nep-bec New Economics Papers
on Business Economics
Issue of 2011‒05‒30
thirty papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. Wage Adjustment and Productivity Shocks By Carlsson, Mikael; Messina, Julián; Nordström Skans, Oskar
  2. Low-Quality Leadership in a Vertically Differentiated Duopoly with Cournot Competition By L. Lambertini; A. Tampieri
  3. The rise of shadow banking and the hidden benefits of diversification By Christian Calmès; Raymond Théoret
  4. Strategic delegation and collusion: Do incentive schemes matter? By Jean-Daniel Guigou; Patrick De Lamirande; Bruno Lovat
  5. Quality distortions in vertical relations By Baake, Pio; von Schlippenbach, Vanessa
  6. Are the Seeds of Bad Governance Sown in Good Times? By Antoinette Schoar; Ebonya L. Washington
  7. Worker information and firm disclosure: Analysis of French workplace data By Perraudin, Corinne; Petit, Héloïse; Rebérioux, Antoine
  8. Labor mobility and entrepreneurship: Who do new firms employ? By Nyström, Kristina
  9. Technological Knowledge and Offshore Outsourcing: Evidence from Japanese firm-level data By ITO Banri; TOMIURA Eiichi; WAKASUGI Ryuhei
  10. Wage bargaining and quality competition By Bhattacharyya, Ranajoy; Saha, Bibhas
  11. Cultural Values, CEO Risk Aversion and Corporate Takeovers By Thorsten Lehnert; Bart Frijn; Aaron Gilbert; Alireza Tourani-Rad
  12. When do inventories destabilize the economy? an analytical approach to (S,s) policies By Pengfei Wang; Yi Wen; Zhiwei Xu
  13. Optimal Contracts with Enforcement Risk By Gennaioli, Nicola
  14. On the amplification role of collateral constraints By Caterina Mendicino
  15. OPEC’s oil exporting strategy and macroeconomic (in)stability By Luís Aguiar-Conraria; Yi Wen
  16. Endogenous market structures and labour market dynamics By Colciago , Andrea; Rossi, Lorenza
  17. Giving Voice to Employees and Spreading Information within the Firm: the Manner Matters By Enzo Valentini
  18. How Do Business and Financial Cycles Interact? By Claessens, Stijn; Kose, Ayhan; Terrones, Marco E
  19. Does timing of decisions in a mixed duopoly matter? By Balogh, Tamás L.; Tasnádi, Attila
  20. The World Has More Than Two Countries: Implications of Multi- Country International Real Business Cycle Models By Hirokazu Ishise
  21. Corporate values guiding the world's largest family-owned businesses: A comparison with non-family firms By Ceja, Lucia; Tapies, Josep
  22. Size Matters: Multi-plant operation and the separation of corporate headquarters By OKUBO Toshihiro; TOMIURA Eiichi
  23. The effects of the block exemption regulation reform on the Swiss car market By Leheyda, Nina; Beschorner, Patrick; Hüschelrath, Kai
  24. Private equity premium in a general equilibrium model of uninsurable investment risk By Francisco Covas; Shigeru Fujita
  25. Real-Financial Linkages in the Canadian Economy: An Input-Output Approach By Leung, Danny; Secrieru, Oana
  26. Decentralization, Communication, and the Origins of Fluctuations By George-Marios Angeletos; Jennifer La'O
  27. Dealing with the Inventory Risk By Olivier Gu\'eant; Charles-Albert Lehalle; Joaquin Fernandez Tapia
  28. High-Technology Entrepreneurship in Silicon Valley By Fairlie, Robert W.; Chatterji, Aaron K.
  29. Spot wages, job changes, and the cycle By Hart, Robert A.; Roberts, J. Elizabeth
  30. Does Domestic Offshoring Precede International Offshoring? Industry-level Evidence By Franz-Josef Bade; Eckhardt Bode; Eleonora Cutrini

  1. By: Carlsson, Mikael (Sveriges Riksbank); Messina, Julián (World Bank); Nordström Skans, Oskar (IFAU)
    Abstract: We study how workers' wages respond to TFP-driven innovations in firms' labor productivity. Using unique data with highly reliable firm-level output prices and quantities in the manufacturing sector in Sweden, we are able to derive measures of physical (as opposed to revenue) TFP to instrument labor productivity in the wage equations. We find that the reaction of wages to sectoral labor productivity is almost three times larger than the response to pure idiosyncratic (firm-level) shocks, a result which crucially hinges on the use of physical TFP as an instrument. These results are all robust to a number of empirical specifications, including models accounting for selection on both the demand and supply side through worker-firm (match) fixed effects. Further results suggest that technological progress at the firm level has negligible effects on the firm-level composition of employees.
    Keywords: matched employer-employee data, sorting, wage, labor productivity, TFP
    JEL: J31 J23 J33
    Date: 2011–05
  2. By: L. Lambertini; A. Tampieri
    Abstract: We model a vertically differentiated duopoly with quantity-setting firms as an extended game in which firms noncooperatively choose the timing of moves at the quality stage, to show that at the subgame perfect equilibrium sequential play obtains, with the low-quality firm taking the leader's role.
    JEL: C73 L13
    Date: 2011–05
  3. By: Christian Calmès (Chaire d'information financière et organisationnelle ESG-UQAM, Laboratory for Research in Statistics and Probability, Université du Québec (Outaouais)); Raymond Théoret (Chaire d'information financière et organisationnelle ESG-UQAM, Université du Québec (Montréal), Université du Québec (Outaouais))
    Abstract: The diversification benefits associated with banks off-balance-sheet activities (OBS), and particularly non- traditional activities, is a question much debated in the literature. These activities, related to the emergence of shadow banking, greatly contribute to the volatility of bank operating revenues, but their impact on accounting returns is less clear (Stiroh and Rumble 2006). In this paper, we use a Canadian dataset to revisit the risk-return trade-off associated with banks OBS activities and study the evolution of the endo-geneity of banks decision to expand their market-oriented business lines. Consistent with the changing mix of noninterest income OBS activities generate, we identify a structural break in 1997 which coincides with an increased impact of endogeneity on banks returns, and which also leads to an increased return on assets (ROA) and a surge in banking risk. We trace the sources of the greater volatility of noninterest income to a tighter cointegrating relationship between noninterest income and stock market indices after 1997. Intro-ducing a new, robust estimation method based on a modification of the Hausman procedure, we find that neglecting endogeneity greatly underestimates the positive impact of shadow banking on bank accounting returns, even when the subprime crisis is considered. Our main results suggest that the influence of market-based activities on the risk-return trade-off might be larger than what was previously thought.
    Keywords: Noninterest income; Hausman test; Structural break; Shadow Banking; Endogeneity.
    JEL: C32 G20 G21
    Date: 2011–04–11
  4. By: Jean-Daniel Guigou (Luxembourg School of Finance, University of Luxembourg); Patrick De Lamirande (Shannon School of Business, Canada); Bruno Lovat (University of Nancy)
    Abstract: This paper introduces delegation decisions and contracts based on relative performance evaluation (RPE) in the analysis of cartel stability. We follow the approach developed by Lambertini and Trombetta [12], where manager's compensation combines pro_ts and sales (CPS) instead. Some of our results are similar while others are distinct from those of Lambertini and Trombetta. In particular, we show that collusion under RPE is always harder to sustain than under CPS.
    Keywords: Cartel Stability, Delegation, Relative Performance Evaluation
    JEL: D43 L13 L21
    Date: 2011
  5. By: Baake, Pio; von Schlippenbach, Vanessa
    Abstract: This paper examines how delivery tariffs and private quality standards are determined in vertical relations that are subject to asymmetric information. We consider an infinitely repeated game where an upstream firm sells a product to a downstream firm. In each period, the firms negotiate a delivery contract comprising the quality of the good as well as a nonlinear tariff. Assuming asymmetric information about the actual quality of the product and focusing on incentive compatible contracts, we show that from the firms' perspective delivery contracts lead to more efficient contracts and thus higher overall profits the lower the firms' outside options, i.e. the higher their mutual dependency. Buyer power driven by a reduced outside option of the upstream firm enhances the efficiency of vertical relations, while buyer power due to an improved outside option of the downstream firm implies less effcient outcomes. --
    Keywords: Quality Uncertainty,Private Standards,Vertical Relations,Buyer Power
    JEL: D82 L14 L15
    Date: 2011
  6. By: Antoinette Schoar; Ebonya L. Washington
    Abstract: This paper examines the extent to which the corporate governance structure of a firm arises endogenously in response to its performance. We demonstrate that following periods of abnormally good performance managers are more likely to call special meetings and to propose and pass governance measures that are contrary to shareholder interests (based on IRRC classification). These results are driven primarily by firms that are characterized as having poor governance according to either the GIM Index or the proportion of activist shareholders. Following these special meeting we find that next quarter performance of the firm is negative. Our results are consistent with an interpretation of shareholder inattention to governance following good firm performance or a desire to reward management for good past performance. Overall our evidence seems more consistent with the former interpretation.
    JEL: G34
    Date: 2011–05
  7. By: Perraudin, Corinne; Petit, Héloïse; Rebérioux, Antoine
    Abstract: Information disclosure requirements significantly increased in French listed companies in the early 2000s, converging toward the U.S./U.K. stock market standards. Following the burgeoning literature on relations between corporate governance and labor, we investigate the consequences of this process regarding worker information: does more information for shareholders mean more information for workers? We take advantage of a French (representative) establishment survey that generates linked ‘employer–employee representative’ information at two points in time, 1998 and 2004. Our results strongly suggest that worker information has improved in listed companies but not in private ones, as an externality of the financialization process.
    Keywords: worker information; corporate governance; firm disclosure; workplace data
    JEL: J53 G39 C21
    Date: 2011–05
  8. By: Nyström, Kristina (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)
    Abstract: Entrepreneurship is often claimed to be important for generating employment. However, the empirical evidence on the relationship between entrepreneurship is not always convincing. Most of the studies that analyse the relationship between new firm formation and employment growth perform their analysis on cross-country or regional data. At the micro-level, we still know little about the labour dynamics and re-allocation effects induced by new firm formation. Which role do new firms play regarding labour reallocation? This paper intends to explore the individual and firm characteristics for employees in new Swedish firms. Do new firm start-ups absorb outsiders in the labour market or do they recruit employees from already incumbent firms? The paper use unique matched firm-employees dataset that makes it possible to link new firm formation and information about the individuals employed in these new firms. The empirical results indicate that the individual and firm characteristics associated with employees differ between new and incumbent firms. In particular, the share of immigrants, recently graduated employees and people entering the labor market is slightly higher in new firms. Hence, new firms might play a more important role for outsiders in the labor market.
    Keywords: Entrepreneurship; labour mobility; employment
    JEL: L21 L26 L62
    Date: 2011–05–24
  9. By: ITO Banri; TOMIURA Eiichi; WAKASUGI Ryuhei
    Abstract: This paper empirically examines the effects of knowledge capital on offshore outsourcing choices based on original survey data of Japanese firms. The results of a multinomial logit model demonstrate that firms' offshoring is positively correlated with knowledge capital measured by their R&D activities or patenting, even after controlling for other firm characteristics including productivity, capital intensity, firm age, and export status. Further, knowledge-intensive firms are more inclined to choose foreign insourcing rather than outsourcing, suggesting that firms tend to internalize their technological knowledge in offshore sourcing.
    Date: 2011–05
  10. By: Bhattacharyya, Ranajoy; Saha, Bibhas
    Abstract: In a standard model of vertical differentiation, wage is assumed to determine the quality. Wage is also subject to bargaining. Increased bargaining power of the worker in the low quality firm reduces quality differential, and increases price competitiveness. The Opposite happens from a similar change in the high quality firm.
    Keywords: Wage bargaining; Quality competition
    JEL: C7
    Date: 2011–05–20
  11. By: Thorsten Lehnert (Luxembourg School of Finance, University of Luxembourg); Bart Frijn (AUT University, NZ); Aaron Gilbert; Alireza Tourani-Rad
    Abstract: We explicitly examine the role of culture in corporate takeover decisions. Prior research suggests that the risk aversion of CEOs affects their takeover decisions. In this paper, we argue that managerial risk aversion at a national level is a cultural trait and affects the net synergies. CEOs of firms located in countries with higher level of risk aversion, measured by Hofstede’s (2001) uncertainty avoidance score, show less takeover activity, engage more in diversifying takeovers and require higher premiums on takeovers. Required net synergies are higher for smaller firms, relatively larger deals, and for firms that engage in more takeover activity.
    Keywords: Financial Decision Making; Risk Aversion; Synergies; Culture; Takeovers.
    JEL: D81 G34 M14
    Date: 2011
  12. By: Pengfei Wang; Yi Wen; Zhiwei Xu
    Abstract: Conventional wisdom has it that inventory investment destabilizes the economy because it is procyclical to sales. Khan and Thomas (2007) show that the conventional wisdom is wrong in a general equilibrium (S,s) model with capital. We argue that their finding is not robust—the conventional wisdom can still hold in general equilibrium if firms can adjust output by varying the capacity utilization rate. Our result also holds true if there exist investment adjustment costs. Unlike the existing (S,s) inventory literature that relies on the Krusell-Smith (1998) numerical solution methods, we characterize (S,s) inventory policies in closed form despite the large state space in our general equilibrium model. Standard log-linearization methods can be used to solve the model and generate impulse response functions.>
    Keywords: Inventories ; Business cycles
    Date: 2011
  13. By: Gennaioli, Nicola
    Abstract: I build a model where potentially biased judges verify complex states by interpreting an imperfect signal whose noise captures factual ambiguities. In a sales and a financial transaction I show that judicial biases amplify and distort factual ambiguities, creating enforcement risk. To insure against such risk, parties write simple non-contingent contracts that optimally protect the party that is most vulnerable to judicial error. These results shed light on the empirical association between law and finance and rationalize salient features of real world enforcement regimes.
    Keywords: imperfect judicial enforcement; optimal contracts
    JEL: K00
    Date: 2011–05
  14. By: Caterina Mendicino
    Abstract: How important are collateral constraints for the propagation and amplification of shocks? To address this question, we analyze a stochastic general equilibrium version of the model by Kiyotaki and Moore (JPE, 1997) in which all agents face concave production and utility functions and are generally identical, except for the subjective discount factor. We document that the existence of costly debt enforcement plays an important role in the endogenous amplification generated by the model. Limiting the amount of borrowing up to a reasonable fraction of the value of the collateral asset, makes the amplification generated by collateral constraints sizable and significantly larger than what we observe either in the representative agent version of the model, or in the version of the model where inefficiencies in the liquidation of the collateralized asset are neglected.
    JEL: E20 E3 E21
    Date: 2011
  15. By: Luís Aguiar-Conraria; Yi Wen
    Abstract: Aguiar-Conraria and Wen (2008) argued that dependence on foreign oil raises the likelihood of equilibrium indeterminacy (economic instability) for oil importing countries. We argue that this relation is more subtle. The endogenous choices of prices and quantities by a cartel of oil exporters, such as the OPEC, can affect the directions of the changes in the likelihood of equilibrium indeterminacy. We show that fluctuations driven by self-fulfilling expectations under oil shocks are easier to occur if the cartel sets the price of oil, but the result is reversed if the cartel sets the quantity of production. These results offer a potentially interesting explanation for the decline in economic volatility (i.e., the Great Moderation) in oil importing countries since the mid-1980s when the OPEC cartel changed its market strategies from setting prices to setting quantities, despite the fact that oil prices are far more volatile today than they were 30 years ago.>
    Keywords: Organization of Petroleum Exporting Countries ; Petroleum industry and trade
    Date: 2011
  16. By: Colciago , Andrea (University of Milano-Bicocca, Department of Economics); Rossi, Lorenza (University of Pavia, Department of Economics)
    Abstract: We propose a flexible prices model where endogenous market structures and search and matching frictions in the labour market interact endogenously. The interplay between firms’ endogenous entry, strategic interactions among producers and labour market frictions represents a strong amplification channel for technology shocks on labour market variables and helps in addressing the unemployment- volatility puzzle. Consistently with US evidence, new firms create a large fraction of new jobs and grow faster than more mature firms, net entry of firms is procyclical and the price mark-up is countercyclical.
    Keywords: endogenous market structures; firms’ entry; search and matching; friction
    JEL: E24 E32 L11
    Date: 2011–05–19
  17. By: Enzo Valentini (University of Macerata)
    Abstract: <div style="text-align: justify;">Economists are paying increasing attention to “factors” in job satisfaction. Job satisfaction can affect productivity, effort, absenteeism, and quits. This paper analyzes data from the “Working in Britain, 2000” questionnaire; the results confirm the effects of individual features on job satisfaction, as highlighted in previous studies. The analysis shows that job satisfaction can be enhanced by spreading information within the organization and by giving voice to employees, but the management must choose communication strategies perceived as reliable by the employees.</div>
    Keywords: Human Resource Management,Job satisfaction,gift exchange,employees’ voice,procedural utility
    JEL: J28 J53 D23
    Date: 2011–05
  18. By: Claessens, Stijn; Kose, Ayhan; Terrones, Marco E
    Abstract: This paper analyzes the interactions between business and financial cycles using an extensive database of over 200 business and 700 financial cycles in 44 countries for the period 1960:1-2007:4. Our results suggest that there are strong linkages between different phases of business and financial cycles. In particular, recessions associated with financial disruption episodes, notably house price busts, tend to be longer and deeper than other recessions. Conversely, recoveries associated with rapid growth in credit and house prices tend to be stronger. These findings emphasize the importance of developments in credit and housing markets for the real economy.
    Keywords: asset busts; booms; credit crunches; financial crises; recessions; recoveries
    JEL: E32 E44 E51 F42
    Date: 2011–05
  19. By: Balogh, Tamás L.; Tasnádi, Attila
    Abstract: We determine the endogenous order of moves in a mixed price-setting duopoly. In contrast to the existing literature on mixed oligopolies we establish the payoff equivalence of the games with an exogenously given order of moves. Hence, it does not matter whether one becomes a leader or a follower. We also establish that replacing a private firm by a public firm in the standard Bertrand-Edgeworth game with capacity constraints increases social welfare and that a pure-strategy equilibrium always exists.
    Keywords: Bertrand-Edgeworth; mixed duopoly; timing games
    JEL: L13 D43
    Date: 2011–05–19
  20. By: Hirokazu Ishise (Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail:
    Abstract: The cross-country correlations of international real business cycle models depend critically on the number of countries in the models. A positive productivity shock in one country will stimulate investment in the country that has experienced the shock, while reducing internal investment in the other countries, which will then simultaneously experience a slump. This comovement mechanism is absent in two-country models.
    Keywords: International Real Business Cycles, Cross-Country Correlations, Multi-Country, Country Size
    JEL: E32 F41
    Date: 2011–05
  21. By: Ceja, Lucia (IESE Business School); Tapies, Josep (IESE Business School)
    Abstract: This paper analyzes formally stated corporate values, a key topic of concern in the field of family businesses. More specifically, the study aims to contribute to the literature by enabling a deeper understanding of the differences and similarities of the corporate values at the foundation of the world's top 100 largest family-owned firms and non-family businesses. According to the study findings, the values of integrity, respect, and customers are the top three most-mentioned values in both family-owned businesses and non-family companies. Likewise, there are distinct values that are mentioned often by family-owned firms and seldom stated or not stated at all by non-family businesses. These values tend to be more people-oriented; emphasize collectivity more than individuality; and support a long-term perspective and a sense of stewardship and responsibility toward the future of the family and the community in which the business operates.
    Keywords: family-owned firms; corporate values; positive psychology; family-business values;
    Date: 2011–03–09
  22. By: OKUBO Toshihiro; TOMIURA Eiichi
    Abstract: This paper addresses two questions: i) under what circumstances corporate headquarters are separated from production plants, and ii) what types of plants are operated by multi-plant firms. We examine these issues using plant-level manufacturing census data. This paper has two main findings. Firstly, when a plant is large, productive, or intensive in labor or material use, then the plant tends to be managed by a corporate headquarters that is geographically separated from the plant, and the plant is also more likely to be a part of multi-plant operation. Secondly, there is a substantially greater marginal effect from a change in plant size on the probability of multi-plant operation when plants have around two hundred workers than at the mean.
    Date: 2011–05
  23. By: Leheyda, Nina; Beschorner, Patrick; Hüschelrath, Kai
    Abstract: In 2002, the Swiss Competition Commission (COMCO) introduced a Notice on the Competitive Treatment of Vertical Restraints in Automobile Trade ('Car Notice'). The objective of the Car Notice has been to strengthen competition in the Swiss car market, in particular by avoiding price-fixing practices and market foreclosure and stimulating intrabrand competition in the market for new car sales and competition in the service market. Based on a survey conducted among Swiss car market players, we find that the Car Notice only had a slight impact on competition in the Swiss car market. Although some changes have been identified, they typically cannot solely be explained by the impact of the Car Notice but rather result from general market developments that have led to stronger competition in Switzerland. --
    Keywords: vertical agreements,automobile market,multibranding,intrabrand competition,interbrand competition,ex-post evaluation of competition policy
    JEL: K21 L42 L62
    Date: 2011
  24. By: Francisco Covas; Shigeru Fujita
    Abstract: This paper studies the quantitative properties of a general equilibrium model where a continuum of heterogeneous entrepreneurs are subject to aggregate as well as idiosyncratic risks in the presence of a borrowing constraint. The calibrated model matches the highly skewed wealth and income distributions of entrepreneurs. The authors provide an accurate solution to the model despite the significant nonlinearities that are absent in the economy with uninsurable labor income risk. The model is capable of generating the average private equity premium of roughly 3 percent and a low risk-free rate. The model also produces procyclicality of the risk-free rate and countercyclicality of the average private equity premium. The countercyclicality of the average equity premium is largely driven by tightening (loosening) of financing constraints during recessions (booms).
    Keywords: Risk ; Private equity ; Business cycles
    Date: 2011
  25. By: Leung, Danny; Secrieru, Oana
    Abstract: The purpose of this paper is twofold. First, the authors provide a detailed social accounting matrix (SAM), which incorporates the income and financial flows into the standard input-output matrix, for the Canadian economy for 2004. Second, they use the SAM to assess the strength of the real-financial linkages by calculating and comparing real SAM multipliers and financial social accounting matrix (FSAM) multipliers. For FSAM multipliers, financial flows are endogenous, whereas for real SAM multipliers they are not. The results show that taking into account financial flows increases the impact of a final demand shock on Canadian output. Financial flows also play an important role in determining the cumulative effect of an income shock or the availability of investment funds. Between 2008 and the first half of 2009, financial institutions shifted their investments toward government bonds, short-term paper, and foreign investments. This shift together with the fact that non-financial institutions were unwilling or unable to increase their financial liabilities, led to estimated declines in all GDP multipliers between 2008 and the first half of 2009 (2009H1). The main advantage of using the extended input-output analysis is that it provides a simple framework, with very few assumptions, which allows the assessment of the strength of real-financial linkages by means of multipliers. However, the methodology is subject to the Lucas critique, that as shocks shift prices, agents cannot adjust. Such a framework is, nevertheless, appropriate in short-term impact analysis such as this study.
    Keywords: Business performance and ownership, Economic accounts, Financial statements and performance, Input-output accounts
    Date: 2011–05–20
  26. By: George-Marios Angeletos; Jennifer La'O
    Abstract: We consider a class of convex, competitive, neoclassical economies in which agents are rational; the equilibrium is unique; there is no room for randomization devices; and there are no shocks to preferences, technologies, endowments, or other fundamentals. In short, we rule out every known source of macroeconomic volatility. And yet, we show that these economies can be ridden with large and persistent fluctuations in equilibrium allocations and prices. These fluctuations emerge because decentralized trading impedes communication and, in so doing, opens the door to self-fulfilling beliefs despite the uniqueness of the equilibrium. In line with Keynesian thinking, these fluctuations may be attributed to “coordination failures” and “animal spirits”. They may also take the form of “fads”, or waves of optimism and pessimism that spread in the population like contagious diseases. Yet, these ostensibly pathological phenomena emerge at the heart of the neoclassical paradigm and require neither a deviation from rationality, nor multiple equilibria, nor even a divergence between private and social motives.
    JEL: D52 D83 E32
    Date: 2011–05
  27. By: Olivier Gu\'eant; Charles-Albert Lehalle; Joaquin Fernandez Tapia
    Abstract: Market makers have to continuously set bid and ask quotes for the stocks they have under consideration. Hence they face a complex optimization problem in which their return, based on the bid-ask spread they quote and the frequency they indeed provide liquidity, is challenged by the price risk they bear due to their inventory. In this paper, we provide optimal bid and ask quotes and closed-form approximations are derived using spectral arguments.
    Date: 2011–05
  28. By: Fairlie, Robert W. (University of California, Santa Cruz); Chatterji, Aaron K. (Duke University)
    Abstract: The economic expansion of the late 1990s created many opportunities for business creation in Silicon Valley, but the opportunity cost of starting a business was also high during this period because of the exceptionally tight labor market. A new measure of entrepreneurship derived from matching files from the Current Population Survey (CPS) is used to provide the first test of the hypothesis that business creation rates were high in Silicon Valley during the "Roaring 90s." Unlike previous measures of firm births based on large, nationally representative datasets, the new measure captures business creation at the individual-owner level, includes both employer and non-employer business starts, and focuses on only hi-tech industries. Estimates indicate that hi-tech entrepreneurship rates were lower in Silicon Valley than the rest of the United States during the period from January 1996 to February 2000. Examining the post-boom period, we find that entrepreneurship rates in Silicon Valley increased from the late 1990s to the early 2000s. Although Silicon Valley may be an entrepreneurial location overall, we provide the first evidence that the extremely tight labor market of the late 1990s, especially in hi-tech industries, may have suppressed business creation during this period.
    Keywords: entrepreneurship, high-technology, Silicon Valley, economic geography, regional clusters
    JEL: J26
    Date: 2011–05
  29. By: Hart, Robert A.; Roberts, J. Elizabeth
    Abstract: This paper makes use of the British New Earnings Survey Panel Dataset between 1976 and 2010. Individual‐level pay and hours data are obtained from company payrolls and consist of a random sample of 1% of the entire British male and female labor force. We find that the real wages of both male and female workers who change job titles within companies are significantly more procyclical than job stayers. Wage cyclicality of internal job movers who retain their job titles is the same as that of job stayers. This lends support to the predicted procyclical real wage effects of the Reynolds‐Reder‐Hall job re‐grading hypothesis. On the extensive margin, title changers and title retainers who move jobs between companies exhibit the same degrees of wage cyclicality and these are significantly greater than for job stayers. We argue that our findings are compatible with earlier research that has established the importance of spot market wage setting in Britain.
    Keywords: job re‐assignments; job moves; spot wages; Real wage cyclicality
    Date: 2011–05
  30. By: Franz-Josef Bade; Eckhardt Bode; Eleonora Cutrini
    Abstract: This paper presents descriptive evidence suggesting that there may be something to be learned about the future patterns of international offshoring from the recent patterns of “domestic offshoring”, the relocation of activities across regions within countries. Industries appear to offshore activities first within the same country and only later across the national border. Investigating the domestic and international offshoring patterns for West German manufacturing industries between 1992 and 2007, we find that, on the one hand, industries that offshored more extensively domestically offshored less extensively internationally, and vice versa. On the other hand, we find that those industries that offshored more extensively domestically were still in earlier stages of their life cycles while those that offshored more extensively internationally were already in later stages. International unbundling may consequently not be as unpredictable as it is currently believed to be
    Keywords: International offshoring, domestic offshoring, functional fragmentation, industry life cycle, Germany, K density
    JEL: C46 F21 R12
    Date: 2011–05

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