nep-bec New Economics Papers
on Business Economics
Issue of 2011‒02‒19
29 papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Efficient Firm Dynamics in a Frictional Labor Market By Leo Kaas; Philipp Kircher
  2. Wages, Implicit Contracts, and the Business Cycle: Evidence from a European Panel By BELLOU Andriana; KAYMAK Baris
  3. "Ménage à trois" in a globalizing world: bargaining between firms, low-skilled and high-skilled workers By M. DUMONT; G. RAYP; P. WILLEMÉ
  4. Une analyse temps-fréquences des cycles financiers By Christophe Boucher; Bertrand Maillet
  5. Firm Size and Growth Rate Variance: the Effects of Data Truncation By Marco Capasso; Elena Cefis
  6. Framing the empirical findings on firm growth By Marco Capasso; Elena Cefis; Sandro Sapio
  7. Outsourcing, Demand and Employment Loss in U.S. Manufacturing, 1990 – 2005 By James Burke; Gerald Epstein; Seung-Yun Oh
  8. Dynamics of Output and Employment in the U.S. Economy By Deepankar Basu; Duncan K. Foley
  9. Optimal contract under asymmetric information: the role of options on futures By Andrea Beccarini
  10. Does high involvement management lead to higher pay? By Böckerman, Petri; Bryson, Alex; Ilmakunnas, Pekka
  11. An Application of Business Cycle Accounting with Misspecified Wedges By NUTAHARA Kengo; INABA Masaru
  12. "Unit Labor Costs in the Eurozone: The Competitiveness Debate, Again" By Jesus Felipe; Utsav Kumar
  13. The Pure Logic of Accounting: A Critique of the Fair Value Revolution By Yuri Biondi
  14. On the long-run evolution of inheritance: France 1820-2050 By Thomas Piketty
  15. Communicating Vertical Hierarchies: the Adverse Selection Case By Salvatore Piccolo
  16. Competition and Trust: Evidence from German Car Manufacturers By Leonardo Felli; Johannes Koenen; Konrad O. Stahl
  17. Entry threats and insufficiency in efficient bargaining By Rupayan Pal; Bibhas Saha
  18. Firms' rents, workers' bargaining power and the union wage premium in France By Thomas Breda
  19. Working in family firms: less paid but more secure? Evidence from French matched employer-employee data By Andrea Bassanini; Thomas Breda; Eve Caroli; Antoine Rebérioux
  20. Learning versus Stealing: How Important are Market-Share Reallocations to India's Productivity Growth By Ann E. Harrison; Leslie A. Martin; Shanthi Nataraj
  21. The Welfare Effects of Third-Degree Price Discrimination in a Differentiated Oligopoly By Takanori Adachi; Noriaki Matsushima
  22. Are union representatives badly paid? Evidence from France By Thomas Breda
  23. How much should you own? Cross-ownership and privatization By Rupayan Pal
  24. The Italian firms between crisis and the new globalization By Antonio Accetturo; Anna Giunta; Salvatore Rossi
  25. Competition and Discrimination : a not so Obvious Relationship. By Clémence Berson
  26. Towards Unrestricted Public Use Business Microdata: The Synthetic Longitudinal Business Database By Satkartar K. Kinney; Jerome P. Reiter; Arnold P. Reznek; Javier Miranda; Ron S. Jarmin; John M. Abowd
  27. Plant-Level Productivity and Imputation of Missing Data in the Census of Manufactures By T. Kirk White; Jerome P. Reiter; Amil Petrin
  28. Dancing with the Dragon Heads: Enforcement, Innovations and Efficiency of Contracts between Agricultural Processors and Farmers in China By Xiaohua Yu; David Abler; Chao Peng
  29. Spatial Differentiation in Industrial Dynamics. A Core-Periphery Analysis based on the Pavitt-Miozzo-Soete Taxonomy By Marco Capasso; Elena Cefis; Koen Frenken

  1. By: Leo Kaas (Department of Economics, University of Konstanz, Germany); Philipp Kircher (Department of Economics, London School of Economics and University of Pennsylvania, USA)
    Abstract: The introduction of firm size into labor search models raises the question how wages are set when average and marginal product differ. We develop and analyze an alternative to the existing bargaining framework: Firms compete for labor by publicly posting long-term contracts. In such a competitive search setting, firms achieve faster growth not only by posting more vacancies, but also by offering higher lifetime wages that attract more workers which allows to fill vacancies with higher probability, consistent with empirical regularities.The model also captures several other observations about firm size, job flows, and pay. In contrast to bargaining models, efficiency obtains on all margins of job creation and destruction, both with idiosyncratic and aggregate shocks. The planner solution allows a tractable characterization which is useful for computational applications.
    Keywords: Labor market search, multi-worker firms, job creation and job destruction
    JEL: E24 J64 L11
    Date: 2011–01–20
  2. By: BELLOU Andriana; KAYMAK Baris
    Abstract: This paper examines the cyclical behavior of hours and wages in a unique panel of 11 European countries, and documents signi?cant history dependence in wages. Workers who experience favorable market conditions during their tenure on the job, have higher wages, and work fewer labor hours. Unobserved differences in productivity, such as varying job quality, or match-speci?c productivity are not likely to explain this variation. The results instead point to the importance of contractual arrangements in wage determination. In economies with decentralized bargaining practices, such arrangements resemble self-enforcing insurance contracts with onesided commitment (by the employer). On the other hand, in countries with strong unions and centralized wage bargaining, wage behavior is better approximated by full-commitment insurance contracts.
    Keywords: Business Cycles; Wage Rigidity; Implicit Contracts
    JEL: E32 J31 J41
    Date: 2011–01
    Abstract: This paper extends the assessment of the impact of globalization on the bargaining power of employees by taking worker heterogeneity into account. In contrast with previous studies, two separate unions - representing low-skilled and high-skilled workers respectively - are considered. Using Belgian firm-level data, labour bargaining power and relative wage preference have been estimated by skill level. Subsequently regressing these estimates on a set of potential determinants, the bargaining power of low-skilled workers appears to fall with imports and offshoring, whereas the bargaining power of high-skilled workers remains unaffected. In addition, a significant effect of globalization is found on the relative preference of unions for wages over employment, indicating that the effect of globalization on the behaviour of labour unions is more encompassing than frequently assumed. A positive impact of R&D intensity on the bargaining power of low-skilled workers is the only effect related to technological change that is found to be statistically significant.
    Date: 2010–11
  4. By: Christophe Boucher (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, A.A.Advisors-QCG - ABN AMRO); Bertrand Maillet (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, A.A.Advisors-QCG - ABN AMRO, EIF - Europlace Institute of Finance)
    Abstract: Cet article s'intéresse aux fluctuations des cours boursiers aux Etats-Unis à différentes échelles temporelles. Nous examinons dans quelle mesure les variations à différentes fréquences du ratio cours-bénéfice s'expliquent par des révisions des bénéfices et/ou des rendements espérés. Nous montrons que les mouvement conjoncturels du ratio cours-bénéfice permettent de prévoir les rendements réels des actions. L'information contenue dans ces fluctuations apparaît même supérieure aux autres variables prédictives identifiées dans la littérature. Ces fluctuations conjoncturelles du ratio cours-bénéfice sont extraites à l'aide d'une analyse par ondelettes qui permet de décomposer une série temporelle à différents niveaux de résolution.
    Keywords: Cycles financiers, prévision, ondelettes.
    Date: 2011–01
  5. By: Marco Capasso; Elena Cefis
    Abstract: This paper discusses the effects of the existence of natural and/or exogenously imposed thresholds in firm size distributions, on estimations of the relation between firm size and variance in firm growth rates. We explain why the results in the literature on this relationship are not consistent. We argue that a natural threshold (0 number of employees or 0 total sales) and/or the existence of truncating thresholds in the dataset, can lead to upwardly biased estimations of the relation. We show the potential impact of the bias on simulated data, suggest a methodology to improve these estimations, and present an empirical analysis based on a comprehensive dataset of Dutch manufacturing and service firms. The only stable relation between firm size and growth rate variance is negative regardless of how we define the measure of firm growth.
    Keywords: firm growth, growth rates variance; truncation; thresholds
    JEL: L25 C21
    Date: 2010–11
  6. By: Marco Capasso; Elena Cefis; Sandro Sapio
    Abstract: This paper proposes a general framework to account for the divergent results in the empirical literature on the relation between firm sizes and growth rates, and on many results on growth autocorrelation. In particular, we provide an explanation for why traces of the LPE sometimes occur in conditional mean (i.e. OLS) autoregressions of firm size or firm growth, and in conditional median (i.e. least absolute deviation) autoregressions, but never in high or low quantile autoregressions. Based on an original empirical analysis of the population of manufacturing firms in the Netherlands between 1994 and 2004, we find that there is no peculiar role played by the median of the growth distribution, which is approximately equal to zero independent of firm size. In economic terms, this is equivalent to saying that most of the phenomena of interest for industrial dynamics can be studied without reference to the behaviour of the median firm, and many `average' relations retrieved in the literature, starting from the negative relation between average size and average growth, are driven by the few dynamic firms in the sample rather than the many stable ones. Moreover, we observe the tent shape of the empirical firm growth rate distribution and confirm the skewness-size and the variance-size relations. The identified quantile regression patterns - autoregressive coefficients above 1 for fast decliners, and below 1 for fast growers - can be obtained by assuming negative variance-size scaling and Laplace growth rate distributions, and are robust to a mild positive relationship between skewness and size. A relationship between quantile regression patterns and previous findings is therefore uncovered.
    Keywords: Firm growth; Law of Proportionate Effect; quantile regression; heterogeneity; variance-size scaling.
    JEL: L11 L25 L60
    Date: 2010–11
  7. By: James Burke; Gerald Epstein; Seung-Yun Oh
    Abstract: Burke, Oh, and Epstein focus on new measures of foreign outsourcing to track changes in the offshoring of manufacturing activity and to explore how offshoring along with other factors are related to the dramatic dislocation of workers in the US manufacturing sector in recent years. They present past studies that have explored the impact on workers of growing offshoring in manufacturing industries, introduce a new measure of imported inputs, and examine the growth of foreign outsourcing activity in manufacturing industries from 1987 to 2002. The authors present a counterfactual analysis as a way to show the loss of manufacturing industry employment resulting from rising foreign outsourcing between 1987 and 2005, and then explore the effect of foreign outsourcing on employment in US manufacturing industries for the period 1990 to 2005 using a regression analysis of industry data.
    Date: 2011
  8. By: Deepankar Basu; Duncan K. Foley
    Abstract: This paper investigates the changing relationship between employment and real output in the U.S. economy from 1948 to 2010 both at the aggregate level and at some major industry-grouping levels of disaggregation. Real output is conventionally measured as value added corrected for price inflation, but there are some industries in which no independent measure of value added is possible and existing statistics depend on imputing value added to equal income. Indexes of output that exclude these imputations are closely correlated with employment over the whole period, and remain more closely correlated during the current business cycle. This analysis offers insights into deeper structural changes that have taken place in the U.S. economy over the past few decades in a context marked by the following three factors: (i) the service (especially the financial) sector has grown in importance, (ii) the economy has become more globalized, and (iii) the policy orientation has increasingly become neoliberal. We demonstrate an economically significant reduction in the coefficient relating employment growth to output growth over the business cycles since 1985. Some of this change is due to sectoral shifts toward services, but an important part of it reflects a reduction in the coefficient for the goods and material value-adding sectors.
    Keywords: Okun's Law; Kaldor-Verdoorn Eect; Global restructuring; measurement of real output
    JEL: E12 E20
    Date: 2011
  9. By: Andrea Beccarini
    Abstract: The aim of this paper is to show that an option on an appropriate future may solve some market failures caused by asymmetric information. Some models related to the adverse selection, moral hazard and verification costs are analyzed and the performance of these options on futures is evaluated. The typical situation regards a consumer (or an investor) who wishes to discount his/her future income in order to finance his/her present consumption (investment); under asymmetric information this agent may incur in liquidity constraints (credit rationing), which is not the case when buying the option on a futures contract. This contract is constructed so that the (future) agent’s income is correlated with some futures contract (but this is private information) on which the option is issued. Some examples show that this is not a very stringent assumption.
    Keywords: Asymmetric information, credit rationing, options on futures
    JEL: D82 G14
    Date: 2011–02
  10. By: Böckerman, Petri; Bryson, Alex; Ilmakunnas, Pekka
    Abstract: Using nationally representative survey data for Finnish employees linked to register data on their wages and work histories we find wage effects of high involvement management (HIM) practices are generally positive and significant. However, employees with better wage and work histories are more likely to enter HIM jobs. The wage premium falls substantially having accounted for employees’ work histories suggesting that existing studies’ estimates are upwardly biased due to positive selection into HIM. Results do not differ significantly when using propensity score matching as opposed to standard regression techniques. The premium rises with the number of HIM practices and differs markedly across different types of HIM practice.
    Keywords: wages; high involvement management; high performance work system; incentive pay; training; team working; information sharing; propensity score matching
    JEL: M53 J31 J24 M12 M54 J33 M52 M50
    Date: 2011–02–02
  11. By: NUTAHARA Kengo; INABA Masaru
    Abstract: The premise of business cycle accounting (BCA) is that the prototype model with time-varying wedges can replicate allocations generated by a large class of models with frictions: the so called equivalence results. However, some recent papers show that the equivalence results do not hold in many models under the conventional VAR(1) assumption for wedges. In order to assess the empirical usefulness of BCA, we apply BCA to a widely used medium-scale DSGE economy, where the equivalence results do not hold. Based on our experiments, the difference between the measured and true wedges is quantitatively quite small and BCA can capture the business cycle implications of wedges almost correctly.
    Date: 2011–02
  12. By: Jesus Felipe; Utsav Kumar
    Abstract: Current discussions about the need to reduce unit labor costs (especially through a significant reduction in nominal wages) in some countries of the eurozone (in particular, Greece, Ireland, Italy, Portugal, and Spain) to exit the crisis may not be a panacea. First, historically, there is no relationship between the growth of unit labor costs and the growth of output. This is a well-established empirical result, known in the literature as Kaldor's paradox. Second, construction of unit labor costs using aggregate data (standard practice) is potentially misleading. Unit labor costs calculated with aggregate data are not just a weighted average of the firms' unit labor costs. Third, aggregate unit labor costs reflect the distribution of income between wages and profits. This has implications for aggregate demand that have been neglected. Of the 12 countries studied, the labor share increased in one (Greece), declined in nine, and remained constant in two. We speculate that this is the result of the nontradable sectors gaining share in the overall economy. Also, we construct a measure of competitiveness called unit capital costs as the ratio of the nominal profit rate to capital productivity. This has increased in all 12 countries. We conclude that a large reduction in nominal wages will not solve the problem that some countries of the eurozone face. If this is done, firms should also acknowledge that unit capital costs have increased significantly and thus also share the adjustment cost. Barring solutions such as an exit from the euro, the solution is to allow fiscal policy to play a larger role in the eurozone, and to make efforts to upgrade the export basket to improve competitiveness with more advanced countries. This is a long-term solution that will not be painless, but one that does not require a reduction in nominal wages.
    Keywords: Competitiveness; Eurozone; Income Distribution; Unit Labor Costs
    JEL: D31 D33 E25 J30
    Date: 2011–02
  13. By: Yuri Biondi (PREG - Pole de recherche en économie et gestion - CNRS : UMR7176 - Polytechnique - X)
    Abstract: When international accounting standards were renamed to become international financial reporting standards, this seemed to imply that accounting no longer needed to exist, but rather had to be reconsidered as a part of financial communication and advertising. Does traditional accountability no longer matter? Betrayed investors and globalized stakeholders would dissent. A difference of nature continues to exist between fair values disclosed by managers and certified by auditors, and the actual performance generated by the enterprise entity through time, space, and interaction. In a world shaped by complex organizations facing unfolding changes, hazard and limited knowledge, the quest for fundamental principles of accounting is not academic. Accounting principles constitute a primary way that the creation and allocation of business incomes is governed; that is, fairly managed and regulated in the public interest, having respect to “other people interests.” This article adopts a dualistic posture that opposes the accounting conceptual frameworks based on fair value (market basis) and historical cost and revenue (process basis). The fundamental premises about the underlying economics of the enterprise entity are discussed, including the representation of the business and the concepts of asset and liability. References are made to the case of accounting for intangibles, and to the distinction between equities and liabilities. The cost and revenue accounting perspective is then defended in terms of accountability, but also from the informational viewpoint: historical accounting information plays a special role as a lighthouse in the dynamic and strategic setting of the Share Exchange. In particular, two refinements of the historical cost (and revenue) accounting model are suggested. The first one regards the treatment of earned revenues from continuing operations, and the second, the recognition of shareholders' equity interest computed on the actual funds provided in the past, coupled with the distinction between shareholders' equity and entity equity.
    Keywords: accounting theory; international financial reporting standards (IFRS); intangibles; conceptual framework; accounting principles and rules; accounting standards; marked-to-market; fair value; marked-to-models; accounting regulation
    Date: 2011
  14. By: Thomas Piketty (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: This paper attempts to document and account for the long run evolution of inheritance. We find that in a country like France the annual flow of inheritance was about 20%-25% of national income between 1820 and 1910, down to less than 5% in 1950, and back up to about 15% by 2010. A simple theoretical model of wealth accumulation, growth and inheritance can fully account for the observed U-shaped pattern and levels. Using this model, we find that under plausible assumptions the annual bequest flow might reach about 20%-25% of national income by 2050. This corresponds to a capitalized bequest share in total wealth accumulation well above 100%. Our findings illustrate the fact that when the growth rate g is small, and when the rate of return to private wealth r is permanently and substantially larger than the growth rate (say, r=4%-5% vs. g=1%-2%), which was the case in the 19th century and early 20th century and is likely to happen again in the 21st century, then past wealth and inheritance are bound to play a key role for aggregate wealth accumulation and the structure of lifetime inequality. Contrarily to a widely spread view, modern economic growth did not kill inheritance.
    Keywords: inheritance ; bequest ; wealth ; capital
    Date: 2010–05
  15. By: Salvatore Piccolo (University of Naples "Federico II" and CSEF)
    Abstract: I study the rationale for information sharing in a model where two principals, which exert production externalities one on another, endogenously decide whether to exchange information about their exclusive agents. I show that one novel effect shapes communication decisions when agents are privately informed about production costs. This effect is absent under complete information and it turns out to be of first-order magnitude relative to those emerging in such benchmark. Roughly, what matters is how sharing information impacts contracting relationships within opponent organizations, and therefore its effect on equilibrium outputs. Information exchange induces strategies to be correlated via the distortions channel. Because of those distortions, the equilibrium value of communication depends on the interplay between the nature of upstream externalities and the sign of cost correlation. When upstream externalities and cost correlation have the same sign, there exists a unique symmetric equilibrium with no communication. By contrast, when upstream externalities and cost correlation have opposite signs there exists a unique symmetric equilibrium where both principals share information. I also show that, unlike in previous models, under asymmetric information principals might run into a prisoner dilemma when there is no communication at equilibrium. Information sharing is also shown to have an unambiguous negative effect on rents. Moreover, there exists a system of transfers such that the equilibrium outcome obtained when both principals share information is collusion-proof.
    Keywords: Adverse selection, communication, information sharing, vertical hierarchies
    Date: 2011–02–09
  16. By: Leonardo Felli (London School of Economics, CEPR); Johannes Koenen (University of Bonn); Konrad O. Stahl (University of Mannheim, CEPR)
    Abstract: We explore the determinants and effects of trust relationships between upstream suppliers and downstream producers. Using unique survey data on individual supplier-buyer relationships in the German automotive industry, we show, by means of different measures of supplier-buyertrust, tha thigher levels of trust mitigate relationship-specific underinvestment in a classical hold-up situation. Moreover, contrary to the extant literature, we show that higher levels of supplier’s trust are reflected in the buyer’s choice of a more competitive procurement strategy among potential suppliers.
    Keywords: Trust, Hold-up problem, Competition, Specific investment, Suppliers, Car manufacturers, German automotive industry
    JEL: D86 L22 L62
    Date: 2011–02
  17. By: Rupayan Pal (Indira Gandhi Institute of Development Research); Bibhas Saha (University of East Anglia)
    Abstract: We examine whether the outcome of bargaining over wage and employment between an incumbent firm and a union remains efficient under entry threat. The workers\' reservation wage is not known to the entrant, and entry is profitable only against the high reservation wage. The entrant observes the pre-entry price, but not necessarily the wage agreements. When wage is not observed, contracts feature over-employment. Under separating equilibrium the low type is over-employed, and under pooling equilibrium the high type is over-employed. But when wage is observed, pooling equilibrium may not always exist, and separating equilibrium does not involve any inefficiency.
    Keywords: Efficient Bargaining, Entry Threat, Signalling, Inefficiency
    JEL: J51 L12 D43 J58
    Date: 2010–09
  18. By: Thomas Breda (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: In this paper, I study the wage premium associated with firm-level union recognition in France and show that this premium is due to a rent-extraction phenomenon. Using a large matched employer-employee dataset from a 2002 survey in France, I first estimate a series of wage determination models that control for individual and firm-level characteristics. I find that union recognition is associated with a 2-3% wage premium. To show that this premium results from a non-competitive phenomenon, I construct a bargaining model and estimate it empirically using a smaller but very detailed matched employer-employee dataset for 2004. The model predicts in particular that the wage premium obtained by unions should increase both with their bargaining power and with the amount of quasi-rents per worker available in the firms they organize. These predictions are validated empirically when I use the firms' market share as a proxy for their quasi-rents and the percentage of unionized as a proxy for the unions' bargaining power. All the results remain valid when I control for the firm-level workers' average productivity.
    Keywords: union wage premium ; rent sharing ; bargaining
    Date: 2010–09
  19. By: Andrea Bassanini (ERMES - Equipe de recherche sur les marches, l'emploi et la simulation - CNRS : UMR7017 - Université Panthéon-Assas - Paris II, IZA - Institute for the Study of Labor - IZA, OECD - OECD); Thomas Breda (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Eve Caroli (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, EconomiX - CNRS : UMR7166 - Université de Paris X - Nanterre); Antoine Rebérioux (EconomiX - CNRS : UMR7166 - Université de Paris X - Nanterre)
    Abstract: We study the compensation package offered by family firms. Using matched employer-employee data for a sample of French establishments in the 2000s, we first show that family firms pay on average lower wages to their workers. This family/non-family wage gap is robust to controlling for several establishment and individual characteristics and does not appear to be due either to the differential of productivity between family and non-family firms or to unobserved establishment and individual heterogeneity. Moreover, it is relatively homogeneous across workers with different gender, educational attainment and age. By contrast, the family/non-family wage gap is found to be larger for clerks and blue-collar workers than for managers, supervisors and technicians, for whom we find no significant wage gap. As a second step, we investigate why workers stay in family firms while being paid less. We show that these firms offer greater job security. We find evidence that the rate of dismissal is lower in family than in non-family firms. We also show that family firms rely less on dismissals and more on hiring reductions when they downsize. These results are confirmed by subjective data: the perceived risk of dismissal is significantly lower in family firms than in non-family ones. We speculate that our results can be explained either by a compensating wage differential story or by a model in which workers sort in different firms according to their preferences.
    Keywords: family firms ; wages ; job security ; linked employer-employee data
    Date: 2010–11
  20. By: Ann E. Harrison; Leslie A. Martin; Shanthi Nataraj
    Abstract: The new trade theory emphasizes the role of market-share reallocations across firms (ÒstealingÓ) in driving productivity growth, while the older literature focused on average productivity improvements (ÒlearningÓ). The authors use comprehensive, firm-level data from IndiaÕs organized manufacturing sector to show that market-share reallocations did play an important role in aggregate productivity gains immediately following the start of IndiaÕs trade reforms in 1991. However, aggregate productivity gains during the overall 20-year period from 1985 to 2004 were driven largely by improvements in average productivity. By exploiting the variation in reforms across industries, they document that the average productivity increases can be attributed to IndiaÕs trade liberalization and FDI reforms. Finally, they construct a panel dataset that allows them to track firms during this time period; their results suggest that while within-firm productivity improvements were important, much of the increase in average productivity also occurred because of firm entry and exit.
    JEL: F13 F14 F23
    Date: 2011–01
  21. By: Takanori Adachi; Noriaki Matsushima
    Abstract: This paper studies the relationship between horizontal product differentiation and the welfare effects of third-degree price discrimination in oligopoly. By deriving linear demand from a representative consumer's utility and focusing on the symmetric equilibrium of a pricing game, we characterize the conditions relating to such demand properties as substitutability and complementarity for price discrimination to improve social welfare. In particular, we show that price discrimination can improve social welfare if firms' brands are substitutes in a market where the discriminatory price is higher and complements in one where it is lower, but welfare never improves in the reverse situation. We verify, however, that consumer surplus is never improved by price discrimination; welfare improvement by price discrimination is solely due to an increase in the firms' profits. This means that there is no chance that firms suffer from a "prisoners' dilemma," that is, firms are better off by switching from uniform pricing to price discrimination.
    Date: 2011–01
  22. By: Thomas Breda (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: In this paper, I study the wage differential between firms' union representatives and their coworkers using a linked employer-employee dataset. On the employee side of the data, the surveyed workers are asked if they are unionized but we do not know which unionized workers are union representatives. On the employer side of the data, I have access to the number of union representatives and unionized workers in each firm. I use this information to construct an indicator of the firm-level probability for a randomly drawn unionized worker to be union representative. This indicator is then used to split the directly observable wage differential between unionized and non-unionized workers into two differentials: one between union representatives and non-unionized workers and another one between unionized workers who are not a union representative and non-unionized workers. Estimates that control for individual characteristics and firm-level fixed effects show that union representatives' wages are 10% lower than those of other unionized workers and non-unionized workers. Additional tests suggest that this gap can be understood as the result of a non-cooperative strategic interaction between employers and union representatives.
    Keywords: unions ; wage differentials ; representative ; probability-based estimator
    Date: 2010–09
  23. By: Rupayan Pal (Indira Gandhi Institute of Development Research)
    Abstract: This paper examines the interdependence of cross-ownership and level of privatization in case of differentiated products mixed duopoly. It shows that it is optimal for the private firm not to own any (own the entire) portion of the privatized share of its rival firm, if the level of privatization is very low (very high). In equilibrium, the government makes sure that cross-ownership is not attracted. However, in most of the situations, the possibility of cross-ownership adversely affects the prospect of privatization. Results of this paper have strong implications to antitrust regulations and divestment policies.
    Keywords: Cross-ownership, mixed duopoly, partial privatization, product differentiation
    JEL: D43 L13 H42 L32
    Date: 2010–09
  24. By: Antonio Accetturo (Banca d'Italia); Anna Giunta (University of Rome - Roma tre); Salvatore Rossi (Banca d'Italia)
    Abstract: This paper analyzes the characteristics of Italian firms involved in global value chains (“intermediate” firms) by using the Bank of Italy survey on industrial companies. Intermediate firms show, on average, worse features than “final” firms: smaller size, lower share of white collars, lower productivity and export propensity. However we observe a strong heterogeneity, depending on the ability (and modalities) to upgrade along the value chains. There are wide differences between upgrading and non-upgrading (marginal) intermediate firms in terms of size, efficiency, human capital endowment and international competitiveness. During the 2008-09 crisis, marginal intermediate firms performed definitely worse; moreover, facing a collapse in world trade, firms that were upgrading by expanding their international linkages were more severely hit than those that were differentiating their internal functions.
    Keywords: fragmentation, offshoring, upgrading
    JEL: D23 L23 L24
    Date: 2011–01
  25. By: Clémence Berson (Centre d'Economie de la Sorbonne)
    Abstract: Discrimination models have diffivulties to study discrimination without assuming that prejudiced firms are more productive and results lead to workers' segregation. In this article, the model uses oligopsony and heterogeneity of workers' preferences to obtain a persistent discrimination. Firms hire both thpes of workers and pay a lower wage to the workers discriminated against whatever their taste for discrimination. A single prejudiced firm leads to a substancial wage gap in all firms. Consequently, the existence of discrimination allows a non-zero profit for unprejudiced firms and they have also no incentives to push out prejudiced firms. Moreover, the wage gap is affected by firms' spread out as well as by the number of prejudiced firms in the market. Government policies decrease the impact of taste for discrimination on wages but governments are not interested in.
    Keywords: Discrimination, oligopsony, wage gap.
    JEL: J42 J71 L13
    Date: 2011–01
  26. By: Satkartar K. Kinney; Jerome P. Reiter; Arnold P. Reznek; Javier Miranda; Ron S. Jarmin; John M. Abowd
    Abstract: In most countries, national statistical agencies do not release establishment-level business microdata, because doing so represents too large a risk to establishments\' confidentiality. One approach with the potential for overcoming these risks is to release synthetic data; that is, the released establishment data are simulated from statistical models designed to mimic the distributions of the underlying real microdata. In this article, we describe an application of this strategy to create a public use file for the Longitudinal Business Database, an annual economic census of establishments in the United States comprising more than 20 million records dating back to 1976. The U.S. Bureau of the Census and the Internal Revenue Service recently approved the release of these synthetic microdata for public use, making the synthetic Longitudinal Business Database the first-ever business microdata set publicly released in the United States. We describe how we created the synthetic data, evaluated analytical validity, and assessed disclosure risk.
    Date: 2011–02
  27. By: T. Kirk White; Jerome P. Reiter; Amil Petrin
    Abstract: In the U.S. Census of Manufactures, the Census Bureau imputes missing values using a combination of mean imputation, ratio imputation, and conditional mean imputation. It is wellknown that imputations based on these methods can result in underestimation of variability and potential bias in multivariate inferences. We show that this appears to be the case for the existing imputations in the Census of Manufactures. We then present an alternative strategy for handling the missing data based on multiple imputation. Specifically, we impute missing values via sequences of classification and regression trees, which offer a computationally straightforward and flexible approach for semi-automatic, large-scale multiple imputation. We also present an approach to evaluating these imputations based on posterior predictive checks. We use the multiple imputations, and the imputations currently employed by the Census Bureau, to estimate production function parameters and productivity dispersions. The results suggest that the two approaches provide quite different answers about productivity.
    Date: 2011–01
  28. By: Xiaohua Yu (Georg-August-University Göttingen); David Abler (The Penn State University); Chao Peng (Renmin University of China)
    Abstract: Contractual breaches are very prevalent in developing countries, such as in China. In order to prevent breaches of contracts, the contractual designs between farmers and agricultural processors (Dragon-Heads Firms) in China, innovate in two ways: organizational innovations and contractual innovations. In particular, contractual innovations are that initial simple price-quantity contracts involve into complex cooperation contracts. Using the data for over 500 State Key Processors in 2003 from Chinese Ministry of Agriculture, we construct econometric models to study contract choices, contract intensity, and the impacts on sales and profits for agricultural processors in China. The results indicate that capital and the number of contracted farmers are endogenous in contract choices. Processors are more likely to use cooperation contracts compared with price-quantity contracts as the number of contracted farmers increases, because then the costs of coordinating, monitoring and enforcing price-quantity contracts may increase dramatically in the case of price-quantity contracts. On the other hand, contract types are not important for the number of contracted farmers, the intensity of contracts, sales and profits for processors, because the purposes of different contract types are related with prevention of breaching contracts. By the way, the results indicate that the elasticity of profits with respect to capital is 0.52, which implies that the returns to investing in the food processing industry are relatively high in China.
    Date: 2011–02–08
  29. By: Marco Capasso; Elena Cefis; Koen Frenken
    Abstract: We compare the industrial dynamics in the core, semi-periphery and periphery in The Netherlands in terms of firm entry-exit, size, growth and sectoral location patterns. The contribution of our work is to provide the first comprehensive study on spatial differentiation in industrial dynamics for all firm sizes and all sectors, including services. We find that at the aggregate level the spatial pattern of industrial dynamics is consistent with the spatial product lifecycle thesis: entry and exit rates are highest in the core and lowest in the periphery, while the share of persistently growing firms is higher in the periphery than in the core. Disaggregating the analysis to the sectoral level following the Pavitt-Miozzo-Soete taxonomy, findings are less robust. Finally, sectoral location patterns are largely consistent with the spatial product lifecycle model: Fordist sectors are over-represented in the periphery, while sectors associated with the ICT paradigm are over-represented in the core, with the notable exception of science-based manufacturing.
    Keywords: Entry, exit, spatial product lifecycle, Fordist paradigm, ICT paradigm
    JEL: L25 L26 L60 L80 O18 O33 R10
    Date: 2010–11

This nep-bec issue is ©2011 by Christian Calmes. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.