of the benchmark index. We test this model using data from six countries and we show that the index helps to explain the excess return of domestic securites. This effect is obvious when we compare a recent subperiod (when institutional investors have a larger weight in capital markets) with a previous subperiod .

This comparison of Israeli kibbutz members to city residents examines how of individualistic/collective society affects financial decision making. Findings revealed that kibbutz members are more risk averse and discount the future more than city residents, undermining the assumption that collective society accords a safety net. We claim that the collective financial management of the kibbutz reduces individuals’ financial knowledge and

The objective of this paper is to develop conditions for global multivariate comparative risk aversion in the presence of uninsurable, or background, risks, and thus generalize Kihlstrom and Mirman [1974] and Karni [1979,1989]. We analyze von Neumann-Morgenstern (VNM) utility functions as well as smooth preference functionals which are nonlinear in distribution but locally linear in probabilities. In each case we provide an economic application which illustrates how our theorems can be used. We analyze a risk sharing, a portfolio choice, and a labor supply problem for VNM utility functions, and the optimal allocation of effort to risky technologies in the presence of a random supply (or quality) of a public good for nonlinear preference functionals. We consider the case where the random variables are mean-independent as well as the case where they are independent. In the labor supply application for VNM utility functions, we show that if the two risks are independent, the comparative statics effect of greater risk aversion on labor supply in the presence of a background non-wage income risk is determined by a monotonic relationship between labor supply and the wage rate under certainty. That is, we extend the applicability of the Diamond-Stiglitz [1974]-Kihlstrom-Mirman [1974] single-crossing property to the case where an independent background risk is present.

This paper examines the moderating role of negative affectivity and risk aversion in the relationships of two bases of continuance organizational commitment (continuancesacrifices and continuance-alternatives) to turnover, within a stress-coping perspective. More specifically, we propose that (a) the perspective of leaving is a source of stress for those who stay due to the fear of losing valued advantages (i.e. high continuancesacrifices commitment) and (b) staying is perceived to be stressful by individuals who remain based on a lack of employment alternatives (i.e. high continuance-alternatives commitment). We argue that these perceptions are magnified by negative affectivity and risk aversion, resulting in individuals who present these traits to use avoidancewithdrawal strategies in coping with these situations. Accordingly, based on a sample of 509 human resource management professionals, we found (a) negative affectivity and risk aversion to strengthen the negative relationship of continuance-sacrifices commitment to turnover and (b) continuance-alternatives commitment to relate positively to turnover among individuals with high negative affectivity. We discuss the implications of these findings for our understanding of how commitment mindsets and personality traits affect turnover decisions.

In a departure from the organizational development literature, this study hypothesized that managerial responses to organizational change are influenced by 7 dispositional traits (locus of control, generalized self-efficacy, self-esteem, positive affectivity, openness to experience, tolerance for ambiguity, and risk aversion). Data were collected from 6 organizations (N = 514) to test the hypotheses. The 7 traits were reduced to 2 factors: Positive Self-Concept and Risk Tolerance. Both of these trait factors significantly predicted self-reports and independent assessments of coping with change. Results also indicated that coping with organizational change was related to extrinsic (salary, job level, plateauing, job performance) and intrinsic (organizational commitment, job satisfaction) career outcomes and that coping mediated roughly half of the relationships between the dispositional factors and these career outcomes. In a recent review of the literature, Quinn, Kahn, and Mandl (1994) noted that research in the field of organizational change and development has evolved from four major paradigms: organizational development, strategic choice, resource dependence-institutional theory, and population ecology. That all four of these paradigms consider change at the organizational level is a telling depiction of the organizational change literature. Research dealing with organizational change has been largely dominated by a macro, systems-oriented focus. Some researchers have called for a more micro, person-oriented focus pertaining to issues important in change (Bray, 1994), yet micro-level research on organizational change remains limited. Studies of individual behavior in relation to organizational change typically have

Using a mechanism design approach, we derive endogenously the optimal IPO mechanism when institutional investors are risk averse. We show that the optimal allocation rule is such that all the institutional investors with sufficiently good information are allocated a positive quantity of shares which is increasing in the quality of the their information. Additionally, we also derive the optimal rationing scheme which is uniform, i.e. all institutional investors are rationed by the same amount of shares [JEL Classification: D8, G2].

We systematically explore decision situations in which a decision maker bears responsibility for somebody else's outcomes as well as for her own in situations of payoff equality. In the gain domain we confirm the intuition that being responsible for somebody else's payoffs increases risk aversion. This is however not attributable to a 'cautious shift' as often thought. Indeed, looking at risk attitudes in the loss domain, we find an increase in risk seeking under responsibility. This raises issues about the nature of various decision biases under risk, and to what extent changed behavior under responsibility may depend on a social norm of caution in situations of responsibility versus naive corrections from perceived biases. To further explore this issue, we designed a second experiment to explore risk-taking behavior for gain prospects offering very small or very large probabilities of winning. For large probabilities, we find increased risk aversion, thus confi...

Subjects in a laboratory experiment completed the Zuckerman Sensation-Seeking Scale (SSS) then chose among five alternative gambles with substantial financial stakes. The gambles differed in expected return and variance. Gambles were presented in one of two different frames in a betweensubjects design. In one, subjects were paid a fixed sum for completing the survey and that sum was then at risk in the subsequent gamble choices. In the other, all payoff amounts for the gambles were nonnegative. Subjects were paid according to their choices and the outcomes of the gambles. We tested for sex differences in this choice task and found women to be consistently more risk averse, on average, than men. We observed no difference across frames. Subjects were then asked to guess the gamble choices of each of the other participants and were rewarded for each correct answer. Subjects of both sexes did substantially better than chance in guessing the particular choices of individuals of both sexes, but both men and women overestimated the risk aversion of others, especially that of women, and most strongly of all with respect to men's predictions of women's choices. Possible realworld implications of biased assumptions about women's risk attitudes are discussed. D 1090-5138/02/$ -see front matter D 2002 Elsevier Science Inc. All rights reserved. PII: S 1 0 9 0 -5 1 3 8 ( 0 2 ) 0 0 0 9 7 -1

This paper examines several aspects of the debate about the causes of the U.S. current account deficit in the 1980's. It surveys several popular explanations before developing two theoreticsl models of international capital flows. The first model is Ricardian, and it extends the analysis of Stockman and Svensson The second model is an overlapping generations framework.

The ultimate point of origin of the great financial crisis of 2007-2009 can be traced back to an extremely indebted US economy. The collapse of the real estate market in 2006 was the close point of origin of the crisis. The failure rates of subprime mortgages were the first symptom of a credit boom tuned to bust and of a real estate shock. But large default rates on subprime mortgages cannot account for the severity of the crisis. Rather, low-quality mortgages acted as an accelerant to the fire that spread through the entire financial system. The latter had become fragile as a result of several factors that are unique to this crisis: the transfer of assets from the balance sheets of banks to the markets, the creation of complex and opaque assets, the failure of ratings agencies to properly assess the risk of such assets, and the application of fair value accounting. To these novel factors, one must add the now standard failure of regulators and supervisors in spotting and correcting the emerging weaknesses. Accounting data fail to reveal the full extent of the financial maelstrom. Ironically, according to these data, US banks appear to be still adequately capitalized. Yet, bank undercapitalization is the biggest stumbling block to a resolution of the financial crisis.

This research examined whether people can accurately predict the risk preferences of others. Three experiments featuring different designs revealed a systematic bias: that participants predicted others to be more risk seeking than themselves in risky choices, regardless of whether the choices were between options with negative outcomes or with positive outcomes. This self-others discrepancy persisted even if a monetary incentive was offered for accurate prediction. However, this discrepancy occurred only if the target of prediction was abstract and vanished if the target was vivid. A risk-as-feelings hypothesis was introduced to explain these findings.

We examine the interaction between corporate governance at two levels: internal organizational governance that is intended to distinguish among managers of a priori unknown abilities to determine who becomes CEO, and corporate governance at the board level that seeks to retain or fire the CEO based on observed performance. An overconfident manager has a higher probability than a rational manager of being promoted to CEO under valuemaximizing internal governance. Moreover, the overconfidence of a risk-averse CEO enhances firm value up to a point, but the effect is non-monotonic and differs from that of lower risk aversion. Overconfident CEOs also underinvest in information production. Corporate governance at the board level depends on the interaction between perceptions of CEO ability and overconfidence. The board fires both excessively diffident and excessively overconfident CEOs. Finally, the Sarbanes-Oxley Act is predicted to improve the precision of information provided to investors, but reduce aggregate investment and possibly firm values.

The research reported in this article examines the influences of the organizational context of the franchisor on the entrepreneurial strategies of franchisors, their innovation efforts, and franchisor support of entrepreneurial activities by franchisees. Specifically, this study examines how ...

IVIE working papers offer in advance the results of economic research under way in order to encourage a discussion process before sending them to scientific journals for their final publication. * My deepest debt of gratitude goes to Avner Greif for his constant suggestions, encouragement and support. I also want to thank Ramon Marimon for his excellent supervision of my Ph.D. dissertation, on which this paper is based. I have benefited from many stimulating comments of B.

This paper presents the results of a dichotomous choice contingent valuation (CV) study of flood control policy in Bangladesh. The application of CV studies in the domain of flood exposure and flood control, where people are asked to trade-off money income in terms of willingness to pay (WTP), the risk of flooding and corresponding impacts on their life and livelihood, is rare. The use of CV in developing countries furthermore faces the challenge of significant income constraints, limiting the applicability of the method. ...

This study attempts to assess the association between surgeon personality factors (measured by the Myers-Briggs Type Indicator personality inventory (MBTI ®)) and risk tolerance (measured by the Revised Physicians' Reactions to Uncertainty (PRU) and Physician Risk Attitude (PRA) scales). DESIGN: Instrument assessing surgeon personality profile (MBTI) and 2 questionnaires measuring surgeon risk tolerance and risk aversion (PRU and PRA).

and building materials exporters better understand the unique market segments A mail survey of Japanese post and beam builders was conducted to measure their that exist within Japan,s residential post level of ethnocentrism, market orientation, risk aversion, and price consciousness. The and beam constmction market, identify data were analyzed utilizing factor and cluster analysis. The results showed that Japa- where

The mission of the International Journal of Risk and Contingency Management (IJRCM) is to discover what risk and uncertainty mean to different disciplines and industries. Risks are known in the sense they can be measured but it is the underlying uncertainty that remains elusive. Risk is present across industries and sectors (private, public, and non-profit). As a result, organizations and government around the world are currently experiencing higher levels of risk. At the other end of the spectrum from risk, contingency is the buffer against expected risk and uncertainty.  The journal provides an interdisciplinary approach to risk and contingency management, encouraging researchers and practitioners to provide best practices and a look into the future of this field.

Although many believe that women's low representation among top executives and lower average income is primarily a result of socialization and discrimination, findings of psychology, biology, and anthropology suggest that evolutionarily derived temperamental sex differences exist that may explain much of these disparities. Stereotypes of men as more competitive and more inclined to take risks than women, and stereotypes of women as more attached to their children and more risk averse than men are true as generalizations. Traits for which average sex differences exist, such as aggressiveness, desire for status, and risk preference, are highly correlated with workplace outcomes.

We provide a computational study of the problem of optimally allocating wealth among multiple stocks and a bank account, to maximize the infinite horizon discounted utility of consumption. We consider the situation where the transfer of wealth from one asset to another involves transaction costs that are proportional to the amount of wealth transferred. Our model allows for correlation between the price processes, which in turn gives rise to interesting hedging strategies. This results in a stochastic control problem with both drift-rate and singular controls, which can be recast as a free boundary problem in partial differential equations. Adapting the finite element method and using an iterative procedure that converts the free boundary problem into a sequence of fixed boundary problems, we provide an efficient numerical method for solving this problem. We present computational results that describe the impact of volatility, risk aversion of the investor, level of transaction costs, and correlation among the risky assets on the structure of the optimal policy. Finally we suggest and quantify some heuristic approximations.

I have the impression that many of the elements that are supposed to provide access to music actually impoverish our relationship with it.Michel Foucault, “Contemporary Music and the Public”As a theory discourse, audience development offers suggestions about changes to arts organizations, such as the orchestra concert. At the same time, these proposals are rather ambiguous about the underlying aesthetical ideals.

COMMON PERSISTENCE IN CONDITIONAL VARIANCES' BY TIM BOLLERSLEV AND ROBERT F. ENGLE Since the introduction of the autoregressive conditional heteroskedastic (ARCH) model in Engle (1982), numerous applications of this modeling strategy have already appeared. A common finding in many of these studies with high frequency financial or monetary data concerns the presence of an approximate unit root in the autoregressive polynomial in the univariate time series representation for the conditional second order moments of the process, as in the so-called integrated generalized ARCH (IGARCH) class of models proposed in Engle and Bollerslev (1986). In the IGARCH models shocks to the conditional variance are persistent, in the sense that they remain important for forecasts of all horizons. This idea is readily extended to a multivariate framework. Even though many time series may exhibit persistence in variance, it is likely that several different variables share the same common long-run component. In that situation, the variables are naturally defined to be co-persistent in variance, and the co-persistent linear combination is interpretable as a long-run relationship. Conditions for co-persistence to occur in the multivariate linear GARCH model are presented. These conditions parallel the conditions for linear co-integration in the mean, as developed by Engle and Granger (1987). The presence of co-persistence has important implications for asset pricing relationships and in optimal portfolio allocation decisions. An empirical example relating to the time series properties of nominal U.S. dollar exchange rates for the deutschemark and the British pound provides a simple illustration of the ideas.

We experimentally test overconfidence in investment decisions by offering participants the possibility to substitute their own for alternative investment choices. Overall, 149 subjects participated in two experiments, one with just one risky asset, the other with two risky assets. Overconfidence increases (i) with the absolute deviation from optimal choices, (ii) with task complexity, and (iii) decreases with uncertainty as indicated by the difference between willingness to pay and to accept. JEL Classification: C91, D81, G11.

This paper marks an important step forward in the study of individual risk attitudes. We use a novel set of survey measures, and a much larger sample than previous studies (22,000 individuals) to provide a representative picture of risk attitudes across an entire population. Our survey measures are attractive for studying determinants of risk attitudes, and also for testing fundamental assumptions about the stability of risk preferences across life domains. We also explore the impact of changes in question-framing on risk attitudes. The paper contributes an additional methodological innovation by testing the ability of the survey measures to predict real behavior under uncertainty, in a laboratory experiment. Ultimately, the analysis in the paper generates five robust facts about risk attitudes: (1) women are more risk averse than men, at all ages during adulthood, across various domains of life, and independent of question-framing; (2) risk aversion increases with age, in various domains of life; (3) individuals with highly-educated mothers are less risk averse; (4) the assumption of a single risk preference, stable across domains, is a reasonable approximation; (5) the survey measures we use are valid predictors of actual behavior under uncertainty.

We examine if a gender gap persists in executive compensation and if the composition and the determinants of executive compensation for men versus women are the same for the S&P1500 listed firms during the period from 1992 to 2004. This analysis is also extended to high tech firms, where high scholarship is required both for male and female executives. The results reveal that the gender gap in executive compensation is reducing essentially after the year 2000. Also, the factors that explain the variation in executive compensation are not all the same for men and women. However, firms continue to pay women, who are considered more risk averse than men, a similar proportion of risky compensation components, such as stock options and restricted stocks, than they pay to men. In terms of technology firms, we find that the gender differences in total compensation are not statistically significant. Our study offers insight into recent data for executive compensation. The finding that the gender gap diminishes is a sign of a better functioning market for executives. Our findings could be potentially useful for compensation committees in order to develop compensation packages that take into consideration the degree of risk aversion in order to enhance performance. Compensation adjusted for risk aversion can produce a higher level of satisfaction for the employees and can lead to better performances. Future research should focus on international comparison of various dimensions of executive compensation.

This paper investigates theoretical and empirical links between jobtenure and short-term mobility wage gains. Standard theoretical approaches examining this subject (search theory, job-matching and on-the-job training models) predict a negative correlation between these variables. Furthermore, this result has been confirmed in different applied researches for US. However, European labour market institutions appear to be quite different from US ones, especially for employment protection and turnover costs. Taking this feature into account we develop a theoretical model, evaluated through analytical and simulation procedures, where optimal switching conditions determine a positive correlation between jobtenure and short-term mobility wage gains. The main proposition derived from our model is confirmed for the Italian case. Using a panel database and different econometric specifications -in order to control for individual observable and non-observable effects, firm attributes and endog...