nep-bec New Economics Papers
on Business Economics
Issue of 2008‒02‒16
thirteen papers chosen by
Christian Calmes
University of Quebec in Ottawa

  1. The Business Cycle Implications of Reciprocity in Labor Relations By Jean-Pierre Danthine; André Kurmann
  2. How do entrepreneurs in clusters contribute to economic growth? By Wennberg, Karl; Lindqvist, Göran
  3. Intra-firm wage inequality and firm performance – First evidence from German linked employer-employee-data By Nils Braakmann
  4. Evaluating the Effects of Mergers and Acquisitions on Employees: Evidence from Matched Employer-Employee Data By Donald Siegel; Kenneth L. Simons
  5. Activists, raiders, and directors: Opportunism and the balance of corporate power By Thomas H. Noe; Michael J. Rebello; Ramana Sonti
  6. Measuring Financial Asset Return and Volatility Spillovers, With Application to Global Equity Markets By Francis X. Diebold; Kamil Yilmaz
  7. Aging Workforces and Challenges to Human Resource Management in German Firms By Uschi Backes-Gellner; Stephan Veen
  8. Gazelles as Job Creators – A Survey and Interpretation of the Evidence By Henrekson, Magnus; Johansson, Dan
  9. Peer Effects and Entrepreneurship By Ramana Nanda; Jesper B. Sorensen
  10. Occupational Mobility and the Business Cycle By Giuseppe Moscarini; Francis G. Vella
  11. Banking Crisis and Borrower Productivity By KOBAYASHI Keiichiro; YANAGAWA Noriyuki
  12. Explaining a productive decade By Stephen D. Oliner; Daniel E. Sichel.; Kevin J. Stiroh
  13. Memory in Contracts: The Experience of the EBRD (1991-2003) By Lionel Artige; Rosella Nicolini

  1. By: Jean-Pierre Danthine; André Kurmann
    Abstract: We develop a reciprocity-based model of wage determination and incorporate it into a moder dynamic general equilibrium framework. We estimate the model and find that, among potential determinants of wage policy, rent-sharing (between workers and firms) and a measure of wage entitlement are critical to fit the dynamic responses of hours, wages and inflation to various exogenous shocks. Aggregate employment conditions (measuring workers' outside option), on the other hand, are found to play only a negligible role in wage setting. These results are broadly consistent with micro-studies on reciprocity in labor relations but contrast with traditional efficiency wage models which emphasize aggregate labor market variables as the main determinant of wage setting. Overall, the empirical fit of the estimated model is at least as good as the fit of models postulating nominal wage contracts. In particular, the reciprocity model is more successful in generating the sharp and significant fall of inflation and nominal wage growth in response to a neutral technology shock.
    Keywords: Efficiency wages, Reciprocity, Estimated DSGE models
    JEL: E24 E31 E32 E52 J50
    Date: 2007
  2. By: Wennberg, Karl (Dept. of Business Administration, Stockholm School of Economics); Lindqvist, Göran (Dept. of Business Administration, Stockholm School of Economics)
    Abstract: This paper investigates the long-term survival and performance of new entrepreneurial firms, comparing firms located within regional clusters with those located outside of clusters.We use matched employee-employer databases to investigate all Swedish firms started in the telecom and consumer electronic s, financial services, information technology, medical equipment, and pharmaceuticals and biotech sectors (N = 4,397). We follow these firms from 1993 to 2002 and measure their contribution to local economic vitality in term of job creation, payment of taxes, and payment of salaries to employees. <p> Controlling for factors such as firm size, age, and absorptive innovative capabilities, we find strong empirical evidence that being located within a cluster has positive effects on the survival of new firms. We also find that clustered firm creates more jobs, higher tax payments, and higher wages to employees. The effects are consistent across alternative measures of agglomeration and different regional levels. <p> Thid study contributes to the literatures on entrepreneurship and economic geography. By measuring the economic contributions of clustered and non-clustered firms, the empirical evidence also provides support for basing economic policies on clusters.
    Keywords: Clusters; Entrepreneurship; Economic Development
    Date: 2007–06–07
  3. By: Nils Braakmann (Institute of Economics, Leuphana University of Lüneburg)
    Abstract: Economic theory suggests both positive and negative relationships between intra- firm wage inequality and productivity. This paper contributes to the growing empirical literature on this subject. We combine German employer-employee-data for the years 1995-2005 with inequality measures using the whole wage distribution of a firm and rely on dynamic panel-data estimators to control for unobserved heterogeneity, simultaneity problems and possible state dependence. Our results indicate a relative minor influence of intra-firm wage inequality on firm productivity. If anything, they provide some support for a view suggesting that some inequality may be beneficial, while too much leads to a detrimental eect on productivity.
    Keywords: Wage dispersion, labor productivity
    JEL: J31 M52
    Date: 2008–02
  4. By: Donald Siegel (Graduate School of Management, University of California, Riverside, Riverside, CA 92521, USA); Kenneth L. Simons (Department of Economics, Rensselaer Polytechnic Institute, Troy, NY 12180-3590, USA)
    Abstract: The unit of analysis in empirical studies of the employment and wage effects of mergers and acquisitions is typically the plant or firm. In contrast, the unit of observation in this study is the individual worker, which allows us to provide direct, systematic empirical evidence on the effects of different types of mergers and acquisitions on employees. Specifically, we analyze linked employer employee data for the entire population of Swedish workers and over 19,000 manufacturing plants for the period 1985-1998. For each worker, we have data on gender, age, national origin, level of education, type of education, location, industrial sector, annual earnings, as well as each employee’s complete work history both before and after a merger or acquisition. We can also identify whether the plant was involved in a full or partial acquisition or divestiture, as well as a related or unrelated acquisition. The empirical evidence suggests that employee outcomes are more favorable when only part of the company is bought or sold or when the firm engages in an unrelated acquisition.
    JEL: G34 J23 J31 C81
    Date: 2008–01
  5. By: Thomas H. Noe; Michael J. Rebello; Ramana Sonti
    Abstract: We model corporate governance in a world with competitive securities markets as well as markets for corporate assets. We show that varying the liquidity and opacity of corporate assets, the vitality of the market for corporate control, and the costs of enforcing shareholder rights to cash flows leads to a plethora of institutional designs. When asset liquidity is high, shareholder rights are enforced through the option to liquidate as in a mutual fund. When the opacity of corporate assets is relatively high and asset liquidity is relatively low, firms will eschew reliance on board monitoring and instead rely on shareholder activism. An increase in the cost of ownership concentration, by increasing the inefficiency of shareholder activism, will increase the reliance on board activism and decrease the reliance on CEO compensation. Decreases in the cost of enforcement of shareholder rights and the opacity of corporate assets, and increased raider activity further strengthen the preference for activist boards.
    Keywords: governance, asset liquidity, institutional design
    JEL: G20 G34
    Date: 2008
  6. By: Francis X. Diebold; Kamil Yilmaz
    Abstract: We provide a simple and intuitive measure of interdependence of asset returns and/or volatilities. In particular, we formulate and examine precise and separate measures of return spillovers and volatility spillovers. Our framework facilitates study of both non-crisis and crisis episodes, including trends and bursts in spillovers, and both turn out to be empirically important. In particular, in an analysis of nineteen global equity markets from the early 1990s to the present, we find striking evidence of divergent behavior in the dynamics of return spillovers vs. volatility spillovers: Return spillovers display a gently increasing trend but no bursts, whereas volatility spillovers display no trend but clear bursts.
    JEL: G1
    Date: 2008–02
  7. By: Uschi Backes-Gellner (Institute for Strategy and Business Economics, University of Zurich); Stephan Veen (Institute for Strategy and Business Economics, University of Zurich)
    Abstract: The aim of this paper is to provide an overview of the main challenges imposed by demographic change on the human resource management (HRM) policies of German companies. Although many more aspects of business are affected by demographic change, such as changes in consumption or in savings and investment and therefore in capital costs, we concentrate on changes in personnel policies prompted by an aging workforce. We cover a wide range of HRM policies, starting with recruitment problems, moving on to training issues, wages and incentives, and end with problems concerning innovation and technological change.
    Keywords: Aging Workforce, Firm Demography, Human Resource Management
    JEL: M51 M54 J1
    Date: 2007–12
  8. By: Henrekson, Magnus (Research Institute of Industrial Economics (IFN)); Johansson, Dan (Ratio)
    Abstract: It is often claimed that small and young firms account for a disproportionately large share of net employment growth. We conduct a meta analysis of the empirical evidence regarding whether net employment growth rather is generated by a few rapidly growing firms – so-called Gazelles – that are not necessarily small and young. Gazelles are found to be outstanding job creators. They create all or a large share of new net jobs. On average, Gazelles are younger and smaller than other firms, but it is young age more than small size that is associated with rapid growth. Gazelles also seem to be overrepresented in services.
    Keywords: Entrepreneurship; Firm Growth; Flyers; Gazelles; High-growth Firms; Job Creation; Rapidly Growing Firms
    JEL: D21 L25 M13 O10 O40
    Date: 2008–02–08
  9. By: Ramana Nanda (Harvard Business School, Entrepreneurial Management Unit); Jesper B. Sorensen (Graduate School of Business, Stanford University)
    Abstract: We examine whether the likelihood of entrepreneurial activity depends on the prior career experiences of an individual's co-workers. We argue that peers may increase an individual's likelihood of becoming an entrepreneur through two channels: by increasing the likelihood that an individual will perceive entrepreneurial opportunities, and by increasing his or her willingness to pursue those opportunities. Our analysis uses a unique panel dataset that allows us to track the career histories of individuals across firms. We find that an individual is more likely to become an entrepreneur if his or her co-workers have been entrepreneurs before, or if the co-workers' careers involved frequent movement between firms. Peer influences appear to be substitutes for direct experience: the effects are strongest for those without exposure to entrepreneurship in their family of origin, and for those who have engaged in little inter-firm mobility themselves. These effects are robust to attempts to address concerns about unobserved heterogeneity bias.
    Date: 2006–03
  10. By: Giuseppe Moscarini; Francis G. Vella
    Abstract: Do workers sort more randomly across different job types when jobs are harder to find? To answer this question, we study the mobility of male workers among three-digit occupations in the matched files of the monthly Current Population Survey over the 1979-2004 period. We clean individual occupational transitions using the algorithm proposed by Moscarini and Thomsson (2008). We then construct a synthetic panel comprising annual birth cohorts, and we examine the respective roles of three potential determinants of career mobility: individual ex ante worker characteristics, both observable and unobservable, labor market prospects, and ex post job matching. We provide strong evidence that high unemployment somewhat offsets the role of individual worker considerations in the choice of changing career. Occupational mobility declines with age, family commitments and education, but when unemployment is high these negative effects are weaker, and reversed for college education. The cross-sectional dispersion of the monthly series of residuals is strongly countercyclical. As predicted by Moscarini (2001)'s frictional Roy model, the sorting of workers across occupations is noisier when unemployment is high. As predicted by job-matching theory, worker mobility has significant residual persistence over time. Finally, younger cohorts, among those in the sample for most of their working lives, exhibit increasingly low unexplained career mobility.
    JEL: E24 E32 J62
    Date: 2008–02
  11. By: KOBAYASHI Keiichiro; YANAGAWA Noriyuki
    Abstract: In this paper, we propose a theoretical model in which a banking crisis (or bank distress) causes declines in aggregate productivity. When borrowing firms need additional bank loans to continue their businesses, a high probability of bank failure discourages ex ante investments (e.g., R&D investment) by firms that enhance their productivity. In a general equilibrium setting, we also show that there may be multiple equilibria: one in which bank distress continues and borrower productivity is low, and in the other, banks are healthy and borrower productivity is high. We show that the bank capital requirement may be effective in eliminating the bad equilibrium and may lead the economy to the good equilibrium in which the productivity of borrowing firms and the aggregate output are both high and the probability of bank failure is low.
    Date: 2008–02
  12. By: Stephen D. Oliner; Daniel E. Sichel.; Kevin J. Stiroh
    Abstract: This paper analyzes the sources of U.S. productivity growth in recent years using both aggregate and industry-level data. We confirm the central role for information technology (IT) in the productivity revival during 1995-2000 and show that IT played a significant, though smaller, role after 2000. Productivity growth after 2000 appears to have been boosted by industry restructuring and cost cutting in response to profit pressures, an unlikely source of future strength. In addition, the incorporation of intangible capital into the growth accounting framework takes some of the luster off the performance of labor productivity since 2000 and makes the gain during 1995-2000 look larger than in the official data. Finally, we examine the outlook for trend growth in labor productivity; our estimate, though subject to much uncertainty, is centered at 2-1/4 percent a year, faster than the lackluster pace that prevailed before 1995 but somewhat slower than the 1995-2006 average.
    Date: 2007
  13. By: Lionel Artige; Rosella Nicolini
    Abstract: The objective of this paper is to identify the role of memory in repeated contracts with moral hazard in financial intermediation. We use the database we have built containing the contracts signed by the European Bank for Reconstruction and Development EBRD between 1991 and 2003. Our framework is a standard setting of repeated moral hazard. After having controlled for the adverse selection component, we are able to prove that client reputation is the discrimination device according to which the bank fixes the amount of credit for the established clients. Our results unambiguously isolate the effect of memory in the bank's lending decisions.
    Keywords: Financial Contracts, Incentives, Investment, Memory, Moral Hazard.
    JEL: D21 D82 G21 L14 P21
    Date: 2008–02–01

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