nep-bec New Economics Papers
on Business Economics
Issue of 2005‒09‒17
sixteen papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. The effect of oil price on industrial production and on stock returns By Ramón Cobo-Reyes; Gabriel Pérez Quirós
  2. Declining Volatility in the U.S. Automobile Industry By Valerie A. Ramey; Daniel J. Vine
  3. Just how Undervalued is the Chinese Renminbi By Michael Funke; Jörg Rahn
  4. Collective Choice and Control Rights in Firms By Gregory K. Dow; Gilbert L. Skillman
  5. The Existence and Persistence of Long Work Hours By Robert Drago; David Black; Mark Wooden
  6. Strategic Experimentation in Networks By Yann Bramoulle; Rachel Kranton
  7. Bargaining Frictions and Hours Worked By Stéphane Auray; Samuel Danthine
  8. A Process Oriented Approach to Waiting Line Management in a Large Pilgrimage Center in India: A Case Study By Ravichandran N; Rao Subba I V
  9. Working Time and Employment under Uncertainty By Yu-Fu Chen; Michael Funke
  10. Managerial Roles and Interfaces: Some Organizational Issues and Implications through Thematic Apperception Test By Parikh Indira J; Kollan Bharti
  11. Individual Wage Setting, Efficiency Wages and Productivity in Sweden By Lundborg, Per
  12. A Reflection of the Indian Women in Entrepreneurial World By Kollan Bharti; Parikh Indira J
  13. Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey By Thomas Dohmen; Armin Falk; David Huffman; Uwe Sunde; Jürgen Schupp; Gert G. Wagner
  14. World Class Logistics Operations: The Case of Bombay Dabbawallahs By Ravichandran N
  15. The Impact of Institutions on the Employment Performance in European Labour Markets By Herbert Buscher; Christian Dreger; Raul Ramos; Jordi Surinach
  16. PRIVATE BANKING IN EUROPE - Getting Clients & Keeping Them! By Anna Omarini; Philip Molineux

  1. By: Ramón Cobo-Reyes (Department of Economic Theory and Economic History, University of Granada); Gabriel Pérez Quirós (Bank of Spain)
    Abstract: This paper analyzes the relationship between oil price shocks and the industrial production and between oil price shocks and the stock returns. The objective is to study which relationship is stronger or which variables reacts more rapidly to changes in oil price. We develop a Markov switching model assuming that there exits a latent variable (the state of the economy) which determines the mean of industrial production and the volatility of stock returns. The results show that raises in oil price affects in a negative and statistically significant way to stock returns and to industrial production, but the effect on stock returns is stronger than on industrial production.
    Keywords: oil price, Markov switching models.
    JEL: E32 E37 C32
    Date: 2005–08–05
  2. By: Valerie A. Ramey; Daniel J. Vine
    Abstract: This paper documents the dramatic changes in volatility that occurred in the U.S. auto industry in the early 1980s. Namely, output volatility declined significantly, the covariance of inventory investment and sales became much more negative, and adjustments to output, which in earlier decades stemmed primarily from plants hiring and laying off workers, were more often accomplished with changes in average hours per worker after the mid 1980s. Building on the work of Blanchard (1983), we show how all of these changes could have stemmed from one underlying factor—a decline in the persistence of motor vehicle sales. We use both industry-level data as well as micro data on production schedules from 103 assembly plants in the United States and Canada to document the developments in the early 1980s. We then use the original Holt, Modigliani, Muth and Simon (1960) linear quadratic inventory model to show how a decline in the persistence of sales leads to all of the changes noted above, including the propensity to use intensive margins of adjustment over extensive labor margins, even in the absence of technological change.
    JEL: E2
    Date: 2005–09
  3. By: Michael Funke; Jörg Rahn
    Abstract: Given that the value of China´s currency has been hot topic recently, this paper explores the equilibrium levels of China´s real and nominal exchange rates. Employing a Johansen cointegration framework, we focus on the behavioral equilibrium exchange rate (BEER) and permanent equilibrium exchange rate (PEER) models. Our results suggest that, while the renminbi is somewhat undervalued against the dollar, the misalignment is not nearly as exaggerated as many popular claims.
    Date: 2005–04
  4. By: Gregory K. Dow (Simon Fraser University); Gilbert L. Skillman (Wesleyan University)
    Abstract: Recent writers have asserted that firms controlled by workers are rare because workers have diverse preferences over firm policies, and thus suffer from high transaction costs in making collective decisions. This is contrasted with firms controlled by investors, who all support the goal of wealth maximization. However, the source of the asymmetry between capital and labor has not been clearly identified. For example, firms could attract labor inputs by selling transferable shares, and well-known unanimity theorems from the finance literature carry over to models of this kind. We resolve this puzzle by arguing that because financial capital is exceptionally mobile, capital markets are sufficiently competitive to induce unanimity. The lower mobility of human capital implies that labor markets are monopolistically competitive and hence that unanimity cannot be expected in labor-managed firms. Moreover, such firms are vulnerable to takeover by investors while capital-managed firms are substantially less vulnerable to takeover by workers.
    Keywords: capitalist firms, labor-managed firms, collective choice, preference heterogeneity, unanimity, voting, membership markets, control rights
    JEL: D1 D2 D3 D4
    Date: 2005–09–09
  5. By: Robert Drago (Pennsylvania State University); David Black (Melbourne Institute of Applied Economic and Social Research, University of Melbourne); Mark Wooden (Melbourne Institute of Applied Economic and Social Research, University of Melbourne and IZA Bonn)
    Abstract: Previous research hypothesizes that long working hours are related to consumerism, the ideal worker norm, high levels of human capital, and a high cost-of-job-loss. The authors test these hypotheses using panel data on working hours for an Australian sample of full-time employed workers. Analyses include a static cross-sectional model and a persistence model for long hours over time. The results suggest that long hours (50 or more hours in a usual week) are often persistent, and provide strongest support for the consumerism hypothesis, with some support for the ideal worker norm and human capital hypotheses, and no support for the cost-of-job-loss hypothesis. Other results are consistent with a backward-bending supply of long hours, and with multiple job holders and the self-employed working long hours.
    Keywords: HILDA Survey, overwork, working hours
    JEL: J22
    Date: 2005–07
  6. By: Yann Bramoulle; Rachel Kranton
    Date: 2005–09–09
  7. By: Stéphane Auray (Université Charles-de-Gaulle Lille 3, GREMARS and CIRPÉE); Samuel Danthine (Université du Québec à Montréal, CIRPÉE and IZA Bonn)
    Abstract: A matching model with labor/leisure choice and bargaining frictions is used to explain (i) differences in GDP per hour and GDP per capita, (ii) differences in employment, (iii) differences in the proportion of part-time work across countries. The model predicts that the higher the level of rigidity in wages and hours the lower are GDP per capita, employment, part-time work and hours worked, but the higher is GDP per hours worked. In addition, it predicts that a country with a high level of rigidity in wages and hours and a high level of income taxation has higher GDP per hour and lower GDP per capita than a country with less rigidity and a lower level of taxation. This is due mostly to a lower level of employment. In contrast, a country with low levels of rigidity in hour and in wage setting but with a higher level of income taxation has a lower GDP per capita and a higher GDP per hour than the economy with low rigidity and low taxation, because while the level of employment is similar in both economies, the share of part-time work is larger.
    Keywords: models of search and matching, bargaining frictions, economic performance, labor market institutions, part-time jobs, labor market rigidities
    JEL: E24 J22 J30 J41 J50 J64
    Date: 2005–07
  8. By: Ravichandran N; Rao Subba I V
    Abstract: This article documents an innovative approach to manage waiting line in the largest pilgrimage center in the world. By a judicious combination of process orientation and advances in Information Technology, the pilgrimage center’s management has been able to dramatically change the pilgrims waiting experience. The pilgrimage location under study is Tirumala located in Andhra Pradesh state in India. The number of visitors to this important location has been steadily increasing over time. As of 2005, the location attracted approximately 16 million visitors a year. The primary objective of a pilgrim visiting Tirumala is to have darshan of the principle deity in the temple. The secondary objectives include tonsure (shaving head as a mark of respect), offering donations, prasad collection, local sight seeing and shopping. The immense popularity of the temple and its location poses significant challenges to the management of the system. This temple is a tradition bound Institution. Therefore, some alternatives to resolve pilgrim waiting time are feasible and some are not. There are some hard constraints which may not stand the test of logic. The ability to manage the traffic volume is a function of processing rate (darshan duration) at the temple and darshan time available per day. This case study is an example of improving operational effectiveness by using formal management methods in addressing an important real life problem in an under researched area.
    Date: 2005–08–10
  9. By: Yu-Fu Chen; Michael Funke
    Abstract: The standard literature on working time has modelled the decisions of firms in a deterministic framework in which firms can choose between employment and overtime (given mandated standard hours). Contrary to this approach, we consider the impact of uncertainty and real options on the decision of working time, i.e. we examine the determinants of employment and hours in a stochastic framework. We conclude the theoretical analysis with a number of simulation exercises to illustrate the working of the model.
    Date: 2004–09
  10. By: Parikh Indira J; Kollan Bharti
    Abstract: Indian organizations are encountering transformations within the organization and in the external – both national and global environment. In this era of rapid transformations Indian managers need assess their role taking and interfaces across the organization. This study is based on 30 workshops arising out of diagnostic studies of the organization and its resultant identification of developmental inputs. The organizations were set on a path of growth and a commitment to professionalize their existing managers so that the organization could become vibrant and dynamic. The present paper emphasis on the content of the stories, situations involving mostly interpersonal relations, Such as father-son or superior and subordinate are examined for the feelings and subsequently, what actors are being triggered off by the interface. The paper also explores the manager’s perception of the job, role, task and performance. Based on the content analysis of each story, the paper investigate how the manager take’s initiatives to accept the challenges of their jobs and subsequently, adding new dimensions to their role.
    Date: 2005–08–26
  11. By: Lundborg, Per (Trade Union Institute for Economic Research)
    Abstract: Swedish wage setting has undergone drastic changes during the last 10-15 years. While Sweden was known for its narrow wage distribution, wage differentiation and wage bargaining at the individual level has become leading principles among white-collar workers’ unions. The purpose of the present paper is to analyse the consequences of this wage policy shift. Wage differences have increased drastically among white-collar workers while remained constant or even decreased among blue collar workers. We show that wage differentiation has had a strong effect on white collar workers’ average wage, and caused a major increase in the wage gap between the aggregates of whitecollar and blue-collar workers. We also show that increases in the coefficient of variation of wages raise productivity in firms with many workers in that worker category. Last and foremost, we show that the transition to individual wage setting raises the scope for firms to set efficiency wages and we find support for the fair wage version of efficiency wage setting. The effects of higher wage/fair wage rates were stronger in the late 1990s, when wage differentiation increased more, than in the early 2000s.
    Keywords: Efficiency wages; productivity; wage differentials
    JEL: J31 J41 J51
    Date: 2005–09–09
  12. By: Kollan Bharti; Parikh Indira J
    Abstract: Entrepreneurship amongst women has been a recent concern. Women have become aware of their existence their rights and their work situation. However, women of the middle class are not too eager to alter their role in fear of social backlash. The progress is more visible among upper class families in urban cities. This paper focuses on Women entrepreneur. Any understanding of Indian women, of their identity, and especially of their role taking and breaking new paths, will be incomplete without a walk down the corridors of Indian history where women have paused, lived and internalized various role models. Some have taken entrepreneurship roles where some have opted for employment, some in entertainment field and some for leadership roles while millions of others have taken the role of ideal stereotyped social roles. The paper slides from the era of fifties to the 21st centuries and how transformation has occurred in the women roles. Also the paper talks about the status of women entrepreneurs and the problems faced by them when they ventured out to carve their own niche in the competitive world of business environment.
    Date: 2005–08–26
  13. By: Thomas Dohmen (IZA Bonn); Armin Falk (IZA Bonn and University of Bonn); David Huffman (IZA Bonn); Uwe Sunde (IZA Bonn and University of Bonn); Jürgen Schupp (DIW Berlin and IZA Bonn); Gert G. Wagner (DIW Berlin, Berlin University of Technology, Cornell University and IZA Bonn)
    Abstract: This paper presents new evidence on the distribution of risk attitudes in the population, using a novel set of survey questions and a representative sample of roughly 22,000 individuals living in Germany. Using a question that asks about willingness to take risks on an 11-point scale, we find evidence of heterogeneity across individuals, and show that willingness to take risks is negatively related to age and being female, and positively related to height and parental education. We test the behavioral relevance of this survey measure by conducting a complementary field experiment, based on a representative sample of 450 subjects, and find that the measure is a good predictor of actual risk-taking behavior. We then use a more standard lottery question to measure risk preference, and find similar results regarding heterogeneity and determinants of risk preferences. The lottery question makes it possible to estimate the coefficient of relative risk aversion for each individual in the sample. Using five questions about willingness to take risks in specific domains - car driving, financial matters, sports and leisure, career, and health - the paper also studies the impact of context on risk attitudes, finding a strong but imperfect correlation across contexts. Using data on a collection of risky behaviors from different contexts, including traffic offenses, portfolio choice, smoking, occupational choice, participation in sports, and migration, the paper compares the predictive power of all of the risk measures. Strikingly, the general risk question predicts all behaviors whereas the standard lottery measure does not. The best overall predictor for any specific behavior is typically the corresponding context-specific measure. These findings call into the question the current preoccupation with lottery measures of risk preference, and point to variation in risk perceptions as an understudied determinant of risky behavior.
    Keywords: risk preferences, preference stability, experimental validation, field experiment, SOEP, gender differences, age, height, subjective well-being
    JEL: D0 D1 D80 D81 C91 C93
    Date: 2005–08
  14. By: Ravichandran N
    Abstract: The Bombay Dabbawallahs operation is widely recognized as an outstanding example of excellence in Logistics. It is often quoted as a standard example of six sigma implementation in the Indian context. Because of its popularity Prince Charles of the United Kingdom paid a visit to the operations site during his official visit to India in 2003. In this article we study in detail the nature and content of this system, critically examine its salient features and analyze the possibility of extending the system to similar or related domains.
    Date: 2005–09–05
  15. By: Herbert Buscher (Institute for Economic Research Halle (IWH)); Christian Dreger (Institute for Economic Research Halle (IWH) and IZA Bonn); Raul Ramos (AQR, University of Barcelona); Jordi Surinach (AQR, University of Barcelona)
    Abstract: This paper investigates the role of institutions for labour market performance across European countries. As participation rates have been rather stable over the past, the unemployment problem is mainly caused by shortages in labour demand. Labour demand is expressed by its structural parameters, such as the elasticities of employment to output and factor prices. Institutional variables include employment protection legislation, the structure of wage bargaining, measures describing the tax and transfer system and active labour market policies. As cointegration between employment, output and factor prices is detected, labour demand equations are fitted in levels by efficient estimation techniques. To account for possible structural change, time varying parameter models and aysmmetries due to the business cycle situation are considered. Then, labour demand elasticities are explained by institutions using panel fixed effects regressions. The results suggest that higher flexibility and incentives of households to work appear to be appropriate strategies to improve the employment record. The employment response to economic conditions is stronger in a more deregulated environment, and the absorption of shocks can be relieved. However, the institutional database should be improved in order to arrive at more definite policy conclusions.
    Keywords: EU employment, labour market institutions
    JEL: E24 J23 J51
    Date: 2005–08
  16. By: Anna Omarini (Università Luigi Bocconi - Milan - Italy); Philip Molineux (SBARD, University of Wales Bangor)
    Abstract: The paper examines the features of private banking business in Europe and focuses on the key roles of client segmentation, retention and acquisition. There has been substantial growth in private banking business over the last decade or so as commercial banks have targeted both the 'mass-affluent' and more upmarket high net worth individuals (HNWI's). The combined amount of investable assets at the disposal of these two groups amounts to around Euro 6 trillion and a wide range of banks, investment firms and other operators have focused on devising strategies aimed at grabbing a share of this potentially lucrative market. The private client wealth management industry in Europe remains relatively fragmented although a few major players have emerged and consolidation is an ongoing theme in the sector. Given the commercial opportunities afforded by this business area the increased complexity of clients needs continues to be a critical strategic issue for industry participants. This paper illustrates important themes relating to the wealth management service proposition and focuses on client segmentation, retention and acquisition strategies. Overall we find that private banks will have to adopt a more systematic approach to these areas and in particular also have to pay greater qualitative and quantitative attention to client satisfaction, trust and loyalty issues if their client retention and acquisition strategies are to be a success.
    Keywords: Private banking, wealth management, segmentation
    JEL: G
    Date: 2005–09–09

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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