nep-bec New Economics Papers
on Business Economics
Issue of 2008‒03‒15
eighteen papers chosen by
Christian Calmes
University of Quebec in Ottawa

  1. Union Density and Varieties of Coverage: The Anatomy of Union Wage Effects in Germany By Fitzenberger, Bernd; Kohn, Karsten; Lembcke, Alexander C.
  2. Real Business Cycles with Cournot Competition and Endogenous Entry By Andrea Colciago; Federico Etro
  3. Technological Progress, Organizational Change and the Size of the Human Resources Departement By Raouf BOUCEKKINE; Patricia, CRIFO; Claudio, MATTALIA
  4. Competition and Relational Contracts: The Role of Unemployment as a Disciplinary Device By Brown, Martin; Falk, Armin; Fehr, Ernst
  5. Occupational Mobility and the Business Cycle By Moscarini, Giuseppe; Vella, Francis
  6. Subjective Performance Evaluation and Inequality Aversion By Grund, Christian; Przemeck, Judith
  7. Tenure, Wage Profiles and Monitoring By Sessions, John G.; Theodoropoulos, Nikolaos
  8. The Impact of Training on Productivity: Evidence from a Large Panel of Firms By Emilio Colombo; Luca Stanca
  9. Outsourcing, Information Leakage and Consulting Firms By Mariagiovanna Baccara
  10. How Are Fixed-term Contracts Used by Firms? An Analysis Using Gross Job and Worker Flows By Catalina Amuedo-Dorantes; Miguel Á. Malo
  11. Higher Wages in Exporting Firms: Self-Selection, Export Effect, or Both? First Evidence from German Linked Employer-Employee Data By Schank, Thorsten; Schnabel, Claus; Wagner, Joachim
  12. Borrowing Constraints, Entrepreneurial Risks, and the Wealth Distribution in a Heterogeneous Agent Model By Christiane Clemens; Maik Heinemann
  13. The Analysis of a Deviation of Investment and Corporate Governance By Shoichi Hisa
  14. Globalization and Labor Market Outcomes: Wage Bargaining, Search Frictions, and Firm Heterogeneity By Felbermayr, Gabriel; Prat, Julien; Schmerer, Hans-Jörg
  15. Preferences for Collective versus Individualised Wage Setting By Boeri, Tito; Burda, Michael C.
  16. Does product market competition improve the labour market performance ? By Gabriele, CARDULLO
  17. Employment Stability of Entrants in Newly Founded Firms: A Matching Approach Using Linked Employer-Employee Data from Germany By Schnabel, Claus; Kohaut, Susanne; Brixy, Udo
  18. A Microfoundation for Production Functions: Assignment of Heterogenous Workers to Heterogenous Jobs By Dupuy, Arnaud

  1. By: Fitzenberger, Bernd (University of Frankfurt); Kohn, Karsten (University of Frankfurt); Lembcke, Alexander C. (CEP, London School of Economics)
    Abstract: Collective bargaining in Germany takes place either at the industry level or at the firm level; collective bargaining coverage is much higher than union density; and not all employees in a covered firm are necessarily covered. This institutional setup suggests to explicitly distinguish union power as measured by net union density (NUD) in a labor market segment, coverage at the firm level, and coverage at the individual level. Using linked employer-employee data and applying quantile regressions, this is the first empirical paper which simultaneously analyzes these three dimensions of union influence on the structure of wages. Ceteris paribus, a higher share of employees in a firm covered by industry-wide or firm-level contracts is associated with higher wages. Yet, individual bargaining coverage in a covered firm shows a negative impact both on the wage level and on wage dispersion. A higher union density reinforces the effects of coverage, but the effect of union density is negative at all points in the wage distribution for uncovered employees. In line with an insurance motive, higher union density compresses the wage structure and, at the same time, it is associated with a uniform leftward movement of the distribution for uncovered employees.
    Keywords: linked employer-employee data, quantile regression, wage structure, collective bargaining coverage, union density, Structure of Earnings Survey 2001, Germany
    JEL: J31 J51 J52
    Date: 2008–02
  2. By: Andrea Colciago; Federico Etro
    Abstract: We introduce Cournot competition and endogenous entry in an oth- erwise neoclassical macroeconomic framework. First, we develop a model with exogenous savings à la Solow describing the dynamic path of busi- ness creation. Then, we develop a model à la Ramsey describing the dynamic interaction of consumption and business creation. Our models are able to explain why markups vary countercylically and pro?ts are procyclical. The analysis of permanent and temporary technology and preference shocks and of the second moments suggests that our model can outperform the Real Business Cycle framework in many dimensions.
    Date: 2007–09
  3. By: Raouf BOUCEKKINE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Patricia, CRIFO; Claudio, MATTALIA
    Abstract: Innovative workplace practices based on multi-tasking and ICT that have been diffusing in most OECD countries since the 1990s have strong consequences on working conditions. Available data show together with the emergence of new organizational forms like multi-tasking, the increase in the proportion of workers employed in managerial occupation and the increase in skill requirements. This paper proposes a theoretical model to analyze the coordination costs between workers and between tasks. Firms can reduce coordination costs by assigning more workers to human resources management. Human capital is endogenously accumulated by workers. The model reproduces pretty well the regularities observed in the data. In particular, exogenous technological accelerations tend to increase both the number of tasks performerd and the skill requirements, and to raise the fraction of workers devoted to management.
    Keywords: Information Technology, Organizational Change, Human Capital, Multi-Tasking
    JEL: J22 J24 L23 O33 C62
    Date: 2008–02–01
  4. By: Brown, Martin (Swiss National Bank); Falk, Armin (University of Bonn); Fehr, Ernst (University of Zurich)
    Abstract: When unemployment prevails, relations with a particular firm are valuable for workers. As a consequence, a worker may adhere to an implicit agreement to provide high effort, even when performance is not third-party enforceable. But can implicit agreements – or relational contracts – also motivate high worker performance when the labor market is tight? We examine this question by implementing an experimental market in which there is an excess demand for labor and the performance of workers is not third-party enforceable. We show that relational contracts emerge in which firms reward performing workers with wages that exceed the going market rate. This motivates workers to provide high effort, even though they could shirk and switch firms. Our results thus suggest that unemployment is not a necessary device to motivate workers. We also discuss how market conditions affect relational contracting by comparing identical labor markets with excess supply and excess demand for labor. Long-term relationships turn out to be less frequent when there is excess demand for labor compared to a market characterized by unemployment. Surprisingly though, this does not compromise market performance.
    Keywords: relational contracts, involuntary unemployment
    JEL: D82 J3 J41 E24 C9
    Date: 2008–02
  5. By: Moscarini, Giuseppe (Yale University); Vella, Francis (Georgetown University)
    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.
    Keywords: occupational mobility, business cycle, synthetic cohorts
    JEL: J24
    Date: 2008–02
  6. By: Grund, Christian (University of Würzburg); Przemeck, Judith (University of Bonn)
    Abstract: Many firms use subjective performance appraisal systems due to lack of objective performance measures. In these cases, supervisors usually have to rate the performance of their subordinates. Using such systems, it is a well established fact that many supervisors tend to assess the employees too good (leniency bias) and that the appraisals hardly vary across employees of a certain supervisor (centrality bias). We explain these two biases in a model with a supervisor, who has preferences for the utility of her inequality averse subordinates, and discuss determinants of the size of the biases. Extensions of the basic model include the role of supervisor’s favoritism of one particular agent and the endogenous effort choice of agents. Whether inequality averse agents exert higher efforts then purely self-oriented ones, depends on the size of effort costs and inequality aversion.
    Keywords: appraisals, inequality aversion, performance evaluation, centrality bias, leniency bias
    JEL: M5 D63
    Date: 2008–03
  7. By: Sessions, John G. (University of Bath); Theodoropoulos, Nikolaos (University of Cyprus)
    Abstract: We investigate the relationship between the slope of the wage-tenure profile and the level of monitoring across two cross sections of matched employer-employee British data. Our theoretical model predicts that increased monitoring leads to a decline in the slope of the wage-tenure profile. Our empirical analysis provides strong support for this prediction.
    Keywords: monitoring, tenure, efficiency wages
    JEL: J33 J41 J54
    Date: 2008–01
  8. By: Emilio Colombo; Luca Stanca
    Abstract: This paper investigates the e®ects of training on labor productiv- ity using a unique nationally representative panel of Italian ¯rms for the period 2002 to 2005. We ¯nd that training has a positive and signi¯cant e®ect on productivity. Using a variety of panel estimation techniques, we show that failing to account for unobserved heterogene- ity leads to overestimate the impact of training on productivity, while failing to account for endogeneity leads to substantially underestimate it. Training also has a positive and signi¯cant impact on wages, but this e®ect is about half the size of the e®ect on productivity. Within occupational groups, the e®ect of training on productivity is large and signi¯cant for blue-collars, but small and not signi¯cant for white collars.
    Keywords: On-the-Job-Training; Productivity; Wages; Panel Data
    JEL: C23 D24 J31
    Date: 2008–01
  9. By: Mariagiovanna Baccara
    Date: 2008
  10. By: Catalina Amuedo-Dorantes (Department of Economics, San Diego State University); Miguel Á. Malo (Universidad de Salamanca)
    Abstract: Using Spanish establishment level data on temporary and permanent job and worker flows, we examine firms’ relative usage of fixed-term contracts in response to changes in their prior net employment expectations for the short-run and the long-run –viewed as proxies of how a wide variety of future shocks are ultimately perceived by establishments. The employment response of establishments to changing net employment expectations for the short-run is, primarily, suggestive of their reliance on fixed-term contracts as a buffer to cushion short-run changes in demand as well as to shield permanent workers from downward workforce adjustments. In contrast, their response to changes in net employment expectations for the long-run mostly hints on the use of fixed-term contracts as a screening device. Therefore, policies providing financial incentives to convert fixed-term into permanent contracts –thus targeting firms’ using fixed-term contracts as a screening device, are likely to only have limited effectiveness.
    Date: 2007–08
  11. By: Schank, Thorsten (University of Erlangen-Nuremberg); Schnabel, Claus (University of Erlangen-Nuremberg); Wagner, Joachim (University of Lüneburg)
    Abstract: While it is a stylized fact that exporting firms pay higher wages than non-exporting firms, the direction of the link between exporting and wages is less clear. Using a rich set of German linked employer-employee panel data we follow over time plants that start to export. We show that the exporter wage premium does already exist in the years before firms start to export, and that it does not increase in the following years. Higher wages in exporting firms are thus due to self-selection of more productive, better paying firms into export markets; they are not caused by export activities.
    Keywords: exports, wages, exporter wage premium, Germany
    JEL: F10 D21 J31
    Date: 2008–02
  12. By: Christiane Clemens (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Maik Heinemann (University of Lüneburg)
    Abstract: This paper deals with credit market imperfections and idiosyncratic risks in a two–sector heterogeneous agent dynamic general equilibrium model of occupational choice. We focus especially on the effects of tightening financial constraints on macroeconomic performance, entrepreneurial risk–taking, and social mobility. Contrary to many models in the literature, our comparative static results cover the entire range of borrowing constraints, from complete markets to a perfectly constrained economy. In our baseline model, we find substantial gains in output, welfare, and wealth equality associated with relaxing the constraints, but argue that it might also prove worthwhile to examine the marginal gains from credit market improvements. Interestingly, the amount of entrepreneurial activity and social mobility increases if borrowing constraints become more tight. These results can be attributed to the general equilibrium nature of our approach, where optimal firm sizes and the demand for credit are determined endogenously. The comparative static results on the entrepreneurship rate and social mobility respond sensitively to a change in income persistence.
    Keywords: DSGE model, wealth distribution, occupational choice, borrowing constraints
    JEL: C68 D3 D8 D9 G0 J24
    Date: 2008–03
  13. By: Shoichi Hisa
    Abstract: Investment of firms is affected by not only fundamentals factors, but liquidity constraint, ownership or corporate structure. Information structure between manager and owner is a significant factor to decide the level of investment, and deviation of investment from optimal condition. The reputation model between manager and owner suggest that the separate of ownership and management may induce the deviation of investment, and indicate that governance structure is important to reduce it. In this paper we estimate the deviation of investment using investment function, and investigate the relation of the derivation and ownership structure or corporate finance using data of Japanese listed firms. In empirical test the following results is induced. (i) The concentration of ownership reduces the deviation of investment. (ii) The deviation becomes smaller when main shareholder is government or individual. (iii) On the contrary it becomes larger when main shareholder is bank or foreign institution. These results suggested that the asymmetry of information between owner and manager bring the instability of investment, and bank system is not well functioned to solve the principal-agent problem to reduce the instability.
    Keywords: Reputation, Startegic Communication, Investment
    JEL: D82 D83 E22 G32
    Date: 2008–03
  14. By: Felbermayr, Gabriel (University of Tuebingen); Prat, Julien (University of Vienna); Schmerer, Hans-Jörg (University of Tuebingen)
    Abstract: We introduce search unemployment à la Pissarides into Melitz’ (2003) model of trade with heterogeneous firms. We allow wages to be individually or collectively bargained and analytically solve for the equilibrium. We find that the selection effect of trade influences labor market outcomes. Trade liberalization lowers unemployment and raises real wages as long as it improves aggregate productivity net of transport costs. We show that this condition is likely to be met by a reduction in variable trade costs or the entry of new trading countries. On the other hand, the gains from a reduction in fixed market access costs are more elusive. Calibrating the model shows that the positive impact of trade openness on employment is significant when wages are bargained at the individual level but much smaller when wages are bargained at the collective level.
    Keywords: trade liberalization, unemployment, search model, firm heterogeneity
    JEL: F12 F15 F16
    Date: 2008–02
  15. By: Boeri, Tito (Bocconi University, Milan); Burda, Michael C. (Humboldt University, Berlin)
    Abstract: Standard models of equilibrium unemployment assume exogenous labour market institutions and flexible wage determination. This paper models wage rigidity and collective bargaining endogenously, when workers differ by observable skill and may adopt either individualized or collective wage bargaining. In the calibrated model, a substantial fraction of workers and firms as well as the median voter prefer collective bargaining to the decentralised regime. A fundamental distortion of the separation decision represented by employment protection (a firing tax) is necessary for such preferences to emerge. Endogenizing collective bargaining can significantly modify comparative statics effects of policy arising in a single-regime setting.
    Keywords: wage rigidity, employment protection, equilibrium unemployment
    JEL: J5 J6 D7
    Date: 2008–02
  16. By: Gabriele, CARDULLO (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)
    Abstract: In this paper, I construct a general equilibrium model in which the labour market exhibits search frictions, whereas Cournot competition is assumed in the goods market. The properties of the long run free-entry equiibrium show that a more competitive product market raises employment, but it has ambiguous effects both on the real wage and on the utility of the employees. Moreover, from a normative viewpoint, the level of employment and the degree of competition may be inefficiently high. Numerical results based on Belgian data are finally performed.
    Keywords: product market competition, search matching equilibrium, barriers to entry
    JEL: E24 J64 L16
    Date: 2008–02–20
  17. By: Schnabel, Claus (University of Erlangen-Nuremberg); Kohaut, Susanne (IAB, Nürnberg); Brixy, Udo (IAB, Nürnberg)
    Abstract: Using a linked employer-employee dataset and taking the perspective of individuals rather than firms, this paper analyzes some effects of joining start-ups. We show that entrants in new firms differ from those joining incumbent firms, and we use a matching approach to compare a group of employees joining new firms in 1995/96 with a control group entering incumbent firms. Our results indicate that individuals’ employment stability was higher in incumbent than in newly founded firms while their risk of becoming unemployed was lower. In particular in eastern Germany, joining firms that were older than six years was the best strategy.
    Keywords: linked employer-employee data, newly founded firms, unemployment, employment, Germany
    JEL: J63 J64
    Date: 2008–02
  18. By: Dupuy, Arnaud (ROA, Maastricht University)
    Abstract: In very different fields of economics, economic inference and policy evaluation require economists to parametrize a production function that links measures of input factors to measures of output. While doing so, strong assumptions are implicitly made about microeconomic variables governing the shape of the aggregate production function. In this paper, I develop an assignment model that provides a microeconomic foundation for aggregate production functions. The shape of the production function depends crucially on the distribution of workers and jobs and the type of technological changes depends crucially on the evolution of these distributions. Sufficient and necessary conditions are provided for the production function to be of the Constant Ratio of Elasticities of Substitution form, a form nesting the broadly used Constant Elasticity of Substitution form. This model provides a way to evaluate how stringent assumptions about the type of production function or technological change are by comparing the implied distribution of jobs and its evolution over time to observations of the distribution of jobs and its evolution over time.
    Keywords: microfoundations of production function, tasks assignment, technical change
    JEL: D2 D3 J3 O3
    Date: 2008–01

This nep-bec issue is ©2008 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.