nep-bec New Economics Papers
on Business Economics
Issue of 2010‒03‒20
thirty-one papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Green Shoots? Where, when and how? By Gabriel Pérez-Quiros; Maximo Camacho; Pilar Poncela
  2. Fair value accounting: villain or innocent victim?: exploring the links between fair value accounting, bank regulatory capital, and the recent financial crisis By Sanders Shaffer
  3. A Note on fair Value and Illiquid Markets By Dominique Guegan; Chafic Merhy
  4. Estimated Macroeconomic Effects of the U.S. Stimulus Bill By Ray C. Fair
  5. Only the Final Outcome Matters: Persistent Effects of Efforts in Dynamic Moral Hazard By Ryo Ogawa
  6. On the necessity of five risk measures By Dominique Guegan; Wayne Tarrant
  7. Optimal Value Commitment in Bilateral Bargaining By Britz Volker
  8. The empirical relevance of Goodwin’s business cycle model for the US economy By Tarassow, Artur
  9. The aggregate Le Chatelier Samuelson principle with Cournot competition By Koebel, Bertrand; Laisney, François
  10. Reciprocity and Incentive Pay in the Workplace By Dur, Robert; Non, Arjan; Roelfsema, Hein
  11. Firm-specific capital, nominal rigidities and the business cycle By David Altig; Lawrence J. Christiano; Martin Eichenbaum; Jesper Linde
  12. Technology shocks: novel implications for international business cycles By Andrea Raffo
  13. Do oil shocks drive business cycles? some U.S. and international evidence By Kristie M. Engemann; Kevin L. Kliesen; Michael T. Owyang
  14. Outsourcing versus Integration at Home or Abroad By Stefano Federico
  15. Globalization, product differentiation and wage inequality By Paulo Bastos; Odd Rune Straume
  16. Executive Compensation: A Brief Review By Michael L. Bognanno
  17. The response of household wealth to the risk of losing the job: evidence from differences in firing costs By Cristina Barceló; Ernesto Villanueva
  18. The Relationship between Social Capital and Corporate Social Responsibility: Modelling Cognitive Social Capital and CSR as Preconditions of Sustainable Networks of Relations By Giacomo Degli Antoni; Lorenzo Sacconi
  19. It’s wages, it’s hours, it’s the Italian wage curve By Sergio Destefanis; Giovanni Pica
  20. Trade Liberalization, Competition and Growth By Omar Licandro; Antonio Navas Ruiz
  21. Corporate Lobbying and Financial Performance By Chen, Hui; Parsley, David; Yang, Ya-wen
  22. Ageing Workforce, Productivity and Labour costs of Belgian Firms By Vincent VANDENBERGHE; Fabio WALTENBERG
  23. Firm Size and Business Startup Reasons of Japanese Workers By TSUCHIYA Ryuichiro
  24. The Role of Construction in the Housing Boom and Bust in Spain By Carlos Garriga
  25. Investigating the exponential age distribution of firms By Coad, Alex
  26. Venture Capital Availability and Labor Market Performance in Industrial Countries: Evidence Based on Survey Data By Feldmann, Horst
  27. Share to Scare: Technology Sharing in the Absence of Intellectual Property Rights By Jos Jansen
  28. Evidence of induced innovation in US sectoral Capital’s shares By Andrew T. Young; Hernando Zuleta; Andrés F. García-Suaza
  29. Performance Pay and Multi-dimensional Sorting - Productivity, Preferences and Gender By Dohmen Thomas; Falk Armin
  30. Bonus Payments and Reference Point Violations By Ockenfels, Axel; Sliwka, Dirk; Werner, Peter
  31. Household debt, house prices and consumption in the United Kingdom: a quantitative theoretical analysis By Waldron, Matt; Zampolli, Fabrizio

  1. By: Gabriel Pérez-Quiros; Maximo Camacho; Pilar Poncela
    Abstract: What is the meaning of green shoots? In this paper we provide a statistical definition of this term which allows us to analyze where, when and how the recovery started. With the same methodology, we coform that the symptoms of recovery are clear in the US, the Euro area and Spain with some differences in timing. In addition, we find some leading behavior from the quotes in the press to the actual confirmation of the data, even when the data include variables with clear expectations contents.
    Date: 2010–02
  2. By: Sanders Shaffer
    Abstract: There is a popular belief that the confluence of bank capital rules and fair value accounting helped trigger the recent financial crisis. The claim is that questionable valuations of long term investments based on prices obtained from illiquid markets created a pro-cyclical effect whereby mark to market adjustments reduced regulatory capital forcing banks to sell off investments which further depressed prices. This ultimately led to bank instability and the credit effects that reached a peak late in 2008. This paper analyzes a sample of large banks to attempt to measure the strength of the link between fair value accounting, regulatory capital rules, pro-cyclicality and financial contagion. The focus is on large banks because they value a significant portion of their balance sheets using fair value. They also hold investment portfolios that contain illiquid assets in large enough volumes to possibly affect the market in a pro-cyclical fashion. The analysis is based on a review of recent historical financial data. The analysis does not reveal a clear link for most banks in the sample, but rather suggests that there may have been other more significant factors putting stress on bank regulatory capital.
    Keywords: Global financial crisis ; Bank capital ; Banks and banking - Accounting
    Date: 2010
  3. By: Dominique Guegan (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Chafic Merhy (Natixis Asset Management - SAMS)
    Abstract: We present in this paper a method to extract fair prices from observable prices in an illiquid market. The dynamics of fair prices have a general form encompassing random walks. In fact, only a part of a movement in price is assumed to reflect fundamental changes, the rest is considered to be friction. That part is optimally estimated by a Kalman filter". The model allows also to recover liquidity premia as a product of innovations times an illiquidity multiplier. Thus the higher the difference between observed and filtered prices (prices obtained under "normal" market dynamics), the higher liquidity premium will be. The model can be adapted to various kind of instruments and calibrated in different ways.
    Keywords: Fair value, illiquid market, Kalman filter, Mark to model.
    Date: 2010–01
  4. By: Ray C. Fair (Cowles Foundation, Yale University)
    Abstract: This paper uses a multicountry macroeconometric model to estimate the macroeconomic effects of the U.S. stimulus bill passed in February 2009. The analysis has the advantage of taking into account many endogenous effects. Real U.S. output is estimated to be $554 billion larger when summed over the 12-year period 2009:1-2020:4 (0.29 percent of the total sum of output). The average number of jobs is 509 thousand larger (0.37 percent). There is some redistribution of output and employment away from 2012-2015. At the end of 2020 the federal government debt is larger by $637 billion in real terms (the debt/GDP ratio is larger by 3.19 percentage points), which may increase the risk of negative asset-market reactions.
    Keywords: Stimulus effects, Government spending multipliers
    JEL: E17
    Date: 2010–03
  5. By: Ryo Ogawa
    Abstract: In dynamic principal-agent relationships, it is sometimes observed that the agent's reward depends only on the final outcome. For example, a student's grade in a course quite often depends only on the final exam score, where the performance in the problem sets and the mid-term exam is ignored. The present paper shows that such an arrangement can be optimal if the agent's effort in each period has strong persistent effects. It is shown that the optimality of such a simple payment scheme crucially depends on the first order stochastic dominance of the final outcome under various effort sequences.
    Date: 2010–01
  6. By: Dominique Guegan (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Wayne Tarrant (Wingate University - Department of Mathematics)
    Abstract: The banking systems that deal with risk management depend on underlying risk measures. Following the recommendation of the Basel II accord, most banks have developed internal models to determine their capital requirement. The Value at Risk measure plays an important role in computing this capital. In this paper we analyze in detail the errors produced by use of this measure. We then discuss other measures, pointing out their strengths and shortcomings. We give detailed examples, showing the need for five risk measures in order to compute a capital in relation to the risk to which the bank is exposed. In the end, we suggest using five different risk measures for computing capital requirements.
    Keywords: Risk measure ; Value at Risk ; Bank capital ; Basel II Accord
    Date: 2010–01
  7. By: Britz Volker (METEOR)
    Abstract: Two impatient players bargain about the division of a pie under a standard bargaining protocol in discrete time with time-invariant recognition probabilities. Instantaneous utility is linear, but players discount the future by a constant factor. Before bargaining starts, a player can commit to a utility level. This commitment is perfectly binding initially. However, once so much time has passed that even receiving the entire pie would yield less than thecommitted level of utility, then the commitment becomes void. Intuitively, this simply means that no player can remain committed to something which has become impossible. If only one player can commit, his subgame--perfect equilibrium payoff varies between one half and the entire pie, depending on the distribution of proposal power. If both players commit sequentially before the bargaining starts, we find a unique perfect equilibrium division. If both players commit simultaneously, there is a range of perfect equilibrium divisions. However, no player obtains less than one third of the pie, even with arbitrarily small proposal power. The equal split is the only division supported by a perfect equilibrium for any choice of the discount factor and the recognition probabilities.
    Keywords: microeconomics ;
    Date: 2010
  8. By: Tarassow, Artur
    Abstract: The paper attempts to verify Richard Goodwin's (1967) endogenous business cycle theory which states that the driving forces behind fluctuations are class struggles between capitalists and workers about income distribution. Based on a Marxian profit-led model, non-linear differential equations lead to endogenous cycles in the wage-share-employment-space which can be observed empirically. Applying a bivariate vector autoregressive model we analyze the relationship between real unit labor costs and the employment rate for the US economy over a period from 1948:1 to 2006:4. Granger-causality tests, orthogonalized impulse response functions and forecast error variance decomposition are conducted for the raw data as well as the cyclical components of the Hodrick-Prescott and Baxter-King filter methods. We verify the profit-led character of the US goods market and find that income distribution is driven by labor market dynamics.
    Keywords: Business cycle; Goodwin; Econometrics; Marxian Economics; Post Keynesian Economics; Functional income distribution
    JEL: E12 E32 E25 E24 E11
    Date: 2010–02–26
  9. By: Koebel, Bertrand; Laisney, François
    Abstract: This paper studies the aggregate substitution and expansion effects triggered by changes in input prices, in a context where firms supply a homogenous commodity and compete in quantities à la Cournot. We derive a sufficient condition for the existence of a Cournot equilibrium and show that this condition also ensures that the Le Chatelier-Samuelson principle is likely to be satisfied in the aggregate at the Cournot equilibrium, although it may not be satisfied at the firm level. These results are confirmed by the empirical findings obtained for two-digit US manufacturing industries, which also highlight the importance of imperfect competition for understanding aggregate growth, investment and employment. --
    Keywords: Aggregation,returns to scale,market power,markup,own-price elasticity
    JEL: C33 D24
    Date: 2010
  10. By: Dur, Robert (Erasmus University Rotterdam); Non, Arjan (Erasmus University Rotterdam); Roelfsema, Hein (Utrecht School of Economics)
    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 empirically examine these predictions using data from the German Socio-Economic Panel. 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: 2010–02
  11. By: David Altig; Lawrence J. Christiano; Martin Eichenbaum; Jesper Linde
    Abstract: This paper formulates and estimates a three-shock US business cycle model. The estimated model accounts for a substantial fraction of the cyclical variation in output and is consistent with the observed inertia in inflation. This is true even though firms in the model reoptimize prices on average once every 1.8 quarters. The key feature of our model underlying this result is that capital is firm-specific. If we adopt the standard assumption that capital is homogeneous and traded in economy-wide rental markets, we find that firms reoptimize their prices on average once every 9 quarters. We argue that the micro implications of the model strongly favor the firm-specific capital specification.
    Date: 2010
  12. By: Andrea Raffo
    Abstract: Understanding the joint dynamics of international prices and quantities remains a central issue in international business cycles. International relative prices appreciate when domestic consumption and output increase more than their foreign counterparts. In addition, both trade flows and trade prices display sizable volatility. This paper incorporates Hicks-neutral and investment-specific technology shocks into a standard two-country general equilibrium model with variable capacity utilization and weak wealth effects on labor supply. Investment-specific technology shocks introduce a source of fluctuations in absorption similar to taste shocks, thus reconciling theory and data. The paper also presents implications for the transmission mechanism of technology shocks across countries and for the Barro and King (1984) critique of investment shocks.
    Date: 2010
  13. By: Kristie M. Engemann; Kevin L. Kliesen; Michael T. Owyang
    Abstract: Hamilton (2005) noted that nine of the last ten recessions in the United States were preceded by a substantial increase in the price of oil. In this paper, we consider whether oil price shocks significantly increase the probability of recessions in a number of countries. Because business cycle turning points generally are not available for other countries, we estimate the turning points together with oil's effect in a Markov-switching model with time-varying transition probabilities. We find that, for most countries, oil shocks do affect the likelihood of entering a recession. In particular, an average sized shock to oil prices increases the probability of recession in the U.S. by about 60 percentage points over the following year.
    Keywords: Business cycles ; Petroleum industry and trade
    Date: 2010
  14. By: Stefano Federico (Bank of Italy, Economics and International Relations)
    Abstract: Using data on a sample of Italian manufacturing companies, this paper analyzes the location (at home or abroad) and the mode of organization (outsourcing versus integration) of intermediate inputs production. We find evidence of a productivity ordering (largely consistent with the assumptions in Antràs and Helpman 2004) where foreign integration is chosen by the most productive and domestic outsourcing by the least productive firms; those with medium-high productivity choose domestic integration, those with medium-low productivity foreign outsourcing. We also find that the preference for integration over outsourcing is positively related to some indicators of headquarter intensity, notably capital intensity, as predicted by Antràs (2003) and Antràs and Helpman (2004).
    Keywords: international outsourcing, foreign direct investment, intra-firm trade, productivity
    JEL: F12 F23 L22
    Date: 2010–02
  15. By: Paulo Bastos (Research Department, Inter-American Development Bank); Odd Rune Straume (Universidade do Minho - NIPE)
    Abstract: This paper develops a two-country, general equilibrium model of oligopoly in which the degree of horizontal product differentiation is endogenously determined by firms' strategic investments in product innovation. Consumers seek variety and product innovation is more skill intensive than production. Greater import competition increases innovation incentives, and thereby the relative demand for skill. An intraindustry trade expansion following trade liberalization can therefore increase wage inequality between skilled and unskilled workers. In addition, since product differentiation is resource consuming, freer trade entails a potential trade-off between production and variety. The import competition effect highlighted by the model, which plays a key role in determining the general equilibrium, is supported by panel data on Chilean manufacturing plants.
    Keywords: Trade liberalization; Product differentiation; Innovation; Wage Inequality; General Oligopolistic Equilibrium.
    JEL: F15 F16 L13 O31
    Date: 2010
  16. By: Michael L. Bognanno (Department of Economics, Temple University)
    Abstract: Chief executive officer (CEO) compensation is defined as the sum of base pay, bonuses, stock grants, stock options, other forms of compensation and benefits. Inflation?adjusted, median total CEO compensation in the United States almost tripled between 1992 and 2000, with grants of stock options evolving to be the largest component of compensation. This article presents the arguments for and against this level and composition of CEO compensation.
    Keywords: CEO compensation
    JEL: J33
    Date: 2010–03
  17. By: Cristina Barceló (Banco de España); Ernesto Villanueva (Banco de España)
    Abstract: Economic theory predicts that individuals exposed to the risk of losing their job postpone their consumption and accumulate more assets to build a buffer stock of saving. We provide a new test of the hypothesis using substantial variation in severance payments across contracts in the Spanish labor market. Using the 2002 and 2005 waves of a new survey of wealth and consumption we estimate the link between the probability that several household members lose their job and the wealth and consumption of that household. We instrument the type of contract using regional variation in the amount, timing and target groups of subsidies given to fi rms to hire workers using high severance payment ones. We find that workers covered by fixed-term contracts accumulate more financial wealth. An increase in the probability of losing the job of 8 percentage points increases average financial wealth by 4 months of income. We provide simulations from a simple buffer stock and a permanent income models that suggest that our results are more likely to be generated by the former.
    Keywords: precautionary savings, household wealth and consumption, labor firing costs
    JEL: D12 D31 D91 J41
    Date: 2010–02
  18. By: Giacomo Degli Antoni (University of Milano-Bicocca); Lorenzo Sacconi (University of Trento - Department of Economics)
    Abstract: Over the last few years, more and more attention has been devoted to trust trustworthiness and social norms of reciprocity and cooperation as key factors able to promote socio-economic development. Even though from different perspective, both the concept of social capital and the notion of corporate social responsibility refer to these elements. Since the seminal work by Putnam, Leonardi and Nanetti (1993) that focuses on the effects of social capital (hereafter also SC) on economic and government performance, the concept of SC has been widely used to analyse the role that interpersonal relations have in affecting economic activity by favouring cooperation. Many definitions of social capital have been proposed and two principal approaches to this concept may be identified. On one hand, social capital is defined in terms of generalised trust, civic norms, beliefs and dispositions which affect the propensity to cooperate (e.g. Putnam et al. 1993 and Knack and Keefer 1997). On the other hand, social capital is defined in terms of cooperative networks among agents (e.g. Coleman 1988; Lin 2001; Burt 2002). Many approaches also characterize the notion of corporate social responsibility (hereafter also CSR). In particular, if we consider the stakeholder approach (Freeman 1984, 2000, Freeman and Evan 1990) or the contractarian approach to CSR (Sacconi 2004; 2006; 2007 a,b), relational aspects, in terms of trust, trustworthiness, beliefs and dispositions to cooperate seem to be fundamental in promoting the coordination processes between the firm and its stakeholders that are essential to implement CSR practices.1 Even though several common elements seem to connect SC and CSR, their relationship has not yet been analysed in depth. In this paper we model the relationship between the firm and its stakeholders and analytically show the role that (cognitive) social capital and corporate social responsibility play in generating (structural) social capital.
    Date: 2010–03
  19. By: Sergio Destefanis (University of Salerno, CELPE and CSEF); Giovanni Pica (University of Salerno, CELPE and CSEF)
    Abstract: Using data from the Bank of Italy’s Household Survey we find that a wage curve exists in Italy after the 1992-93 wage reforms for annual and monthly wages but not for hourly wages. Consistently, after the reforms we find a negative elasticity of annual hours and months worked with respect to the unemployment rate.
    Keywords: Wage Drift, Panel Data, Unemployment
    JEL: J30 J60
    Date: 2010–03–08
  20. By: Omar Licandro; Antonio Navas Ruiz
    Abstract: Increasing evidence support the claim that international trade enhances innovation and productivity growth through an increase in competition. This paper develops a two-country endogenous growth model, with firm specific R&D and a continuum of oligopolistic sectors under Cournot competition to provide a theoretical support to this claim. Since countries are assumed to produce the same set of varieties, trade openness makes markets more competitive, reducing prices and increasing quantities. Under Cournot competition, trade is pro-competitive. Since firms undertake cost reducing innovations, the increase in production induced by a more competitive market push firms to innovate more. Consequently, a reduction on trade barriers enhances growth by reducing domestic firm's market power.
    Keywords: Trade Openness, Growth, Competition
    JEL: F13 F43 O3
    Date: 2010–03–04
  21. By: Chen, Hui; Parsley, David; Yang, Ya-wen
    Abstract: Corporate lobbying activities are designed to influence legislators and thus to further company goals by encouraging favorable policies and/or outcomes. Using data made available by the Lobbying Disclosure Act of 1995, this study examines corporate lobbying activities from a financial perspective. We find that on average, lobbying is positively related to accounting and market measures of financial performance. These results are robust across a number of empirical specifications and continue to hold when we account for potential sample selection. We also report market performance evidence using a portfolio approach. We find that portfolios of firms with the highest lobbying intensities significantly outperform their benchmarks in the three years following portfolio formation.
    Keywords: Corporate Lobbying; accounting performance; market returns; portfolio
    JEL: G30 G10
    Date: 2010–01
  22. By: Vincent VANDENBERGHE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Fabio WALTENBERG (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and Centro de Estudos sobre Desigualdade e Desenvolvimento (CEDE), Universidade Federal Fluminense (UFF), Brazil)
    Abstract: The Belgian population is ageing due to demographic changes, so does the workforce of firms active in the country. Such a trend is likely to remain for the foreseeable future. And it will be reinforced by the willingness of public authorities to expand employment among individuals aged 50 or more. But are employers willing to employ older workers? The answer depends to a large extent on the ratio between older workersÕ productivity and their cost to employers. To address this question we tap into a unique firm-level panel data set to produce robust evidence on the causal effect of ageing on productivity and labour costs. Unobserved firm fixed-effects and short-term endogeneity of workforce age pose serious estimation challenges, which we try to cope with. Our results indicate a negative productivity differential for older workers ranging from 20 to 40% when compared with prime-age workers, and these productivity differentials are not compensated by lower relative labour costs. Furthermore, the (now dominant) service sector does not seem to offer working conditions that mitigate the negative age/productivity relationship. Finally, older workers in smaller firms (<100 workers) display a larger productivity differential and a productivity that is less aligned on labour costs.
    Keywords: Ageing, Labour Productivity, Panel Data Analysis
    JEL: J24 C52 D24
    Date: 2010–02–12
  23. By: TSUCHIYA Ryuichiro
    Abstract: Small firms are more likely to produce entrepreneurs than large firms. This study empirically examines a potential mechanism that might explain this phenomenon, observed in previous research, using Japanese survey data of employees planning to start businesses. The data contain information on employer, job, and personal characteristics and also indicates the reasons for starting the businesses. The results from a principal component analysis of various startup reasons identify four separate component factors that account for 70 percent of variance: a need for self-fulfillment, a need for flexibility in work schedule, a need to solve a career problem, and a need to secure a livelihood. I empirically examine the relationship between rating scores for these factors and the size of employers. The results from multivariate regression models indicate that the score for a need to solve a career problem was significantly higher for those working for small firms, while none of the other three factors are significantly different between employees of large and small firms. In addition, the results also suggest that the relationship between the need to solve a career problem and employment of small firms is associated with the tendency for middle managers. The implications of these findings for researchers and policy-makers are discussed.
    Date: 2010–03
  24. By: Carlos Garriga
    Abstract: This paper describes a quantitative model developed to account for the change in the level of house prices (boom-and-bust cycle) in Spain. The driving forces behind the housing boom are residential investment, immigration, current account deficits, and the elimination of land regulation. The model emphasizes the interaction of housing supply (determined by the existing stock of residential investment and new construction) with market demand. A calibrated version of the model for the Spanish economy replicates the key aggregate of the economy in 1995. The model predicts that a change in observed fundamentals can rationalize at least 84 percent of the recent boom in the value of housing capital. The model suggests that without large current account deficits and demographic changes the housing boom could have been much smaller. With respect to the housing bust, the model suggests that the combination of increasing mortgage rates, unemployment, and low productivity can have large effects in the value of housing capital. Some conservative predictions quantify adjustments that range between 24 and 29 percent.
    Date: 2010–02
  25. By: Coad, Alex
    Abstract: While several plots of the aggregate age distribution suggest that firm age is exponentially distributed, we find some departures from the exponential benchmark. At the lower tail, we find that very young establishments are more numerous than expected, but they face high exit hazards. At the upper tail, the oldest firms are older than the exponential would have predicted. Furthermore, the age distribution of international airline companies displays multimodality. Although we focused on departures from the exponential, we found that the exponential was a useful reference point and endorse it as an appropriate benchmark for future work on industrial structure. --
    Keywords: Age distribution,exponential distribution,firm size distribution,survival
    JEL: L20 L25 L11
    Date: 2010
  26. By: Feldmann, Horst
    Abstract: This paper finds that more readily available venture capital is likely to have lowered unemployment rates and raised employment rates in industrial countries over the period 1982 to 2003. More readily available venture capital is also likely to have lowered the share of long-term unemployed in the total number of unemployed. The magnitude of the effects appears to have been substantial. To measure access to venture capital, we use answers from surveys of senior business executives. We also employ a large number of control variables. Our regression results are robust to variations in specification and sample size.
    Keywords: employment; labor market; unemployment; venture capital
    Date: 2010–01
  27. By: Jos Jansen (Max Planck Institute for Research on Collective Goods)
    Abstract: I study the incentives of Cournot duopolists to share their technologies with their competitor in markets where intellectual property rights are absent and imitation is costless. The trade-off between a signaling effect and an expropriation effect determines the technology-sharing incentives. In equilibrium at most one firm shares some of its technologies. For similar technology distributions, there exists an equilibrium in which nobody shares. If the technology distributions are skewed towards efficient technologies, then there may exist equilibria in which one firm shares all technologies, only the best technologies, or only intermediate technologies. No other equilibria can exist.
    Keywords: Innovation, strategic disclosure, trade secret, Cournot duopoly, indivisibility, open source, skewed distribution
    JEL: D82 L13 O32 O34 L17
    Date: 2009–10
  28. By: Andrew T. Young; Hernando Zuleta; Andrés F. García-Suaza
    Abstract: We use annual data on capital’s share and relative factor prices from 35 US industries from 1960 to 2005 to test the induced innovation hypothesis. We derive, from a production function framework, testable implications for the effect of contemporaneous and lagged factor price ratios on capital’s share of production. The predicted effect is positive or negative depending on the elasticity of substitution between labor and capital. From panel regressions, the estimated effect of the contemporaneous factor price ratio implies an elasticity of substitution that is less than unity, consistent with the consensus from the literature. Based on this, our negative estimated effects for lagged price ratios are both statistically significant and consistent with the induced innovation hypothesis.
    Date: 2010–03–06
  29. By: Dohmen Thomas; Falk Armin (METEOR)
    Abstract: This paper studies the impact of incentives on worker self-selection in a controlled laboratory experiment. Subjects face the choice between a fixed and a variable payment scheme. Depending on the treatment, the variable payment is a piece rate, a tournament or a revenue-sharing scheme. We find that output is higher in the variable pay schemes (piece rate, tournament, and revenue sharing) compared to the fixed payment scheme. Thisdifference is largely driven by productivity sorting. In addition personal attitudes such as willingness to take risks and relative self-assessment as well as gender affect the sorting decision in a systematic way. Moreover, self-reported effort is significantly higher in all variable pay conditions than in the fixed wage condition. Our lab findings are supported by an additional analysis using data from a large and representative sample. In sum, our findings underline the importance of multi-dimensional sorting, i.e., the tendency for different incentive schemes to systematically attract people with different individual characteristics.
    Keywords: microeconomics ;
    Date: 2010
  30. By: Ockenfels, Axel (University of Cologne); Sliwka, Dirk (University of Cologne); Werner, Peter (University of Cologne)
    Abstract: We investigate how bonus payments affect satisfaction and performance of managers in a large, multinational company. We find that falling behind a naturally occurring reference point for bonus comparisons reduces satisfaction and subsequent performance. The effects tend to be mitigated if information about one's relative standing towards the reference point is withheld.
    Keywords: reference points, incentives, bonus payments, job satisfaction, job performance
    JEL: M52
    Date: 2010–02
  31. By: Waldron, Matt (Bank of England); Zampolli, Fabrizio (Bank of England)
    Abstract: Household debt and house prices in the United Kingdom rose substantially between 1987 and 2006. In this paper we use a calibrated overlapping generations model of the household sector to examine the extent to which changes in demographics, lower inflation, and a lower long-run real interest rate may explain the build-up of debt and the rise in house prices over that period. Our model suggests that lower real interest rates were particularly important. If households expected lower real interest rates to persist, then the model can more than explain the rise in debt and can explain most of the rise in house prices. However, the model leaves a puzzle because it predicts that an unanticipated fall in real interest rates should lead to a consumption boom that did not materialise in the data.
    Keywords: Consumption; housing market; collateral constraints; life cycle; OLG
    JEL: E21 R31
    Date: 2010–03–10

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