nep-bec New Economics Papers
on Business Economics
Issue of 2007‒03‒31
29 papers chosen by
Christian Calmes
University of Quebec in Ottawa

  1. Subjective Evaluation of Performance Through Individual Evaluation Interview: Empirical evidence from France By Marc-Arthur Diaye; Nathalie Greenan; Michal Urdanivia
  2. Collateral Constraint and News-driven Cycles By KOBAYASHI Keiichiro; NAKAJIMA Tomoyuki; INABA Masaru
  3. Bargaining in Mergers and Termination Fees By Rosenkranz, Stephanie; Weitzel, Utz
  4. Wage Structure and Firm Productivity in Belgium By Thierry Lallemand; Robert Plasman; Francois Rycx
  5. A Richer Understanding of Australia’s Productivity Performance in the 1990s: Improved estimates based upon firm-level panel data By Robert Breunig; Marn-Heong Wong
  6. Input and Output Inventories in General Equilibrium By Matteo Iacoviello; Fabio Schiantarelli; Scott Schuh
  7. Does Globalization Create Superstars? By Gersbach, Hans; Schmutzler, Armin
  8. Training and age-biased technical change By BEHAGHEL Luc; GREENAN Nathalie
  9. The young, the old, and the restless: demographics and business cycle volatility By Nir Jaimovich; Henry E. Siu
  10. International trade, technological shocks and spillovers in the labour market; A GVAR analysis of the US manufacturing sector. By Paul Hiebert; Isabel Vansteenkiste
  11. Union Organization in Great Britain By Alex Bryson; P Willman
  12. Wage Structure and Labor Mobility in Norway 1980–1997 By Arngrim Hunnes; Jarle Møen; Kjell G. Salvanes
  13. Gender-Biased Behavior at Work: What Can Surveys Tell Us About the Link Between Sexual Harassment and Gender Discrimination? By Heather Antecol; Vanessa E. Barcus; Deborah A. Cobb-Clark
  14. Establishment Wage Differentials By Lane, Julia I.; Salmon, Laurie A.; Spletzer, James R.
  15. Econometric Explorations on Bounded Rationality: The Case of Job Changing Behavior By Bruno Contini; Matteo Morini
  16. The Role of Housing Collateral in an Estimated Two-Sector Model of the U.S. Economy By Matteo Iacoviello; Stefano Neri
  17. The Plant Size-Place Effect: Agglomeration and Monopsony in Labour Markets By Alan Manning
  18. Delegating Infrastructure Projects with Open Access By Keizo Mizuno; Testuya Shinkai
  19. Accounting for Collective Action: Resource Acquisition and Mobilization in British Unions By Alex Bryson; P Willman
  20. Using Behavioral Economic Field Experiments at a Large Motor Carrier: The Context and Design of the Truckers and Turnover Project By Stephen V. Burks; Jeffrey Carpenter; Lorenz Goette; Kristen Monaco; Aldo Rustichini; Kay Porter
  21. Preferencing, internalization and inventory position By Lescourret, Laurence; Robert, Christian Y.
  22. Equilibrium Unemployment with Outsourcing under Labour Market Imperfections By Erkki Koskela; Rune Stenbacka
  23. International experience and career advancement: a multilevel analysis By MONIKA HAMORI
  24. Firm Size, Wages and Unobserved Skills : Evidence from Dual Job Holdings in the UK By Alexander Muravyev
  25. Market power and relationships in small business lending By Elizabeth Laderman
  26. Computable Markov-Perfect Industry Dynamics: Existence, Purification, and Multiplicity By Doraszelski, Ulrich; Satterthwaite, Mark
  27. Behind the Gap Between Productivity and Wage Growth By Dean Baker
  28. Offshoring: General Equilibrium Effects on Wages, Production and Trade By Richard Baldwin; Frederic Robert-Nicoud
  29. Entry, Exit and Productivity: Empirical Results for German Manufacturing Industries By Joachim Wagner

  1. By: Marc-Arthur Diaye; Nathalie Greenan; Michal Urdanivia
    Abstract: Individual evaluation interviews have become a widespread practice. 52% of employees in French manufacturing firms over 50 employees declared an annual individual evaluation interview in 1997. However whereas the problem of constructing an optimal contract with subjective evaluation (which is defined simply as a signal in most papers) receives a large attention, firm-level evaluation interviews are strikingly left aside from economic analysis. This paper aims at identifying the underlying logics of individual evaluation interviews in the case of individual production and of team production. Especially, it aims at analyzing the relationships between effort, wage distribution within the firms and individual evaluation interviews. From a theoretical standpoint, three papers by Alchian and Demsetz (1972), by Che and Yoo (2001) and by MacLeod (2003) are closely related to our paper and from an empirical point of view, a paper by Engellandt and Riphahn (2004). Our theoretical analysis allows to derive testable predictions regarding the effect of individual evaluation interviews on productive and cognitive effort, on work overload and on wage setting. Using a matched employer / employee survey on computerisation and organisational change (COI), we are able to test part of these predictions and to corroborate them. First, evaluation interviews have a positive impact on productive and cognitive effort. Second, evaluation interviews increase effort through two effects: the classical incentive effect and also a selection effect. Third, the selection effect is stronger in the case of individual production compared with the case of team production. Fourth, evaluated employees earn more than employees in a classical incentive scheme and fifth, evaluated workers have a better knowledge of the rules driving wage setting.
    JEL: M5 M50 M54 M55
    Date: 2007–03
  2. By: KOBAYASHI Keiichiro; NAKAJIMA Tomoyuki; INABA Masaru
    Abstract: The boom-bust cycles such as the episode of the "Internet bubble" in the late 1990s may be described as the business cycle driven by changes in expectations or news about the future. The comovements in consumption, labor, and investment, in response to news about productivity changes in the future can be called the news-driven cycles. We show that with the assumption that firms are subject to the collateral constraint in financing input costs, a fairly standard Real Business Cycle model can generate the news-driven cycles. The collateral constraint models have several virtues: (1) The model structure is simple; (2) introduction of the intermediate input enables our models to reproduce procyclical movements in the total factor productivity; (3) our models can generate procyclical movements in price of capital (Tobin's q); and (4) the second model in our paper, which is a modified version of the Carlstrom-Fuerst model, can generate countercyclical movements in bankruptcies, while the original Carlstrom-Fuerst model cannot.
    Date: 2007–03
  3. By: Rosenkranz, Stephanie; Weitzel, Utz
    Abstract: We model takeovers as a bargaining process and explain termination fees for, both, the target and the acquirer, subject to parties’ bargaining power and outside options. In equilibrium, termination fees are offered by firms with outside options in exchange for a greater share of merger synergies. Termination fees decrease in firms’ bargaining power, and increase in firms’ outside options. We find that a merger with the second highest bidder, including a termination fee, can lead to equally high premiums as a merger with the highest bidder, without a termination fee. This novel result directly contrasts the agency cost perspective, which argues that termination provisions may be used by managers to lock into acquirers that do not generate the highest shareholder value. Further, even in a merger with the highest bidder and in the absence of bidding related costs, a termination fee is not necessarily a deal protection device, but can be used to improve shareholder value. Our bargaining model offers an alternative to auction related explanations of termination fees, like cost compensation or seller commitment.
    Keywords: bargaining; break-up fees; lockups; mergers and acquisitions; outside option; termination fees
    JEL: C71 C78 D44 G34 K22
    Date: 2007–03
  4. By: Thierry Lallemand; Robert Plasman; Francois Rycx
    Abstract: The objective of this paper is twofold. First, we analyse the structure of wages within and between Belgian firms. Next, we examine how the productivity of these firms is influenced by their internal wage dispersion. To do so, we use a large matched employer-employee data set (i.e., a combination of the 1995 'Structure of Earnings' and 'Structure of Business' Surveys). On the basis of the methodology developed by Winter-Ebmer and Zweimuller (1999), we find that within-firm wage dispersion has a positive and significant effect on firm productivity. This result is robust to controls for individual and firm characteristics as well as to instrumenting the wage inequality variable. Findings also suggest that the intensity of this effect is stronger within firms with: i) a majority of blue-collar workers, and ii) a high degree of monitoring. These results are more in line with the 'tournament' models than with the 'fairness, morale and cohesiveness' models.
    JEL: J24 J31 J41
    Date: 2007–03
  5. By: Robert Breunig; Marn-Heong Wong
    Abstract: Australia’s productivity performance is characterized by important differences across continuing firms, frequent entry of new firms, and substantial exit of firms which, for one reason or another, decide to cease production. These basic facts call into question the appropriateness of measuring productivity using an aggregate production function that is based upon a representative firm. This study relaxes the standard assumptions that industries are comprised of a set of homogeneous firms, the set of which are constant over time. Instead, we apply a semi-parametric production to continue production. The model controls for the relationship between productivity shocks and input choices and the inter-relationship between these and the decision to continue production. Using the Business Longitudinal Survey we estimate an improved set of production functions for twenty-five two-digit industries in Australia. We use these results to examine aggregate industry-level productivity performance. We use a new aggregation method in calculating these changes which allows us to separate productivity changes and output composition changes which sheds new light on industry-level productivity performance in Australia.
    Keywords: Firm-level production function estimation, multi-factor productivity, semiparametric estimation, Australian economic performance
    JEL: D21 D24 L20 C14
    Date: 2007–03
  6. By: Matteo Iacoviello (Boston College); Fabio Schiantarelli (Boston College); Scott Schuh (Federal Reserve Bank of Boston)
    Abstract: We build and estimate a two-sector (goods and services) dynamic general equilibrium model with two types of inventories: finished goods (output) inventories yield utility services while materials (input) inventories facilitate the production of goods. The model, which contains neutral and inventory-specific technology shocks and preference shocks, is estimated by Bayesian methods. The estimated model replicates the volatility and cyclicality of inventory investment and inventory-target ratios. When estimated over subperiods, the results suggest that changes in the volatility of inventory shocks, or in structural parameters associated with inventories, play a minor role in the reduction of the volatility of output.
    Keywords: Inventories, business cycles, output volatility, Bayesian estimation
    JEL: E22 E32 E37
    Date: 2007–03–23
  7. By: Gersbach, Hans; Schmutzler, Armin
    Abstract: To examine the impact of globalization on managerial compensation, we consider a matching model where a number of firms compete both in the product market and in the managerial market. We show that globalization, that is, the simultaneous integration of product markets and managerial pools, leads to an increase in the heterogeneity of managerial salaries. Typically, while the most able managers obtain a wage increase, less able managers are faced with a reduction in wages. Hence our model can explain the increasing heterogeneity of CEO compensation that has been observed in the last few decades.
    Keywords: Globalization; Manager Remuneration; Superstars
    JEL: D43 F15 J31 L13
    Date: 2007–03
  8. By: BEHAGHEL Luc; GREENAN Nathalie
    Abstract: Can an ageing labour force sustain rapid technical and organisational changes? This depends on the ability of older workers to adapt their skills through training. Using a matched employer-employee dataset on the French manufacturing sector in the 1990s, we investigate whether training incidence increases in response to technical and organisational changes, and whether this response varies with age. In low-skill occupations, workers older than 50 suffer from reduced training incidence when firms implement advanced information technologies, in sharp contrast with the increased training incidence among workers younger than 50. But training responses are not systematically unfavourable to older workers; in particular, new organisational practices tend to raise training incidence among all groups of workers, regardless of age and occupation. The results hold when controlling for workers’ selection and when using instrumental variables to take into account the endogenous use of new technologies and new organisational practices. These findings confirm that technical change is biased against older low-skilled workers. But they also suggest that older age and a shorter career horizon do not constitute a systematic barrier to training. The difficulties faced by older low-skill workers born in the 1940s may rather be due to the fact that they lack the basic computer literacy that is a prerequisite for training in advanced IT.
    Keywords: technical change, organisational change, training, older workers
    JEL: J14 J24 J26 O30
    Date: 2007–03
  9. By: Nir Jaimovich; Henry E. Siu
    Abstract: We investigate the consequences of demographic change for business cycle analysis. We find that changes in the age composition of the labor force account for a significant fraction of the variation in business cycle volatility observed in the U.S. and other G7 economies. During the postwar period, these countries experienced dramatic demographic change, although details regarding extent and timing differ from place to place. Using panel-data methods, we exploit this variation to show that the age composition of the workforce has a large and statistically significant effect on cyclical volatility. We conclude by relating these findings to the recent decline in U.S. business cycle volatility. Using both simple accounting exercises and a quantitative general equilibrium model, we find that demographic change accounts for a significant part of this moderation.
    Date: 2007
  10. By: Paul Hiebert (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.); Isabel Vansteenkiste (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: We empirically analyse the response of US manufacturing labour market variables to various shocks, notably to trade openness and technology. The econometric approach involves an application of the recently developed global VAR (GVAR) methodology of Dées, DiMauro, Pesaran, and Smith (2005) to 12 manufacturing industries over the period 1977-2003. This frame-work allows for an assessment of both shocks to weakly exogenous variables and intra-industry spillovers. In this vein, beyond a standard set of labour-market related variables (employment, real compensation, productivity and capital stock) and exogenous factors (a sector-specific measure of trade openness, along with common technology and oil price shocks), specific measures of manufacturing-wide variables are included for each sector. Generalised impulse responses indicate that increased trade openness negatively affects real compensation, has negligible employment effects and leads to higher labour productivity. These impacts, however, are relatively weaker those induced by technology shocks, with the latter positively and significantly affecting both real compensation and employment. There is also evidence of positive spillovers across industries from sector-specific employment and productivity shocks. Impact elasticities suggest strong intra-sectoral linkages for employment and capital stock formation, contrasting with weak linkages for what concerns real compensation and productivity. JEL Classification: F16; J01; O33.
    Keywords: Trade; technological change; labour market; global VAR (GVAR); impulse responses.
    Date: 2007–02
  11. By: Alex Bryson; P Willman
    Abstract: Union membership and density in Britain has experienced substantial decline since 1979. Thefall in private sector membership and density has been much greater than in the public sector.The size of the union sector, measured by employer recognition, has shrunk. Membershipdecline has been accompanied by financial decline. Much of the decline occurred before1997, under Conservative governments. Since 1997 and the return of a Labour government,the position has in some respects stabilized. Currently, unions have a substantially reducedeconomic impact, but a continued, if limited, role in workplace communication and grievancehandling, often as part of a voice regime including non union elements.
    Keywords: British trade unions, union structure, union membership
    JEL: J5 J51 J53 J54
    Date: 2007–01
  12. By: Arngrim Hunnes; Jarle Møen; Kjell G. Salvanes
    Abstract: To what extent do different firms follow different wage policies? How do such policies affect worker mobility between firms, and what are the effects of different wage bargaining regimes? The empirical branch of personnel economics has long been hampered by a lack of representative data sets. Norway is one of a handful of countries that has produced rich linked employer/employee data suitable for such analysis. This paper has three parts. First, we describe the wage setting and employment protection institutions in Norway. Next, we describe the Norwegian datasets. Finally, we document a large number of stylized facts regarding wage structure and labor mobility within and between Norwegian firms. Our main dataset covers white-collar workers in the manufacturing and private sectors for the period 1980-1997. We also have blue-collar data for the 1986-1997 period covering the core of the manufacturing sector. Information about occupations, monthly wages, hours worked and bonuses is available, as well as various worker and firm characteristics.
    JEL: J31 J50 J62 J63 M52
    Date: 2007–03
  13. By: Heather Antecol (Claremont McKenna College and IZA); Vanessa E. Barcus (Mighty Karma, Denver); Deborah A. Cobb-Clark (SPEAR, RSSS, Australian National University and IZA)
    Abstract: This paper examines the links between survey-based reports of sexual harassment and gender discrimination. In particular, we are interested in assessing whether these concepts measure similar forms of gender-biased behavior and whether they have the same effect on workers’ job satisfaction and intentions to leave their jobs. Our results provide little support for the notion that survey-based measures of sexual harassment and gender discrimination capture the same underlying behavior. Respondents do appear to differentiate between incidents of sexual harassment and incidents of gender discrimination in the workplace. Both gender discrimination and sexual harassment are associated with a substantially higher degree of job dissatisfaction, particularly amongst men. While women who experience gender discrimination are somewhat more likely to intend to change jobs, amongst men it is sexual harassment that leads to an increased propensity to quit. We find no significant interactions between our two measures of gender bias, perhaps implying that the intensity of gender bias is relatively unimportant for understanding job dissatisfaction and the intention to quit. At the same time, this may reflect the lack of precision with which we estimate this interaction, especially for men.
    Keywords: sexual harassment, gender discrimination, job satisfaction, intentions to quit
    JEL: J16 J28
    Date: 2007–02
  14. By: Lane, Julia I. (The National Opinion Research Center (NORC) and IZA); Salmon, Laurie A. (U.S. Bureau of Labor Statistics); Spletzer, James R. (U.S. Bureau of Labor Statistics)
    Abstract: Economists have long known that individual wages depend on a combination of employee and employer characteristics, as well as the interaction of the two. Although it is important to understand how employee and employer characteristics are related to wages, little is known about the magnitude and relation of these wage effects. This is primarily due to the lack of microdata which links individuals to the establishments where they work, but also due to technical difficulties associated with separating out employee and employer effects. This paper uses data from the Occupational Employment Statistics program at the Bureau of Labor Statistics that permit both of these issues to be addressed. Our results show that employer effects contribute substantially to earnings differences across individuals. We also find that establishments that pay well for one occupation also pay well for others. This paper contributes to the growing literature that analyzes firms’ compensation policies, and specifically the topic of employer effects on wages.
    Keywords: Establishment Wage Differentials; Occupational Employment Statistics
    JEL: J31 L20
  15. By: Bruno Contini (University of Torino, LABORatorio R. Revelli and IZA); Matteo Morini (University of Torino and LABORatorio R. Revelli)
    Abstract: In this paper we question the hypothesis of full rationality in the context of job changing behavior, via simple econometric explorations on microdata drawn from WHIP (Worker Histories Italian Panel). A rational outcome of the job matching process implies a positive tradeoff between future wages and risk-on-the-job. The main result of this paper is that no "rational" tradeoff is observable after controlling for a variety of possible shifters. However, if we control for individual characteristics and replace wage growth by its predictor net of individual effects, the picture changes with the emergence of a significantly positive tradeoff between wage growth and risk-on-the-job. The interpretation is suggestive: while market forces (net of individual effects) drive towards a rational outcome, individual characteristics, instead of reinforcing the "rationality" of a positive tradeoff, lead towards the opposite direction of confounding good and bad options. Our explanation for these findings is that people act on the basis of bounded rationality à la Simon. If our assessment is correct, the implications are powerful: are there reasons to believe that such patterns are found only in the context of job search and worker mobility and not in other instances of economic behavior? Recent literature on bounded rationality strongly suggests the contrary. Why, then, should economists leave unchallenged and unchallengeable the hypothesis of full rationality? Had our investigation aimed at estimating the elasticities of wage growth and job safety of the workers’ utilities, we would have miserably failed. Is this a consequence of a misspecified model or of the wrong behavioral assumptions? Our support unquestionably goes to the latter.
    Keywords: job mobility, bounded rationality, risk on the job
    JEL: D8 J63
    Date: 2007–02
  16. By: Matteo Iacoviello (Boston College); Stefano Neri (Banca D'Italia)
    Abstract: The ability of a two-sector model to quantify the contribution of the housing market to business fluctuations is investigated using U.S. data and Bayesian methods. The estimated model, which contains nominal and real rigidities and collateral constraints, displays the following features: First, a large fraction of the upward trend in real housing prices over the last 40 years can be accounted for by slow technological progress in the housing sector; second, residential investment and housing prices are very sensitive to monetary policy and housing demand shocks; third, the wealth effects from housing on consumption are positive and significant. The structural nature of the model allows identifying and quantifying the sources of áuctuations in house prices and residential investment and measuring the contribution of housing booms and busts to business cycles.
    Keywords: Housing, Collateral Constraints, Bayesian Estimation, Two-sector Models
    JEL: E32 E44 E47 R21 R31
    Date: 2007–03–25
  17. By: Alan Manning
    Abstract: This paper shows, using data from both the US and the UK, that average plant size is larger indenser markets. However, many popular theories of agglomeration - spillovers, costadvantages and improved match quality - predict that establishments should be smaller incities. The paper proposes a theory based on monopsony in labour markets that can explainthe stylized fact - that firms in all labour markets have some market power but that they haveless market power in cities. It also presents evidence that the labour supply curve toindividual firms is more elastic in larger markets.
    Keywords: Agglomeration, Labour Markets, Monopsony
    JEL: J21 J42 R23
    Date: 2007–01
  18. By: Keizo Mizuno (School of Businiess Administration, Kwansei Gakuin University); Testuya Shinkai (School of Economics, Kwansei Gakuin University)
    Abstract: This paper provides a simple model that examines a firmfs incentive to invest in a network infrastructure through coalition formation in an open access environment with a deregulated retail market. A regulator faces a dilemma between inducing an incentive for efficient investment and reducing the distortion generated by imperfect competition. We show that, in such a case, the degree of cost-reducing effect of the investment is crucial from a welfare point of view. In particular, when network investment through coalition formation creates a large (small) cost-reducing effect, the regulator can (should not) delegate an investment decision to firms with an appropriate level of access charge.
    Keywords: Network infrastructure, Coalition, Access Charge, Delegation
    JEL: L13 L22 L43 L90
    Date: 2006–01
  19. By: Alex Bryson; P Willman
    Abstract: The paper uses two data sources to map trends in resource availability for trade unions inBritain. Union resources exist on the one hand in the form of subscription income andaccumulated assets shown in union accounts and, on the other, establishment level resourcesprovided by employers and union members. The paper documents a substantial decline inboth forms of resource across the period 1990 -2004 and attempts to explain both the reasonsfor this decline and its consequences for employee representation in Britain.
    Keywords: Union membership
    JEL: J3 J31 J50 J51
    Date: 2006–12
  20. By: Stephen V. Burks; Jeffrey Carpenter; Lorenz Goette; Kristen Monaco; Aldo Rustichini; Kay Porter
    Abstract: The Truckers and Turnover Project is a statistical case study of a single firm and its employees which matches proprietary personnel and operational data to new data collected by the researchers to create a two-year panel study of a large subset of new hires. The project's most distinctive innovation is the data collection process which combines traditional survey instruments with behavioral economics experiments. The survey data include information on demographics, risk and loss aversion, time preference, planning, non-verbal IQ, and the MPQ personality profile. The data collected by behavioral economics experiments include risk and loss aversion, time preferences (discount rates), backward induction, patience, and the preference for cooperation in a social dilemma setting. Subjects will be followed over two years of their work lives. Among the major design goals are to discover the extent to which the survey and experimental measures are correlated, and whether and how much predictive power, with respect to key on-the-job outcome variables, is added by the behavioral measures. The panel study of new hires is being carried out against the backdrop of a second research component, the development of a more conventional in-depth statistical case study of the cooperating firm and its employees. This is a high-turnover service industry setting, and the focus is on the use of survival analysis to model the flow of new employees into and out of employment, and on the correct estimation of the tenure-productivity curve for new hires, accounting for the selection effects of the high turnover.
    JEL: C82 C93 J63 L92
    Date: 2007–03
  21. By: Lescourret, Laurence (ESSEC Business School); Robert, Christian Y. (Ecole Nationale de la Statistique et de l’Administration Economique (ENSAE))
    Abstract: We present a model of market-making in which dealers differ by their current inventory positions and by their preferencing agreements. Under preferencing, dealers receive captive orders that they guarantee to execute at the best price. We show that preferencing raises the inventory holding costs of preferenced dealers. In turn, competitors post less aggressive quotes. Since price-competition is softened, expected spreads widen. The entry of unpreferenced dealers, or the ability to route preferenced orders to best-quoting dealers, as internalization does restore price competitiveness. We also show that a greater transparency may negatively affect expected spreads, depending on the scale of preferencing.
    Keywords: Internalization; Inventory Control; Market Microstructure; Preferencing; Transparency
    JEL: D43 L21
    Date: 2006–11
  22. By: Erkki Koskela (University of Helsinki and IZA); Rune Stenbacka (Göteborg University and Swedish School of Economics, Helsinki)
    Abstract: We study both the various consequences and the incentives of outsourcing. We argue that the wage elasticity of labour demand is increasing as a function of the share of outsourcing, which is importantly a result consistent with existing empirical research. Furthermore, we show that a production mode with a higher proportion of outsourcing activity reduces the negotiated wage in the high-wage country with an imperfectly competitive labour market so that outsourcing reduces equilibrium unemployment. Finally, we characterize the optimal production mode and show that stronger labour market imperfections lead to a production mode with a higher share of outsourcing.
    Keywords: outsourcing, labour market imperfections, equilibrium unemployment
    JEL: E23 E24 J51 J64
    Date: 2007–02
  23. By: MONIKA HAMORI (Instituto de Empresa)
    Abstract: We look at the relationship between the length and breadth of professionals´ international experience, the type of employer commissioning the international assignment, the individual´s career stage at the first assignment, and two aspects of career advancement: compensation level and the time executives took to be appointed to the CEO position from the start of their career. Our sample of 1001 chief executives, based in 23 countries and affiliated with the 500 largest corporations in Europe and the 500 largest in USA allows us to examine important individual-, organization- and nation-level contingencies that affect the relationship between international experience and career advancement.
    Keywords: Career success, Chief executives, International assignments
    Date: 2007–03
  24. By: Alexander Muravyev
    Abstract: The paper examines the labour quality explanation of the employer size-wage gap: larger firms pay higher wages because they employ more skilled workers. Most previous studies control for unobserved skills of workers using longitudinal data and the fixed effects estimator thus relying on a questionable assumption of time-invariant unobserved individual heterogeneity. This paper releases this assumption by using a sample of workers who simultaneously hold two jobs; hence, identification is achieved by differencing across two jobs held at the same time rather than in different periods. A caveat of this approach is possible heterogeneity of the two jobs; this issue is discussed in details in the paper. Based on data from the UK Quarterly Labour Force Survey, this study finds little support for the labour quality explanation: controlling for unobserved skills in the sample of moonlighters does not reduce the estimate of the wage gap.
    Keywords: firm size, wages, dual job holdings
    JEL: J24 J31
    Date: 2007
  25. By: Elizabeth Laderman
    Abstract: The empirical research literature regarding the effects of market structure on small business lending has yielded ambiguous results. This paper empirically tests for the presence of countervailing effects of increases in market concentration on small business loan volume. Countervailing effects would be expected if both the traditional Structure, Conduct, Performance (SCP) paradigm of industrial organization and a paradigm whereby market power benefits the formation of lending relationships (the relationship hypothesis), are at work. Using Community Reinvestment Act (CRA) data on small loans to small businesses, it is found that, on average, across MSAs, SCP effects dominate. But, as predicted by the relationship hypothesis, the negative effects of increases in concentration on small business loan volume are weaker, the greater the presence of young firms and the higher the business failure rate. Relationship effects due to business failure appear to come from highly concentrated MSAs. Endogeneity concerns are further addressed with the estimation of a regression that separates out the effects of changes in the number of lenders from the effects of changes in the sum of squared deviations of market shares.
    Keywords: Small business - Finance
    Date: 2006
  26. By: Doraszelski, Ulrich; Satterthwaite, Mark
    Abstract: We provide a general model of dynamic competition in an oligopolistic industry with investment, entry, and exit. To ensure that there exists a computationally tractable Markov perfect equilibrium, we introduce firm heterogeneity in the form of randomly drawn, privately known scrap values and setup costs into the model. Our game of incomplete information always has an equilibrium in cutoff entry/exit strategies. In contrast, the existence of an equilibrium in the Ericson & Pakes (1995) model of industry dynamics requires admissibility of mixed entry/exit strategies, contrary to the assertion in their paper, that existing algorithms cannot cope with. In addition, we provide a condition on the model's primitives that ensures that the equilibrium is in pure investment strategies. Building on this basic existence result, we first show that a symmetric equilibrium exists under appropriate assumptions on the model's primitives. Second, we show that, as the distribution of the random scrap values/setup costs becomes degenerate, equilibria in cutoff entry/exit strategies converge to equilibria in mixed entry/exit strategies of the game of complete information. Finally, we provide the first example of multiple symmetric equilibria in this literature.
    Keywords: dynamic oligopoly; industry dynamics; Markov perfect equilibrium
    JEL: C73 L13
    Date: 2007–03
  27. By: Dean Baker
    Abstract: Much has been written in this business cycle regarding the rapid increases in productivity and the stagnant growth in wages. From the peak of the last business cycle in the first quarter of 2001 to the second quarter of 2006, productivity increased by 17.9 percent, an average growth rate of 3.2 percent per year. But real wages have barely moved, with the average hourly wage for production and nonsupervisory workers increasing by just 1.2 percent, an average annual growth rate of just over 0.2 percent. This report explores the forces behind this difference. It looks at cyclical trends in labor and capital income, and the difference between gross and net productivity.
    JEL: E32 E24
    Date: 2007–02
  28. By: Richard Baldwin; Frederic Robert-Nicoud
    Abstract: A simple model of offshoring, which depicts offshoring as 'shadow migration,' permits straightforward derivation of necessary and sufficient conditions for the effects on wages, prices, production and trade. We show that offshoring requires modification of the four classic international trade theorems, so econometricians who ignore offshoring might reject the Heckscher-Ohlin theorem when a properly specified version held in the data. We also show that offshoring is an independent source of comparative advantage and can lead to intra-industry trade in a Walrasian setting. The model is extended to allow for two-way offshoring between similar nations, and to allow for monopolistic competition.
    JEL: F11 F12 F16
    Date: 2007–03
  29. By: Joachim Wagner (University of Lueneburg and IZA)
    Abstract: Using panel data from Spain Farinas and Ruano (IJIO 2005) test three hypotheses from a model by Hopenhayn (Econometrica 1992): (H1) Firms that exit in year t were in t-1 less productive than firms that continue to produce in t. (H2) Firms that enter in year t are less productive than incumbent firms in year t. (H3) Surviving firms from an entry cohort were more productive than non-surviving firms from this cohort in the start year. Results for Spain support all three hypotheses. This paper replicates the study using unique newly available panel data sets for all manufacturing plants from Germany (1995-2002). Again, all three hypotheses are supported empirically.
    Keywords: entry, exit, productivity
    JEL: L11 L60
    Date: 2007–03

This nep-bec issue is ©2007 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.