nep-bec New Economics Papers
on Business Economics
Issue of 2011‒07‒13
29 papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. No news in business cycles By Mario Forni; Luca Gambetti; Luca Sala
  2. Idiosyncratic uncertainty, capacity utilization and the business cycle. By Fagnart, Jean-Francois; Licandro, Omar; Portier, Franck
  3. Liquidity, Assets and Business Cycles By Shouyong Shi
  4. Performance pay and shifts in macroeconomic correlations By Francesco Nucci; Marianna Riggi
  5. Unionisation, International Integration and Selection By Catia Montagna; Antonella Nocco
  6. Efficient Search on the Job and the Business Cycle By Guido Menzio; Shouyong Shi
  7. Managerial Compensation Contracting. By Engesaeth, E.J.P.
  8. Catching up in total factor productivity through the business cycle: Evidence from Spanish manufacturing firms By Álvaro Escribano; Rodolfo Stucchi
  9. British Relative Economic Decline Revisited By Crafts, Nicholas
  10. Part-Time Work, Fixed-Term Contracts, and the Returns to Experience By Fernández-Kranz, Daniel; Paul, Marie; Rodriguez-Planas, Nuria
  11. Who do High-growth Firms Employ, and Who do they Hire? By Coad, Alex; Daunfeldt, Sven-Olov; Johansson, Dan; Wennberg, Karl
  12. Information Revelation in Competing Mechanism Games By Andrea Attar; Eloisa Campioni; Gwenael Piaser
  13. What Explains the German Labor Market Miracle in the Great Recession? By Michael C. Burda; Jennifer Hunt
  14. Incomplete Contracts and the Impact of Globalization on Consumer Welfare By Fabrice Defever
  15. Credit ratings and credit risk By Jens Hilscher; Mungo Wilson
  16. Firm Lifecycles and External Restructuring By Ari Hyytinen; Mika Maliranta
  17. Price setting in a leading Swiss online supermarket By Martin Berka; Michael B. Devereux; Thomas Rudolph
  18. Learning, Capital-Embodied Technology and Aggregate Fluctuations By Christoph Görtz; John Tsoukalas
  19. Endogenous Market Structures and Innovation by Leaders: an Empirical Test By Federico Etro; Dirk Czarnitzki; Kornelius Kraft
  20. House Price, Mortgage Premium, and Business Fluctuations By Nan-Kuang Chen; Han-Liang Cheng; Ching-Sheng Mao
  21. A Multi-Method Approach to Identifying Norms and Normative Expectations within a Corporate Hierarchy: Evidence from the Financial Services Industry By Burks, Stephen V.; Krupka, Erin L.
  22. Distortions in Cross-Sectional Convergence Analysis when the Aggregate Business Cycle is Incomplete By Stefano Magrini; Margherita Gerolimetto; Hasan Engin Duran
  23. Corporate Social Responsibility in the work place - Experimental evidence on CSR from a gift-exchange game By Hannes Koppel; Tobias Regner
  24. Job Anxiety, Work-Related Psychological Illness and Workplace Performance By Jones, Melanie K.; Latreille, Paul L.; Sloane, Peter J.
  25. On the Stability of Mixed Oligopoly Equilibria with CSR Firms By L. Lambertini; A. Tampieri
  26. The determination of wages of newly hired employees: survey evidence on internal versus external factors By Kamil Galuščắk; Mary Keeney; Daphne Nicolitsas; Frank Smets; Pawel Strzelecki; Matija Vodopivec
  27. How Firms Respond to Mandatory Information Disclosure By Anil R. Doshi; Glen W.S. Dowell; Michael W. Toffel
  28. Competing Mechanisms, Exclusive Clauses and the Revelation Principle By Andrea Attar; Eloisa Campioni; Gwenael Piaser
  29. Entry and Competition in the Pharmaceutical Market following Patent Expiry By Appelt, Silvia

  1. By: Mario Forni; Luca Gambetti; Luca Sala
    Abstract: This paper uses a structural, large dimensional factor model to evaluate the role of `news' shocks (shocks with a delayed effect on productivity) in generating the business cycle. We find that (i) existing small-scale VECM models are affected by `non-fundamentalness' and therefore fail to recover the correct shock and impulse response functions; (ii) news shocks have a limited role in explaining the business cycle; (iii) their effects are in line with what predicted by standard neoclassical theory; (iv) the bulk of business cycle flucuations is explained by shocks unrelated to technology.
    Keywords: structural factor model; news shocks; invertibility; fundamentalness
    JEL: C32 E32 E62
    Date: 2011–06
  2. By: Fagnart, Jean-Francois; Licandro, Omar; Portier, Franck
    Abstract: In a stochastic dynamic general equilibrium framework, we introduce the concept of variable capacity utilization (as opposed to the concept of capital utilization). We consider an economy where imperfectly competitive firms use a putty-clay technology and decide on their productive capacity level under uncertainty. An idiosyncratic uncertainty about the exact position of the demand curve facedby each firm explains why sorne productive capacities may remain idle in the sequel and why individual capacity utilization rates differ across firms. The capacity underutilization at the aggregate level thus hides a diversity of microeconomic situations. The variability of the capacity utilization allows for a good description of sorne of the main stylized facts of the business cycle, propagates and magnifies aggregate technological shocks and generates endogenous persistence (Le., the output growth rate displays positive serial correlation).
    Keywords: Business Cycle; Capacity Utilization; Idiosyncratic shocks; Mark-ups; Propagation Mecanism;
  3. By: Shouyong Shi
    Abstract: Equity price is cyclical and often leads the business cycle by one or two quarters. These observations lead to the hypothesis that shocks to equity market liquidity are an independent source of the business cycle. In this paper I construct a model to evaluate this hypothesis. The model is easy for aggregation and for the construction of the recursive competitive equilibrium. After calibrating the model to the US data, I find that a negative liquidity shock in the equity market can generate large drops in investment and output but, contrary to what one may conjecture, the shock generates an equity price boom. This response of equity price occurs as long as a negative liquidity shock tightens firms' financing constraints on investment. Thus, liquidity shocks to the equity market cannot be the primary driving force of the business cycle. For equity price to fall as it typically does in a recession, a negative liquidity shock must be accompanied or caused by other shocks that reduce the need for investment sufficiently and relax firms' financing constraints on investment. I illustrate that a strong negative productivity shock is a good candidate of such concurrent shocks.
    Keywords: Liquidity; Asset prices; Business cycle
    JEL: E32 E5 G1
    Date: 2011–06–14
  4. By: Francesco Nucci (La Sapienza University of Rome); Marianna Riggi (Bank of Italy)
    Abstract: A coincidence in time between the volatility break associated with the "Great Moderation" and large changes in the pattern of conditional and unconditional correlations between output, hours and labor productivity was detected by Galí and Gambetti (2009). We provide a novel explanation for these findings, based on the major changes that occurred in the U.S. design of labor compensation around the mid-1980s. These include a substantial increase in the incidence of performance pay coupled with a higher responsiveness of real wages to the business cycle. We capture this shift in the structure of labor compensation in a Dynamic New Keynesian (DNK) model and show that, by itself, it generates the disappearance of the procyclical response of labor productivity to non-technology shocks and a reduction of the contractionary effects of technology shocks on hours worked. Moreover, it accounts for a large share of the observed drop in output volatility after 1984 and for most of the observed changes in unconditional correlations.
    Keywords: procyclical productivity, wage rigidities, performance pay.
    JEL: E24 E32 J3 J22
    Date: 2011–03
  5. By: Catia Montagna; Antonella Nocco
    Abstract: We study how unionisation affects competitive selection between heterogeneous firms when wage negotiations can occur at the firm or at the profit-centre level. With productivity specific wages, an increase in union power has: (i) a selection-softening; (ii) a counter-competitive; (iii) a wage-inequality; and (iv) a variety effect. In a two-country asymmetric setting, stronger unions soften competition for domestic firms and toughen it for exporters. With profit-centre bargaining, we show how trade liberalisation can affect wage inequality among identical workers both across firms (via its effects on competitive selection) and within firms (via wage discrimination across destination markets).
    Keywords: firm selection, unionisation, wage inequality, trade liberalisation
    JEL: F12 F16 R13 J51
    Date: 2011–06
  6. By: Guido Menzio; Shouyong Shi
    Abstract: The paper develops a model of directed search on the job where transitions of workers between unemployment, employment and across employers are driven by heterogeneity in the quality of firm-worker matches. The equilibrium is such that the agents' value and policy functions are independent of the distribution of workers across employment states. Hence, the model can be solved outside of steady-state and used to measure the effect of cyclical productivity shocks on the labor market. Productivity shocks are found to generate large fluctuations in workers' transitions, unemployment and vacancies when matches are experience good, but not when matches are inspection goods.
    Keywords: Directed search; On the Job Search; Business Cycles; Unemployment
    JEL: E24 E32 J64
    Date: 2011–06–19
  7. By: Engesaeth, E.J.P. (Universiteit van Tilburg)
    Date: 2011
  8. By: Álvaro Escribano (Universidad Carlos III de Madrid); Rodolfo Stucchi (Inter-American Development Bank)
    Abstract: After facing more than a decade of price stability and economic growth, Spain is experiencing now one of the most significant slowdowns in economic activity across EU economies. There is a general consensus the severity of this slowdown is due to the low level and low rates of growth experienced by total factor productivity (TFP) during more than a decade. Using firm-level data over the period 1991-2005 we study the effect of recessions on the productivity growth of firms with different level of productivity (i.e., technological leaders and technological followers) and we find that firms tend to converge in recessions. In expansions, on the other hand, we find higher persistence in terms of productivity and no convergence. These findings are consistent with the predictions of technological diffusion models and the fact that firm’s innovation is procyclical. We also find that human capital and innovation are key factors that could enhance the productivity of Spanish manufacturing firms.
    Keywords: productivity catching up; technology diffusion; pro-cyclical innovation; technological leaders; business cycle
    JEL: C23 C52 D24 L16 L60
    Date: 2011–06–28
  9. By: Crafts, Nicholas (University of Warwick)
    Abstract: This paper examines the role of competition in productivity performance in Britain over the period from the late-nineteenth to the early twenty-first century. A detailed review of the evidence suggests that the weakness of competition from the 1930s to the 1970s undermined productivity growth but since the 1970s stronger competition has been a key ingredient in ending relative economic decline. The productivity implications of the retreat from competition resulted in large part from interactions with idiosyncratic British institutional structures in terms of corporate governance and industrial relations. This account extends familiar insights from cliometrics both analytically and chronologically.
    Keywords: competition; productivity; relative economic decline
  10. By: Fernández-Kranz, Daniel (IE Business School, Madrid); Paul, Marie (University of Freiburg); Rodriguez-Planas, Nuria (Universitat Autònoma de Barcelona)
    Abstract: Using data from Spanish Social Security records, we investigate the returns to experience in different flexible work arrangements, including part-time and full-time work, and permanent and fixed-term contracts. We use a trivariate random effects model which consists of a three-equation system that is estimated simultaneously by Markov Chain Monte Carlo techniques. Our results indicate that there is a large pay gap for working part-time which persists many years after having resumed full-time work. We also find that working part-time involves lower returns to experience than standard full-time employment and thus a substantial negative wage differential for those employed part-time accumulates over time. Finally, we find that heterogeneity exist by contract type and motherhood status.
    Keywords: fixed-term and permanent contracts, part-time employment, returns to experience of differential work histories, random effects models, MCMC, motherhood
    JEL: J16 J24 J31 J41 C11 C33
    Date: 2011–06
  11. By: Coad, Alex (Science and Technology Policy Research (SPRU), Freeman Centre, University of Sussex); Daunfeldt, Sven-Olov (The Swedish Retail Institute (HUI) and Dalarna University); Johansson, Dan (The Ratio Institute); Wennberg, Karl (The Ratio Institute and Stockholm School of Economics)
    Abstract: The purpose of this paper is to study who high- growth firms (HGFs) hire using a matched employer-employee dataset for all knowledge intensive industries in Sweden, where high growth is measured over the period 1999-2002. The results indicate that HGFs to a larger extent employ young people, immigrants, and individuals with longer unemployment periods. However, these patterns seem contingent on the stage of firm evolution. HGFs that have already realized rapid growth seem to start focusing on hiring individuals from other companies, even though immigrants are still overrepresented among new employees.
    Keywords: Gazelles; firm growth; rapid firm growth; high-impact firms
    JEL: D24 L25 L26
    Date: 2011–07–01
  12. By: Andrea Attar (Faculty of Economics, University of Rome "Tor Vergata"); Eloisa Campioni (Faculty of Economics, University of Rome "Tor Vergata"); Gwenael Piaser (IPAG Business School, Paris;)
    Abstract: We consider multiple-principal multiple-agent games of incomplete information. In this context, we identify a class of direct and incentive compatible mechanisms: each principal privately recommends to each agent to reveal her private information to the other principals, and each agent behaves truthfully. We show that there is a rationale in restricting attention to this class of mechanisms: if all principals make use of direct incentive compatible mechanisms, there are no incentives to unilaterally deviate towards more sophisticated mechanisms. We develop two examples to show that private recommendations are a key element of our construction, and that the restriction to direct incentive compatible mechanisms is not sufficient to provide a complete characterization of equilibria.
    Keywords: Incomplete information, competing mechanisms, information revelation
    JEL: D82
    Date: 2011–07–04
  13. By: Michael C. Burda; Jennifer Hunt
    Abstract: Germany experienced an even deeper fall in GDP in the Great Recession than the United States, with little employment loss. Employers’ reticence to hire in the preceding expansion, associated in part with a lack of confidence it would last, contributed to an employment shortfall equivalent to 40 percent of the missing employment decline in the recession. Another 20 percent may be explained by wage moderation. A third important element was the widespread adoption of working time accounts, which permit employers to avoid overtime pay if hours per worker average to standard hours over a window of time. We find that this provided disincentives for employers to lay off workers in the downturn. Although the overall cuts in hours per worker were consistent with the severity of the Great Recession, reduction of working time account balances substituted for traditional government-sponsored short-time work.
    JEL: E24 E32 J6
    Date: 2011–06
  14. By: Fabrice Defever
    Abstract: We embed a North-South trade model into an incomplete contracts setting where the production of heterogeneous firms can be geographically separated. When a Northern headquarter contracts with a Southern supplier instead of a Northern supplier, the presence of international incomplete contracts may lead to a higher price. As a result, trade liberalization, that induces offshoring, is not necessarily welfare-enhancing for consumers, despite the lower cost of labor in the South. In addition, firms which use the supplier's component intensively, offshore their supplier in the South using outsourcing. As trade costs fall, less componentintensive firms also offshore, but by vertically integrating their supplier. We argue that this organizational change increases production-shifting in the South, implying that a larger number of varieties will be produced in the South where contracts are incomplete. We show that, this may reduce consumer welfare in both countries.
    Keywords: Consumer Welfare, Incomplete Contracts, hold-up problem
    JEL: F23 L22 R3
    Date: 2011–07
  15. By: Jens Hilscher (International Business School, Brandeis University); Mungo Wilson (University of Oxford)
    Abstract: This paper investigates the information in corporate credit ratings. We examine the extent to which firms' credit ratings measure raw probability of default as opposed to systematic risk of default, a firm's tendency to default in bad times. We find that credit ratings are dominated as predictors of corporate failure by a simple model based on publicly available financial information (`failure score'), indicating that ratings are poor measures of raw default probability. However, ratings are strongly related to a straightforward measure of systematic default risk: the sensitivity of firm default probability to its common component (`failure beta'). Furthermore, this systematic risk measure is strongly related to credit default swap risk premia. Our findings can explain otherwise puzzling qualities of ratings.
    Keywords: Credit Rating, Credit Risk, Default Probability, Forecast Accuracy, Systematic Default Risk
    JEL: G12 G24 G33
    Date: 2011–06
  16. By: Ari Hyytinen; Mika Maliranta
    Abstract: This paper studies how firms contribute to the productivity growth of an industry over their lifecycle. We present a decomposition method that allows us to condition the components of productivity growth on the age of production units. We find evidence for a prolonged positive exit effect that mirrors market selection during the early stages of firms’ lifecycle. This effect is tightly related to the negative initial productivity effect of entry. We also find some evidence that productivity-enhancing reallocation of resources between firms is concentrated on the middle aged firms.
    Keywords: productivity, decomposition, lifecycle, entry, exit
    JEL: O12 O14 O47
    Date: 2011–06–27
  17. By: Martin Berka; Michael B. Devereux; Thomas Rudolph
    Abstract: We study a newly released data set of scanner prices for food products in a large Swiss online supermarket. We find that average prices change about every two months, but when we exclude temporary sales, prices are extremely sticky, changing on average once every three years. Non-sale price behavior is broadly consistent with menu cost models of sticky prices. When we focus specifically on the behavior of sale prices, however, we find that the characteristics of price adjustment seems to be substantially at odds with standard theory.
    Date: 2011–07
  18. By: Christoph Görtz; John Tsoukalas
    Abstract: Recent evidence suggests that agents’ expectations may have played a role in several cycli¬cal episodes such as the U.S. "new economy" boom in the late 1990s, the real estate boom in Japan in the 1980s and the real estate boom in the U.S. which ended in 2008. One chal¬lenge in the expectations driven view of fluctuations has been to develop simple one sector models that can give rise to such fluctuations without a compromise on other dimensions. In this paper we propose a simple generalization of the Greenwood et al. (1988) one sec¬tor model and show it can generate fluctuations that arise as a result of agents difficulty to forecast productivity embodied in new capital. The two key assumptions in the model are: (1) the vintage view of capital productivity, whereby each successive vintage has (po¬tentially) different productivity and (2) agents’ imperfect information and learning about this productivity. The model is consistent with second and third moments from U.S. data. Simulations of the model suggest that, (a) noise amplifies fluctuations and (b) pure noise can trigger recessions that mimic in magnitude, duration and depth the typical post WW II U.S. recession.
    Keywords: News shocks, expectations, growth asymmetry, Bayesian learning, business cy¬cles.
  19. By: Federico Etro (Department of Economics, University Of Venice Cà Foscari); Dirk Czarnitzki (K.U. Leuven); Kornelius Kraft (Technical University of Dortmund)
    Abstract: Simple models of competition for the market with endogenous entry show that, contrary to the Arrow view, an endogenous entry threat in a market induces the average firm to invest less in R&D and the incumbent leader to invest more. We test these predictions based on a unique dataset and survey for the German manufacturing sector (the Mannheim Innovation Panel). In line with our predictions, endogenous entry threats as perceived by the firms reduce R&D intensity for the average firm, but they increase it for an incumbent leader. These results hold after a number of robustness tests with instrumental variable regressions.
    Keywords: Endogenous market structures, innovation, leadership
    JEL: O31 O32
    Date: 2011
  20. By: Nan-Kuang Chen (National Taiwan University and Hong Kong Institute for Monetary Research); Han-Liang Cheng (Chung-Hua Institution for Economic Research); Ching-Sheng Mao (National Taiwan University)
    Abstract: This paper investigates the transmission mechanism of mortgage premium to characterize the relationship between the housing market and the business cycle for the U.S. economy. The model matches the main features of the U.S. housing market and business cycles well. The mortgage premium is crucial for the amplification and propagation of the model to match the data. If the Federal Reserve had exercised pre-emptive monetary policy in 2002Q1, the counterfactual analysis suggests that a higher interest rate would have stabilized house price and housing investment volatilities, but would have taken a big toll on real GDP: its volatility remains approximately the same, but the level of GDP contracts dramatically.
    Keywords: Mortgage Premium, House Price, DSGE
    JEL: E3 E4 E5 G1
    Date: 2011–06
  21. By: Burks, Stephen V. (University of Minnesota, Morris); Krupka, Erin L. (University of Michigan)
    Abstract: This paper presents the results of a field study at a large financial services firm that combines multiple methods, including two economic experiments, to measure ethical norms and their behavioral correlates. Standard survey questions eliciting ethical evaluations of actions in on-the-job ethical dilemmas are transformed into a series of incentivized coordination games in the first experiment. We use the results of this experiment to identify the actual ethical norms for financial adviser behavior held by key personnel – financial advisers and their corporate leaders – in three settings: a clash of incentives between serving the client and earning commissions, a dilemma about fiduciary responsibility to a client, and a dilemma about whistle-blowing on a peer. We also measure the beliefs of financial advisers about the ethical expectations of their corporate leaders and the beliefs of corporate leaders about financial adviser norms. In addition, we ask financial advisers about their personal normative opinions, matching a common methodology in the literature. We find, first, systematic agreements in the normative evaluations across the corporate hierarchy that are consistent with ex ante expectations, but second, we also find some measurable differences between the normative expectations of corporate leaders about on-the-job behavior and the actual norms shared among financial advisers. When there is a normative mismatch across the hierarchy we are able to distinguish miscommunication from ethical disagreement between leaders and employees. Our subjects also report their job satisfaction and take part in a second incentivized experiment in which it is costly to report private information honestly. A last finding is that a mismatch between advisers’ personal ethical opinions and corporate norms – especially those of peers – strongly correlates with job dissatisfaction, and less strongly but significantly with the willingness to be dishonest.
    Keywords: norms, ethics, financial adviser, corporate leader, financial services, field experiment, coordination game
    JEL: C93 D23 M14
    Date: 2011–06
  22. By: Stefano Magrini (Department of Economics, University Of Venice Cà Foscari); Margherita Gerolimetto (Department of Economics, University Of Venice Cà Foscari); Hasan Engin Duran (Department of Economics, University Of Venice Cà Foscari)
    Abstract: One of the most important drawbacks of the existing literature on convergence is that it largely ignores the effect of aggregate fluctuations on the evolution of income disparities. To the extent that regional income disparities follow a distinct cyclical pattern in the short-run, moving either pro- or counter-cyclically, the period of analysis should be chosen with great care. Failing to do so might in fact lead to an overestimation of the tendency towards either convergence or divergence, depending on the type of short-run cyclical pattern followed by the disparities and on which cycle phases are over-represented within the period being analyzed. In this paper, we use the distribution dynamics approach to show that the distortion introduced when the period of analysis contains incomplete business cycles could be quite sizeable and then analyze convergence among 48 conterminous US states over a appropriately chosen period (1989-2007) that includes only complete cycles.
    Keywords: Convergence, Regional disparities, Business cycle, Distribution dynamics
    JEL: O40 R10 E32 C14
  23. By: Hannes Koppel (Max Planck Institute of Economics, Jena); Tobias Regner (Max Planck Institute of Economics, Jena)
    Abstract: We analyze the effect of investments in corporate social responsibility (CSR) on workers' motivation. In our experiment, a gift exchange game variant, CSR is captured by donating a certain share of profits to a charity. We are testing for CSR effects by varying the possible share of profits given away. Additionally, we investigate the effect of a mission match, i.e., a worker prefering the same charity the firm is actually donating to. Our results show that on average workers reciprocate investments into CSR with increased effort. A mission match does result in higher effort, but only when investment into CSR is high.
    Keywords: Corporate Social Responsibility, gift-exchange game, experiment, labor market, incentives
    JEL: C73 C91 J01 M14 M52
    Date: 2011–06–30
  24. By: Jones, Melanie K. (Swansea University); Latreille, Paul L. (Swansea University); Sloane, Peter J. (Swansea University)
    Abstract: This paper uses matched employee-employer data from the British Workplace Employment Relations Survey (WERS) 2004 to examine the determinants of employee job anxiety and work-related psychological illness. Job anxiety is found to be strongly related to the demands of the job as measured by factors such as occupation, education and hours of work. Average levels of employee job anxiety, in turn, are positively associated with work-related psychological illness among the workforce as reported by managers. The paper goes on to consider the relationship between psychological illness and workplace performance as measured by absence, turnover and labour productivity. Work-related psychological illness is found to be negatively associated with several measures of workplace performance.
    Keywords: job anxiety, stress, absence, labour productivity
    JEL: I0 J28 J81 J20
    Date: 2011–06
  25. By: L. Lambertini; A. Tampieri
    Abstract: This paper examines the stability conditions of the equilibria in a market where profit-maximising and CSR firms coexist in the presence of an environmental externality. An equilibrium in mixed duopoly is stable for low impact of productivity on pollution and high CSR sensitivity to consumer surplus. In addition, a mixed oligopoly equilibrium is stable if the number of CSR is sufficiently low.
    JEL: H23 L13 O31
    Date: 2011–07
  26. By: Kamil Galuščắk (Czech National Bank); Mary Keeney (Central Bank and Financial Services Authority of Ireland); Daphne Nicolitsas (Bank of Greece); Frank Smets (European Central Bank); Pawel Strzelecki (National Bank of Poland); Matija Vodopivec (Bank of Slovenia)
    Abstract: This paper uses information from a rich firm-level survey on wage and price-setting procedures, in around 15,000 firms in 15 European Union countries, to investigate the relative importance of internal versus external factors in the setting of wages of newly hired workers. The evidence suggests that external labour market conditions are less important than internal pay structures in determining hiring pay, with internal pay structures binding even more often when there is labour market slack. When explaining their choice firms allude to fairness considerations and the need to prevent a potential negative impact on effort. Cross-country differences, that do exist, are found to depend on institutional factors (bargaining structures); countries in which collective agreements are more prevalent and collective agreement coverage is higher report to a greater extent internal pay structures as the main determinant of hiring pay. Within-country differences are found to depend on firm and workforce characteristics; strong association between the use of external factors in hiring pay, on the one hand, and skills (positive) and tenure (negative) on the other.
    Keywords: wage rigidity; newly hired workers; internal pay structure; employee turnover; business cycle; survey data
    JEL: J31 J41 J51
    Date: 2011–04
  27. By: Anil R. Doshi (Harvard Business School); Glen W.S. Dowell (Johnson School of Management, Cornell University); Michael W. Toffel (Harvard Business School, Technology and Operations Management Unit)
    Abstract: We explore which organizations are particularly likely to resist, or acquiesce to, new institutional pressures that arise from mandatory information disclosure regulations. We hypothesize that when information is disclosed about organizational performance, certain organizational characteristics amplify pressures to improve. Examining organizational responses to a change in a prominent information disclosure program, we provide some of the first empirical evidence characterizing organizations' heterogeneous responses to information disclosure regulations. We find that private ownership and proximity to headquarters and corporate siblings are associated with superior performance trends following information disclosure. We also find that regional density moderates effect of establishment size on performance improvement. We find no evidence that capability transfers are associated with performance improvement. We highlight implications for institutional theory, managers, and policymakers.
    Keywords: information disclosure, institutional theory, empirical analysis, Toxics Release Inventory, environmental strategy, mandatory disclosure.
    Date: 2011–07
  28. By: Andrea Attar (Faculty of Economics, University of Rome "Tor Vergata"); Eloisa Campioni (Faculty of Economics, University of Rome "Tor Vergata"); Gwenael Piaser (IPAG Business School, Paris;)
    Abstract: We consider multiple-principal multiple-agent games of incomplete information in which each agent can at most participate with one principal. In such contexts, we show that the restriction to direct truthful mechanisms involves a loss of generality, even if one only focuses on pure strategy equilibria. However, the traditional Revelation Principle retains its power in games with a single agent.
    Keywords: Competing Mechanisms, Exclusivity
    JEL: D82
    Date: 2011–06–30
  29. By: Appelt, Silvia
    Abstract: This dissertation encompasses three essays on entry and competition in the German generic drug market. The first paper examines the market entry decisions of generic companies and finds that original drug producrs do not create barriers to entry by launching a generic version of the brand drug prior to patent expiry. The second paper examines generic market share dynamics and patients‘ switching behaviors among generic drugs. The analysis shows that generic market shares are little influenced by prices and highly persistent over time, conferring a substantial advantage to first generic entrants. Price differentials likewise have a negligible impact on the likelihood that patients switch to a generic drug offered by a different manufacturer. The third paper investigates generic price differentials and provides evidence of economies of scope and reputation effects.
    Keywords: Generic Entry; Generic Market Share Dynamics; Patient Switching Behavior; Generic Price Dispersion
    Date: 2011–06–01

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