nep-bec New Economics Papers
on Business Economics
Issue of 2009‒05‒23
24 papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Financial development and economic volatility: a unified explanation By Pengfei Wang; Yi Wen
  2. Reciprocity and Incentive Pay in the Workplace By Robert Dur; Arjan Non; Hein Roelfsema
  3. The distinct effects of Information Technology and Communication Technology on firm organization By Nicholas Bloom; Luis Garicano; Raffaella Sadun; John Van Reenen
  4. The Effects of Corporate Finance on Firm Risk-taking and Performance: Theory and Evidence By Toshihiro Okada; Kohei Daido
  5. Dynamic Duopoly with Intertemporal Capacity Constraints By Berg Anita H.J. van den; Herings P. Jean-Jacques; Peters Hans J.M.
  6. Vacancy Duration, Wage Offers, and Job Requirements - Pre-Match Data Evidence By Chen, Longhwa; Eriksson, Tor
  7. Managers, Coordination, and the Firm Age-Wage Relationship By Peter Thompson
  8. The Effect of Employment Protection Legislation and Financial Market Imperfections on Investment: Evidence from a Firm-Level Panel of EU Countries By Cingano, Federico; Leonardi, Marco; Messina, Julián; Pica, Giovanni
  9. Mergers, Innovation, and Productivity: Evidence from Japanese manufacturing firms By HOSONO Kaoru; TAKIZAWA Miho; TSURU Kotaro
  10. Inter-firm dependency and employment inequalities : Theoretical hypotheses and empirical tests. By Corinne Perraudin; Héloïse Petit; Nadine Thèvenot; Bruno Tinel; Julie Valentin
  11. Using employee flows to improve measures of job creation and destruction and firm dynamics: The case of Belgium By Geurts, Karen; Ramioul, Monique; Vets, Peter
  12. Unionisation Structures, Productivity, and Firm Performance By Sebastian Braun
  13. Corporate Debt Maturity and the Real Effects of the 2007 Credit Crisis By Heitor Almeida; Murillo Campello; Bruno Laranjeira; Scott Weisbenner
  14. Wage Structure and Unionization in the U.S. Construction Sector By Cihan Bilginsoy
  15. Analyzing the Extent and Influence of Occupational Licensing on the Labor Market By Morris M. Kleiner; Alan B. Krueger
  16. Small Open Economy Firms in International Trade: Evidence from Danish Transactions-Level Data By Eriksson, Tor; Smeets, Valerie; Warzynski, Frederic
  17. The Missing Link Between Financial Constraints and Productivity By Marialuz Moreno Badia; Veerle Slootmaekers
  18. The Structure and Formation of Business Groups: Evidence from Korean Chaebols By Heitor Almeida; Sang Yong Park; Marti Subrahmanyam; Daniel Wolfenzon
  19. Employer monopsony power in the labor market for undocumented workers By Julie L. Hotchkiss; Myriam Quispe-Agnoli
  20. Noisy Business Cycles By George-Marios Angeletos; Jennifer La'O
  21. Concentration in corporate bank loans. What do we learn from European comparisons? By Christophe J. Godlewski; Ydriss Ziane
  22. Does Growth Cause Structural Change, or Is it the Other Way Round? A Dynamic Panel Data Analyses for Seven OECD Countries By Andreas Dietrich
  23. Long Memory in US Real Output per Capita By Guglielmo Maria Caporale; Luis A. Gil-Alana
  24. An efficiency wage - imperfect information model of the aggregate supply curve By Campbell, Carl M.

  1. By: Pengfei Wang; Yi Wen
    Abstract: Empirical studies showed that firm-level volatility has been increasing but the aggregate volatility has been decreasing in the US for the post-war period. This paper proposes a unified explanation for these diverging trends. Our explanation is based on a story of financial development - measured by the reduction of borrowing constraints because of greater access to external financing and options for risk sharing. By constructing a dynamic stochastic general-equilibrium model of heterogenous firms facing borrowing constraints and investment irreversibility, it is shown that financial liberalization increases the lumpiness of firm-level investment but decreases the variance of aggregate output. Hence, the model predicts that financial development leads to a larger firm-level volatility but a lower aggregate volatility. In addition, our model is also consistent with the observed decline in volatility of private held firms which do not have (or have only limited) access to external funds.
    Keywords: Financial institutions ; Business cycles
    Date: 2009
  2. By: Robert Dur; Arjan Non; Hein Roelfsema
    Abstract: We study optimal incentive contracts for workers who are reciprocal to management attention. When neither worker¿s effort nor manager¿s attention can be contracted, a double moral-hazard problem arises, implying that reciprocal workers should be given weak financial incentives. In a multiple-agent setting, this problem can be resolved using promotion incentives. We test these predictions using German Socio-Economic Panel data. We find that workers who are more reciprocal are significantly more likely to receive promotion incentives, while there is no such relation for individual bonus pay.
    Keywords: Reciprocity, social exchange, incentive contracts, double moral hazard, GSOEP
    JEL: D86 J41 M51 M52 M54 M55
    Date: 2009
  3. By: Nicholas Bloom; Luis Garicano; Raffaella Sadun; John Van Reenen
    Abstract: Empirical studies on information communication technologies (ICT) typically aggregate the "information" and "communication" components together. We show theoretically and empirically that these have very different effects on the empowerment of employees, and by extension on wage inequality. If managerial hierarchies are devices to acquire and transmit knowledge and information, technologies that reduce information costs enable agents to acquire more knowledge and 'empower' lower level agents. Conversely, technologies reducing communication costs substitute agent's knowledge for directions from their managers, and lead to centralization. Using an original dataset of firms in the US and seven European countries we study the impact of ICT on worker autonomy, plant manager autonomy and spans of control. Consistently with the theory we find that better information technologies (Enterprise Resource Planning for plant managers and CAD/CAM for production workers) are associated with more autonomy and a wider span of control. By contrast, communication technologies (like data networks) decrease autonomy for both workers and plant managers. Our findings are robust to using exogenous variation in cross-country telecommunication costs arising from differential regulatory regimes.
    JEL: F23 O31 O32 O33
    Date: 2009–05
  4. By: Toshihiro Okada (School of Economics, Kwansei Gakuin University); Kohei Daido (School of Economics, Kwansei Gakuin University)
    Abstract: Some firms may exhibit better operating performance than others because they undertake riskier projects: risk-return tradeoff. We develop a model to examine the effects of financial contracts on a firm's choice between safer (lower risk, lower return) and riskier (higher risk, higher return) projects. The model shows that, assuming a competitive capital market (i.e., financiers with no monopoly power), three types of financial contracts can each be an equilibrium contract, depending on conditions. We show that firms undertake ''safer'' projects when using rollover loans (i.e., short-term loans with a possible rollover), while firms undertake ''riskier'' projects when using non-rollover loans (i.e., long-term loans) or new share issues. The model emphasizes the role of rollover loans (with passive monitoring) as a potential disciplinary device to suppress a firm's risk-taking. The model generates several predictions about the determinants of a firm's risk-taking and its performance. One key prediction of the model is that (risk-neutral) firms with closer bank relationships are more likely to use rollover loans and undertake ''safer'' projects, even with a contestable capital market. We find novel empirical support for the model's predictions.
    Keywords: corporate finance, corporate governance, firm risk-taking, firm performance, loan rollover
    JEL: G32
    Date: 2009–05
  5. By: Berg Anita H.J. van den; Herings P. Jean-Jacques; Peters Hans J.M. (METEOR)
    Abstract: We analyze strategic firm behavior in settings where the production stage is followed by several periods during which only sales take place. We analyze the dynamics of the market structure, the development of prices and sales over time, and the implications for profits and consumer surplus. Two specific settings are analyzed. In the first, a firm can commit up-front to a sales strategy that does not depend on the actual sales of its competitor. In this case there is a unique Nash equilibrium and price increases over time. In the second setting,there is no commitment and firms can adjust their sales in response to observed supply of their competitor in the previous period. It is shown that in this case a subgame perfect Nash equilibrium does not always exist. Equilibria can have surprising features. For some parameter constellations, price may decrease over time. It is also possible that the firm increases its pro…t by destroying some of its production. When firms have equal size, the equilibrium outcome is the same in both the commitment and the non-commitment setting. In general, the setting without commitment is bene…cial to the larger firm, whereas the setting with commitment leads to higher pro…ts for the smaller firm.
    Keywords: mathematical economics;
    Date: 2009
  6. By: Chen, Longhwa (Aletheia University); Eriksson, Tor (Department of Economics, Aarhus School of Business)
    Abstract: Besides wage offers, credentials like education, work experience and skill requirements are key screening tools for firms in their recruitment of new employees. This paper contributes some new evidence to a relatively tiny literature on firms’ recruitment behaviour. In particular, our analysis is concerned with how vacancy durations vary with firms’ minimum wage offers and minimum job requirements (regarding education, skills, age, gender and earlier work experience). The empirical analysis is based on ten employer surveys carried out by the DGBAS on Taiwan during the period 1996-2006. We estimate logistic discrete hazard models with a rich set of job and firm characteristics as explanatory variables. The results show that vacancies associated with higher wage offers take, ceteris paribus, longer to be filled. The impact of firms’ wage offers and credential requirements does not vary over the business cycle. However, firms vary their skills requirements over the business cycle: our empirical analysis shows that, for a given wage offer, requirements are stricter in recessions and downturns. Separating between reasons for posting vacancies turned out important in explaining differences in vacancy durations. The duration of vacancies due to regular turnover and changing business cycle condition are less affected by skill requirements than that of other vacant jobs.
    Keywords: Job vacancies; Recruitment; Wage offers; Job requirements
    JEL: J32 J33 M12
    Date: 2009–05–15
  7. By: Peter Thompson (Department of Economics, Florida International University)
    Abstract: This paper describes a version of Lucas’ span of control model, in which managers of younger and smaller firms are less able than managers of older firms to provide precise instructions to employees. Employees differ in their propensity to follow instructions, and those least likely to follow instructions are said to be high-a types. In equilibrium, younger [older] firms employ high-a [low-a] types, and wages exhibit a U-shaped relationship in which the lowest wages are paid by firms of intermediate age. A natural extension of the model, in which employee ability also varies, is developed to examine the effect of employer age and size on entry into self-employment.
    Keywords: Management, firm age and wages, self-employment
    JEL: J24 J31 L26
    Date: 2009–03
  8. By: Cingano, Federico (Bank of Italy); Leonardi, Marco (University of Milan); Messina, Julián (University of Girona); Pica, Giovanni (University of Salerno)
    Abstract: This paper analyzes the joint effect of EPL and financial market imperfections on investment, capital-labour substitution, labour productivity and job reallocation in a cross-country framework. In the spirit of Rajan and Zingales (1998) and Ciccone and Papaioannou (2006), we exploit variation in the need for reallocation at the sectoral and aggregate level to assess the average effect of EPL on firms' policies. Then, exploiting firm-level information we study if the effect of EPL is stronger in firms with lower levels of internal resources. We find that, on average, EPL reduces investment per worker, capital per worker and value added per worker in high reallocation sectors relative to low reallocation sectors. The reduction in the capital-labour ratio is less pronounced in firms with higher internal resources, suggesting that financial constraints exacerbate the negative effects of EPL on capital deepening.
    Keywords: labor market imperfections, financial market imperfections, capital-labor substitution
    JEL: J21
    Date: 2009–04
  9. By: HOSONO Kaoru; TAKIZAWA Miho; TSURU Kotaro
    Abstract: We investigate the impact of merger on innovation and efficiency using a micro dataset of Japanese manufacturing firms including unlisted firms during the period of 1995-1999. We find that the acquirer's total factor productivity (TFP) decreases immediately after mergers and does not significantly recover to the pre-merger level within three years after mergers. We also find that the R&D intensity does not significantly change after mergers in spite of a significant increase in the debt-to-asset ratio. Our results suggest that the costs of business integration are large and persistent. To take into considering large integration costs, we also analyze the post-merger performance from one year after mergers, finding no significant increase in TFP or R&D intensity up to three years after mergers. Given the heterogeneity of mergers, we analyze the post-merger performance by classifying merger types. We find that the recovery of TFP after mergers is significant for mergers across industries or within the same business group, suggesting that a synergy effect works well and integration costs are small for those types of mergers.
    Date: 2009–04
  10. By: Corinne Perraudin (Centre d'Etudes de l'Emploi et Centre d'Economie de la Sorbonne); Héloïse Petit (Centre d'Etudes de l'Emploi et Centre d'Economie de la Sorbonne); Nadine Thèvenot (Centre d'Economie de la Sorbonne); Bruno Tinel (Centre d'Economie de la Sorbonne); Julie Valentin (Centre d'Economie de la Sorbonne)
    Abstract: This article highlights the importance of power relations in inter-firm relations and analyses their impact on firms' employment management practices. We show, firstly, that the use of subcontracting creates a chain of inter-firm economic dependency because it leads the principal contractor to plan and control the activities of the subcontractors. We then advance the hypothesis that this chain of dependency influences both the skill structure and wage levels. Empirical tests carried out on French data confirm that firms that subcontract outsource execution tasks and that the hierarchy of firms impacts employees' wage levels.
    Keywords: Subcontracting, skills, wages, power relation.
    JEL: L24 J82 J31
    Date: 2009–04
  11. By: Geurts, Karen; Ramioul, Monique; Vets, Peter
    Abstract: This paper presents a methodology for the improved estimation of measures of firm dynamics and job creation and destruction. The analysis is based on a linked employer-employee data set covering all private employers in Belgium. In keeping with a novel approach recently developed in the Scandinavian countries and the V.S, we use clustered employee flows between employers to reduce the upward bias in the estimated measures. The worker flow approach results in a substantial quality improvement of the discussed measures. In the period of observation, we find that 35 to 50 per cent of total entries and exits of firms with at least 10 employees does not coincide with the real opening or closing of a firm. Overall job creation and destruction levels are substantially being revised downwards as well. Besides affecting average levels, correcting for worker flows also strongly reduces annual variation the estimated measures, especially at the sectoral level.
    Keywords: Job flows; Labor reallocation; Micro data
    JEL: J21 C81 J23
    Date: 2009
  12. By: Sebastian Braun
    Abstract: This paper studies how different unionisation structures affect firm productivity, firm performance, and consumer welfare in a monopolistic competition model with heterogeneous firms and free entry. While centralised bargaining induces tougher selection among hetero- geneous producers and thus increases average productivity, firm-level bargaining allows less productive entrants to remain in the market. Centralised bargaining also results in higher average output and profit levels than either decentralised bargaining or a competitive labour market. From a welfare perspective, the choice between centralised and decentralised bar- gaining involves a potential trade-off between product variety and product prices. Extending the model to a two-country setup, I furthermore show that the positive effect of centralised bargaining on average productivity can be overturned when firms face international low-wage competition.
    Keywords: Trade Unions, Productivity, Firm Performance, International Competition
    JEL: J50 D43 F16
    Date: 2009–05
  13. By: Heitor Almeida; Murillo Campello; Bruno Laranjeira; Scott Weisbenner
    Abstract: We use the 2007 credit crisis to assess the effect of financial contracting on real corporate behavior. We identify heterogeneity in financial contracting at the onset of the crisis by exploring ex-ante variation in long-term debt maturity. Our empirical methodology uses an experiment-like design in which we control for observed and unobserved firm heterogeneity via a differences-in-differences matching estimator. We study whether firms with large portions of their long-term debt maturing right at the time of the crisis observe more pronounced outcomes than otherwise similar firms that need not refinance their debt during the crisis. Firms whose long-term debt was largely maturing right after the third quarter of 2007 reduced investment by 2.5% more (on a quarterly basis) than otherwise similar firms whose debt was scheduled to mature well after 2008. This relative decline in investment is statistically significant and economically large, representing approximately one-third of pre-crisis investment levels. A number of falsification and placebo tests confirm our inferences about the effect of credit supply shocks on corporate policies. For example, in the absence of a credit shock ("normal times"), the maturity composition of long-term debt has no effect on investment outcomes. Likewise, maturity composition has no impact on investment when long-term debt is not a major source of funding for the firm.
    JEL: E22 E32 G31 G32
    Date: 2009–05
  14. By: Cihan Bilginsoy
    Abstract: This paper estimates the union effects on the wage gap and dispersion in two pooled samples of construction craftworkers (CPS 1983-88 and 2000-05) using decomposition analysis and kernel density estimation. It shows that despite the decline in the adjusted union wage gap declined over time, the unadjusted union wage premium remained high due to the divergence of returns to workforce characteristics in favor of union workers. This pattern was more marked in the basic trades in comparison with the mechanical trades. Unions also contributed to a wider wage dispersion because they created a union wage gap and this wage gap increased across the “competitive” wage distribution. Unions raised the wages of workers who were located in the middle of the wage density but did not have an effect on the lower wage workers.
    Keywords: Wage structure, unionization, construction
    JEL: J3 J5 L7
    Date: 2009–07
  15. By: Morris M. Kleiner; Alan B. Krueger
    Abstract: This study examines the extent and influence of occupational licensing in the U.S. using a specially designed national labor force survey. Specifically, we provide new ways of measuring occupational licensing and consider what types of regulatory requirements and what level of government oversight contribute to wage gains and variability. Estimates from the survey indicated that 35 percent of employees were either licensed or certified by the government, and that 29 percent were fully licensed. Another 3 percent stated that all who worked in their job would eventually be required to be certified or licensed, bringing the total that are or eventually must be licensed or certified by government to 38 percent. We find that licensing is associated with about 14 percent higher wages, but the effect of governmental certification on pay is much smaller. Licensing by multiple political jurisdictions is associated with the highest wage gains relative to only local licensing. Specific requirements by the government for a worker to enter an occupation, such as education level and long internships, are positively associated with wages. We find little association between licensing and the variance of wages, in contrast to unions. Overall, our results show that occupational licensing is an important labor market phenomenon that can be measured in labor force surveys.
    JEL: J08 J44 J58 J80 K23 K31 L38 L5 L51
    Date: 2009–05
  16. By: Eriksson, Tor (Department of Economics, Aarhus School of Business); Smeets, Valerie (Department of Economics, Aarhus School of Business); Warzynski, Frederic (Department of Economics, Aarhus School of Business)
    Abstract: In this paper, we use a rich dataset disaggregating imports and exports decisions by product and origin/destination of all Danish companies for the period 1993-2003 to provide key elements in characterizing Danish firms in international trade. Most evidence to date emanates from the U.S. or developing economies like Columbia or Mexico. Benchmarking on these studies, we find some similarities but also differences which we think are representative of European-type, small open economies. We find that Danish exporters make up a fairly small fraction of the total of firms, but that this fraction is higher than in e.g., the U.S. Firms engaged in exporting have the same positive performance characteristics – size, capital and skilled labour intensity, labour as well as total factor productivity, and wages – found in also in previous studies. But most exporter premia are significantly larger in Denmark than in the U.S. There are few traces of the European Union’s Single Market Program and the adoption the Euro in 1998. We observe no impact of these changes on the number of exporters, but some signs of impacts on the number of products and export destination countries. Finally, we find that trade is positively related to productivity of firms. The association between productivity and the firm’s imports of intermediate goods is particularly strong.
    Keywords: Exporters; exporter premium; firm heterogeneity
    JEL: D21 F14 F23
    Date: 2009–05–15
  17. By: Marialuz Moreno Badia; Veerle Slootmaekers
    Abstract: The global financial crisis has reopened the debate on the potential spillover effects from the financial sector to the real economy. This paper adds to that debate by providing new evidence on the link between finance and firm-level productivity, focusing on the case of Estonia. We contribute to the literature in two important respects: (i) we look explicitly at the role of financial constraints; and (ii) we develop a methodology that corrects for the misspecification problems of previous studies. Our results indicate that young and highly indebted firms tend to be more financially constrained. Overall, a large number of firms shows some degree of financial constraints, with firms in the primary sector being the most constrained. More importantly, we find that financial constraints do not lower productivity for most sectors.
    Keywords: Financial sector , Estonia , Productivity , Nonbank financial sector , Credit expansion , Private investment , Corporate sector , Economic models ,
    Date: 2009–04–17
  18. By: Heitor Almeida; Sang Yong Park; Marti Subrahmanyam; Daniel Wolfenzon
    Abstract: In this paper we study the determinants of business groups' ownership structure using unique panel data on Korean chaebols. In particular, we attempt to understand how pyramids form over time. We find that chaebols grow vertically (that is, pyramidally) as the family uses well-established group firms ("central firms") to set up and acquire younger firms that have low profitability and high capital requirements. Chaebols grow horizontally (that is, using direct family ownership) when the family acquires firms that are highly profitable and require less capital. Our evidence suggests that the (previously documented) lower profitability of pyramidal firms is partly due to a selection effect (e.g., the family optimally places low profitability firms in pyramids). To show this, we examine instances of large changes in the ownership structure of group firms. Specifically, we find that poor past performance predicts an increase in the degree of pyramiding in a firm's ownership structure. Most compellingly, we find that the profitability of new group firms in the year before they are added to the group predicts whether they are added to pyramids or controlled directly by the family. We also examine the relative valuation of chaebol firms. We find that the group's central firms trade at a discount relative to other public group firms possibly due to the selection of low-profitability, high capital intensity firms into pyramids. Our results shed light on the process by which pyramids form, and provide new evidence on the performance and valuation of business group firms.
    JEL: G32 G34
    Date: 2009–05
  19. By: Julie L. Hotchkiss; Myriam Quispe-Agnoli
    Abstract: Using matched employer-employee data from the state of Georgia, this paper investigates the potential for employer monopsony power in the labor market for undocumented workers. We find that the labor supply elasticity of undocumented workers is about 13 percent lower than that estimated for documented workers, suggesting that at least some of the observed wage gap between documented and undocumented workers can be explained by firms' exploiting their monopsony power. There is also evidence of some displacement, with the hiring of undocumented workers being associated with a small amount of documented worker separation.
    Keywords: Labor market
    Date: 2009
  20. By: George-Marios Angeletos; Jennifer La'O
    Abstract: This paper investigates a real-business-cycle economy that features dispersed information about the underlying aggregate productivity shocks, taste shocks, and, potentially, shocks to monopoly power. We show how the dispersion of information can (i) contribute to significant inertia in the response of macroeconomic outcomes to such shocks; (ii) induce a negative short-run response of employment to productivity shocks; (iii) imply that productivity shocks explain only a small fraction of high-frequency fluctuations; (iv) contribute to significant noise in the business cycle; (v) formalize a certain type of demand shocks within an RBC economy; and (vi) generate cyclical variation in observed Solow residuals and labor wedges. Importantly, none of these properties requires significant uncertainty about the underlying fundamentals: they rest on the heterogeneity of information and the strength of trade linkages in the economy, not the level of uncertainty. Finally, none of these properties are symptoms of inefficiency: apart from undoing monopoly distortions or providing the agents with more information, no policy intervention can improve upon the equilibrium allocations.
    JEL: C7 D6 D8
    Date: 2009–05
  21. By: Christophe J. Godlewski (Laboratoire de Recherche en Gestion et Economie, Université de Strasbourg); Ydriss Ziane (BETA, Université de Nancy)
    Abstract: The aim of this paper is to empirically investigate the determinants of creditor concentration in the use of bank loans by firms in a European cross-country framework. We analyze the influence of loan and borrower characteristics but also banking market structure and legal enforcement country-specific variables that are expected to influence the financial and strategic decision relative to the number of bank lenders. We find that firms tend to diversify sources of financing by reducing bank concentration when their level of quality is higher and both asymmetric information and the risk of early liquidation are minimal (larger, older, transparent, liquid and profitable firms). Furthermore, lenders’ monitoring appears to be an important feature of lending concentration, particularly in order to prevent private benefits extraction by insiders in legal environment where shareholders benefit from better protections.
    Keywords: Financial intermediation, bank lending, creditor concentration, information asymmetry, Europe.
    JEL: G21 G32 G33
    Date: 2009
  22. By: Andreas Dietrich (Darmstadt University of Technology)
    Abstract: In economic development, structural change among the three main sectors of an economy accompanies with aggregate economic growth. Nevertheless the question whether economic growth causes structural change or change in the economic structure causes aggregate growth is still unanswered. To shed some more light on this issue, this study examines a Granger- causality test in a panel environment to determine the causality of economic growth and structural change measured either in terms of employment shares or in terms of real value added shares. Estimation and analysis with annual data of seven OECD countries covering the period from 1960-2004 show that the causality appears to be heterogeneous.
    Keywords: structural change, economic growth, tertiarization, panel Granger-causality-test
    JEL: L16 O14 O57
    Date: 2009–05–11
  23. By: Guglielmo Maria Caporale; Luis A. Gil-Alana
    Abstract: This paper analyses the long memory properties of quarterly real output per capita in the US (1948Q1 ¿ 2008Q3) using non-parametric, semi-parametric and parametric techniques. The results vary substantially depending on the methodology employed. Evidence of mean reversion is obtained in a parametric context if the underlying disturbances are weakly autocorrelated. We also examine the possibility of a structural break in the data and the results indicate that there is a slight reduction in the degree of persistence after the break that is found to occur in the second quarter of 1978.
    Keywords: Fractional Integration, Long Memory, Convergence
    JEL: C22 O40
    Date: 2009
  24. By: Campbell, Carl M.
    Abstract: This study derives a reduced-form equation for the aggregate supply curve from a model in which firms pay efficiency wages and workers have imperfect information about average wages at other firms. If specific assumptions are made about workers’ expectations of average wages and about aggregate demand, the model predicts how the aggregate demand and supply curves shift and how output and prices adjust in response to demand shocks and supply shocks. The model also provides an alternative explanation for Lucas’ (1973) finding that the AS curve is steeper in countries with greater inflation variability.
    Keywords: Aggregate supply curve; efficiency wages; imperfect information
    JEL: E32 J41 E10
    Date: 2009–05–18

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