nep-bec New Economics Papers
on Business Economics
Issue of 2007‒10‒06
thirty papers chosen by
Christian Calmes
University of Quebec in Ottawa

  1. Product Differentiation and Relative Performance Evaluation in an Asymmetric Duopoly By Aditi Sengupta
  2. Liquidity and Manipulation of Executive Compensation Schemes By Axelson, Ulf; Baliga, Sandeep
  3. Large Shareholders and Corporate Policies By Cronqvist, Henrik; Fahlenbrach, Rüdiger
  4. The Determinants of Performance Appraisal Systems: A Note (Do Brown and Heywood’s Results for Australia Hold Up for Britain?) By John T. Addison; Clive R. Belfield
  5. Why Are the Returns to Education Higher for Entrepreneurs than for Employees? By Justin van der Sluis; Mirjam van Praag; Arjen van Witteloostuijn
  6. Asymmetric Collusion and Merger Policy By Mattias Ganslandt; Lars Persson; Helder Vasconcelos
  7. Job Satisfaction and Co-worker Wages: Status or Signal? By Andrew E. Clark; Nicolai Kristensen; Niels Westergård-Nielsen
  8. Does Qualification Drive Innovation? A Microeconometric Analysis Using Linked-employer-employee Data By Bianca Brandenburg; Jutta Günther; Lutz Schneider
  9. International Outsourcing vs. ICT in explaining the wage gap in Italian Manufacturing By Stefano STAFFOLANI; Alessia LO TURCO; Andrea PRESBITERO; Chiara BROCCOLINI
  10. Exploring the "mechanics" of firm growth : evidence from a short-panel VAR. By Alex Coad
  11. Strategic Divisionalization, Product Differentiation and International Competition By Iwasa, Kazumichi; Kikuchi, Toru
  12. On the Anticompetitive Effect of Exclusive Dealing when Entry by Merger is Possible By Fumagalli, Chiara; Motta, Massimo; Persson, Lars
  13. The Wage Impact of Trade Unions In the UK Public and Private Sectors By David G. Blanchflower; Alex Bryson
  14. Impact of the Operations Manager's dual role on inventory policy By José Alfaro; Josep A. Tribo
  15. News and Business Cycles in Open Economies By Nir Jaimovich; Sergio Rebelo
  16. Twin Deficits, Openness and the Business Cycle By Corsetti, Giancarlo; Müller, Gernot
  17. Where Are the Real Bottlenecks? Evidence from 20,000 Firms in 60 Countries about the Shadow Costs of Constraints to Firm Performance By Wendy Carlin; Mark Schaffer; Paul Seabright
  18. The employment effects of innovation. By Alex Coad; Rekha Rao
  19. The Value Relevance of Top Executive Departures: Evidence from the Netherlands By Kees Cools; C. Mirjam van Praag
  20. The Cyclical Behaviour of European Bank Capital Buffers By Jokipii, Terhi; Milne, Alistair
  21. Imperfect competition, technical progress and capital accumulation. By Biancamaria d'Onofrio; Bertrand Wigniolle
  22. The Unilateral Incentives for Technology Transfers: Predation by Proxy By Anthony Creane; Hideo Konishi
  23. Liquidity Constraints and Entrepreneurial Performance By Hvide, Hans K; Møen, Jarle
  24. How General Is Human Capital? A Task-Based Approach By Christina Gathmann; Uta Schönberg
  25. Intermediated Quantities and Returns By Rajnish Mehra; Edwarad C Prescott; Facundo Piguillem
  26. Spillovers from High-Skill Consumption to Low-Skill Labor Markets By Francesca Mazzolari; Giuseppe Ragusa
  27. Self Selection and Post-Entry effects of Exports. Evidence from Italian Manufacturing firms By Francesco Serti; Chiara Tomasi
  28. Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis By Paul Lanoie; Jérémy Laurent-Lucchetti; Nick Johnstone; Stefan Ambec
  29. Real-time measurement of business conditions By S. Boragan Aruoba; Francis X. Diebold; Chiara Scotti
  30. Reply to Solow By V. V. Chari; Patrick J. Kehoe

  1. By: Aditi Sengupta (Southern Methodist University)
    Abstract: In a model of managerial delegation in a duopoly with asymmetric costs, I show that an increase in the intensity of market competition (product differentiation) increases the absolute weight placed on rival's profit (relative performance) in the managerial compensation scheme for both firms and also increases market concentration. The relatively efficient (larger) firm always places higher weight on rival's performance and obtains higher market share.
    Keywords: Strategic Delegation, Relative Performance, Managerial Compensation, Oligopoly
    JEL: D43 L13 M52 M21
    Date: 2007–09
  2. By: Axelson, Ulf (Swedish Institute for Financial Research); Baliga, Sandeep (Northwestern University)
    Abstract: Several standard components of managerial compensation contracts have been criticized for encouraging managers to manipulate short-term information about the firm, thereby reducing transparency. This includes bonus schemes that encourage earnings smoothing, and option packages that allow managers to cash out early when the firm is overvalued. We show in an optimal contracting framework that these components are critical for giving long-term incentives to managers. The lack of transparency induced by the features of the contract makes it harder for the principal to engage in ex post optimal but ex ante inefficient liquidity provision to the manager.
    Keywords: Executive compensation; earnings management; transparency
    JEL: G34 J33
    Date: 2007–07–15
  3. By: Cronqvist, Henrik (The Ohio State University); Fahlenbrach, Rüdiger (The Ohio State Unversity)
    Abstract: We develop an empirical framework that allows us to analyze the effects of heterogeneity across large shareholders, using a new blockholder-firm panel data set in which we can track all unique blockholders among large public U.S. firms. We find statistically significant and economically important blockholder fixed effects in investment, financial, and executive compensation policies. This evidence suggests that blockholders vary in their beliefs, skills, or preferences. Different large shareholders have distinct investment and governance styles: they differ in their approaches to corporate investment and growth, their appetite for financial leverage, and their attitudes towards CEO pay. We also find blockholder fixed effects in firm performance measures, and differences in style are systematically related to firm performance differences. Our results are consistent with influence for activist, pension fund, corporate, individual, and private equity blockholders, hut consistent with systematic selection for mutual funds. Finally, we analyze sources of the heterogeneity, and find that blockholders with larger block size, board membership, or direct management involvement as officers are associated with larger effects on corporate policies and firm performance.
    Keywords: Large shareholders; blockholders; corporate policies; firm performance
    JEL: G31 G32 G34 G35
    Date: 2007–09–15
  4. By: John T. Addison (Queen’s University Belfast and IZA); Clive R. Belfield (Queens College, City University of New York)
    Abstract: This paper offers a replication for Britain of Brown and Heywood’s analysis of the determinants of performance appraisal in Australia. Although there are some important limiting differences between our two datasets - the AWIRS and the WERS - we reach one central point of agreement and one intriguing shared insight. First, performance appraisal is negatively associated with tenure: where employers cannot rely on the carrot of deferred pay or the stick of dismissal to motivate workers they will tend to rely more on monitoring, ceteris paribus. Alternatively put, when the probability of job separation is greater, the influence of deferred compensation diminishes. Second, there is also some suggestion in the data that employer monitoring and performance pay may be complementary. However, consonant with the disparate results from the wider literature, there is more modest agreement on the contribution of specific HRM practices, and still less on the role of job control. Finally, there is no carry over to Britain of the structural determinants identified by Brown and Heywood.
    Keywords: performance appraisal, monitoring, deferred compensation, performance pay, HRM practices, worker tenure, unionism
    JEL: J5 L23 M5
    Date: 2007–09
  5. By: Justin van der Sluis (Amsterdam Center for Entrepreneurship and University of Amsterdam); Mirjam van Praag (Amsterdam Center for Entrepreneurship, Tinbergen Institute, University of Amsterdam and IZA); Arjen van Witteloostuijn (University of Groningen and University of Durham)
    Abstract: We compare the returns to education (RTE) for entrepreneurs and employees, based on 19 waves of the NLSY database. By using instrumental variable techniques (IV) and taking account of selectivity, we find that the RTE are significantly higher for entrepreneurs than for employees (18.3 percent and 9.9 percent, respectively). We perform various analyses in an attempt to explain the difference. We find (indirect) support for the argument that the higher RTE for entrepreneurs is due to fewer (organizational) constraints faced by entrepreneurs when optimizing the profitable employment of their education.
    Keywords: entrepreneurship, self-employment, returns to education employment
    JEL: J23 J24 J31 J44 M13
    Date: 2007–09
  6. By: Mattias Ganslandt (Research Institute of Industrial Economics (IFN)); Lars Persson (Research Institute of Industrial Economics (IFN) and CEPR); Helder Vasconcelos (Universidade Católica Portuguesa (Porto) and CEPR)
    Abstract: In their merger control, EU and the US have considered symmetric size distribution (cost structure) of firms to be a factor potentially leading to collusion. We show that forbidding mergers leading to symmetric market structures can induce mergers leading to asymmetric market structures with higher risk of collusion, when firms face indivisible costs of collusion. In particular, we show that if the rule determining the collusive outcome has the property that the large (efficient) firm benefits sufficiently more from collusion when industry asymmetries increase, collusion can become more likely when firms are moderately asymmetric.
    Keywords: Collusion; Cost Asymmetries; Merger Policy
    JEL: D43 L41
    Date: 2007–08
  7. By: Andrew E. Clark (Paris School of Economics, CCP, Aarhus School of Business and IZA); Nicolai Kristensen (Aarhus School of Business, CIM and CCP); Niels Westergård-Nielsen (Aarhus School of Business, CCP and IZA)
    Abstract: This paper uses matched employer-employee panel data to show that individual job satisfaction is higher when other workers in the same establishment are better-paid. This runs contrary to a large literature which has found evidence of income comparisons in subjective well-being. We argue that the difference hinges on the nature of the reference group. We here use co-workers. Their wages not only induce jealousy, but also provide a signal about the worker’s own future earnings. Our positive estimated coefficient on others’ wages shows that this positive future earnings signal outweighs any negative status effect. This phenomenon is stronger for men, and in the private sector.
    Keywords: job satisfaction, co-workers, comparison income, wage expectations, tournaments
    JEL: C23 C25 D84 J28 J31 J33
    Date: 2007–09
  8. By: Bianca Brandenburg; Jutta Günther; Lutz Schneider
    Abstract: Degree-level science and engineering skills as well as management and leadership skills are often referred to as a source of innovative activities within companies. Broken down by sectoral innovation patterns, this article examines the role of formal education and actual occupation for product innovation performance in manufacturing firms within a probit model. It uses unique micro data for Germany (LIAB) that contain detailed information about innovative activities and the qualification of employees. We find significant differences of the human capital endowment between sectors differentiated according to the Pavitt classification. Sectors with a high share of highly skilled employees engage in product innovation above average (specialized suppliers and science based industries). According to our hitherto estimation results, within these sectors the share of highly skilled employees does not, however, substantially increase the probability to be an innovative firm.
    Keywords: innovation, human capital, qualification, sectoral innovation system
    JEL: O31 J
    Date: 2007–09
  9. By: Stefano STAFFOLANI (Universita' Politecnica delle Marche, Dipartimento di Economia); Alessia LO TURCO (Universita' Politecnica delle Marche, Dipartimento di Economia); Andrea PRESBITERO ([n.a.]); Chiara BROCCOLINI (Universita' Politecnica delle Marche, Dipartimento di Economia)
    Abstract: The aim of this paper is to empirically evaluate the relative eects of international;outsourcing of materials and services and of ICT capital deepening on wage inequality between blue and white collars in the Italian manufacturing industry during the period 1985 - 1999. We merge an administrative data set on workers' wages and individual characteristics with data on imported inputs from Italian input-output tables and other sector-level variables. Results show that international outsourcing plays an important role in shaping the observed pattern in the wage gap, both in traditional and innovative industries,;while the role of technological change is less pronounced and limited to innovative sectors.
    Keywords: ICT, inequality, international outsourcing, wage
    JEL: C23 F16 J31 O3
    Date: 2007–09
  10. By: Alex Coad (Centre d'Economie de la Sorbonne et Max Planck Institute of Economics - Germany)
    Abstract: This paper offers many new insights into the processes of firm growth by applying a vector autoregression (VAR) model to longitudinal panel data on French manufacturing firms. We observe the co-evolution of key variables such as growth of employment, sales, gross operating surplus and labour productivity growth. Preliminary results suggest that employment growth is succeeded by the growth of sales, which in turn is followed by growth of profits. Generally speaking, however, growth of profits is not followed by much employment growth or sales growth.
    Keywords: Firm growth, panel VAR, employment growth, industrial dynamics, productivity growth.
    JEL: L25 L20
    Date: 2007–07
  11. By: Iwasa, Kazumichi; Kikuchi, Toru
    Abstract: In this note we construct a simple international differentiated duopoly model that involves a divisionalization decision. It will be shown that the number of third market divisions of a parent firm with a cost advantage is relatively large. The results imply that the cost competitiveness of one country’s firm will be magnified through divisionalization decisions.
    Keywords: divisionalization; product differentiation; cost competitiveness
    JEL: F12
    Date: 2007
  12. By: Fumagalli, Chiara (Università Bocconi); Motta, Massimo (European University Institute); Persson, Lars (Research Institute of Industrial Economics (IFN))
    Abstract: We extend the literature on exclusive dealing, which assumes that entry can occur only by installing new capacity, by allowing the incumbent and the potential entrant to merge. This uncovers new effects. First, exclusive deals can be used to improve the incumbent's bargaining position in the merger negotiation. Second, the incumbent finds it easier to elicit the buyer's acceptance. Third, exclusive dealing, despite allowing the more efficient technology to find its way into the industry, reduces welfare because (i) it may trigger entry through merger whereas independent entry would be socially optimal, (ii) it leads to a sub-optimal contractual price when the exclusive dealing include a price commitment, (iii) it may deter entry altogether.
    Keywords: Technology Transfer; Inefficient Entry; Antitrust; Authority's Behavior
    JEL: L24 L42
    Date: 2007–09–20
  13. By: David G. Blanchflower (Dartmouth College, University of Stirling, Bank of England, NBER, CESifo and IZA); Alex Bryson (Policy Studies Institute and Centre for Economic Performance)
    Abstract: This paper draws attention to an increase in the size of the union membership wage premium in the UK public sector relative to the private sector. We find the public sector membership wage premium is approximately double that in the private sector controlling for a full range of individual, job and workplace characteristics. Using data from the Labour Force Surveys of 1993-2006 the gap between the membership premium in the public and private sectors closes with the addition of three digit occupational controls, although significant wage premia remain in both sectors. However, using data from the Workplace Employment Relations Survey of 2004, the public sector union membership wage premium remains roughly twice the size of the private sector membership premium having accounted for workplace fixed effects, workers’ occupations, their job characteristics, qualifications and worker demographics. Furthermore, the membership wage premium among workers covered by collective bargaining is only apparent in the public sector.
    Keywords: trade unions, wage differentials, public and private sectors
    JEL: J31
    Date: 2007–09
  14. By: José Alfaro; Josep A. Tribo
    Abstract: In modern corporations, the Operations Manager’s role in defining of firm’s strategy is becoming more important. In this paper we describe how firms can use this tendency for Operations Managers to make strategic decisions as a mechanism to prevent inventory mismanagement. These managers have incentives to speculate with inventory cost reductions, thereby avoiding sharp reductions in a single period, because it would hinder further reductions in the future. Remarkably, firms may prevent such behavior by stimulating the Operations Managers’ strategic orientation, without losing sight of inventory-efficient management.
    Date: 2007–09
  15. By: Nir Jaimovich; Sergio Rebelo
    Abstract: It is well known that the neoclassical model does not generate comovement among macroeconomic aggregates in response to news about future total factor productivity. We show that this problem is generally more severe in open economy versions of the neoclassical model. We present an open economy model that generates comovement both in response to sudden stops and to news about future productivity and investment-specific technical change. We find that comovement is easier to generate in the presence of weak short-run wealth effects on the labor supply, adjustment costs to labor, and/or investment, and whenever the real interest rate faced by the economy rises with the level of net foreign debt.
    JEL: F3
    Date: 2007–09
  16. By: Corsetti, Giancarlo; Müller, Gernot
    Abstract: In this paper, we study the co-movement of the government budget balance and the trade balance at business cycle frequencies. In a sample of 10 OECD countries we find that the correlation of the two time series is negative, but less so in more open economies. Moreover, for the US the cross-correlation function is S-shaped. We analyze these regularities taking the perspective of international business cycle theory. First, we show that a standard model delivers predictions broadly in line with the evidence. Second, we show that conditional on spending shocks the model predicts a perfect correlation of the budget balance and the trade balance. Yet, the effect of spending shocks on the trade balance is contained if an economy is not very open to trade.
    Keywords: Business Cycle; Fiscal Policy; Openness; Twin Deficits
    JEL: E32 F41 F42
    Date: 2007–09
  17. By: Wendy Carlin (University College London and CEPR); Mark Schaffer (Heriot-Watt University, CEPR and IZA); Paul Seabright (Toulouse School of Economics and CEPR)
    Abstract: We use data from over 20,000 firms in 60 countries to identify constraints on the growth of firms. We interpret managers’ answers to survey questions on the extent to which various aspects of their external environment inhibit the performance of their firm as measuring the shadow cost of constraints to their activities, not as direct measures of the constraints. These costs can vary with firm characteristics as well as with the magnitude of the constraints themselves. Our model reveals that, contrary to common practice, the importance of an obstacle to performance is not, except under very restrictive assumptions, measured by the coefficient on the reported level of the obstacle in a performance regression. We test the predictions of the model on the large firm-level dataset and show how the importance of different constraints varies across countries and how the cost of a constraint depends on the characteristics of the firm. We find that telecoms are less important, and taxes more important, as constraints on performance than the literature has previously identified.
    Keywords: public goods, constraints on growth, infrastructure, finance, institutions, subjective data
    JEL: H41 O12 O16 O57
    Date: 2007–09
  18. By: Alex Coad (Centre d'Economie de la Sorbonne et Max Planck Institute of Economics - Germany); Rekha Rao (LEM, Sant'Anna School of Advanced Studies, Pisa, Italy)
    Abstract: The issue of technological unemployment receives perennial popular attention. Although there are previous empirical investigations that have focused on the relationship between innovation and employment, the originality of our approach lies in our choice of method. We focus on four 2-digit manufacturing industries that are known for their high patenting activity. We then use Principal Components Analysis to generate a firm-and year-specific "innovativeness" index by extracting the common variance in a firm's patenting and R&D expenditure histories. To begin with, we explore the heterogeneity of firms by using semi-parametric quantile regression. Whilst some firms may reduce employment levels after innovating, others increase employment. We then move on to a weighted least squares (WLS) analysis, which explicitly takes into account the different job-creating potential of firms of different sizes. As a result, we focus on the effect of innovation on total number of jobs, whereas previous studies have focused on the effect of innovation on firm behavior. Indeed, previous studies have typically taken the firm as the unit of analysis, implicity weighting each firm equally according to the principle of "one firm equals one observation". Our results suggest that firm-level innovative activity leads to employment creation that may have been underestimated in previous studies.
    Keywords: Technological unemployment, innovation, firm growth, Weighted Least Squares, aggregation, quantile regression.
    JEL: L25 O33 J01
    Date: 2007–07
  19. By: Kees Cools (University of Groningen and Boston Consulting Group); C. Mirjam van Praag (University of Amsterdam, Tinbergen Institute, Max Planck Institute of Economics Jena and IZA)
    Abstract: On theoretical grounds, monitoring of top executives by the (supervisory) board is expected to be value relevant. The empirical evidence is ambiguous and we analyze three noncompeting explanations for this ambiguity: (i) The positive effect on firm value of board monitoring is hidden in stock price effects due to the simultaneous occurrence of the positive real effect of monitoring and the opposing information effect. (ii) The combination of board monitoring and monitoring by other parties prevents assessing the value relevance of board monitoring in isolation. (iii) The confounding effect of a simultaneous successor appointment typically generates an upward biased estimate. Based on an analysis of price effects and trading volumes at announcement, we conclude that monitoring by the supervisory board is valued by investors: Forced departures of executive directors, also without a successor appointment, are value relevant in the Netherlands where external control mechanisms and shareholder control were virtually absent in the period studied (1991-2000).
    Keywords: top management departure, dismissal, corporate governance, internal monitoring, value relevance
    JEL: J32 J33 M12 M51 G3
    Date: 2007–09
  20. By: Jokipii, Terhi (Stockholm School of Economics); Milne, Alistair (Bank of Finland and Cass Business School)
    Abstract: Using an unbalanced panel of accounting data from 1997 to 2004 and controlling for individual bank costs and risk, we find capital buffers of the banks in the EU15 have a significant negative co-movement with the cycle. For banks in the accession countries there is significant positive co-movement. Capital buffers of commercial and savings banks, and of large banks, exhibit negative co-movement. Those of co-operative and smaller banks exhibit positive co-movement. Speeds of adjustment are fairly slow. We interpret these results and discuss policy implications, noting that negative co-movement of capital buffers will exacerbate the procyclical impact of Basel II.
    Keywords: Bank capital; bank regulation; business cycle fluctuations
    JEL: G21 G28
    Date: 2007–07–15
  21. By: Biancamaria d'Onofrio (Universita di Roma); Bertrand Wigniolle (Centre d'Economie de la Sorbonne)
    Abstract: This paper explores the consequences of imperfect competition on capital accumulation. The framework is an OLG growth model with altruistic agents. Two types of long run equilibria exist : egoistic or altruistic.We assume both competitive and non-competitive firms exist, the latter being endowed with more productive technology. They behave strategically on the labor market : they take into account the impact of their demand for labor on the equilibrium wage and on their profit. The effect of technical progress for a non-competitive firm depends on the initial productivity of the firm and on the type of steady state (egoistic or altruistic). An increase in the productivity of the most productive firm has a negative impact on capital accumulation in an egoistic steady state, and a positive one in an altruistic steady state. An increase in the productivity of the competitive sector can have various effects on capital accumulation. If the productivity levels of the non-competitive firms are close enough, capital accumulation increases in an egoistic steady state and decreases in an altruistic one. But, the impact of increasing productivity in the competitive sector can be reversed if the productivity of the less productive non-competitive firm is low enough.
    Keywords: Imperfect competition, capital accumulation, technical progress.
    JEL: D43 D9 O3
    Date: 2006–05
  22. By: Anthony Creane (Michigan State University); Hideo Konishi (Boston College)
    Abstract: In 1984 GM and Toyota began the joint production of automobiles to much controversy over its anti-competitive effects. The argument for the joint production was the considerable efficiency gains GM would obtain. Since then, the anti-trust controversy has died, but a question remains: why would the most efficient manufacturer (Toyota) transfer to its largest rival the knowledge to transform itself into a very efficient rival? We examine when such transfers could be unilaterally profitable, finding that it can serve as a credible way to make the market more competitive, forcing high cost firms to exit (or preventing future entry). This is not without a cost to Toyota since such a transfer also makes the remaining rivals more efficient. Despite this, we find a sufficient (but not necessary) condition for it to be profitable to predate "by proxy": the market satisfies an entry equilibrium condition. Further, we find that it is then optimal to predate on every firm that is vulnerable and so a market with many firms can become a duopoly. Profitable predation implies higher prices, to the detriment of consumers. Yet the improved production efficiency outweighs this loss, resulting enhanced social welfare. In contrast, profitable non-predatory joint production (or technology transfers) may reduce welfare. Paradoxically, the potential for predation could encourage entry ex ante.
    Keywords: Predation, Technology Transfers
    JEL: D4 L1 L41
    Date: 2007–09–29
  23. By: Hvide, Hans K; Møen, Jarle
    Abstract: If entrepreneurs are liquidity constrained and cannot borrow to operate on an efficient scale, those with more personal wealth should do better than those with less wealth. We investigate this hypothesis using a unique datset from Norway. Consistent with liquidity constraints being present, we find a strong positive relationship between founder prior wealth and start-up size. The relationship between prior wealth and start-up performance, as measured by profitability on assets, increases for the main bulk of the wealth distribution and decreases sharply at the top. We estimate that profitability on assets increases by about 8 percentage points from the 10th to the 75th percentile of the wealth distribution. This suggests an entrepreneurial production function with a region of increasing returns. Liquidity constraints may then stop entrepreneurs from being able to exploit a "hump" in marginal productivity. From the 75th to the 99th percentile returns drops by about 10 percentage points. This suggests that an abundance of liquidity may to do more harm than good.
    Keywords: Entrepreneurship; Household Finance; Private benefits; Start-ups; Wealth
    JEL: E44 G14 L26 M13
    Date: 2007–09
  24. By: Christina Gathmann (Stanford University and IZA); Uta Schönberg (University of Rochester and IZA)
    Abstract: This paper studies how portable skill accumulated in the labor market are. Using rich data on tasks performed in occupations, we propose the concept of task-specific human capital to measure the transferability of skills empirically. Our results on occupational mobility and wages show that labor market skills are more portable than previously considered. We find that individuals move to occupations with similar task requirements and that the distance of moves declines with time in the labor market. We also show that task-specific human capital is an important source of individual wage growth, in particular for university graduates. For them, at least 40 percent of overall wage growth over a ten year period can be attributed to task-specific human capital. For the low- and medium-skilled, task-specific human capital accounts for at least 35 and 25 percent of overall wage growth respectively.
    Keywords: human capital, skill transferability, wage growth, occupations, Germany
    JEL: J24 J31
    Date: 2007–09
  25. By: Rajnish Mehra; Edwarad C Prescott; Facundo Piguillem
    Date: 2007–10–01
  26. By: Francesca Mazzolari (University of California, Irvine and IZA); Giuseppe Ragusa (University of California, Irvine)
    Abstract: Census data show that since 1980 low-skill workers in the United States have been increasingly employed in the provision of non-tradeable time-intensive services - such as food preparation and cleaning - that can be broadly thought as substitutes of home production activities. Meanwhile the wage gap between this sector and the rest of the economy has shrunk. If skilled workers, with their high opportunity cost of time, demand more of these time-intensive services, then wage gains at the top of the wage distribution (such as those observed in the last three decades) are expected to raise the consumption of these services, consistent with these stylized facts. Using both consumption expenditure data and city-level data on employment and wages of workers of different skills, we provide several pieces of evidence in favor of these demand shifts, and we argue that they provide a viable explanation for the growth in wages at the bottom quantiles observed in the last fifteen years.
    Keywords: service jobs, market substitutes for home production, low-skill employment and wages, wage growth polarization
    JEL: J21 J22 J23 J31
    Date: 2007–09
  27. By: Francesco Serti; Chiara Tomasi
    Abstract: A large body of empirical research suggests the superior performance of exporting firms relative to non exporters. Specifically, firms involved in foreign markets are found to be larger, more productive, more capital and skilled-intensive. This paper provides empirical evidence of the relationship between firm's performances and export behavior in Italian manufacturing firms. Similarly to other empirical studies, we find that exporters are more productive relative to non exporters. Our empirical analysis support the idea that the superior performance of the former is due to a market selection mechanism according to which only the most productive firms are capable of entering international markets. Moreover, we provide empirical evidence on the causal effects of exporting on productivity (and other interesting firm characteristics) by using an econometric approach that combines propensity score matching and Differences in Differences techniques.
    Keywords: Learning by exporting, Export Behavior, Productivity, Matching
    Date: 2007–09–11
  28. By: Paul Lanoie; Jérémy Laurent-Lucchetti; Nick Johnstone; Stefan Ambec
    Abstract: Jaffe and Palmer (1997) present three distinct variants of the so-called Porter Hypothesis. The “weak” version of the hypothesis posits that environmental regulation will stimulate certain kinds of environmental innovations. The “narrow” version of the hypothesis asserts that flexible environmental policy regimes give firms greater incentive to innovate than prescriptive regulations, such as technology-based standards. Finally, the “strong” version posits that properly designed regulation may induce cost-saving innovation that more than compensates for the cost of compliance. In this paper, we test the significance of these different variants of the Porter Hypothesis using data on the four main elements of the hypothesised causality chain (environmental policy, research and development, environmental performance and commercial performance). The analysis is based upon a unique database which includes observations from approximately 4200 facilities in seven OECD countries. In general, we find strong support for the “weak” version, qualified support for the “narrow” version, and qualified support for the “strong” version as well. <P>Jaffe et Palmer (1997) présentent trois variantes distinctes de l’hypothèse de Porter. La version « faible » de l'hypothèse suppose que la réglementation environnementale stimulera l’apparition d’innovations dans le domaine de l’environnement. La version « étroite » de l'hypothèse affirme que les réglementations environnementales flexibles donnent aux firmes une plus grande incitation pour innover que les réglementations rigides, telles que les normes prescrivant une technologie pour une industrie donnée. Enfin, la version « forte » pose qu’une réglementation correctement conçue peut induire davantage de gains en termes d’innovation que de coûts pour se conformer à la règle. Dans cet article, nous examinons la portée de ces différentes variantes de l'hypothèse de Porter en utilisant des données sur les quatre principaux éléments de la chaîne présumée de causalité (politique environnementale, recherche et développement, performance environnementale et performance commerciale). L'analyse est fondée sur une base de données unique qui inclut des observations d'approximativement 4200 établissements dans sept pays de l’OCDE. Nos résultats supportent fortement la version « faible », mais de façon plus mitigée les versions « étroite » et « forte ».
    Keywords: Porter hypothesis, environmental policy, innovation, environmental performance, business performance., hypothèse de Porter, politique environnementale, innovation, performance environnementale, performance financière.
    JEL: L21 M14 Q52 Q55 Q58
    Date: 2007–09–01
  29. By: S. Boragan Aruoba; Francis X. Diebold; Chiara Scotti
    Abstract: We construct a framework for measuring economic activity in real time (e.g., minute-by-minute), using a variety of stock and flow data observed at mixed frequencies. Specifically, we propose a dynamic factor model that permits exact filtering, and we explore the efficacy of our methods both in a simulation study and in a detailed empirical example.
    Date: 2007
  30. By: V. V. Chari; Patrick J. Kehoe
    Abstract: Here we reply to Robert Solow’s comment (forthcoming) on our work (Chari and Kehoe (2007)).
    Keywords: Macroeconomics
    Date: 2007

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.