nep-bec New Economics Papers
on Business Economics
Issue of 2006‒06‒24
eighteen papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. The Rules of Standard Setting Organizations: an Empirical Analysis By CHIAO, Benjamin; LERNER, Josh; TIROLE, Jean
  2. Why Do Worker-Firm Matches Dissolve? By Anne C. Gielen; Jan C. van Ours
  3. Searching for a Metric for Financial Stability By Lea Zicchino; Dimitrios Tsomocos; Miguel Segoviano; Charles Goodhart; Oriol Aspachs
  4. Re-Employment Probabilities over the Business Cycle By Guido W. Imbens; Lisa M. Lynch
  5. Transformational and transactional leadership: an axamination of managerial cognition among spanish By JUAN CARLOS PASTOR; MARGARITA MAYO
  6. A New Approach Based on Cumulants for Estimating Financial Regression Models with Errors in the Variables: the Fama and French Model Revisited By Alain Coen; Francois-Éric Racicot; Raymond Théoret
  7. Competitiveness and the employment relationship in the 21 st Century: By CRISTINA SIMON; GAYLE ALLARD
  8. Measurement of Business Cycles By Don Harding; Adrian Pagan
  9. Effort and Comparison Income: Experimental and Survey Evidence By Andrew E. Clark; David Masclet; Marie-Claire Villeval
  10. Benchmark Index of Risk Appetite By Miroslav Misina
  11. Income Taxes and Entrepreneurial Choice: Empirical Evidence from Germany By Frank M. Fossen; Viktor Steiner
  12. Financial Innovations and Macroeconomic Volatility By Urban Jermann; Vincenzo Quadrini
  13. Moore's Law and the Semiconductor Industry: A Vintage Model By Ana Aizcorbe; Samuel Kortum
  14. Globalization, Offshoring, and Multinational Companies: What Are the Questions, and How Well Are We Doing in Answering Them? By Ralph Kozlow
  15. Consolidation and Value Creation in the Insurance Industry: the Role of Governance By Narjess Boubakri; Georges Dionne; Thouraya Triki
  16. Outsourcing and Imported Services in BEA’s Industry Accounts By Robert E. Yuskavage; Erich H. Strassner; Gabriel W. Medeiros
  17. Why Are Semiconductor Price Indexes Falling So Fast?: Industry Estimates and Implications for Productivity Measurement By Ana Aizcorbe
  18. The impact of supply chain applications annoucements on the market value of firms By GONZALO CHAVEZ; OSWALDO LORENZO

  1. By: CHIAO, Benjamin; LERNER, Josh; TIROLE, Jean
    Date: 2006–05
  2. By: Anne C. Gielen (Tilburg University, CentER and Institute for Labor Studies (OSA)); Jan C. van Ours (Tilburg University, CentER, CEPR and IZA Bonn)
    Abstract: In a dynamic labor market worker-firm matches dissolve frequently causing workers to separate and firms to look for replacements. A separation may be initiated by the worker (a quit) or the firm (a layoff), or may result from a joint decision. A dissolution of a worker-firm match may be inefficient if it can be prevented by wage renegotiation. In this paper we study worker separations in the Dutch labor market. From an analysis of matched worker-firm data we conclude that both quits and layoffs are less likely to occur in high quality matches. We also find that workers with a high propensity to quit are offered higher wages to prevent them to quit. Similarly, workers with a high layoff probability give up some of their wage to prevent them from being laid-off. Despite these wage renegotiations some inefficiency in separations remains. However, there is a clear difference between quits and layoffs. Whereas inefficient quits are rare, inefficient layoffs occur frequently. These phenomena may be related to downward wage rigidity. While it is easy to renegotiate higher wages to prevent quits, it is much more difficult to renegotiate lower wages to prevent layoffs even if that would overall be beneficial to the workers involved.
    Keywords: separations, quits, layoffs, matched worker-firm dataset
    JEL: J31 J63 M51
    Date: 2006–06
  3. By: Lea Zicchino; Dimitrios Tsomocos; Miguel Segoviano; Charles Goodhart; Oriol Aspachs
    Date: 2006–05
  4. By: Guido W. Imbens (Harvard University and NBER); Lisa M. Lynch (Tufts University, NBER and IZA Bonn)
    Abstract: Using a Cox proportional hazard model that allows for a flexible time dependence in order to incorporate business cycle effects, we analyze the determinants of reemployment probabilities of young workers in the U.S. from 1978-1989. We find considerable changes in the chances of young workers finding jobs over the business cycle despite the fact that personal characteristics of those starting jobless spells do not vary much over time. Therefore, government programs that target specific demographic groups may change individuals’ positions within the queue of job seekers, but may only have a more limited impact on average re-employment probabilities. Living in an area with high local unemployment reduces re-employment chances as does being in a long spell of nonemployment. However, the damage associated with being in a long spell seems to be reduced somewhat if a worker is unemployed in an area with high overall unemployment.
    Keywords: unemployment, duration dependence, business cycle
    JEL: E24 E32 J2 J6
    Date: 2006–06
  5. By: JUAN CARLOS PASTOR (Instituto de Empresa); MARGARITA MAYO (Instituto de Empresa)
    Abstract: Transformational leadership predicts follower´s satisfaction and performance beyond traditional forms of leadership. However, little is known about the beliefs system associated with transformational leaders. Taking a cognitive perspective, we examined how the managerial beliefs that executives hold about their followers relate to their perceived leadership style among a sample of 76 Presidents and CEO´s of Spain largest firms.
    Keywords: Transformational leadership, Managerial cognition, Goal orientation, Theory Y.
  6. By: Alain Coen (Département de stratégie des affaires, Université du Québec (Montréal)); Francois-Éric Racicot (Département des sciences administratives, Université du Québec (Outaouais) et LRSP); Raymond Théoret (Département de stratégie des affaires, Université du Québec (Montréal))
    Abstract: This paper proposes to revisit both the CAPM and the three-factor model of Fama and French (1993) in presence of errors in the variables. To reduce the bias induced by measurement and specification errors, we transpose to the cost of equity an estimator based on cumulants of order three and four initially developed by Dagenais and Dagenais (1997) and lated generalized to financial models by Racicot (2003). Our results show that our technique has great and significant consequences on the measure of the cost of equity. We obtain ipso facto a new estimator of the Jensen alpha.
    Keywords: Errors in the variables, cumulants, higher moments, instrumental variables, cost of equity, Jensen alpha.
    JEL: C13 C49 G12 G31
    Date: 2006–05–01
  7. By: CRISTINA SIMON (Instituto de Empresa); GAYLE ALLARD (Instituto de Empresa)
    Abstract: Competitiveness is an often ill-defined concept that is key to economic success. This paper focuses on the links between competitiveness and the employment relationship. It ranks European countries by their specialization in high-technology, skilled labor sectors to yield a competitiveness ranking, and examines workers´ values and attitudes to identify common features of the "competitive" countries.
    Keywords: Employment relationship
  8. By: Don Harding; Adrian Pagan
    Abstract: We describe different ways of measuring the business cycle. Insti- tutions such as the NBER, OECD and IMF do this through locating the turning points in series taken to represent the aggregate level of economic activity. The turning points are determined according to rules that either come from a parametric model or are non-parametric. Once located information can be extracted on cycle characteristics. We also distinguish cases where a single or multiple series are used to represent the level of activity.
    JEL: E32
    Date: 2006
  9. By: Andrew E. Clark (PSE and IZA Bonn); David Masclet (CNRS and CREM); Marie-Claire Villeval (CNRS, GATE and IZA Bonn)
    Abstract: This paper considers the effect of status or relative income on work effort combining experimental evidence from a gift-exchange game with ISSP survey data. We find a consistent negative effect of others’ incomes on individual effort in both datasets. The individual’s rank in the income distribution is a stronger determinant of effort than others’ average income, suggesting that comparisons are more ordinal than cardinal. We then show that effort is also affected by comparisons over time: those who received higher income offers or had higher income rank in the past exert lower levels of effort for a given current income and rank.
    Keywords: effort, comparison income, rank, peak-end, experiments
    JEL: M54 J33 A13 C92 D63
    Date: 2006–06
  10. By: Miroslav Misina
    Abstract: Changes in investors' risk appetite have been used to explain a variety of phenomena in asset markets. And yet, popular indicators of changes in risk appetite typically have scant foundation in theory, and give contradictory signals in practice. The question is which popular indicator, if any, captures these changes. Kumar and Persaud (2002) offer an intuitively appealing argument regarding the effects of changes in risk appetite on asset prices in a portfolio, and Misina (2003) establishes the conditions under which these effects will be present. The author proposes a method that empirically implements these conditions and thus ensures that the resulting index can identify changes in risk appetite in the data. This index is then used to assess other risk appetite indexes used in practice. An example illustrates how the index can be used to help interpret price movements in foreign exchange markets.
    Keywords: Economic models; Financial markets
    JEL: G12
    Date: 2006
  11. By: Frank M. Fossen (DIW Berlin); Viktor Steiner (Free University of Berlin, DIW Berlin and IZA Bonn)
    Abstract: Entrepreneurial activity is often regarded as an engine for economic growth and job creation. Through tax policy, governments possess a potential lever to influence the decisions of economic agents to start and close small businesses. In Germany, the top marginal income tax rates were reduced exclusively for entrepreneurs in 1994 and 1999/2000. These tax reforms provided two naturally defined control groups that enable us to exploit the legislation changes as "natural experiments". First, the tax rate reductions did not apply to freelance professionals (Freiberufler), and second, entrepreneurs with earnings below a certain threshold were not affected. Using data from two different sources, the SOEP and the Mikrozensus (LFS), we analyse the effect of the tax cuts on transitions into and out of selfemployment and on the rate of self-employment. We apply a "difference-in-difference-indifference" estimation technique within a discrete time hazard rate model. The results indicate that the decrease in tax rates did not have a significant effect on the self-employment decision.
    Keywords: taxation, entrepreneurship, natural experiment, difference-in-difference-indifference estimation
    JEL: H24 H25 J23
    Date: 2006–06
  12. By: Urban Jermann; Vincenzo Quadrini
    Abstract: The volatility of US business cycle has declined during the last two decades. During the same period the financial structure of firms has become more volatile. In this paper we develop a model in which financial factors play a key role in generating economic fluctuations. Innovations in financial markets allow for greater financial flexibility and generate a lower volatility of output together with a higher volatile in the financial structure of firms.
    JEL: E3 G1 G3
    Date: 2006–06
  13. By: Ana Aizcorbe; Samuel Kortum (Bureau of Economic Analysis)
    JEL: E60
    Date: 2004–12
  14. By: Ralph Kozlow (Bureau of Economic Analysis)
    Abstract: This paper identifies key questions that are being asked about globalization and MNC’s and then reviews the types of statistics that are required to answer those questions. The paper goes on to assess whether the statistics collected by the Bureau of Economic Analysis are adequate to address those questions.
    JEL: E60
    Date: 2006–01
  15. By: Narjess Boubakri; Georges Dionne; Thouraya Triki
    Abstract: We examine the long run performance of M&A transactions in the property-liability insurance industry. We specifically investigate whether such transactions create value for the bidders' shareholders and assess how corporate governance mechanisms affect such performance. Our results show that M&A create value in the long run as buy and hold abnormal returns are positive and significant after three years. While tender offers appear to be more profitable than mergers, our evidence does not support the conjecture that domestic transactions create more value than cross border transactions. Furthermore, positive returns are significantly higher for frequent acquirers and in countries where investor protection is better. Internal corporate governance mechanisms are also significant determinants of the performance of bidders.
    Keywords: Merger and acquisition, property-liability insurance, governance, value creation, performance of bidders
    JEL: D80 G22
    Date: 2006
  16. By: Robert E. Yuskavage; Erich H. Strassner; Gabriel W. Medeiros (Bureau of Economic Analysis)
    JEL: E60
    Date: 2006–03
  17. By: Ana Aizcorbe (Bureau of Economic Analysis)
    Abstract: By any measure, price deflators for semiconductors fell at a staggering pace over much of the last decade, pulled down by steep declines in the deflator for the microprocessor (MPU) segment. These rapid price declines are typically attributed to technological innovations that lower constant-quality manufacturing costs through either increases in the quality of the devices or decreases in costs. However, Intel’s dominance in the microprocessor market raises the possibility that those price declines could also reflect changes in Intel’s profit margins. This paper uses industry estimates on Intel’s operations to decompose a price index for Intel’s MPUs into three components: quality improvements, reductions in costs, and changes in markups. The decomposition suggests that 1) virtually all of the declines in a price index for Intel’s chips can be attributed to quality increases associated with product innovation, rather than declines in the cost per chip. Of course, these increases in quality pushed down constant-quality costs. However, cost per chip did not play a role in generating the observed price declines in the MPU price index, as cost increases associated with the introduction of new, higher quality chips more than offset cost reductions associated with learning economies. With regard to markups, the sizable decline in Intel's markups from 1993-99 only accounted for about 6 percentage points of the average 24 percent decline per quarter in a price index for Intel’s chips. Consistent with the inflection point that Jorgenson(2000) noted in the overall price index for semiconductors, the Intel price index falls faster after 1995 than in the earlier period but, again, the decomposition attributes virtually all of the inflection point to an acceleration in quality increases.
    Date: 2005
  18. By: GONZALO CHAVEZ (Instituto de Empresa); OSWALDO LORENZO (Instituto de Empresa)
    Abstract: We show that the announcement of SCM applications have a positive impact on the market value of firms using event study methodology. When SCM applications are disaggregated according to whether they are stand-alone SCM applications, or part of an enterprise system (SCM-ES) implementation, we find that the latter carry a significant value enhancement, while the former do not present a significant market reaction.
    Keywords: SCM applications, Event study

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