nep-bec New Economics Papers
on Business Economics
Issue of 2008‒08‒06
23 papers chosen by
Christian Calmes
University of Quebec in Ottawa

  1. Organizational Redesign, Information Technologies and Workplace Productivity By Dostie, Benoit; Jayaraman, Rajshri
  2. On the Amplification Role of Collateral Constraints By Caterina Mendicino
  3. Mergers, cartels and leniency programs : the role of production capacities By Emilie Dargaud
  4. The Employment Consequences of Seniority Wages By Zwick, Thomas
  5. Investability and Firm Value By Thomas O'Connor; Todd Mitton
  6. Does the Color of the Collar Matter? Firm Specific Human Capital and Post-Displacement Outcomes By Schwerdt, Guido; Ichino, Andrea; Ruf, Oliver; Winter-Ebmer, Rudolf; Zweimüller, Josef
  7. Past Performance Evaluation in Repeated Procurement: A Simple Model of Handicapping By Berardino Cesi; Gian Luigi Albano
  8. Interpreting the Great Moderation: changes in the volatility of economic activity at the macro and micro Levels By Steven J. Davis; James A. Kahn
  9. Team Governance: Empowerment of Hierarchical Control By FRIEBEL, Guido; SCHNEDLER, Wendelin
  10. Productivity and Survival of Family Firms in Japan: An Analysis Using Firm-Level Microdata By MORIKAWA Masayuki
  11. Services offshoring and wages: Evidence from micro data By Ingo Geishecker; Holger Görg
  12. Relevance or Irrelevance of Capital Structure By M. V. Ibrahimo; Carlos Pestana Barros
  13. A Note on the Determinants and Consequences of Outsourcing Using German Data By Addison, John T.; Bellmann, Lutz; Pahnke, André; Teixeira, Paulino
  14. Paying More to Hire the Best? Foreign Firms, Wages and Worker Mobility By Martins, Pedro S.
  15. Real Effects of the Subprime Mortgage Crisis: Is it a Demand or a Finance Shock? By Hui Tong; Shang-Jin Wei
  16. Entrepreneurial Moral Hazard in Income Insurance By Mette Ejrnaes; Stefan Hochguertel
  17. A Good Time to Stay Out? Strikes and the Business Cycle By Devereux, Paul; Hart, Robert A.
  18. The Effect of the Great Moderation on the U.S. Business Cycle in a Time-varying Multivariate Trend-cycle Model By Drew Creal; Siem Jan Koopman; Eric Zivot
  19. Market and Technology Access Through Firm Acquisitions: Beyond One Size Fits All By Grimpe, Christoph; Hussinger, Katrin
  20. The Internationalization of Global Start-Ups: Understanding the Role of Serial Entrepreneurs By Onetti Alberto; Odorici Vincenza; Presutti Manuela
  21. Anticipation and Real Business Cycles By David R.F. Love; Jean-Francois Lamarche
  22. Can News Be a Major Source of Aggregate Fluctuations? A Bayesian DSGE Approach By Ippei Fujiwara; Yasuo Hirose; Mototsugu Shintani
  23. Investment spikes and uncertainty in the petroleum refining industry By Timothy Dunne; Xiaoyi Mu

  1. By: Dostie, Benoit (HEC Montreal); Jayaraman, Rajshri (European School of Management and Technology (ESMT))
    Abstract: Using a large longitudinal, nationally representative workplace-level dataset, we explore the productivity gains associated with computer use and organizational redesign. The empirical strategy involves the estimation of a production function, augmented to account for technology use and organizational design, correcting for unobserved heterogeneity. We find large returns associated with computer use. We also find that computer use and organizational redesign may be complements or substitutes in production, and that the productivity gains associated with organizational redesign are industry-specific.
    Keywords: linked employer-employee data, workplace practices, productivity, information technologies
    JEL: D20 L20 M54 O33
    Date: 2008–07
  2. By: Caterina Mendicino
    Abstract: Following the seminal contribution of Kiyotaki and Moore (1997), the role of collateral constraints for business cycle fluctuations has been highlighted by several authors and collateralized debt is becoming a popular feature of business cycle models. In contrast, Kocherlakota (2000) and Cordoba and Ripoll (2004) demonstrate that collateral constraints per se are unable to propagate and amplify exogenous shocks, unless unorthodox assumptions on preferences and production technologies are made. The aim of this paper is to examine the contribution of costly debt enforcement procedures in the amplification of business cycle fluctuations through collateral constraints. We show that for realistic degrees of inefficiency, collateral constraints can significantly amplify the effects of productivity shocks on output even under standard assumptions on preferences and technology.
    Keywords: Business fluctuations and cycles; Credit and credit aggregates
    JEL: E20 E3 E32
    Date: 2008
  3. By: Emilie Dargaud (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: In this paper, we study the impact of a merger on collusion depending on the endowment of capital asset among firms. We show that the merger makes the collusion easier to sustain when asymmetric capital stock combines with less efficient insiders because of more symmetric conditions and closer incentive constraints. Moreover, this model allows us to determine<br />an optimal threshold of asymmetry among insiders and outsiders such as a merger has pro-competitive effects and we compare this value with the value which would restore perfect symmetry between firms after the merger.
    Keywords: mergers ; collusion ; leniency programs
    Date: 2008
  4. By: Zwick, Thomas
    Abstract: This paper combines two strains of the literature on the employment effects of deferred compensation. The first strain separates seniority and job matching wage effects on the basis of individual data, but cannot look at employment consequences. The second strain explains the employment structure on the basis of establishment data, but cannot properly calculate seniority wages. This paper uses linked employeremployee data, aggregates individual seniority wages to the establishment level, and correlates them with the establishment employment structure. According to the deferred compensation hypothesis this paper finds that establishments with stronger seniority wages have a higher tenure but hire less older employees.
    Keywords: Seniority Wages, Employment Structure, Linked Employer-Employee Data
    JEL: J14 J21 J31
    Date: 2008
  5. By: Thomas O'Connor (Economics Finance and Accounting, National University of Ireland, Maynooth); Todd Mitton (Brigham Young University)
    Abstract: We study how investability, or openness to foreign equity investors, affects firm value in a sample of over 1,400 firms from 26 emerging markets. We find that, on average, investability is associated with a 9% valuation premium (as measured by Tobin's q). However, in firm-fixed effects regressions this valuation premium disappears, suggesting that investability does not have a causal effect on firm value. Analysis of the components of Tobin's q shows that firms that become investable experience significant increases in both market values and physical investment. These effects are strongest for firms that face country-level or firm-level financial constraints prior to becoming investable
    Keywords: Financial liberalization; Investability; Foreign investors; Tobin's q
    JEL: G15 F36
  6. By: Schwerdt, Guido (Ifo Institute for Economic Research); Ichino, Andrea (University of Bologna); Ruf, Oliver (University of Zurich); Winter-Ebmer, Rudolf (University of Linz); Zweimüller, Josef (University of Zurich)
    Abstract: We investigate whether the costs of job displacement differ between blue collar and white collar workers. In the short run earnings and employment losses are substantial for both groups but stronger for white collar workers. In the long run, there are only weak effects for blue collar workers but strong and persistent effects for white collars. This is consistent with the idea that firm-specific human capital and internal labor markets are more important in white-collar than in blue collar jobs.
    Keywords: firm specific human capital, plant closures, matching
    JEL: J14 J65
    Date: 2008–07
  7. By: Berardino Cesi (University "G. D.Annunzio"); Gian Luigi Albano (Italian Public Procurement Agency (Consip S.p.A.))
    Abstract: When procurement contracts are awarded through competitive tendering participating firms commit ex ante to fulfil a set of contractual duties. However, selected contractors may find profitable to renege ex post on their promises by opportunistically delivering lower quality standards. In order to deter ex post moral hazard, buyers may use different strategies depending on the extent to which quality dimensions are contractible, that is, verifiable by contracting parties and by courts. We consider a stylized repeated procurement framework in which a buyer awards a contract over time to two firms with different efficiency levels. If the contractor does not deliver the agreed level of performance the buyer may handicap the same firm in future competitive tendering. We prove that under complete information extremely severe handicapping is never a credible strategy for the buyer, rather the latter finds it optimal to punish the opportunistic firm so as to make the pool of competitors more alike. In other words, when opportunistic behaviour arises, the buyer should use handicapping to “level the playing field”.
    Keywords: Repeated Procurement, Handicapping, Relational Contracts, Stick and Carrot Strategy
    JEL: C73 D82 D44 H57 K12 L14
    Date: 2008–03
  8. By: Steven J. Davis; James A. Kahn
    Abstract: We review evidence on the Great Moderation together with evidence about volatility trends at the micro level to develop a potential explanation for the decline in aggregate volatility since the 1980s and its consequences. The key elements are declines in firm-level volatility and aggregate volatility - most dramatically in the durable goods sector - but with no decline in household consumption volatility and individual earnings uncertainty. Our explanation for the aggregate volatility decline stresses improved supply-chain management, particularly in the durable goods sector, and, less important, a shift in production and employment from goods to services. We provide evidence that better inventory control made a substantial contribution to declines in firm-level and aggregate volatility. Consistent with this view, if we look past the turbulent 1970s and early 1980s, much of the moderation reflects a decline in high-frequency (short-term) fluctuations. While these developments represent efficiency gains,they do not imply (nor is there evidence for) a reduction in economic uncertainty faced by individuals and households.>
    Keywords: Business cycles ; Consumption (Economics) ; Durable goods, Consumer ; Service industries ; Households - Economic aspects
    Date: 2008
  9. By: FRIEBEL, Guido; SCHNEDLER, Wendelin
    Date: 2007–09
  10. By: MORIKAWA Masayuki
    Abstract: This article, by using a unique dataset of a large number of Japanese firms, empirically investigates the relationship between the structure of shareholding and productivity, survival, and managerial objectives. The focus is on the distinct traits of family firms, which compose the majority of Japanese firms. According to the results, the managerial objectives and performance of family firms are qualitatively and quantitatively different from those of non-family firms. Specifically, 1) productivity growth of family firms are significantly slower than non-family firms, after controlling for firm size, firm age, and industry; 2) family firms' probability of survival is higher than that of non-family firms; and 3) even after controlling for the high propensity to survive, family firms' productivity growth is slower. As family firms' management objectives are different from non-family firms, these results cannot be interpreted normatively. However, it is desirable to expand ownership options by reducing barriers to going public or transferring ownership.
    Date: 2008–07
  11. By: Ingo Geishecker; Holger Görg
    Abstract: This paper investigates the effects of services offshoring on wages using individual level data combined with industry information on offshoring. Our results show that services ofsshoring affects the real wage of low and medium skilled individuals negatively. By contrast, skilled workers benefit from services offshoring in terms of higher real wages. Hence, offshoring has contributed to a widening of the wage gap between skilled and less skilled workers. This result is obtained while controlling for individual and sectoral observed and unobserved heterogeneity. In particular, our empirical model also controls for the impact of technological change and offshoring materials
    Keywords: Services offshoring, individual wages
    JEL: F16 J31 C23
    Date: 2008–07
  12. By: M. V. Ibrahimo; Carlos Pestana Barros
    Abstract: In this paper we examine the effects of asymmetric information on the nature of financial equilibrium and on the capital structure of firms. In the first model presented, the financial contracts on offer involve pooling equilibrium with no adverse selection. However, in the special case analyzed, where contracts are of mixed form, there may be a separating equilibrium and also equilibrium may not exist. Interesting result is that the separating equilibrium found is not economically efficient since aggregate investments falls short of first-best level. More importantly, capital structure does matter. The relative magnitude of outside equity makes a real difference to the quantity of aggregate investment in equilibrium.
    Date: 2008–06
  13. By: Addison, John T. (University of South Carolina); Bellmann, Lutz (IAB, Nürnberg); Pahnke, André (IAB, Nürnberg); Teixeira, Paulino (University of Coimbra)
    Abstract: Using German data from the Institute for Employment Research Establishment Panel, this paper constructs two main measures of outsourcing and examines their determinants and consequences for employment. There are some commonalities in the correlates of the two measures of outsourcing, as well as agreement on the absence of adverse employment effects across all industries. For one specification, however, some negative effects are reported for manufacturing industry, balanced by positive effects for the services sector for another. But there are no indications of survival bias. This is because the association between outsourcing and plant closings is predominantly negative, albeit poorly determined.
    Keywords: outsourcing, organizational change, employment change, plant closings, value added
    JEL: F16 J23
    Date: 2008–07
  14. By: Martins, Pedro S. (Queen Mary, University of London)
    Abstract: In the context of the debate on the labour-market consequences of globalisation, we examine worker mobility in order to identify the wage differences between foreign and domestic firms. Using matched employer-employee panel data for Portugal, we consider virtually all spells of interfirm mobility over a period of ten years. We find that foreign firms offer significantly more generous wage policies, although there is also a (smaller) selection effect. The results are robust to the consideration of wage growth differences, the case of displaced workers and different subsets of workers.
    Keywords: foreign direct investment, worker displacement, wage growth
    JEL: J31 J63 F23
    Date: 2008–07
  15. By: Hui Tong; Shang-Jin Wei
    Abstract: We develop a methodology to study how the subprime crisis spills over to the real economy. Does it manifest itself primarily through reducing consumer demand or through tightening liquidity constraint on non-financial firms? Since most non-financial firms have much larger cash holding than before, they appear unlikely to face significant liquidity constraint. We propose a methodology to estimate these two channels of spillovers. We first propose an index of a firm's sensitivity to consumer demand, based on its response to the 9/11 shock in 2001. We then construct a separate firm-level index on financial constraint based on Whited and Wu (2006). We find that both channels are at work, but a tightened liquidity squeeze is economically more important than a reduced consumer spending in explaining cross firm differences in stock price declines.
    Keywords: Working Paper , United States ,
    Date: 2008–07–25
  16. By: Mette Ejrnaes (Copenhagen University); Stefan Hochguertel (VU University Amsterdam)
    Abstract: We study risk behavior of Danish self-employed entrepreneurs, whose income risk may be driven by both exogenous factors and effort choice (moral hazard). Partial insurance is available through voluntary unemployment insurance (UI). Additional incentives to sign insurance contracts stem from a UI-embedded, government-subsidized early retirement (ER) program, giving benefits that are unrelated to business risk. Indeed, we argue that the self-employed's incentives to insure themselves stem from the ER plan rather than from the UI cover. We show how to use a policy reform to identify moral hazard in observed transitions to unemployment when insurance is a choice variable. We use administrative (register) panel data covering 10% of the Danish population. We find that the insured are indeed more likely to transit into unemployment than the uninsured, once we properly instrument for the insurance choice.
    Keywords: entrepreneurs; self-employment; early retirement; unemployment insurance; moral hazard; Denmark; panel data
    JEL: C33 D12 D14 D91 J23 J26
    Date: 2008–07–14
  17. By: Devereux, Paul (University College Dublin); Hart, Robert A. (University of Stirling)
    Abstract: In this paper, we compile a unique historical dataset that records strike activity in the British engineering industry from 1920 to 1970. These data have the advantage of containing a fairly homogenous set of companies and workers, covering a long period with varying labour market conditions, including information that enables the addition of union and company fixed effects, and providing geographical detail that allows a district-level analysis that controls for year and seasonal effects. We study the cyclicality of strike durations, strike incidence, and strike outcomes and distinguish between pay and non-pay strikes. Like the previous literature, we find evidence that strikes over pay have countercyclical durations. However, in the post-war period, the magnitude of this effect is much reduced when union and firm fixed effects are included. These findings suggest that it is important when studying strike durations to take account of differences in the composition of companies and unions that are involved in strikes at different points of the business cycle. We also find that strike outcomes tend to be more favourable to unions when the national unemployment rate is lower.
    Keywords: incidence, duration, cyclicality, strikes, outcome
    JEL: E32 J31
    Date: 2008–07
  18. By: Drew Creal (VU University Amsterdam); Siem Jan Koopman (VU University Amsterdam); Eric Zivot (University of Washington)
    Abstract: In this paper we investigate whether the dynamic properties of the U.S. business cycle have changed in the last fifty years. For this purpose we develop a flexible business cycle indicator that is constructed from a moderate set of macroeconomic time series. The coincident economic indicator is based on a multivariate trend-cycle decomposition model that accounts for time variation in macroeconomic volatility, known as the great moderation. In particular, we consider an unobserved components time series model with a common cycle that is shared across different time series but adjusted for phase shift and amplitude. The extracted cycle can be interpreted as the result of a model-based bandpass filter and is designed to emphasize the business cycle frequencies that are of interest to applied researchers and policymakers. Stochastic volatility processes and mixture distributions for the irregular components and the common cycle disturbances enable us to account for all the heteroskedasticity present in the data. The empirical results are based on a Bayesian analysis and show that time-varying volatility is only present in the a selection of idiosyncratic components while the coefficients driving the dynamic properties of the business cycle indicator have been stable over time in the last fifty years.
    Keywords: Bandpass filter; Markov chain Monte Carlo; Stochastic volatility; Trend-cycle decomposition; Unobserved components time series model
    JEL: C11 C32 E32
    Date: 2008–07–17
  19. By: Grimpe, Christoph; Hussinger, Katrin
    Abstract: Firm acquisitions have been shown to serve as a way to gain access to international markets, technological assets, products or other valuable resources of the target firm. Given this heterogeneity of takeover motivations and the skewness of the distribution of the deal value we show whether and how the importance of different takeover motivations changes along the deal value distribution. Based on a comprehensive dataset of 652 European mergers and acquisitions in the period from 1997 to 2003, we use quantile regressions to decompose the deal value at different points of its distribution. Our results indicate that the importance of technological assets is indeed higher for smaller target firms. The findings support the view on small acquisition targets to complement the acquirer’s technology portfolio while larger acquisition targets tend to be used to gain access to international markets.
    Keywords: Firm acquisitions, technological assets, market access, quantile regression
    JEL: G34 L20 O34
    Date: 2008
  20. By: Onetti Alberto (Department of Economics, University of Insubria, Italy); Odorici Vincenza (Business Administration Department , University of Bologna, Italy); Presutti Manuela (Business Administration Department , University of Bologna, Italy)
    Abstract: Using qualitative methodology, we aim to understand how serial entrepreneurs can foster the development of born-global ventures. We consider a born-global start-up as the final stage of the learning process for a serial entrepreneur, advancing propositions regarding the importance of prior entrepreneurial experience – in terms of knowledge acquisition, identification and exploitation of opportunities, social networks development – for bornglobal venture creation and growth. We verify that the serial entrepreneur’s previous entrepreneurial experiences could substitute for the lack of knowledge, opportunity recognition and social networks of a born-global start-up. Thus, we recognize the necessity of a shift in the unit of analysis, from born-global start-up to a global serial entrepreneur. Moreover, we suggest to follow a dynamic approach when the born-global start-up issue is discussed since we expect that the entrepreneur’s learning process evolves over time in relation to their quality of previous experiences.
    Keywords: born-global, international new ventures, entrepreneurship, serial entrepreneur, internationalization, social network, entrepreneurial experience, opportunity identification, opportunity exploration, longitudinal case study.
    Date: 2008–04
  21. By: David R.F. Love (Department of Economics, Brock University); Jean-Francois Lamarche (Department of Economics, Brock University)
    Abstract: Standard real business cycle (RBC) theory assumes that changes in economic conditions are unanticipated. We argue that upcoming changes are often well anticipated. Employing the RBC methodology to evaluate models when changes in economic conditions are fully anticipated provides evidence on the relevance of this alternative. We find that anticipation effects i) reduce the exogenous volatility required for the models to explain output folatility, ii) improves or leaves unchanged, the model predictions for the data moments studied and, iii) can go some way to providing realistic internal propagation mechanisms within theoretical frameworks.
    Keywords: Anticipation, Real Business Cycles, Impulse Responses
    JEL: E10 E30 E37
    Date: 2004–09
  22. By: Ippei Fujiwara (Institute for Monetary and Economic Studies, Bank of Japan (E-mail:; Yasuo Hirose (Economist, International Department, Bank of Japan (E-mail:; Mototsugu Shintani (Associate Professor, Department of Economics, Vanderbilt University, and Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail:,
    Abstract: We examine whether the news shocks, as explored in Beaudry and Portier (2004), can be a major source of aggregate fluctuations. For this purpose, we extend a dynamic stochastic general equilibrium model, a la Christiano, Eichenbaum, and Evans (2005), by allowing news shocks on the total factor productivity and estimate the model using Bayesian methods. Estimation results on the Japanese and U.S. economies show that (1) the news shocks play an important role in business cycles; (2) a news shock with a longer forecast horizon has larger effects on nominal variables; and (3) the overall effect of the total factor productivity on hours worked becomes ambiguous in the presence of news shocks.
    Keywords: Demand for Money, Aggregation, Heterogeneity
    JEL: E41 C43
    Date: 2008–07
  23. By: Timothy Dunne; Xiaoyi Mu
    Abstract: This paper investigates the effect of uncertainty on the investment decisions of petroleum refineries in the US. We construct uncertainty measures from commodity futures market and use data on actual capacity changes to measure investment episodes. Capacity changes in US refineries occur infrequently and a small number of investment spikes account for a large fraction of the change in industry capacity. Given the lumpy nature of investment adjustment in this industry, we empirically model the investment process using hazard models. An increase in uncertainty decreases the probability a refinery adjusts its capacity. The results are robust to various investment thresholds. Our findings lend support to theories that emphasize the role of irreversibility in investment decisions.
    Date: 2008

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