nep-bec New Economics Papers
on Business Economics
Issue of 2009‒04‒18
seventeen papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Human Capital and Wages in Exporting Firms By Munch, Jakob Roland; Rose Skaksen, Jan
  2. The Importance of Two-Sided Heterogeneity for the Cyclicality of Labour Market Dynamics By Ronald Bachmann; Peggy David
  3. Wage Rigidity and Job Creation By Christian Haefke; Marcus Sonntag; Thijs van Rens
  4. The rise of individual performance pay By Kvaløy, Ola; Olsen, Trond
  5. Agent Takeover Risk of Principal in Outsourcing Relationships By Bhimani, Al; Hausken, Kjell; Ncube , Mthuli
  6. Labour flows in Belgium By Pierrette Heuse; Yves Saks
  7. Financial Integration and Business Cycle Synchronization By Sebnem Kalemli-Ozcan; Elias Papaioannou; José Luis Peydró
  8. Aggregate Fluctuations of Discrete Investments By Nirei, Makoto
  9. The propagation of regional recessions By James D. Hamilton; Michael T. Owyang
  10. Credit and self-employment By Kartik Athreya; Ahmet Akyol
  11. Globalisation, concentration and footloose firms: in search of the main cause of the declining labour share By Damiaan Persyn; John Hutchinson
  12. The global entrepreneurship index (GEINDEX) By Zoltán J. Ács; László Szerb
  13. The impact of the 2004 EU-enlargement on enterprise performance and exports of service enterprises in the German eastern border region By Nils Braakmann; Alexander Vogel
  14. Profit-shifting in Two-sided Markets By Schindler, Dirk; Schjelderup, Guttorm
  15. CAPM for Estimating the Cost of Equity Capital: Interpreting the Empirical Evidence By Zhi Da; Re-Jin Guo; Ravi Jagannathan
  16. Wage Bargaining and Induced Technical Change in a Linear Economy: Model and Application to the US (1963-2003) By Tavani, Daniele
  17. “Managing Banks’ Optimal Debt Contracts under Costly Enforcement” By Celli, Gian Luca

  1. By: Munch, Jakob Roland (Department of Economics, Copenhagen Business School); Rose Skaksen, Jan (Department of Economics, Copenhagen Business School)
    Abstract: This paper studies the link between a firms education level, export performance and wages of its workers. We argue that firms may escape intence competition in international markets by using high skilled workers to differentiate their products. This story is consistent with our empirical results. Osing a very rich matched worker-firm longitudinal dataset we find that firms with high export intensities pay higher wages. However, an interaction term between export intensity and skill intensity has a positive impact on wages and it absorbs the direct effect of the export intensity. That is, we find an export wage premium, but it accrues to workers in firms with high skill intensities. Keywords: Exports, Wages, Human Capital, Rent Sharing, Matched Worker-Firm Data JEL Classification: J30, F10, I20
    Keywords: na
    JEL: G10
    Date: 2009–04–07
  2. By: Ronald Bachmann; Peggy David
    Abstract: Using two data sets derived from German administrative data, including a linked employer-employee data set, we investigate the cyclicality of worker and job flows. The analysis stresses the importance of two-sided labour market heterogeneity in this context, taking into account both observed and unobserved characteristics. We find that small firms hire mainly unemployed workers, and that they do so at the beginning of an economic expansion. Later on in the expansion, hirings more frequently result from direct job-to-job transitions, with employed workers moving to larger firms. Contrary to our expectations, workers moving to larger firms do not experience significantly larger wage gains than workers moving to smaller establishments. Furthermore, our econometric analysis shows that the interaction of unobserved heterogeneities on the two sides of the labour market plays a more important role for employed job seekers than for the unemployed.
    Keywords: worker °ows, accessions, separations, business cycle, job-to-job, employer-to-employer, linked employer-employee
    JEL: J63 J64 J21 E24
    Date: 2009–03
  3. By: Christian Haefke; Marcus Sonntag; Thijs van Rens
    Abstract: Standard macroeconomic models underpredict the volatility of unemployment fluctuations. A common solution is to assume wages are rigid. We explore whether this explanation is consistent with the data. We show that the wage of newly hired workers, unlike the aggregate wage, is volatile and responds one-to-one to changes in labor productivity. In order to replicate these findings in a search model, it must be that wages are rigid in ongoing jobs but flexible at the start of new jobs. This form of wage rigidity does not affect job creation and thus cannot explain the unemployment volatility puzzle
    Keywords: Wage Rigidity, Search and Matching Model, Business Cycle
    JEL: E24 E32 J31 J41 J64
    Date: 2009–03
  4. By: Kvaløy, Ola (University of Stavanger); Olsen, Trond (Norwegian School of Economics and Business Administration)
    Abstract: x
    Keywords: Relational contracts; Multiagent Moral Hazard; Indispensable human capital
    JEL: D23 J33 L14
    Date: 2008–12–15
  5. By: Bhimani, Al; Hausken, Kjell (University of Stavanger); Ncube , Mthuli
    Abstract: x
    Keywords: Principal; Agent; Outsourcing; Hostile Takeover
    JEL: A10
    Date: 2009–02–09
  6. By: Pierrette Heuse (National Bank of Belgium, Research Department); Yves Saks (National Bank of Belgium, Research Department)
    Abstract: The paper describes job flows in Belgium using micro data at the firm level collected through the annual social balance sheets that companies have to file with the National Bank of Belgium. The coverage of the study is very broad: all industries and commercial services are included. We contribute to the previous literature by studying a long period from 1998 to 2006, covering both upturns and downturns in the Belgian economy. Furthermore, data from the social balance sheets make it possible to take into account the heterogeneity of the workforce, on top of the eterogeneity of firms themselves: job flows are broken down by socio-professional status and type of employment contract
    Keywords: Job flows, business cycle, heterogeneity
    JEL: J23 J21 I20
    Date: 2009–04
  7. By: Sebnem Kalemli-Ozcan; Elias Papaioannou; José Luis Peydró
    Abstract: Standard theory predicts that financial integration leads to a lower degree of business cycle synchronization. Surprisingly, cross-country studies find the opposite. Our contribution is to document the theoretically predicted negative effect of financial integration on business cycle synchronization as a robust regularity. We use a confidential dataset on banks' international bilateral exposure over the past three decades in a panel of twenty developed countries. The rich panel structure allows us to control for time-invariant country-pair factors and global trends that affect both financial integration and business cycle patterns. In contrast to previous empirical work we find that a higher degree of financial integration is associated with less synchronized output cycles. We also employ two distinct instrumental variable approaches to identify the one-way effect of integration on synchronization. These specifications reveal that the component of banking integration predicted by legislative-regulatory harmonization policies and the nature of the bilateral exchange rate regime has a negative effect on output synchronization.
    JEL: E32 F15 F36 G21 O16
    Date: 2009–04
  8. By: Nirei, Makoto
    Keywords: Lumpy investment, (S,s) economy, strategic complementarity, self-organized criticality, fat-tailed distribution
    JEL: E22 E32
    Date: 2008–12
  9. By: James D. Hamilton; Michael T. Owyang
    Abstract: This paper develops a framework for inferring common Markov-switching components in a panel data set with large cross-section and time-series dimensions. We apply the framework to studying similarities and differences across U.S. states in the timing of business cycles. We hypothesize that there exists a small number of cluster designations, with individual states in a given cluster sharing certain business cycle characteristics. We find that although oil-producing and agricultural states can sometimes experience a separate recession from the rest of the United States, for the most part, differences across states appear to be a matter of timing, with some states entering recession or recovering before others.
    Keywords: Business cycles ; Recessions
    Date: 2009
  10. By: Kartik Athreya; Ahmet Akyol
    Abstract: Limited personal liability for debts has long been justified as a tool to promote entrepreneurial risk taking by providing insurance to the borrower in the event of low returns. Nonetheless, such limits erode repayment incentives, and so may increase unsecured borrowing costs. Our paper is the first to evaluate the tradeoff between credit costs and insurance against failure. We build a life-cycle model with risky, and repeated, occupational choice in the presence of defaultable debt contracts. We find that limits to liability can encourage self-employment, and alter the timing, size, and financing of self-employment projects. We also find that the positive relationship between wealth and self-employment rates may not be evidence for credit constraints: We show that such a relationship is present even when limited liability is eliminated.
    Date: 2009
  11. By: Damiaan Persyn; John Hutchinson
    Abstract: Over the last two decades the share of national income which accrues to labour has followed a marked downward trend across a host of industrialised countries. This paper attempts to assess the importance of several potential causes of this phenomenon. We investigate compositional effects, the effect of declining trade costs, changes in the market structure (concentration) and the effect of low-wage competition between countries. Overall, the findings suggest that lower trade costs and factors related to economic integration such as industry concentration, the market power of firms and increased international low-wage competition indeed affect the labour share. However, their effect has been quite limited when compared to changes in the sectoral composition, the effects of technological change, cyclical factors and changes in the prices of intermediary goods.
    Keywords: factor shares, globalisation
    JEL: J30 E25
    Date: 2009
  12. By: Zoltán J. Ács (George Mason University); László Szerb (University of Pécs)
    Abstract: This paper constructs a Global Entrepreneurship Index (GEINDEX) that captures the contextual feature of entrepreneurship across countries. We find the relationship between entrepreneurship and economic development to be mildly S-shaped not U-shaped or L-shaped. Our findings suggest moving away from simple measures of entrepreneurship across countries illustrating a U-shaped or L-shaped relationship to more complex measures, which are positively related to economic development. Implications for public policy suggest that institutions need to be strengthened before entrepreneurial resource can be deployed to drive innovation.
    Keywords: Entrepreneurship, Development, Stages of Growth, Globalization, Innovation, Index, Knowledge, Institutions
    JEL: L26 O1 O3
    Date: 2009–04–14
  13. By: Nils Braakmann (Institute of Economics, University of Lüneburg); Alexander Vogel (Institute of Economics, University of Lüneburg)
    Abstract: We consider the impact of the 2004 EU-enlargement on enterprise performance and the exporting behavior of German service enterprises in Germany’s eastern border region. Our results from regression adjusted difference-in-differences-estimators combined with matching and panel data from official statistics suggest that the EU-enlargement resulted in a decline by circa 1 percent in the turnover and the profitability of large enterprises in the border region, respectively. For small enterprises, we find an annual increase in turnover by 2.7% in both 2004 and 2005 and an annual decrease in profitability by 1.8 and 2.6 percentage points in 2004 and 2005 respectively.
    Keywords: EU-enlargement, enterprise performance, exports
    JEL: F15 L80
    Date: 2009–04
  14. By: Schindler, Dirk (Universität Konstanz); Schjelderup, Guttorm (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)
    Abstract: We investigate how multinational two-sided platform firms set their prices on intra firm transactions. Two-sided platform firms derive income from two customer groups that are connected through at least one positive network externality from one group to the other. A main finding is that even in the absence of taxation transfer prices deviate from marginal cost of production. A second result of the paper is that it is inherently difficult to establish arm's length prices in two-sided markets. Finally, we find that differences in national tax rates may be welfare enhancing despite the use of such prices as a profit shifting device.
    Keywords: Multinational enterprises; two-sided markets; profit shifting
    JEL: D21 L24
    Date: 2009–04–14
  15. By: Zhi Da; Re-Jin Guo; Ravi Jagannathan
    Abstract: We argue that the CAPM may be a reasonable model for estimating the cost of capital for projects in spite of increasing criticisms in the empirical asset pricing literature. Following Hoberg and Welch (2007), we first show that there is more support for the CAPM than has been previously thought. We then present evidence that is consistent with the view that the option to modify existing projects and undertake new projects available to firms may be an important reason for the poor performance of the CAPM in explaining the cross section of returns on size and book-to-market sorted stock portfolios. That lends support to the McDonald and Siegel (1985) and Berk, Green and Naik (1999) observation that stock returns need not satisfy the CAPM even when the expected returns on all individual projects do. From the perspective of a person who believes that the CAPM provides a reasonable estimate of the required return on elementary individual projects, the empirical evidence in the literature is not sufficient to abandon the use of the CAPM in favor of other models.
    JEL: G00 G11 G12 G31
    Date: 2009–04
  16. By: Tavani, Daniele
    Abstract: In a simple one-sector, two-class, fixed-proportions economy, wages are set through axiomatic bargaining a la Nash [1950]. As for choice of technology, firms choose the direction of factor augmentations to maximize the rate of unit cost reduction (Kennedy [1964], and more recently Funk [2002]). The aggregate environment resulting by self-interested decisions made by economic agents is described by a two-dimensional dynamical system in the employment rate and output/capital ratio. The economy converges cyclically to a long-run equilibrium involving a Harrod-neutral prole of technical change, a constant rate of employment of labor, and constant input shares. The type of oscillations predicted by the model matches the available data on the United States (1963-2003). Finally, institutional change, as captured by variations in workers' bargaining power, has a positive effect on the rate of output growth but a negative effect on employment.
    Keywords: Bargaining; Induced Technical Change; Factor Shares; Employment
    JEL: E25 E24 J52 O31
    Date: 2009–04–02
  17. By: Celli, Gian Luca
    Abstract: The proposed research model from “Optimal Debt Contracts under Costly Enforcement” alters the original Costly State Verification (CSV) model introduced by Townsend (1979) by assuming that monitoring is non-contractible and non-deterministic. It emerges, from my analysis, that there are technical problems with the entrepreneur participation constraint. Particularly, the authors did not frame the principal optimization problem taking in to account a type-dependent participation constraint. To correct for this errors, I developed an adverse selection model that integrates the agent out-side opportunity utility. This approach opens up in to an interesting research turf on hypothetical creditors and debt market segmentation.
    Keywords: Debt Tiers, Agency Costs, Debt Management, Debt Contract, Costly Enforcement, Adverse Selection Models, Investor Heterogeneity
    JEL: D86
    Date: 2008–05–28

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