nep-bec New Economics Papers
on Business Economics
Issue of 2005‒12‒20
twenty papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Where Did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income By Ian Dew-Becker; Robert J. Gordon
  2. Financial System Risk and Flight to Quality By Ricardo Caballero; Arvind Krishnamurthy
  3. China and the Relationship Between the Oil Price and the Dollar By Agnes Benassy-Quere; Valerie Mignon; Alexis Penot
  4. Intraday Value at Risk (IVaR) Using Tick-by-Tick Data with Application to the Toronto Stock Exchange By Georges Dionne; Pierre Duchesne; Maria Pacurar
  5. Product Market Competition, Profit Sharing and Equilibrium Unemployment By Erkki Koskela; Rune Stenbacka
  6. Real Business Cycle Models: Past, Present and Future By Sergio Rebelo
  7. Does Social Capital Improve Labour Productivity in Small and Medium Enterprises? By Fabio Sabatini
  8. Productivity consequences of workforce ageing - Stagnation or a Horndal effect? By Malmberg, Bo; Lindh, Thomas; Halvarsson, Max
  9. Cross-Border Mergers and Acquisitions: On Revealed Comparative Advantage and Merger Waves By Steven Brakman; Harry Garretsen; Charles van Marrewijk
  10. Identification of a competing risks model with unknown transformations of latent failure times By Simon Lee
  11. Gender-Job Satisfaction Differences across Europe: An Indicator for Labor Market Modernization By Lutz Kaiser
  12. Inside the Family Firm: The Role of Families in Succession Decisions and Performance By Morten Bennedsen; Kasper Nielsen; Francisco Pérez-González; Daniel Wolfenzon
  13. Business failure prediction: simple-intuitive models versus statistical models By Ooghe, H.; Spaenjers, C.; Pieter vandermoere
  14. The reciprocal producers' incentives to prey and the relailers' buying power By Bergès Sennou, F.; Chambolle, C.
  15. Is Human Capital Losing from Outsourcing? Evidence for Austria and Poland By Andzelika Lorentowicz; Dalia Marin; Alexander Raubold
  16. Matchmakers in Wine Marketing Channels : The Case of French Wine Brokers WINE BROKERS By Virginie Baritaux; Magali Aubert; Etienne Montaigne; Hervé Remaud
  17. Perfect Competition, Spatial Competition, and Tax Incidence in the Retail Gasoline Market By James Alm; Edward Sennoga; Mark Skidmore
  18. Clues, cues and complexity: unpackuing the concept of organizational surprise By Cunha, Miguel Pina e; Kamoche, Ken; Clegg, Stewart R.
  19. Impact of strategy, HRM Strength and HRM bundles on innovation performance and organizational performance By Cunha, Rita Campos e; Cunha, Miguel Pina e
  20. Venture capital as human resource management By Carvalho, Antonio Gledson de; Calomiris, Charles W.; Matos, Joao Amaro de

  1. By: Ian Dew-Becker; Robert J. Gordon
    Abstract: A basic tenet of economic science is that productivity growth is the source of growth in real income per capita. But our results raise doubts by creating a direct link between macro productivity growth and the micro evolution of the income distribution. We show that over the entire period 1966-2001, as well as over 1997-2001, only the top 10 percent of the income distribution enjoyed a growth rate of real wage and salary income equal to or above the average rate of economy-wide productivity growth. Growth in median real wage and salary income barely grew at all while average wage and salary income kept pace with productivity growth, because half of the income gains went to the top 10 percent of the income distribution, leaving little left over for the bottom 90 percent. Half of this inequality effect is attributable to gains of the 90th percentile over the 10th percentile; the other half is due to increased skewness within the top 10 percent. In addition to its micro analysis, this paper also asks whether faster productivity growth reduces inflation, raises nominal wage growth, or raises profits. We find that an acceleration or deceleration of the productivity growth trend alters the inflation rate by at least one-for-one in the opposite direction. This paper revives research on wage adjustment and produces a dynamic interactive model of price and wage adjustment that explains movements of labor's share of income. What caused rising income inequality? Economists have placed too much emphasis on "skill-biased technical change" and too little attention to the sources of increased skewness at the very top, within the top 1 percent of the income distribution. We distinguish two complementary explanations, the "economics of superstars," i.e., the pure rents earned by sports and entertainment stars, and the escalating compensation premia of CEOs and other top corporate officers. These sources of divergence at the top, combined with the role of deunionization, immigration, and free trade in pushing down incomes at the bottom, have led to the wide divergence between the growth rates of productivity, average compensation, and median compensation.
    JEL: D31 D33 D63 E31
    Date: 2005–12
  2. By: Ricardo Caballero; Arvind Krishnamurthy
    Abstract: We present a model of flight to quality episodes that emphasizes financial system risk and the Knightian uncertainty surrounding these episodes. In the model, agents are uncertain about the probability distribution of shocks in markets different from theirs, treating such uncertainty as Knightian. Aversion to this uncertainty generates demand for safe financial claims. It also leads agents to require financial intermediaries to lock-up capital to cover their own markets' shocks in a manner that is robust to uncertainty over other markets. These actions are wasteful in the aggregate and can trigger a financial accelerator. A lender of last resort can unlock private capital markets to stabilize the economy during these episodes by committing to intervene should conditions worsen.
    JEL: E30 E44 E5 F34 G1
    Date: 2005–12
  3. By: Agnes Benassy-Quere; Valerie Mignon; Alexis Penot
    Abstract: We study cointegration and causality between the real price of oil and the real price of the dollar over the 1974-2004 period. Our results suggest that a 10% rise in the oil price coincides with a 4.3% appreciation of the dollar in the long run, and that the causality runs from oil to the dollar. Through the development of a theoretical model, we then investigate possible reasons why this relationship could be reversed in the future due to the emergence of China as a major player on both the oil and the foreign exchange markets.
    Keywords: Oil price; real exchange rate; dollar; euro; China; cointegration; causality; error correction model; dollar; energy cost; models; foreign exchange markets
    JEL: C22 F31 Q43
    Date: 2005–10
  4. By: Georges Dionne; Pierre Duchesne; Maria Pacurar
    Abstract: The objective of this paper is to investigate the use of tick-by-tick data for market risk measurement. We propose an Intraday Value at Risk (IVaR) at different horizons based on irregularly time-spaced high-frequency data by using an intraday Monte Carlo simulation. An UHF-GARCH model extending the framework of Engle (2000) is used to specify the joint density of the marked-point process of durations and high-frequency returns. We apply our methodology to transaction data for the Royal Bank and the Placer Dome stocks traded on the Toronto Stock Exchange. Results show that our approach constitutes reliable means of measuring intraday risk for traders who are very active on the market. The UHF-GARCH model performs well out-of-sample for almost all the time horizons and the confidence levles considered even when normality is assumed for the distribution of the error term, provided that intraday seasonality has been accounted for prior to the estimation.
    Keywords: Value at Risk, tick-by-tick data, UHF-GARCH models, intraday market risk, high-frequency models, intraday Monte Carlo simulation, Intraday Value at Risk
    JEL: C22 C41 C53 G15
    Date: 2005
  5. By: Erkki Koskela; Rune Stenbacka
    Abstract: We investigate the implications of product market imperfections on profit sharing, wage negotiation and equilibrium unemployment. The optimal profit share, which the firms use as a wage-moderating commitment device, is below the bargaining power of the trade union. Intensified product market competition decreases profit sharing, but increases the negotiated base wage, because the wage-increasing effect of reduced profit sharing dominates the wage-reducing effect associated with a higher wage elasticity of labor demand. Finally, we show that intensified product market competition does not necessarily reduce equilibrium unemployment, because it induces both higher wage mark-ups and lower optimal profit shares.
    Keywords: product market competition, profit sharing, wage bargaining, equilibrium unemployment
    JEL: J33 J51 L11
    Date: 2005
  6. By: Sergio Rebelo (Northwestern University, NBER, and CEPR.)
    Abstract: In this paper I review the contribution of real business cycles models to our understanding of economic fluctuations, and discuss open issues in business cycle research.
    Date: 2005–12
  7. By: Fabio Sabatini (University of Rome La Sapienza, Department of Public Economics)
    Abstract: This paper carries out an empirical assessment of the relationship between social capital and labour productivity in small and medium enterprises in Italy. By means of structural equations models, the analysis investigates the effect of different aspects of the multifaceted concept of social capital. While the bonding social capital of strong family ties seems to be irrelevant, the bridging social capital of weak ties connecting friends and acquaintances is proved to exert a significant and positive influence both on labour productivity and on human development.
    Keywords: Labour productivity, Small and medium enterprises, Social capital, Social networks, Structural equations models
    JEL: J24 R11 O15 O18
    Date: 2005–12–11
  8. By: Malmberg, Bo (Institute for Futures Studies); Lindh, Thomas (Institute for Futures Studies); Halvarsson, Max (Institute for Futures Studies)
    Abstract: Data linking the production of value-added at the plant level to the individual employees provide an opportunity to deepen the understanding of how the labor force composition relates to productivity performance. In view of the anticipated aging of the workforce in industrialised economies a body of research has emerged that indicate that individual productivity has a more pronounced hump-shape than the wage profile. This paper studies these issues by examining the composition of the workforce at the plant level in relation to the productivity performance of the plants. Our data cover the Swedish mining and manufacturing industries 1985-1996. The fact that older workers selectively work with older capital may have biased results found in the literature. Endogeneity of workforce composition poses serious estimation problems, but our attempts to cope with these problems tend to indicate that biases in general go in the direction that productivity of the young is overestimated and the productivity of the old is underestimated.
    Keywords: workforce ageing; productivity growth
    JEL: J10 J21 J24
    Date: 2005–12–12
  9. By: Steven Brakman; Harry Garretsen; Charles van Marrewijk
    Abstract: By combining two large data sets (on international trade flows and on mergers and acquisitions - M&As), we are able to test two implications of Neary’s (2003, 2004a) recent theoretical work. Analyzing M&As in a General Oligopolistic Equilibrium (GOLE) model incorporating strategic interaction between firms in a general equilibrium setting, we argue that: (i) M&As follow revealed comparative advantage as measured by the Balassa index, and (ii) M&As come in waves. We find convincing support for both hypotheses, thus showing for the first time that there is an empirical connection between export performance and mergers and acquisitions.
    Keywords: comparative advantage, cross border mergers and acquisitions, merger waves, general oligopolistic equilibrium model
    JEL: F10 F12 L13
    Date: 2005
  10. By: Simon Lee (Institute for Fiscal Studies and University College London)
    Abstract: This paper is concerned with identification of a competing risks model with unknown transformations of latent failure times. The model in this paper includes, as special cases, competing risks versions of proportional hazards, mixed proportional hazards, and accelerated failure time models. It is shown that covariate effects on latent failure times, cause-specific link functions, and the joint survivor function of the disturbance terms can be identified without relying on modelling the dependence between latent failure times parametrically nor using an exclusion restriction among covariates. As a result, the paper provides an identification result on the joint survivor function of the latent failure times conditional on covariates.
    Keywords: Competing risks model; Identification; Transformation model
    Date: 2005–11
  11. By: Lutz Kaiser (IZA Bonn, DIW Berlin and EPAG)
    Abstract: In 14 member states of the European Union, women’s relative to men’s levels of job satisfaction are compared by using data of the European Household Community Panel. The countries under consideration can be assigned to three different groups. Denmark, Finland and the Netherlands do not show significant gender-job satisfaction differences. In contrast, in Portugal men are more satisfied with their jobs than women. However, in the vast majority of the investigated countries female workers show a significantly higher level of job satisfaction. As the majority of women are disadvantaged compared to men in the labor market, the findings clearly demonstrate a gender-job satisfaction paradox in these countries. From this point of view, only Denmark, Finland and the Netherlands display gender-job satisfaction equality. The results suggest that objective (socio-economic and institutional) determinants of labor market statuses and subjective (assessed and evaluated) perspectives are mutually complementary. The more restrictive the labor market access and process is for women, the more likely a gender-job satisfaction paradox is to emerge in any country. With regard to the process of labor market modernization, the results support the hypotheses that equal opportunities for women and men like in Scandinavian countries and also partially in the Netherlands implicate that the gender-job satisfaction paradox does not appear anymore due to a fading-out over past decades.
    Keywords: cross-national comparison, gender-job satisfaction paradox, labor supply, labor market modernization
    JEL: J28
    Date: 2005–12
  12. By: Morten Bennedsen (Copenhagen Business School); Kasper Nielsen (University of Copenhagen); Francisco Pérez-González (Columbia University); Daniel Wolfenzon (New York University)
    Abstract: This paper uses a unique dataset from Denmark to investigate (1) the role of family characteristics in corporate decision making, and (2) the consequences of these decisions on firm performance. We focus on the decision to appoint either a family or an external chief executive officer (CEO). We show that a departing CEO’s family characteristics have a strong predictive power in explaining CEO succession decisions: family CEOs are more frequently selected the larger the size of the family, the higher the ratio of male children and when the departing CEOs had only had one spouse. We then analyze the impact of family successions on performance. We overcome endogeneity and omitted variables problems of previous papers in the literature by using the gender of a departing CEO’s first-born child as an instrumental variable (IV) for family successions. This is a plausible IV as male first-child family firms are more likely to pass on control to a family CEO than female first-child firms, but the gender of the first child is unlikely to affect firms’ performance. We find that family successions have a dramatic negative causal impact on firm performance: profitability on assets falls by at least 6 percentage points around CEO transitions. These estimates are significantly larger than those obtained using ordinary least squares. Finally, our findings demonstrate that professional non-family CEOs provide extremely valuable services to the organizations they work for.
    Keywords: family firms; successions; CEO turnover; governance
    JEL: G32 G34 M13
    Date: 2005–06
  13. By: Ooghe, H.; Spaenjers, C.; Pieter vandermoere
    Abstract: We give an overview of the shortcomings of the most frequently used statistical techniques in failure prediction modelling. The statistical procedures that underpin the selection of variables and the determination of coefficients often lead to ‘overfitting’. We also see that the ‘expected signs’ of variables are sometimes neglected and that an underlying theoretical framework mostly does not exist. Based on the current knowledge of failing firms, we construct a new type of failure prediction models, namely ‘simple-intuitive models’. In these models, eight variables are first logit-transformed and then equally weighted. These models are tested on two broad validation samples (1 year prior to failure and 3 years prior to failure) of Belgian companies. The performance results of the best simple-intuitive model are comparable to those of less transparent and more complex statistical models.
    Date: 2005–12–15
  14. By: Bergès Sennou, F.; Chambolle, C.
    Abstract: In this paper, we analyze how the upstream Bertrand competition is distorted when we take into account repetition of the interactions within a vertical relationship. We argue that, in a two-period setting, a downstream monopsonist may prevent an efficient producer to prey on a less efficient upstream competitor. The reason is the retailer has an incentive to maintain the inefficient producer on the upstream market in order to preserve its second period buying power towards the efficient supplier. We thus point out that there exists an equilibrium where the efficient supplier grants tariff concessions to the monopsonist retailer to become its exlusive supplier and benefits of a monopoly power in the second period. However, there exists another type of equilibrium where te retailer maintain both suppliers in the first period. In this latter case, for high value of future (high), producters make the retailer pay the high price for enjoying manufacturer's competition in the second period : producers realize a first period monopoly profit whereas competing à la Bertrand. ...French Abstract : Dans cet article, les auteurs analysent comment la concurrence amont à la Bertrand est faussée lorsque l'on prend en compte l'aspect répété des intéractions dans les relations verticales. Ils prouvent que, dans un jeu à deux périodes, un monopsoniste en aval préfère parfois empêcher que le producteur le plus efficace ne s'attaque au producteur moins efficace. La raison est que le détaillant trouve un intérêt à maintenir le producteur inefficace sur le marché amont afin de préserver la concurrence en seconde période. Ils montrent donc qu'il existe un équilibre oû le producteur efficace accorde des concessions tarifaires au détaillant pour devenir son fournisseur exclusif, bénéficiant alors d'un pouvoir de monopole en seconde période. Cependant, il existe aussi un autre type d'équilibre oû le détaillant maintient les deux producteurs en première période. Dans un tel cas, pour des valeurs élevées du taux d'escompte, les producteurs font payer le prix fort au distributeur pour son opportunisme à vouloir faire jouer la concurrence en amont en seconde période. Les producteurs réalisent alors un profit de monopole en première période alors qu'ils se concurrencent à la Bertand.
    JEL: L14 L12 D2
    Date: 2005
  15. By: Andzelika Lorentowicz; Dalia Marin; Alexander Raubold
    Abstract: Feenstra and Hanson (1997) have argued in the context of the North American Free Trade Agreement that US outsourcing to Mexico leads to an increase in the skill premium in both the US and Mexico. In this paper we show on the example of Austria and Poland that with the new international division of labour emerging in Europe Austria, the high income country, is specializing in the low skill intensive part of the value chain and Poland, the low income country, is specializing in the high skill part. As a result, skilled workers in Austria are losing from outsourcing, while gaining in Poland. In Austria, relative wages for human capital declined by 2 percent during 1995-2002 and increased by 41 percent during 1994-2002 in Poland. In both countries outsourcing contributes roughly 35 percent to these changes in the relative wages for skilled workers. Furthermore, we show that Austria's R&D policy has contributed to an increase in the skill premium there.
    JEL: F21 F23 J31 P45
    Date: 2005
  16. By: Virginie Baritaux (UMR MOISA - INRA - Montpellier France); Magali Aubert (UMR MOISA - INRA - Montpellier France); Etienne Montaigne (UMR MOISA - AGRO.M - Montpellier France); Hervé Remaud (UMR MOISA-AGRO.M - Montpellier France)
    Abstract: Wine brokers are wholesale intermediaries. They belong to the category of the matchmaker intermediaries. These middlemen are not well known. Their role is to help buyers and sellers of bulk wine to meet and transact. Assuming that wine merchants appeal to brokers because they reduce transaction costs, we analyze how a broker intervention can reduce search costs, negotiation costs, and monitoring and enforcement costs of a transaction on bulk wine. A data base of contracts on bulk vins de table and vins de pays is used to estimate a logistic model of the probability “broker intervention”.
    Keywords: Broker, Matchmaker, Marketing Channels, Wine, Transaction costs, France
    JEL: L11 L14 L22
    Date: 2005–12–15
  17. By: James Alm (Andrew Young School of Policy Studies, Georgia State University); Edward Sennoga (Andrew Young School of Policy Studies, Georgia State University); Mark Skidmore (Department of Economics, University of Wisconsin - Whitewater)
    Abstract: In this paper we use monthly gasoline price data for all fifty U.S. states over the period 1984 to 1999 to examine the incidence of state gasoline excise taxes. Standard economic theory predicts full shifting of the excise tax to consumers when the supply of gasoline is perfectly elastic, and our empirical results are largely consistent with this prediction. In general, we find full shifting of gasoline taxes to the final consumer, with changes in gasoline taxes fully reflected in the tax-inclusive gasoline price almost instantly, a result consistent with a retail gasoline market in which firms are perfectly competitive and produce at constant cost. In addition, although we find that gasoline retail prices demonstrate asymmetric responses to changes in gasoline wholesale prices, we find only limited evidence of such behavior for retail prices with respect to gasoline excise taxes. Importantly, we also present a novel application of a spatial price discrimination model to examine tax incidence in markets that are not perfectly competitive. In this alternative framework, the incidence of excise taxes depends upon the competitiveness of retail gasoline markets, which depends in turn on spatial aspects of the market. Consistent with this alternative theoretical framework, our empirical estimates demonstrate that gasoline markets in urban states exhibit full shifting, but those in rural states demonstrate somewhat less than full shifting.
    Keywords: incidence, spatial competition, asymmetric response
    JEL: H22
    Date: 2005–10
  18. By: Cunha, Miguel Pina e; Kamoche, Ken; Clegg, Stewart R.
    Abstract: We discuss why surprises, defined as events that happen unexpectedly or expected events that take unexpected shapes, are important to organizations and should be considered in the organizational literature. The concept of organizational surprises is unpacked on the basis of a typology built around the (un)expectedeness of issue and process. This typology uncovers the several types of surprising events that organizations may face, and contributes to the literature by suggesting that different surprises require distinct approaches.
    Date: 2004
  19. By: Cunha, Rita Campos e; Cunha, Miguel Pina e
    Abstract: This study uses structural equation modeling to test a model of the impact of human resource management bundles on perceived organizational performance and innovation performance, on a large sample of companies. Strategic management orientation and innovation as a strategic factor are proposed to influence the existence of two types of HR bundles, functional flexibility and performance management, as well as contributing to stronger HR systems. HRM Strength, which integrates the metafeatures of an HRM system and provides a common interpretation of organizational goals, has a strong positive impact on both innovation and organizational performances. Finally, while both the functional flexibility and performance management bundles have a positive impact on organizational performance, they do not seem to affect innovation performance.
    Date: 2004
  20. By: Carvalho, Antonio Gledson de; Calomiris, Charles W.; Matos, Joao Amaro de
    Abstract: Part of the way venture capitalists add value to portfolio firms is by obtaining and transferring information about senior managers across firms over time. Information transfer occurs on a significant scale and takes place both among a single venture capitalists portfolio firms and between different venture capitalists firms via a network of venture capitalists, which venture capitalists use to locate and relocate managers. We collect and analyze survey data on the operation of this human resource network. Theoretical and empirical analyses indicate that cross-sectional differences among portfolio firms are associated with differences in the intensity with which venture capitalists network. The observable factors relevant in explaining the intensity with which venture capitalists network include: 1) the value of the information transmitted though the network, 2) the riskiness of the activities of the portfolio firms, 3) the size of the venture capital fund, 4) the degree of difficulty in enticing executives to manage portfolio firms, and 5) the reputation of the venture capitalist for successfully recycling managers. We show that each of these factors reflects the costs and benefits to venture capitalists of participating in the network.
    Date: 2005

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