nep-bec New Economics Papers
on Business Economics
Issue of 2005‒03‒20
twenty-two papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. China's Innovation System Reform and Growing Industry and Science Linkages By Kazuyuki Motohashi; Xiao Yun
  2. The Role of Multinational Firms in International Trade: The Case of Japan By Kozo Kiyota; Shujiro Urata
  3. Canada’s Low Business R&D Intensity: the Role of Industry Composition By Aled ab Iorwerth
  4. Job Satisfaction in Europe By Namkee Ahn; Juan Ramón García
  5. Social Change By Jeremy Greenwood; Nezih Guner
  6. Contracts, Fairness and Incentives By Ernst Fehr; Alexander Klein; Klaus M Schmidt
  7. Self-Enforcing Labour Contracts and the Dynamics Puzzle By Christian Calmès
  8. A Recursive Thick Frontier Approach To Estimating Production Efficiency By Rien Wagenvoort; Paul Schure
  9. Why Are Jobs Designed the Way They Are? By Zoghi, Cindy; Levenson, Alec; Gibbs, Michael
  10. Gross Job Flows over the Past Two Business Cycles: Not all 'Recoveries' are Created Equal By R. Jason Faberman
  11. The measurement of gender wage discrimination: the distributional approach revisited By Coral del Río Otero; Carlos Gradín Lago; Olga Cantó Sánchez
  12. Ownership Change, Productivity, and Human Capital: New Evidence from Matched Employer-Employee Data in Swedish Manufacturing By Donald S. Siegel; Kenneth L. Simons; Tomas Lindstrom
  13. Interfirm Mobility, Wages, and the Returns to Seniority and Experience in the U.S. By Buchinsky, Moshe; Fougère, Denis; Kramarz, Francis; Tchernis, Rusty
  14. Aligning Ambition and Incentives By Koch, Alexander K.; Peyrache, Eloïc
  15. Which Workers Gain from Computer Use? By Sabrina Wulff Pabilonia; Cindy Zoghi
  16. Economic Well-Being Based on Income, Consumer Expenditures and Personal Assessments of Minimal Needs By Thesia I. Garner; Kathleen Short
  17. Measuring Organizational Capital in the New Economy By Black, Sandra E.; Lynch, Lisa M.
  18. The Determinants of Credit Default Swap Premia By Ericsson, Jan; Jacobs, Kris; Oviedo-Helfenberger, Rodolfo
  19. Leading Indicators: What Have We Learned? By Massimiliano Marcellino
  20. Incentives for Developers’ Contributions and Product Performance Metrics in Open Source Development: An Empirical Exploration By Haruvy Ernan; Wu Fang; Chakravarty Sujoy
  21. The Unanticipated Effects of Insider Trading Regulation By Art Durnev; Amrita S. Nain

  1. By: Kazuyuki Motohashi; Xiao Yun
    Abstract: In this paper, linkages of S&T activities between industry and science are investigated in the context of innovation system reforms. A firm level dataset from S&T survey at National Bureau of Statistics (NBS) of PRC for about 22,000 manufacturing firms is used for econometrics analysis of firm's S&T outsourcing activities. In transition period of China's innovation system from 1996 to 2002, firm's S&T outsourcing activities have been increased significantly. In addition, positive association between basic research oriented firms and collaboration with science sector can be found. China's innovation system was suffered from Russian model, where S&T activities at public research institutes and production activities at state owned enterprises are completely separated. However, in transition period of innovation system reform toward network type one, we can find that some firms have gained their technological capability to collaborate with universities and PRIs.
    Date: 2005–03
  2. By: Kozo Kiyota; Shujiro Urata
    Abstract: This paper examines the role of multinational firms in international trade, using firm-level panel data for Japanese firms between 1994 and 2000. Our results indicate that multinational firms dominate Japanese trade. In 2000, only 13.8 percent of Japanese firms were multinationals but they accounted for 95.1 and 85.4 percent of Japanese exports and imports, respectively. Multinational firms are found to have emerged from being exporters/importers. These results imply that firms do not make the choice of either exports or FDI, unlike the findings of previous studies. Rather, exporters make a decision on whether or not to undertake FDI.
    Date: 2005–03
  3. By: Aled ab Iorwerth
    Abstract: This paper looks at the reasons for Canada’s low business research and development (R&D) intensity. R&D performance across OECD countries is examined, and a detailed decomposition is undertaken of differences between Canadian and U.S. R&D levels across industries. Canada’s low aggregate R&D performance hides high research intensities in some research-intensive industries. The smaller relative size of these industries, however, combined with low R&D intensity in the motor vehicle and service industries, account for the weak aggregate R&D performance in Canada. <P> L’auteur examine les raisons pour le faible niveau de l’intensité en recherche et développement (R&D) dans le secteur privé au Canada. La performance en R&D dans les pays de l’OCDE est examinée et une décomposition détaillée est faite pour les différences entre les niveaux de R&D des industries aux États-Unis et au Canada. La faible performance agrégée du Canada en R&D cache des intensités en recherche élevées aux seins de plusieurs industries qui utilisent la R&D de façon intensive. Cependant la plus petite taille relative de ces industries en plus d’intensité très faible dans les industries des véhicules automobiles et des services enfreignent la performance globale en R&D au Canada.
  4. By: Namkee Ahn; Juan Ramón García
    Abstract: Job satisfaction is an important part of overall life satisfaction among the working age population. We examine Western Europeans’ overall job satisfaction and the satisfaction levels in several job domains using the European Community Household Panel Survey (1994-2001). With respect to overall job satisfaction, wage is important. Yet, some other factors show equally or more important effects. For example, health turns out to be a single most important determinant of overall job satisfaction. Job match quality, contract type and job status are also important. With respect to the relationship between overall and job domain satisfaction, work type comes out as the most important job domain in all countries, followed by pay, working condition and job security. In analyzing determinants of each job domain satisfaction, we find some interesting results. Female workers declare higher pay satisfaction but lower work hour satisfaction, which are consistent with the hypothesis of low aspiration and greater non-market responsibility among women. Good job matches increase satisfaction levels in all job domains, but in particular with respect to pay and work type. Local unemployment rate has no effects on overall job satisfaction, but it has significant effects in two job domains, job security and work hours. Those in countries or times of high unemployment declare much lower satisfaction with job security, while they declare higher satisfaction with hours of work. Finally, even after controlling many variables which are responsible, directly and indirectly, for overall and each job domain satisfaction, there still remain large country fixed effects. Given the same observed worker and job characteristics, Austrian, Danish and Irish workers declare substantially higher satisfaction in all job domains than the workers in the Mediterranean countries.
  5. By: Jeremy Greenwood (University of Rochester); Nezih Guner (Pennsylvania State University)
    Abstract: Social norms are influenced by the technological environment that a society faces. Behavioral modes reflect purposive decision making by individuals, given the environment they live in. Thus, as technology changes, so might social norms. There were big changes in social norms during the 20th century, especially in sexual mores. In 1900 only six percent of unwed women engaged in premarital sex. Now, three quarters do. It is argued here that this was the result of technological improvement in contraceptives, which lowered the cost of premarital sex. The evolution from an abstinent to a promiscuous society is studied using an equilibrium matching model.
    Keywords: Social change; the sexual revolution; technological progress in contraceptives; bilateral search.
    JEL: E1 J1 O3
    Date: 2005–03
  6. By: Ernst Fehr; Alexander Klein; Klaus M Schmidt
    Date: 2005–03–16
  7. By: Christian Calmès
    Abstract: To properly account for the dynamics of key macroeconomic variables, researchers incorporate various internal-propagation mechanisms in their models. In general, these mechanisms implicitly rely on the assumption of a perfect equality between the real wage and the marginal product of labour. The author proposes a theoretical validation of a micro-founded internal-propagation mechanism: he builds a model that features a limited-commitment economy, and derives endogenous self-enforcing labour contracts that produce a different linkage between the real wage and the marginal product of labour. The risk-sharing between the entrepreneur and the worker, both faced with enforcement problems, provides an admissible explanation of the prolonged comovements observed between consumption and labour. Since these co-movements are at the core of the persistence of the impulse response of output to exogenous technology shocks, this persistence can, in turn, be rationalized with the endogenous real rigidity emerging from the economy. The author shows that, in this framework, the persistence ultimately depends on the initial bargaining power and the magnitude of the risk-sharing.
    Keywords: Business fluctuations and cycles; Economic models; Labour markets
    JEL: E12 E49 J30 J31 J41
    Date: 2005
  8. By: Rien Wagenvoort (European Investment Bank, Luxembourg); Paul Schure (Department of Economics, University of Northern B.C.)
    Abstract: We introduce a new panel data estimation technique for cost and production functions: the Recursive Thick Frontier Approach (RTFA). RTFA has two advantages over existing thick frontier methods. First, technical inefficiency is allowed to be dependent on the explanatory variables of the frontier model. Secondly, no distributional assumptions are imposed on the inefficiency component of the error term. We show by means of simulation experiments that RTFA can outperform the popular stochastic frontier approach (SFA) and the “within” OLS estimator for realistic parameterisations of the productivity model.
    Keywords: Technical Efficiency, Efficiency Measurement, Frontier Production Functions, Recursive Thick Frontier Approach
    JEL: C15 C23 C50 D2
    Date: 2005–03–11
  9. By: Zoghi, Cindy (U.S. Bureau of Labor Statistics); Levenson, Alec (University of Southern California); Gibbs, Michael (University of Chicago GSB and IZA Bonn)
    Abstract: In this paper we study job design. Will an organization plan precisely how the job is to be done ex ante, or ask workers to determine the process as they go? We first model this decision and predict complementarity between these job attributes: multitasking, discretion, skills, and interdependence of tasks. We argue that characteristics of the firm and industry (e.g., product and technology, organizational change) can explain observed patterns and trends in job design. We then use novel data on these job attributes to examine these issues. As predicted, job designs tend to be ‘coherent’ across these characteristics within the same job. Job designs also tend to follow similar patterns across jobs in the same firm, and especially in the same establishment: when one job is optimized ex ante, others are more likely to be also. There is some evidence that firms may segregate different types of job designs across different establishments.
    Keywords: job design, organization design, specialization, job enrichment, intrinsic motivation
    JEL: M5 M50 J2 J24 L23
    Date: 2005–03
  10. By: R. Jason Faberman (U.S. Bureau of Labor Statistics)
    Abstract: I compare the behavior of job creation and job destruction over the past two economic downturns. Both periods have brief but sharp rises in job destruction followed by flat net job growth. The dynamics underlying these slow recoveries differ drastically. In 1991-92, job destruction is slow to decline. In 2001, job creation falls dramatically and remains persistently low through 2003. I find this trend qualitatively similar in both manufacturing and service industries. I also find that neither a structural shift of jobs across industries nor increased trade liberalization is a consistent explanation for the recent lack of growth. Instead, the evidence suggests that a large drop in business investment may explain the decline in job creation.
    Keywords: job reallocation, business cycles, employment fluctuations
    JEL: E24 E32
    Date: 2004–06
  11. By: Coral del Río Otero; Carlos Gradín Lago; Olga Cantó Sánchez
  12. By: Donald S. Siegel (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA); Kenneth L. Simons (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA); Tomas Lindstrom (National Institute of Economic Research, Box 3116, SE-103 62 Stockholm, Sweden)
    Abstract: Empirical studies of the impact of changes in ownership of manufacturing plants on productivity (e.g., Lichtenberg and Siegel (1987, 1990a, 1990b), McGuckin and Nguyen (1995, 2001), and Maksimovic and Phillips (2001)) have provided limited evidence on how such transactions affect investment in human capital and have been based strictly on U.S. and U.K. data. We attempt to fill these gaps, based on an analysis of matched employer-employee data from over 19,000 Swedish manufacturing plants for the years 1985-1998. The sample covers virtually the entire population of manufacturing plants with 20 or more employees and a probability-based sample of smaller plants. We assess whether there are differential effects on productivity and human capital for different types of ownership changes, such as partial and full acquisitions and divestitures, and related and unrelated acquisitions. Our results suggest that ownership change results in an increase in relative productivity. We also find that plants involved in these transactions experience increases in average employee age, experience, and the percentage of employees with a college education. Ownership change also leads to an increase in wages and a reduction in the percentage of female workers. All of these patterns emerge most strongly for full acquisitions and divestitures and unrelated acquisitions.
    JEL: G34 D24 C81
    Date: 2005–03
  13. By: Buchinsky, Moshe (UCLA,CREST-INSEE and NBER); Fougère, Denis (CNRS, CREST-INSEE, CEPR and IZA Bonn); Kramarz, Francis (CREST-INSEE, CEPR and IZA Bonn); Tchernis, Rusty (Indiana University)
    Abstract: Much of the research in labor economics during the 1980s and the early 1990s was devoted to the analysis of changes in the wage structure across many of the world’s economies. Only recently, has research turned to the analysis of mobility in its various guises. From the life cycle perspective, decreased wage mobility and increased job instability, makes the phenomenon of increasing wage inequality more severe than it appears to be at first sight. In general, workers’ wages may change through two channels: (a) return to their firm-specific human capital (seniority); or (b) inter-firm wage mobility. Our theoretical model gives rise to three equations: (1) a participation equation; (2) a wage equation; and (3) an interfirm mobility equation. In this model the wage equation is estimated simultaneously with the two decision equations. We use the Panel Study of Income Dynamics (PSID) to estimate the model for three education groups. Our main finding is that returns to seniority are quite high for all education groups. On the other hand, the returns to experience appear to be similar to those previously found in the literature.
    Keywords: wage mobility, interfirm mobility, returns to seniority, panel data, Markov Chain Monte Carlo methods
    JEL: C11 C15 J31 J63
    Date: 2005–03
  14. By: Koch, Alexander K. (Royal Holloway, University of London and IZA Bonn); Peyrache, Eloïc (HEC School of Management, Paris)
    Abstract: In many economic situations several principals contract with the same agents sequentially. Asymmetric learning about agents' abilities provides the first principal with an informational advantage and has profound implications for the design of incentive contracts. We show that the principal always strategically distorts information revelation to future principals about the ability of her agents. The second main result is that she can limit her search for optimal incentive schemes to the class of relative performance contracts that cannot be replicated by contracts based on individual performance only. This provides a new rationale for the optimality of such compensation schemes.
    Keywords: relative performance contracts, reputation, asymmetric learning
    JEL: D82 J33 L14
    Date: 2005–03
  15. By: Sabrina Wulff Pabilonia (U.S. Bureau of Labor Statistics); Cindy Zoghi (U.S. Bureau of Labor Statistics)
    Abstract: Workers who use computers earn more than those who do not. Is this a productivity effect or merely selection? Using the Canadian Workplace and Employee Survey, we control for selection and find a wage premium of 3.8% for the average worker upon adopting a computer. This premium, however, obscures important differences in returns to computer adoption across education and occupation groups. We find that long-run returns to computer use are over 5% for most workers. Differences between short-run and long-run returns may suggest that workers share training costs through sacrificed wages.
    Keywords: Computers, training, technological change
    JEL: J31 O30
    Date: 2004–06
  16. By: Thesia I. Garner (U.S. Bureau of Labor Statistics); Kathleen Short (U.S. Census Bureau)
    Abstract: Responses to minimum income and minimum spending questions are used to produce economic well-being thresholds. Thresholds are estimated using a regression framework.  Regression coefficients are based on U.S. Survey of Income and Program Participation (SIPP) data and then applied to U.S. Consumer Expenditure Survey (CE) data. Three different resource measures are compared to the estimated thresholds.  The first resource measure is total before-tax money income, and the other two are expenditure based.  The first of these two refers to expenditure outlays and the second to outlays adjusted for the value of the service flow of owner-occupied housing (rental equivalence). The income comparison is based on SIPP data while the outlays comparisons are based on CE data. Results using official poverty thresholds are shown for comparison. This is among the earliest work in the U.S. in which expenditure outlays have been used for economic well-being determinations in combination with personal assessments, and the first time rental equivalence has been used in such an exercise. Comparisons of expenditures for various bundles of commodities are compared to the CE derived thresholds to provide insight concerning what might be considered minimum or basic. Results reveal that CE and SIPP MIQ thresholds are higher than MSQ thresholds, and resulting poverty rates are also higher with the MIQ.  CE-based MSQ thresholds are not statistically different from average expenditure outlays for food, apparel, and shelter and utilities for primary residences.  When reported rental equivalences for primary residences that are owner occupied are substituted for out-of-pocket shelter expenditures, single elderly are less likely to be as badly off as they would be with a strict outlays approach in defining resources.
    Keywords: well-being, sufficiency, poverty, income, expenditures, Consumer Expenditure Survey, Survey of Income and Program Participation
    JEL: D12 I31 I32
    Date: 2005–03
  17. By: Black, Sandra E. (UCLA, NBER and IZA Bonn); Lynch, Lisa M. (Tufts University, NBER and IZA Bonn)
    Abstract: A growing body of literature over the past decade suggests that a firm’s organizational structure/capital can contribute in significant ways to the productive capacity of a firm. But, as with other intangible assets, there is no consensus definition of what this organizational capital is, how to measure it, or how to best quantify its contribution to output (either current or future). We try to address this gap in the literature by proposing a definition of organizational capital based on recent empirical work on the impact of organizational capital on firm productivity and workers’ wages. We then discuss in detail how organizational capital has been measured and the measurement issues that face those trying to understand the extent of organizational capital in an economy.
    Keywords: human capital, productivity
    JEL: J2 D2
    Date: 2005–03
  18. By: Ericsson, Jan (McGill University); Jacobs, Kris (McGill University); Oviedo-Helfenberger, Rodolfo (McGill University)
    Abstract: Using a new dataset of bid and offer quotes for credit default swaps, we investigate the relationship between theoretical determinants of default risk and actual market premia using linear regression. These theoretical determinants are firm leverage, volatility and the riskless interest rate. We find that estimated coefficients for these variables are consistent with theory and that the estimates are highly significant both statistically and economically. The explanatory power of the theoretical variables for levels of default swap premia is approximately 60%. The explanatory power for the differences in the premia is approximately 23%. Volatility and leverage by themselves also have substantial explanatory power for credit default swap premia. A principal component analysis of the residuals and the premia shows that there is only weak evidence for a residual common factor and also suggests that the theoretical variables explain a significant amount of the variation in the data. We therefore conclude that leverage, volatility and the riskfree rate are important determinants of credit default swap premia, as predicted by theory.
    Keywords: Credit default swap; Credit risk; Structural model; Leverage; Volatility
    JEL: G12
    Date: 2004–09–15
  19. By: Massimiliano Marcellino
    Abstract: We provide a summary updated guide for the construction, use and evaluation of leading indicators, and an assessment of the most relevant recent developments in this field of economic forecasting. To begin with, we analyze the problem of selecting a target coincident variable for the leading indicators, which requires coincident indicator selection, construction of composite coincident indexes, choice of filtering methods, and business cycle dating procedures to transform the continous target into a binary expansion/recession indicator. Next, we deal with criteria for choosing good leading indicators, and simple non-model based methods to combine them into composite indexes. Then, we examine models and methods to transform the leading indicators into forecasts of the target variable. Finally, we consider the evaluation of the resulting leading indicator based forecasts, and review the recent literature on the forecasting performance of leading indicators.
  20. By: Haruvy Ernan; Wu Fang; Chakravarty Sujoy
    Abstract: In open source software development, users rather than paid developers engage in innovation and development without the direct involvement of manufacturers. This paradigm cannot be explained by the two traditional models of innovation, the private investment model and the collective action model. Neither model in itself can explain the phenomenon of the open source model or its success. In order to bridge the gap between existing models and the open source phenomenon, we analyze data from a web survey of 160 open source developers. First, we investigate the motives affecting the individual developer’s contributions by comparing and contrasting the incentives from both the traditional private investment and collective action models. Second, we demonstrate that there is a common ground between the private and collective models where private returns and social considerations can coexist. Third, we explore the effect of incentives on the output of innovation—final product performance. The results show that the motivations for individual developer’s contributions are quite different from the incentives that affect product performance.
    Keywords: Open Source Software, Incentives, Altruism, Developers’ Contributions, Software Performance
    Date: 2005–03–10
  21. By: Art Durnev; Amrita S. Nain
    Abstract: Using a sample of 2,827 firms from 21 countries we examine whether insider trading laws achieve the primary objective for which they are introduced – protecting uninformed investors from private information-based trading. We find that when control is concentrated in the hands of a large shareholder, insider trading regulation is less effective in reducing private information-based trading if investor protection is poor. We suggest that controlling shareholders who are banned from trading may resort to covert expropriation of firm resources, creating more information asymmetry and thereby encouraging private information trading by informed outsiders. Consistent with this, we find evidence that when the rights of controlling shareholders are high, insider trading restrictions are associated with greater earnings opacity.
    Keywords: Insider Trading Regulation, Ownership, Private Information Trading, Earnings Opacity
    JEL: G15 G14 G38
    Date: 2004–05–01
  22. By: Witold J. Henisz; Bennet A. Zelner;
    Abstract: In this paper we examine the effects of interest group pressure and the structure of political institutions on infrastructure deployment by state-owned electric utilities in a panel of 78 countries during the period 1970 – 1994. We consider two factors that jointly influence the rate of infrastructure deployment: (1) the extent to which the consumer base consists of industrial consumers, which are capable of exerting discipline on political actors whose competing incentives are to construct economically inefficient “white elephants” to satisfy the demands of concentrated geographic interests, labor unions and construction firms; and (2) veto points in formal policymaking structures that constrain political actors, thereby reducing these actors’ sensitivity to interest group demands. A higher fraction of industrial customers provides political actors with stronger incentives for discipline, reducing the deployment of white elephants and thus the infrastructure growth rate, ceteris paribus. Veto points reduce political actors’ sensitivity to interest group demands in general and thus moderate the relationship between industrial interest group pressure and the rate of infrastructure deployment.
    Keywords: Electricity, Institutional Environment, Investment, Regulation, interest group, state owned enterprise
    JEL: L94 L32 F21
    Date: 2004–07–01

This nep-bec issue is ©2005 by Christian Calmes. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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