nep-bec New Economics Papers
on Business Economics
Issue of 2008‒09‒29
thirty papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Does the color of the collar matter? Firm specific human capital and post-displacement outcomes By Guido Schwerdt; Andrea Ichino; Oliver Ruf; Rudolf Winter-Ebmer; Josef Zweimüller
  2. Real-Time Measurement of Business Conditions By S. Boragan Aruoba; Francis X. Diebold; Chiara Scotti
  3. Relative Performance Pay, Bonuses, and Job-Promotion Tournaments By Kräkel, Matthias; Schöttner, Anja
  4. Trade, Wages, and Productivity By Behrens, Kristian; Mion, Giordano; Murata, Yasusada; Suedekum, Jens
  5. Dismissals for cause: The difference that just eight paragraphs can make By Pedro S. Martins
  6. Corporate Fraud, Governance and Auditing By Giovanni Immordino; Marco Pagano
  7. Lumpy Labor Adjustment as a Propagation Mechanism of Business Cycles By Fang Yao
  8. The Role of the Agent's Outside Options in Principal-Agent Relationships By Imran Rasul; Silvia Sonderegger
  9. Intermediated Quantities and Returns By Rajnish Mehra; Facundo Piguillem; Edward C. Prescott
  10. Profit Sharing and the Quality of Relations with the Boss By John S Heywood; Colin Green
  11. Growth Expectation By Ippei Fujiwara
  12. Managing reductions in working hours: a study of work-time and leisure preferences in UK industry By Dan Wheatley; Irene Hardill; Bruce Philp
  13. Expected Stock Returns and Variance Risk Premia By Tim Bollerslev; Tzuo Hao; George Tauchen
  14. Leadership by Confidence in Teams By Kobayashi, Hajime; Suehiro, Hideo
  15. When Market Competition Benefits Firms By Junichiro Ishida; Toshihiro Matsumura; Noriaki Matsushima
  16. Bank mergers and the dynamics of deposit interest rates By Ben R Craig; Valeriya Dinger
  17. Measuring financial asset return and volatility spillovers, with application to global equity markets By Francis X. Diebold; Kamil Yilmaz
  18. Bank mergers and lending relationships. By Judit Montoriol-Garriga
  19. Flexible Outsourcing and the Impacts of Labour Taxation in European Welfare States By Koskela, Erkki; Poutvaara, Panu
  20. Banking with Contingent Contracts, Macroeconomic Risks, and Banking Crises By Hans Gersbach
  21. Unemployment and entrepreneurship: a cyclical relationship? By Joao Ricardo Faria; Juan Carlos Cuestas; Luis Gil-Alana
  22. Learning, adaptive expectations, and technology shocks By Kevin X.D. Huang; Zheng Liu; Tao Zha
  23. The Effects of Displacement on Self-employment Survival By Nykvist, Jenny
  24. China in the World Economy: Dynamic Correlation Analysis of Business Cycles By Fidrmuc, Jarko; Batorova, Ivana
  25. The impact of financial position on investment: an analysis for non-financial corporations in the euro area By Carmen Martínez-Carrascal; Annalisa Ferrando
  26. Régulation et mode de gestion : une étude économétrique sur les prix et la performance dans le secteur de l'eau potable By Marcel Boyer; Serge Garcia
  27. Globalization, Transparency and Economic Growth: The Vulnerability of Chinese Firms to Macroeconomic Shocks By Oxelheim, Lars
  28. The Calibration of CES Production Functions By Jonathan R. W. Temple
  29. Low-Wage Labor Markets and the Power of Suggestion By Natalya Y. Shelkova
  30. The Small Core of the German Corporate Board Network By Simone Alfarano; Thomas Lux; Mishael Milakovic

  1. By: Guido Schwerdt; Andrea Ichino; Oliver Ruf (University of Zurich, Switzerland); Rudolf Winter-Ebmer; Josef Zweimüller
    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 workes. 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: 2008–09
  2. By: S. Boragan Aruoba; Francis X. Diebold; Chiara Scotti
    Abstract: We construct a framework for measuring economic activity at high frequency, potentially in real time. We use a variety of stock and flow data observed at mixed frequencies (including very high frequencies), and we use a dynamic factor model that permits exact filtering. We illustrate the framework in a prototype empirical example and a simulation study calibrated to the example.
    JEL: C01 C22 E32 E37
    Date: 2008–09
  3. By: Kräkel, Matthias (University of Bonn); Schöttner, Anja (University of Bonn)
    Abstract: Several empirical studies have challenged tournament theory by pointing out that (1) there is considerable pay variation within hierarchy levels, (2) promotion premiums only in part explain hierarchical wage differences and (3) external recruitment is observable on nearly any hierarchy level. We explain these empirical puzzles by combining job-promotion tournaments with higher-level bonus payments in a two-tier hierarchy. Moreover, we show that under certain conditions the firm implements first-best effort on tier 2 although workers earn strictly positive rents. The reason is that the firm can use second-tier rents for creating incentives on tier 1. If workers are heterogeneous, the firm strictly improves the selection quality of a job-promotion tournament by employing a hybrid incentive scheme that includes bonus payments.
    Keywords: bonuses, external recruitment, job promotion, limited liability, tournaments
    JEL: D82 D86 J33
    Date: 2008–09
  4. By: Behrens, Kristian (University of Québec at Montréal); Mion, Giordano (CORE, Catholic University of Louvain); Murata, Yasusada (Nihon University); Suedekum, Jens (University of Duisburg-Essen)
    Abstract: We develop a new general equilibrium model of trade with heterogeneous firms, variable demand elasticities and endogenously determined wages. Trade integration favors wage convergence, intensifies competition, and forces the least efficient firms to leave the market, thereby affecting aggregate productivity. Since wage and productivity responses are endogenous, our model is well suited to study the impacts of trade integration on aggregate productivity and factor prices. Using Canada-U.S. interregional trade data, we first estimate a system of theory-based gravity equations under the general equilibrium constraints generated by the model. Doing so allows us to measure 'border effects' and to decompose them into a 'pure' border effect, relative and absolute wage effects, and a selection effect. Using the estimated parameter values, we then quantify the impacts of removing the Canada-U.S. border on wages, productivity, markups, the share of exporters, the mass of varieties produced and consumed, and welfare. We finally provide a similar quantification with respect to regional population changes.
    Keywords: monopolistic competition, general equilibrium, gravity equations, heterogeneous firms, variable demand elasticities
    JEL: F12 F15 F17
    Date: 2008–09
  5. By: Pedro S. Martins
    Abstract: We present evidence about the effects of dismissals-for-cause requirements, a specific component of employment protection legislation that has received little attention. We study a quasi-natural experiment generated by a law introduced in Portugal: out of the 12 paragraphs in the law that dictated the costly procedure required for dismissals for cause, eight did not apply to small firms. Using matched employer-employee longitudinal data and difference-in-differences methods, we examine the impact of that differentiated change in firing costs upon several variables over a long period of time. In our results, we do not find robust evidence of effects on job or worker flows, although some estimates suggest a slight increase in hirings. On the other hand, firms that gain flexibility in their dismissals exhibit consistently slower wage growth and sizeable increases in their relative performance. Our findings suggest that reducing firing costs of the type studied here increase workers' effort and reduce their bargaining power.
    Keywords: Employment protection legislation, worker flows, wages, firm performance
    JEL: J53 J63 J31
    Date: 2008–09
  6. By: Giovanni Immordino (Università di Salerno and CSEF); Marco Pagano (Università di Napoli Federico II, CSEF, EIEF and CEPR)
    Abstract: We analyze corporate fraud in a model where managers have superior information but, due to private benefits from empire building, are biased against liquidation. This may induce them to misreport information and even bribe auditors when liquidation would be value-increasing. To restrain fraud, shareholders optimally choose auditing quality and the performance sensitivity of managerial pay, taking into account external corporate governance and auditing regulation. For given managerial pay, it is optimal to rely on auditing when external governance is in an intermediate range. When both auditing and managerial incentive pay are used, worse external governance must be balanced by heavier reliance on both of these incentive mechanisms. In designing managerial pay, equity can improve managerial incentives while options worsen them.
    Keywords: accounting fraud, auditing, managerial compensation, corporate governance, regulation
    JEL: G28 K22 M42
    Date: 2008–09–01
  7. By: Fang Yao
    Abstract: I explore the aggregate effects of micro lumpy labor adjustment in a prototypical RBC model, which embeds a stochastic labor duration mechanism in the spirit of Calvo(1983), and it extends this approach by introducing a Weibull-distributed labor adjustment process to capture the increasing hazard function corroborated by the micro data. My principal findings are: The aggregate labor demand equation derived from the baseline Calvostyle model corresponds to the same reduced form as the quadratic-adjustment-cost model and deep parameters have a one-to-one mapping. However, this result does not hold in general. When introducing the Weibull labor adjustment, the aggregate dynamics vary with the extent of increasing hazard function, e.g., the volatility of aggregate labor is increasing, but the persistence is decreasing in degree of the increasing hazard of the labor adjustment.
    Keywords: business cycles; heterogeneous labor rigidity; increasing hazard function; Weibull distribution
    JEL: E32 E24 C68
    Date: 2008–08
  8. By: Imran Rasul; Silvia Sonderegger
    Abstract: We consider a principal-agent model of adverse selection where, in order to trade with the principal, the agent must undertake a relationship-specific investment which affects his outside option to trade, i.e. the payoff that he can obtain by trading with an alternative principal. This creates a distinction between the agent’s ex ante (before investment) and ex post (after investment) outside options to trade. We investigate the consequences of this distinction, and show that whenever an agent's ex ante and ex post outside options differ, this equips the principal with an additional tool for screening among different agent types, by randomizing over the probability with which trade occurs once the agent has undertaken the investment. In turn, this may enhance the e¢ciency of the optimal second-best contract.
    Keywords: adverse selection, randomization, type-dependent outside options.
    JEL: D21 L14
    Date: 2008–09
  9. By: Rajnish Mehra; Facundo Piguillem; Edward C. Prescott
    Abstract: The difference between average borrowing and lending rates in the United States is over 2 percent. In spite of this large difference, there is over 1.7 times GNP in 2007 of intermediated borrowing and lending between households. In this paper a model is developed consistent with these facts. The only difference within an age cohort is preferences for bequests. Individuals with little or no bequest motive are lenders, while individuals with strong bequest motive are borrowers and owners of productive capital. Given no aggregate uncertainty, the return on equity is the same as the household borrowing rate. The government can borrow at the household lending rate, so there is a 2 percent equity premium in our world with no aggregate uncertainty. We examine the distribution and life cycle patterns of asset holding and consumption and find there is large dispersion in asset holdings and little in consumption.
    JEL: E2 E44 E6 G1 G11 G12 G23
    Date: 2008–09
  10. By: John S Heywood; Colin Green
    Abstract: Profit sharing generates conflicting changes in the relationship between supervisors and workers. It may increase cooperation and helping effort. At the same time it can increase direct monitoring and pressure by the supervisor, and mutual monitoring and peer pressure from other workers that is transmitted through the supervisor. Using data on satisfaction with the boss, we initially show that workers under profit sharing tend to have lower satisfaction with their supervisor. Additional estimates show this is largely generated by groups of workers who would be least likely to respond to increased supervisory pressure with increase effort: women, those with dependents and those with health limitations. Despite this finding, profit sharing seems to have little or no influence on overall job satisfaction as the reduction in satisfaction with the boss is offset with increased satisfaction with earnings, a finding consistent with profit sharing enhancing productivity and earnings.
    Keywords: Mutual Monitoring, Job Satisfaction, Supervision JEL CODES: J28, J33, J53.
    Date: 2008
  11. By: Ippei Fujiwara (Institute for Monetary and Economic Studies, Bank of Japan (E-mail:
    Abstract: For a long time, changes in expectations about the future have been thought to be significant sources of economic fluctuations, as argued by Pigou (1926). Although creating such an expectation-driven cycle (the Pigou cycle) in equilibrium business cycle models was considered to be a difficult challenge, as pointed out by Barro and King (1984), recently, several researchers have succeeded in producing the Pigou cycle by balancing the tension between the wealth effect and the substitution effect stemming from the higher expected future productivity. Seminal research by Christiano, Ilut, Motto and Rostagno (2007) explains the gstock market boom-bust cycles,h characterized by increases in consumption, labor inputs, investment and the stock prices relating to high expected future technology levels, by introducing investment growth adjustment costs, habit formation in consumption, sticky prices and an inflation-targeting central bank. We, however, show that such a cycle is difficult to generate based on ggrowth expectation,h which reflect expectations of higher productivity growth rates. Thus, Barro and King's (1984) prediction still applies.
    Keywords: Expectations, Equilibrium Business Cycle, Technological Progress
    JEL: C52 D58 E32
    Date: 2008–09
  12. By: Dan Wheatley; Irene Hardill; Bruce Philp
    Abstract: This paper is predicated on the view that reductions in work-time are generally desirable. We analyse historical trends in working-hours, the organisation of production, and theories of power and authority in firms and other organisations. Then we consider this in relation to patterns of work in the UK, demonstrating empirically that managers are more wedded to a ‘long-hours’ culture than are other employees. We theorise that this is because managers’ roles align their attitudes with those desired by the firm or organisation and conclude that, as a consequence, the “voluntary” nature of work-time regulation should be revisited.
    Keywords: Working hours, Hierarchy, Power, Preferences
    JEL: J08 J22 J53
    Date: 2008–06
  13. By: Tim Bollerslev; Tzuo Hao; George Tauchen (School of Economics and Management, University of Aarhus, Denmark)
    Abstract: Motivated by the implications from a stylized self-contained general equilibrium model incorporating the effects of time-varying economic uncertainty, we show that the difference between implied and realized variation, or the variance risk premium, is able to explain a non-trivial fraction of the time series variation in post 1990 aggregate stock market returns, with high (low) premia predicting high (low) future returns. Our empirical results depend crucially on the use of “model-free,” as opposed to Black- Scholes, options implied volatilities, along with accurate realized variation measures constructed from high-frequency intraday, as opposed to daily, data. The magnitude of the predictability is particularly strong at the intermediate quarterly return horizon, where it dominates that afforded by other popular predictor variables, like the P/E ratio, the default spread, and the consumption-wealth ratio (CAY).
    Keywords: Equilibrium asset pricing, stochastic volatility, risk neutral expectation, return predictability, option implied volatility, realized volatility, variance risk premium
    JEL: C22 C51 C52 G12 G13 G14
    Date: 2008–09–03
  14. By: Kobayashi, Hajime; Suehiro, Hideo
    Abstract: We study endogenous signaling in teams by analyzing a team production problem with endogenous timing. Each agent of the team is privately endowed with some level of confidence about team productivity. Each of them must then commit a level of effort in one of two periods. At the end of each period, each agent observes his partner's move in this period. Both agents are rewarded by a team output determined by team productivity and total invested effort. Each agent must personally incur the cost of effort that he invested. We show a sufficient condition under which sender and receiver emerge endogenously in a stable equilibrium. This result implies that leadership in teams emerges through the leader's signaling incentives only based on his confidence.
    Keywords: Endogenous Signaling; Team Production; Leadership
    JEL: D82 C72
    Date: 2008–07–07
  15. By: Junichiro Ishida (Osaka School of International Public Policy (OSIPP),Osaka University); Toshihiro Matsumura (Institute of Social Science, University of Tokyo); Noriaki Matsushima (Graduate School of Business Administration, Kobe University)
    Abstract: A conventional wisdom in economics posits that more intense market competition, measured in almost any way, reduces firm profit. In this paper, we challenge this conventional wisdom in a simple Cournot model with strategic R&D investments wherein an efficient firm (dominant firm) competes against less efficient firms (fringe firms). We find that an increase in the number of fringe firms can stimulate R&D by the dominant firm, while it always reduces R&D by each of the fringe firms. More importantly, this force can be strong enough to compensate for the loss that arises from more intense market competition: the dominant firm's profit may indeed increase with the number of fringe firms, quite contrary to the conventional wisdom. An implication of this result is far-reaching, as it gives dominant firms to help, rather than harm, fringe competitors. We relate this implication to a practice know as open knowledge disclosure, especially Ford's strategy of disclosing its know-how publicly and extensively at the beginning of the 20th century.
    Keywords: competition, oligopoly, R&D, heterogeneity, entry
    Date: 2008–09
  16. By: Ben R Craig; Valeriya Dinger
    Abstract: Despite extensive research interest in the last decade, the banking literature has not reached a consensus on the impact of bank mergers on deposit rates. In particular, results on the dynamics of deposit rates surrounding bank mergers vary substantially across studies. In this paper, we aim for a comprehensive empirical analysis of a bank merger’s impact on deposit rate dynamics. We base the analysis on a unique dataset comprising deposit rates of 624 U.S. banks with a monthly frequency for the time period 1997–2006. These data are matched with individual bank and local market characteristics and the complete list of bank mergers in the United States. The data allow us to track the dynamics of bank mergers while controlling for the rigidity of the deposit rates and for a range of merger, bank, and local market features. An innovation of our work is the introduction of an econometric approach for estimating the change of the deposit rates given their rigidity.
    Keywords: Bank mergers ; Bank deposits
    Date: 2008
  17. By: Francis X. Diebold; Kamil Yilmaz
    Abstract: The authors provide a simple and intuitive measure of interdependence of asset returns and/or volatilities. In particular, they formulate and examine precise and separate measures of return spillovers and volatility spillovers. The authors framework facilitates study of both noncrisis and crisis episodes, including trends and bursts in spillovers, and both turn out to be empirically important. In particular, in an analysis of 19 global equity markets from the early 1990s to the present, they 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.
    Keywords: Assets (Accounting)
    Date: 2008
  18. By: Judit Montoriol-Garriga (Federal Reserve Bank of Boston, 600 Atlantic Avenue, Boston, MA 02210, USA.)
    Abstract: This paper analyzes the effects of bank mergers on bank-firm relationships. Using matched bank-firm level data, I find that mergers disrupt lending relationships, specially to small borrowers of target banks. However, I find significant positive effects of mergers for borrowers that continue the lending relationship with the consolidated bank. On average, consolidated banks reduce loan interest rates. The most beneficial mergers from the borrower point of view are those involving two large banks and commercial banks. While the reduction in interest rates is larger when the acquirer and the target have some market overlap, the decline is much smaller when there is a significant increase in local banking market concentration. JEL Classification: G21, G34.
    Keywords: Banking consolidation, Lending relationships, Small business lending.
    Date: 2008–09
  19. By: Koskela, Erkki (University of Helsinki); Poutvaara, Panu (University of Helsinki)
    Abstract: In European Welfare States, unskilled workers are typically unionized, while the wage formation of skilled workers is more competitive. To focus on this aspect, we analyze how flexible international outsourcing and labour taxation affect wage formation, employment and welfare in dual domestic labour markets. Higher productivity of outsourcing, lower cost of outsourcing and lower factor price of outsourcing increase wage dispersion between the skilled and unskilled workers. Increasing wage tax progression of unskilled workers decreases the wage rate and increases the labour demand of unskilled workers. It decreases the welfare of unskilled workers and increases both the welfare of skilled workers and the profit of firms.
    Keywords: flexible outsourcing, dual labour market, impacts of labour taxation, welfare state
    JEL: E24 H22 J21 J31 J51
    Date: 2008–09
  20. By: Hans Gersbach (CER-ETH - Center of Economic Research at ETH Zurich, Switzerland)
    Abstract: We examine banking competition when deposit or loan contracts contingent on macroeconomic shocks become feasible. We show that the risk allocation is efficient, provided that banks are not bailed out. In this case, banks may shift part of the risk to depositors. The private sector insures the banking sector and banking crises are avoided. In contrast, when banks are bailed out, depositors receive non-contingent contracts with high interest rates, while entrepreneurs obtain loan contracts that demand high repayment in good times and low repayment in bad times. As a result, the present generation overinvests, and banks create large macroeconomic risks for future generations, even if the underlying risk is small or zero.
    Keywords: Financial intermediation, macroeconomic risks, state contingent contracts, banking regulation
    JEL: D41 E4 G2
    Date: 2008–08
  21. By: Joao Ricardo Faria; Juan Carlos Cuestas; Luis Gil-Alana
    Abstract: This paper presents a cyclical model for unemployment and entrepreneurship. The estimated periodicity of the cycles for the US, the UK, Spain and Ireland is between 5 and 10 years, and the orders of integration are smaller (greater) than 1 if the underlying disturbances are autocorrelated (white noise), corresponding to dampen cycles (limit cycle).
    Keywords: New firms, Employment creation, cycles.
    JEL: J69 L26 M13
    Date: 2008–02
  22. By: Kevin X.D. Huang; Zheng Liu; Tao Zha
    Abstract: This study explores the macroeconomic implications of adaptive expectations in a standard real business cycle model. When rational expectations are replaced by adaptive expectations, we show that the self-confirming equilibrium is the same as the steady state rational expectations equilibrium for all admissible parameters, but that dynamics around the steady state are substantially different between the two equilibria. The differences are driven mainly by the dampened wealth effect and the strengthened intertemporal substitution effect, not by the escapes emphasized by Williams (2003). As a result, adaptive expectations can be an important source of frictions that amplify and propagate technology shocks and seem promising for generating plausible labor market dynamics.
    Keywords: Macroeconomics
    Date: 2008
  23. By: Nykvist, Jenny (Research Institute of Industrial Economics (IFN))
    Abstract: A large literature has studied the effect of displacement on labor market outcomes in general, but none has evaluated how the displaced manage as self-employed. This paper studies how the survival of the business is affected by displacement in connection to entry, using a discrete-time proportional hazard model on a matched sample of displaced and non-displaced individuals. The main result of the paper is that, as a consequence of previous displacement, the probability of switching from self-employment to paid employment decreases and the probability of switching to unemployment is unaffected.
    Keywords: Self-employment; Survival; Displacement
    JEL: J24 J63 J65 M13
    Date: 2008–09–24
  24. By: Fidrmuc, Jarko; Batorova, Ivana
    Abstract: We analyse the business cycles in China and in selected OECD countries between 1992 and 2006. We show that, although negative correlation dominates for nearly all countries, we can also see large differences for various frequencies of cyclical developments. On the one hand, nearly all OECD countries show positive correlations of the very short-run developments that may correspond to intensive supplier linkages. On the other hand, business cycle frequencies (cycles with periods between 1.5 and 8 years) are typically negative. Nevertheless, countries facing a comparably longer history of intensive trading links tend to show also slightly higher correlations of business cycles with China.
    Keywords: business cycles, synchronisation, trade, FDI, dynamic correlation
    Date: 2008
  25. By: Carmen Martínez-Carrascal (Banco de España); Annalisa Ferrando (European Central Bank)
    Abstract: This paper analyses the impact that firms' financial position has on investment decisions using panel data from a large sample of non-financial corporations (around 120,000 firms) in six euro area countries (Belgium, Germany, France, Italy, the Netherlands and Spain). The results indicate that financial position is important to explain capital expenditures, as financial pressure appears relevant in explaining investment dynamics when it is proxied by cash flow, indebtedness and debt burden. The results also show differences in the sensitivity of investment rates to changes in financial pressure across countries, which appears to be especially large in the Netherlands and Italy and relatively small in Germany.
    Keywords: financial pressure, fixed investment, balance sheet channel, panel data
    JEL: C33 E22 G32 J23
    Date: 2008–09
  26. By: Marcel Boyer; Serge Garcia
    Abstract: We model the interactions between management regimes (municipal vs. delegated) and operating costs of water supply services in order to compare their performance and pricing. We estimate the models from panel data in France. We show that the choice between management regimes at the local community level depends on costs and service characteristics, that there is a significant difference in average productive efficiency in favor of delegated services, and that municipal services appear more efficient in network returns. Under delegation, the margins realized by operators depend on service and contract characteristics. <P>Nous modélisons les interactions entre mode de gestion (régie ou délégation) et coûts d'exploitation des services d'eau potable afin de comparer leurs performances et la tarification. Nous estimons ces modèles sur des données de panel en France. Nous montrons que le choix de la collectivité locale dépend des coûts et des caractéristiques des services. Il existe une différence significative d'efficacité productive moyenne en faveur de la gestion déléguée, mais les services en régie semblent plus performants sur les rendements de réseau. Les marges réalisées par l'exploitant sont expliquées par les caractéristiques des services, et celles du contrat dans le cas de délégation.
    Keywords: water supply services, management regime, selection model, cost function, pricing, panel data, services d'eau potable, mode de gestion, modèle de sélection, fonction de coût, tarification, données de panel.
    JEL: C25 C33 D42 L25 L95
    Date: 2008–09–01
  27. By: Oxelheim, Lars (Research Institute of Industrial Economics (IFN))
    Abstract: The process of globalization encompasses economic and financial integration. Abolition of capital controls and dismantling of barriers of different kinds are important ingredients of the process that will entirely change the exposure of previously sheltered companies to shocks on the global economic arena. Lessons learned by policy-makers in already globalized countries are that market participants should be prepared to meet the new exposure to fluctuating exchange rates, interest rates and inflation rates. China has recently adopted International Financial Reporting Standards (IFRS) in her efforts to improve the quality of information available for risk management and for pricing of risk. This paper claims that further improvements are needed and presents a new framework for how to understand and measure the impact of different scenarios on corporate performance. It also elaborates on how to communicate the macroeconomic effects to external stakeholders of the firm in a way that fosters further economic growth in China.
    Keywords: International Financial Reporting Standards; Transparency; Economic Growth; Macroeconomic Impact; Globalization
    JEL: E22 E32 E44 F15 F23 F37 G18 G32 L25 M21
    Date: 2008–09–24
  28. By: Jonathan R. W. Temple
    Abstract: This note addresses some issues that arise when using 'normalized' CES production functions, an approach that has become popular in the literature. The results of Klump and de La Grandville (2000) provide a simple way to calibrate the parameters of the CES production function when the necessary data are available. But some of the other applications of normalized CES production functions appear problematic, especially when used to argue that productivity is increasing in the elasticity of substitution.
    Keywords: CES production functions, elasticity of substitution, normalization
    JEL: D24 O40
    Date: 2008–09
  29. By: Natalya Y. Shelkova (University of Connecticut)
    Abstract: Low-wage labor markets are traditionally viewed as competitive, and the possibility of strategic behavior by employers is dismissed. However, such behavior is not impossible. This paper investigates the possibility of tacit collusion by low-wage employers while setting wages. A game-theoretic explanation along the lines of the Folk theorem is of- fered, suggesting that a non-binding minimum wage may serve as a focal point for tacit collusion, proposing a symmetric solution to an infinitely played game of wage-setting. Several empirical techniques were employed in testing the hypothesis, including hurdle models of collusion. CPS monthly data is used for the years 1990-2005, a period that covers the last four federal minimum wage increases (in the US). The likelihood of collusion at minimum wage is evaluated, as well as its dynamics during this period. The results generally support the col- lusion hypothesis and suggest that employers respond strategically to changes in minimum wage legislation while using the statutory mini- mum wage as a coordination tool in tacit collusion.
    Keywords: minimum wage, low-wage markets, collusion, tacit collusion, focal points
    JEL: J31 J38 J42 L10
    Date: 2008–09
  30. By: Simone Alfarano; Thomas Lux; Mishael Milakovic
    Abstract: We consider the current bipartite graph of German corporate boards and identify a small core of directors who are highly central in the entire network while being densely connected among themselves. To identify the core, we compare the actual number of board memberships to a random benchmark, focusing on deviations from the benchmark that span several orders of magnitude. It seems that the board appointment decisions of largely capitalized companies are the driving force behind the existence of a core in Germany’s board and director network. Conditional on being a board member, it is very improbable to obtain a second membership, but multiple board membership becomes increasingly likely once this initial barrier is overcome. We also present a simple model that describes board appointment decisions as a trade-off between social capital and monitoring ability
    Keywords: Board and director interlocks, network core, network formation, market capitalization
    JEL: D85 L20 M14 M51
    Date: 2008–09

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