nep-bec New Economics Papers
on Business Economics
Issue of 2008‒12‒21
sixteen papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Rent-sharing under different bargaining regimes : Evidence from linked employer-employee data By Michael Rusinek; François Rycx
  2. Determinants of board members’ financial expertise – Empirical evidence from France By Stolowy, Hervé; Jeanjean, Thomas
  3. The Regional Dimension of Collective Wage Bargaining: The Case of Belgium By Plasman, Robert; Rusinek, Michael; Tojerow, Ilan
  4. Modeling the Volatility of Real GDP Growth: The Case of Japan Revisited By WenShwo Fang; Stephen M. Miller
  5. Labour Force Paths as Industry Linkages: A Perspective on Clusters and Industry Life Cycles By Mika Maliranta; Tuomo Nikulainen
  6. Firm Turnover and Productivity Growth in the Canadian Retail Trade Sector By Baldwin, John R.; Gu, Wulong
  7. The Quiet Life of a Monopolist: The Efficiency Losses of Monopoly Reconsidered By Jun Chen; Zhiqi Chen
  8. The Evolution of Corporate Ownership After IPO: The Impact of Investor Protection By C. Fritz Foley; Robin Greenwood
  9. Institutional features of wage bargaining in 23 European countries, the US and Japan By Philip Ducaju; Erwan Gautier; Daphné Momferatou; Mélanie Ward-Warmedinge
  10. Business Cycle Measurement with Semantic Filtering: A Micro Data Approach By Christian Müller; Eva Köberl
  11. The role of managers’ behavior in corporate fraud By Cohen, Jeffrey; Ding, Yuan; Lesage, Cedric; Stolowy, Hervé
  12. The Great Moderation Flattens Fat Tails: Disappearing Leptokurtosis By WenShwo Fang; Stephen M. Miller; ChunShen Lee
  13. A Nonparametric Examination of Capital-Skill Complementarity By Henderson, Daniel J.
  14. Start-Ups and Employment Growth - Evidence from Sweden By Martin Andersson; Florian Noseleit
  15. Financial structure, financial development and banking fragility: International evidence By Ruiz-Porras, Antonio
  16. What is a Company Really Worth? Intangible Capital and the "Market to Book Value" Puzzle By Charles R. Hulten; Xiaohui Hao

  1. By: Michael Rusinek (Université Libre de Bruxelles, DULBEA); François Rycx (National Bank of Belgium, Research Department; Université Libre de Bruxelles, DULBEA; IZA Bonn)
    Abstract: In many European countries, the majority of workers have their wage rates determined directly by industry-level agreements. For some workers, industry agreements are supplemented by firm-specific agreements. Yet, the relative importance of individual company and industry agreements (in other words, the degree of centralisation) differs drastically across industries. The authors of this paper use unique linked employer-employee data from a 2003 survey in Belgium to examine how these bargaining features affect the extent of rent-sharing. Their results show that there is substantially more rent-sharing in decentralised than in centralised industries, even when controlling for the endogeneity of profits, for heterogeneity among workers and firms and for differences in characteristics between bargaining regimes. Moreover, in centralised industries, rent-sharing is found only for workers that are covered by a company agreement. The findings of this paper finally suggest that, within decentralised industries, both firm-specific and industry-wide bargaining generate rent-sharing to the same extent.
    Keywords: Rent-sharing, collective bargaining, propensity score matching.
    JEL: J31 J51
    Date: 2008–12
  2. By: Stolowy, Hervé; Jeanjean, Thomas
    Abstract: This article investigates the determinants of boards’ financial expertise using a sample of 95 non-financial French listed firms.
    Keywords: Financial expertise; board of directors; supervisory board; corporate governance
    JEL: D21 D53
    Date: 2008–10–13
  3. By: Plasman, Robert (Free University of Brussels); Rusinek, Michael (ECARES, Free University of Brussels); Tojerow, Ilan (Free University of Brussels)
    Abstract: The potential failure of national industry agreements to take into account productivity levels of least productive regions has been considered as one of the causes of regional unemployment in European countries. Two solutions are generally proposed: the first, encouraged by the European commission and the OECD, consists in decentralising wage bargaining to the firm. The second solution, the regionalisation of wage bargaining, is frequently mentioned in Belgium or in Italy where regional unemployment differentials are high. The objective of this paper is to verify if the Belgian wage setting system, where industry bargaining has a national scope, indeed prevents regional productivity levels to be taken into account in wage formation. Using a very rich linked employer-employee dataset which provides detailed information on wages, productivity, and worker's and firm's characteristics, we find that regional wage differentials and regional productivity differentials within joint committees are positively correlated. Moreover, this relation is stronger (i) for joint committees where firm-level bargaining is relatively frequent and (ii) for joint committees already sub-divided along a local line. We conclude that the current Belgian wage setting system (which combines interprofessional, industry and firm level bargaining) already includes mechanisms that allow regional productivity to be taken into account.
    Keywords: wages, collective bargaining, federalism, regions, Belgium
    JEL: D31 J31 J41
    Date: 2008–12
  4. By: WenShwo Fang (Feng Chia University; University of Connecticut); Stephen M. Miller (University of Nevada, Las Vegas, and University of Connecticut)
    Abstract: Previous studies (e.g., Hamori, 2000; Ho and Tsui, 2003; Fountas et al., 2004) find high volatility persistence of economic growth rates using generalized autoregressive conditional heteroskedasticity (GARCH) specifications. This paper reexamines the Japanese case, using the same approach and showing that this finding of high volatility persistence reflects the Great Moderation, which features a sharp decline in the variance as well as two falls in the mean of the growth rates identified by Bai and Perron’s (1998, 2003) multiple structural change test. Our empirical results provide new evidence. First, excess kurtosis drops substantially or disappears in the GARCH or exponential GARCH model that corrects for an additive outlier. Second, using the outlier-corrected data, the integrated GARCH effect or high volatility persistence remains in the specification once we introduce intercept-shift dummies into the mean equation. Third, the time-varying variance falls sharply, only when we incorporate the break in the variance equation. Fourth, the ARCH in mean model finds no effects of our more correct measure of output volatility on output growth or of output growth on its volatility.
    Keywords: Japan, real GDP growth, the Great Moderation, outlier, structural changes, IGARCH effect
    JEL: C32 E32 O40
    Date: 2008–12
  5. By: Mika Maliranta; Tuomo Nikulainen
    Abstract: ABSTRACT : We make several findings related to the dynamics of labour markets and industry life cycles in our analysis, which makes use of longitudinal employer-employee data that cover the whole working age population in Finland. Firstly, we find that across industry transitions of the employed are common. Secondly, employment transitions portray a network of industry linkages where specific industry clusters can be identified, as well as labour flow paths with long backward and forward linkages. Thirdly, most of the upstream labour mobility linkages are end up in the education industry, which thus seems to be an “ancestor” of the most of the industries. On the other hand, we find eight totally isolated industries that had no distinct backward or forward linkages in the labour markets. Finally, we show that the labour flows are a significant indicator for industry life cycles.
    Keywords: employment transitions, industry clusters, industry life cycle
    JEL: J23 J63 L16
    Date: 2008–12–08
  6. By: Baldwin, John R.; Gu, Wulong
    Abstract: This paper examines firm turnover and productivity growth in the Canadian retail trade sector. Firm turnover occurs as the competitive process shifts market share from exiting firms and existing firms that contracted to entering firms and existing firms that expanded. There is considerably more firm turnover in the retail sector than in the manufacturing sector and more of it comes from entry and exit. Moreover, contrary to the manufacturing sector where only part of overall productivity growth comes from firm turnover and the re-allocation of resources from the less to the more productive, all of the aggregate productivity growth comes from this source in the retail sector. This suggests that the much-discussed Wal-Mart effect on retail sector productivity mainly comes from the Wal-Mart-created competitive pressure that shifts market share from exitors and declining incumbents to entrants and growing incumbents. Foreign-controlled firms contributed 30% of labour productivity growth and 45% of multifactor productivity growth in the retail trade sector in the period from 1984 to 1996, which are mainly due to the entry of foreign-controlled firms and expansion of more productive foreign-controlled existing firms.
    Keywords: Manufacturing, Retail and wholesale, Economic accounts, Productivity accounts
    Date: 2008–12–08
  7. By: Jun Chen (Department of Economics, Carleton University); Zhiqi Chen (Department of Economics, Carleton University)
    Abstract: In this paper we study the efficiency losses of monopoly by analyzing a model where a firm's total costs of production decrease with the manager's effort to control costs. We consider two separate cases with regard to ownership and control: (1) the owner of the firm manages the firm himself; and (2) the owner hires a manager to operate the firm. We demonstrate that even in the case where the owner manages the firm, the level of effort exerted by the owner-manager of a monopoly is not first-best. Interestingly, the productive inefficiency of monopoly in this case may be caused by too much rather than too little effort. In such a situation, moreover, the separation of ownership and control can mitigate the productive inefficiency of monopoly, thus raising the intriguing possibility that managerial slack can actually improve the efficiency of monopoly equilibrium. To phrase our results in Hicks'(1935) terminology, a monopolist does not necessarily live a quiet life, and a quiet life is not necessarily a bad thing from the perspective of economic efficiency.
    Keywords: Monopoly, Efficiency losses, Principal-agent problem
    JEL: L12 D82
    Date: 2008–06–02
  8. By: C. Fritz Foley; Robin Greenwood
    Abstract: Recent research documents that ownership concentration is higher in countries with weak investor protection. However, drawing on panel data on corporate ownership in 34 countries between 1995 and 2006, we show this pattern does not hold for newly public firms, which tend to have concentrated ownership regardless of the level of investor protection. We show that firms in countries with strong investor protection are more likely to experience decreases in ownership concentration after listing, that these decreases appear in response to growth opportunities, and that they are associated with new share issuance. We consider the implications of these findings for financing choices and patterns in firm growth and analyze alternative explanations for the diffusion of ownership that could distort our interpretations. We conclude that ownership concentration falls as firms age following their IPO in countries with strong investor protection because firms in these countries raise capital and grow, diluting blockholders in the process.
    JEL: G3 K22
    Date: 2008–12
  9. By: Philip Ducaju (National Bank of Belgium, Research Department); Erwan Gautier (Banque de France); Daphné Momferatou (European Central Bank); Mélanie Ward-Warmedinge (European Central Bank)
    Abstract: This paper presents information on wage-bargaining institutions, collected for 23 European countries, plus the US and Japan using a standardised questionnaire. Our data provide information from the years 1995 and 2006, for four sectors of activity and the aggregate economy. The main findings include a high degree of regulation in wage-setting in most countries. Although union membership is limited in many of them, union coverage is high and almost all countries also have some form of national minimum wage. Most countries negotiate wages on several levels, the sectoral level still being the most dominant, with an increasingly important role for bargaining at the individual firm level. The average length of collective bargaining agreements is found to lie between one and three years. Most agreements are strongly driven by developments in prices and eleven of the countries surveyed have some form of indexation mechanism which affects wages. Cluster analysis identifies three country groupings of wage-setting institutions
    Keywords: wage bargaining, institutions, indexation, coverage, trade union membership, contract length
    JEL: J31 J38 J51 J58
    Date: 2008–12
  10. By: Christian Müller (Zurich University of Applied Sciences, School of Management and ETH Zurich, KOF Swiss Economic Institute); Eva Köberl (KOF Swiss Economic Institute, ETH Zurich, Switzerland)
    Abstract: In this paper we develop a business cycle measure that can be shown to have excellent ex-ante forecasting properties for GDP growth. For identifying business cycle movements, we use a semantic approach. We infer nine different states of the economy directly from firms’ responses in business tendency surveys. Hence, we can identify the current state of the economy. We therewith measure business cycle fluctuations. One of the main advantages of our methodology is that it is a structural concept based on shock identification and therefore does not need any - often rather arbitrary - statistical filtering. Futhermore, it is not subject to revisions, it is available in real-time and has a publication lead to official GDP data of at least one quarter. It can therefore be used for one quarter ahead forecasting real GDP growth.
    Keywords: business cycle measurement, semantic cross validation, shock identification
    JEL: E32 C4 C5
    Date: 2008–11
  11. By: Cohen, Jeffrey; Ding, Yuan; Lesage, Cedric; Stolowy, Hervé
    Abstract: Based on anecdotal evidence from press articles covering 39 high profile alleged or acknowledged corporate fraud cases, the objective of this paper is to examine one dimension partially unexplored: the role of managers’ behavior in the commitment of the fraud.
    Keywords: Fraud auditing standards; fraud triangle; corporate fraud; theory of planned behavior; personality traits; ethics
    JEL: D23
    Date: 2008–07–01
  12. By: WenShwo Fang (Feng Chia University); Stephen M. Miller (University of Nevada, Las Vegas, and University of Connecticut); ChunShen Lee (Feng Chia University)
    Abstract: Recently, Fagiolo et al. (2008) find fat tails of economic growth rates after adjusting outliers, autocorrelation and heteroskedasticity. This paper employs US quarterly real output growth, showing that this finding of fat tails may reflect the Great Moderation. That is, leptokurtosis disappears after GARCH adjustment once we incorporate the break in the variance equation.
    Keywords: Real GDP growth, the Great Moderation, leptokurtosis, GARCH models
    JEL: C32 E32 O40
    Date: 2008–12
  13. By: Henderson, Daniel J. (Binghamton University, New York)
    Abstract: This paper uses nonparametric kernel methods to construct observation-specific elasticities of substitution for a balanced panel of 73 developed and developing countries to examine the capital-skill complementarity hypothesis. The exercise shows some support for capital-skill complementarity, but the strength of the evidence depends upon the definition of skilled labor and the elasticity of substitution measure being used. The added flexibility of the nonparametric procedure is also able to uncover that the elasticities of substitution vary across countries, groups of countries and time periods.
    Keywords: capital-skill complementarity, elasticity of substitution, nonparametric kernel, stochastic dominance
    JEL: C14 C23 D2
    Date: 2008–12
  14. By: Martin Andersson (Centre of Excellence for Science and Innovation Studies (CESIS), Royal Institute of Technology and Jönköping International Business School (JIBS)); Florian Noseleit (Friedrich-Schiller-University Jena, School of Economics and Business Administration)
    Abstract: We use longitudinal data over a decade on start-ups and employment in Swedish regions and analyze the effect of start-ups on subsequent employment growth. We extend previous analyses by examining the influence of regional start-ups in a sector on regional employment growth in the same sector and on other sectors. We find differences between different types of start-ups. Knowledge-intensive start-ups seem to have larger effects on the regional economy. In particular, start-ups in high-end services have significant negative impacts on employment in other sectors but a positive long-run impact. This is consistent with the idea that start-ups are a vehicle for changes in the composition of regional industry. Moreover, our results illustrate that the known S-shaped pattern can be attributed to different effects that start-ups in a sector have on employment change in the same sector and in others.
    Keywords: Entrepreneurship, Employment Growth, Regional Development, Start-ups
    JEL: J23 M13 O52
    Date: 2008–12–09
  15. By: Ruiz-Porras, Antonio
    Abstract: We study the effects of financial structure and financial development on banking fragility. We develop our study by using fixed-effects panel-data regressions and by controlling the effects of certain banking indicators. We use individual and principal-components indicators of the activity, size and efficiency of intermediaries and markets. The indicators include data for 211 countries between 1990 and 2003. Our main findings suggest that banking stability is enhanced in market-based financial systems. Financial development reduces it. However this fragility-enhancing effect can be unveiled only when we account for financial structure. Thus, financial structure and development jointly matter to assess banking fragility.
    Keywords: Banks; fragility; financial structure; financial development
    JEL: N20 E44 G21
    Date: 2008–12–12
  16. By: Charles R. Hulten; Xiaohui Hao
    Abstract: "What is a company really worth?" is a question asked repeatedly during the recent financial crisis. Attention has been focused on short-term valuation issues, like the "mark-to-market" controversy. Sorting out these issues is complicated by the fact that the market puts a value on shareholder equity that is consistently more than twice the reported book value of a company. Numerous observers have pointed to the absence of most intangible assets from financial statements as an important source of this puzzle. We use Compustat financial data for 617 R&D intensive firms to test this possibility. We find that conventional book value alone explains only 31 percent of the market capitalization of these firms in 2006, and that this increases to 75 percent when our estimates of intangible capital are included. The debt-equity ratio also falls from 1.46 to 0.61. These findings suggest that financial reports tend to substantially understate the long-run intrinsic value of corporate America.
    JEL: G3 M41 O30
    Date: 2008–12

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