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on Business Economics |
| By: | Taylor, Mark P. |
| Abstract: | We identify patterns of self-employment entry, exit and survival in a sample of EU countries and examine factors that explain individuals self-employment experiences within and between countries. We estimate a range of models, including dynamic random effects models that endogenise the initial condition. Our results highlight similarities and differences between countries, and illustrate the importance of age and previous labour market experiences in determining self-employment flows. We also find a high degree of persistence in self-employment across countries, which is most pronounced in France and Germany and least pronounced in Spain. Our results suggest that flows into self-employment are positively associated with the strictness of employment protection legislation. |
| Date: | 2011–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:ese:iserwp:2011-26&r=bec |
| By: | Chao Gu; Randall Wright |
| Abstract: | We study models of credit with limited commitment, which implies endogenous borrowing constraints. We show that there are multiple stationary equilibria, as well as nonstationary equilibria, including some that display deterministic cyclic and chaotic dynamics. There are also stochastic (sunspot) equilibria, in which credit conditions change randomly over time, even though fundamentals are deterministic and stationary. We show this can occur when the terms of trade are determined by Walrasian pricing or by Nash bargaining. The results illustrate how it is possible to generate equilibria with credit cycles (crunches, freezes, crises) in theory, and as recently observed in actual economies. |
| JEL: | E32 E44 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17510&r=bec |
| By: | Yiting Li; Guillaume Rocheteau; Pierre-Olivier Weill |
| Abstract: | We study an over-the-counter (OTC) market with bilateral meetings and bargaining where the usefulness of assets, as means of payment or collateral, is limited by the threat of fraudulent practices. We assume that agents can produce fraudulent assets at a positive cost, which generates endogenous upper bounds on the quantity of each asset that can be sold, or posted as collateral in the OTC market. Each endogenous, asset-specific, resalability constraint depends on the vulnerability of the asset to fraud, on the frequency of trade, and on the current and future prices of the asset. In equilibrium, the set of assets can be partitioned into three liquidity tiers, which differ in their resalability, their prices, their sensitivity to shocks, and their responses to policy interventions. The dependence of an asset's resalability on its price creates a pecuniary externality, which leads to the result that some policies commonly thought to improve liquidity can be welfare reducing. |
| JEL: | E41 E44 E5 E58 G1 G12 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17500&r=bec |
| By: | Hubert BONIN (GREThA, CNRS, UMR5113 - IEP BORDEAUX) |
| Abstract: | Having already fixed the arguments about French entrepreneurship in a previous on a long term scope, we focus our paper on the French syndrome about low entrepreneurship throughout the challenges of the rebuilding of economic power and growth after WWII within the framework of planification, at times when the very substance of economic elites was at stake among the business associations, the regional communities of business and the state economic apparel. The 1960s-1970s seemed to foster a balance between from a “from the top approach” and a “from the basis” renewal of entrepreneurship, thanks to new layers of entrepreneurial bourgeoisies, either family business or transfers from the state system – France being supposed to become the “South Korea of Europe”. But the crisis of the 1970s-1990s shook this regarnished confidence: doubtful elites reconsidered the “French model” along issues of differenciation and competitiveness, within the mindsets of “eurosclerosis” and a specific type of “declinism”. We’ll thus ponder the evolution of entrepreneurial reactivity throughout the dismantle of traditional family business and industries and the upsurge of new productive models; and once more tackle the argument about the role of the state in fuelling entrepreneurship and about the ever-dreamed rebirth of “productive districts” and creative communities of entrepreneurship. |
| Keywords: | Enterprise, businessmen, economic regions, corporate strategy, productive system, industrial and services specialisation |
| JEL: | L26 L20 N84 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:grt:wpegrt:2011-32&r=bec |
| By: | Chauvet, Marcelle; Senyuz, Zeynep; Yoldas, Emre |
| Abstract: | This paper provides an extensive analysis of the predictive ability of financial volatility measures for economic activity. We construct monthly measures of aggregated and industry-level stock volatility, and bond market volatility from daily returns. We model log financial volatility as composed of a long-run component that is common across all series, and a short-run component. If volatility has components, volatility proxies are characterized by large measurement error, which veils analysis of their fundamental information and relationship with the economy. We find that there are substantial gains from using the long term component of the volatility measures for linearly projecting future economic activity, as well as for forecasting business cycle turning points. When we allow for asymmetry in the long-run volatility component, we find that it provides early signals of upcoming recessions. In a real-time out-of-sample analysis of the last recession, we find that these signals are concomitant with the first signs of distress in the financial markets due to problems in the housing sector around mid-2007 and the implied chronology is consistent with the crisis timeline. |
| Keywords: | Realized Volatility; Business Cycles; Forecasting; Dynamic Factor Models; Markov Switching |
| JEL: | C32 E32 E44 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34104&r=bec |
| By: | Martin Berka; Mario J Crucini; Chih-Wei Wang |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:acb:camaaa:2011-34&r=bec |
| By: | Marcelle, Chauvet; Jeremy, Piger |
| Abstract: | The Great Recession of 2007-2009 has not only caused a large wealth loss, it was also followed by a sluggish subsequent recovery. Two years after officially emerging from the recession, the economy was still growing at a low pace and payroll employment was far from reaching its previous peak. However, assessment of the employment situation was markedly different across different series. The two most important employment series, payroll employment (ENAP) and civilian employment (TCE), have recently been displaying divergent patterns. This has been a source of great uncertainty regarding labor market conditions. This paper investigates the differences in the cyclical dynamics of these series and the implications for monitoring business cycle on a current basis. Univariate and multivariate Markov switching models are applied to revised and real time unrevised data. We find that the main differences across these series occur around recessions. The employment measures have diverged considerably around the last three recessions in 1990-1991, in 2001, and in 2007-2009, but especially during their subsequent recoveries. In particular, while the probabilities of recession for models that include ENAP depict jobless recoveries, the probabilities of recessions from models with TCE fall right around the trough of the last three recessions, as determined by the NBER. This significantly impacts the identification of turning points in multivariate models in sample and in recursive real time analysis, with models that use TCE being more accurate compared to the NBER dating, and delivering faster call of troughs in real time. Models that include ENAP series, on the other hand, yield delays in signaling business cycle troughs, especially the most recent ones. |
| Keywords: | Employment; Business Cycle; Turning Point; Real Time; Markov-Switching; Dynamic Factor Model; Jobless Recovery |
| JEL: | E32 C22 |
| Date: | 2010–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34103&r=bec |
| By: | John Thanassoulis |
| Abstract: | This study outlines a new theory linking industrial structure to optimal employment contracts and value reducing risk taking. Firms hire their executives using optimal contracts derived within a competitive labour market. To motivate effort firms must use some variable remuneration. Such remuneration introduces a myopic risk taking problem: an executive would wish to inflate early expected earnings at some risk to future profits. To manage this some bonus pay is deferred. Convergence in size amongst the largest firms makes the cost of managing the myopic risk taking problem grow faster than the cost of managing the moral hazard problem. Eventually the optimal contract jumps from one achieving zero myopic risk taking to one tolerating the possibility of myopic risk taking. Under some conditions the industry partititions: the largest firms hire executives on contracts tolerant of myopic risk taking, smaller firms ensure myopia is ruled out. |
| Keywords: | Myopic risk taking, Moral hazard, Compensation, Bonuses, Bankers' pay, Tail risk, Industrial structure |
| JEL: | G21 G34 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:571&r=bec |
| By: | Fanti, Luciano; Gori, Luca |
| Abstract: | We study the stability issue in a Cournot duopoly with codetermined firms. We show that when both firms codetermine employment together with decentralised employees’ representatives, a rise in wages acts as an economic de-stabiliser (stabiliser) when the wage is fairly low (high), while under profit maximisation a rise in wages always stabilises the market equilibrium. Moreover, increasing the union’s bargaining power has a de-stabilising effect, except when the wage is low and the firm’s power is already high. |
| Keywords: | Bifurcation; Codetermination; Cournot; Duopoly; Employment |
| JEL: | L13 D43 C62 |
| Date: | 2011–10–16 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34144&r=bec |
| By: | Kangsik, Choi |
| Abstract: | We investigate a differentiated mixed duopoly in which private and public firms can choose to strategically set prices or quantities when the public firm is less efficient than the private firm. Thus, regardless of whether the goods are substitutes or complements, if the degree of public firm's inefficiency is sufficiently small, there exists a dominant strategy for both public and private firms that choose Bertrand competition, while there exists a dominant strategy only for the private firm that chooses Bertrand competition if the degree of inefficiency is sufficiently large. Consequently, we show that regardless of the nature of goods, (i) social welfare under Bertrand competition is determined in equilibrium, if the degree of public firm's inefficiency is sufficiently small; and (ii) if the degree of its inefficiency is sufficiently large, social welfare under which the private firm sets its price and the public firm sets its quantity is determined in equilibrium. Moreover, the ranking of a private firm's profit is not reversed. |
| Keywords: | Inefficiency; Cournot-Bertrand Competition; Mixed Duopoly |
| JEL: | L13 D43 H44 |
| Date: | 2011–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34100&r=bec |
| By: | Paige Ouimet; Rebecca Zarutskie |
| Abstract: | We present evidence that young employees are an important ingredient in the creation and growth of firms. Our results suggest that young employees possess attributes or skills, such as willingness to take risk or innovativeness, which make them relatively more valuable in young, high growth, firms. Young firms disproportionately hire young employees, controlling for firm size, industry, geography and time. Young employees in young firms command higher wages than young employees in older firms and earn wages that are relatively more equal to older employees within the same firm. Moreover, young employees disproportionately join young firms that subsequently exhibit higher growth and raise venture capital financing. Finally, we show that an increase in the regional supply of young workers increases the rate of new firm creation. Our results are relevant for investors and executives in young, high growth, firms, as well as policymakers interested in fostering entrepreneurship. |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:11-31&r=bec |
| By: | David Hummels; Rasmus Jørgensen; Jakob R. Munch; Chong Xiang |
| Abstract: | We estimate how offshoring and exporting affect wages by skill type. Our data match the population of Danish workers to the universe of private-sector Danish firms, whose trade flows are broken down by product and origin and destination countries. Our data reveal new stylized facts about offshoring activities at the firm level, and allow us to both condition our identification on within-job-spell changes and construct instruments for offshoring and exporting that are time varying and uncorrelated with the wage setting of the firm. We find that within job spells, (1) offshoring tends to increase the high-skilled wage and decrease the low-skilled wage; (2) exporting tends to increase the wages of all skill types; (3) the net wage effect of trade varies substantially across workers of the same skill type; and (4) conditional on skill, the wage effect of offshoring exhibits additional variation depending on task characteristics. We then track the outcomes for workers after a job spell and find that those displaced from offshoring firms suffer greater earnings losses than other displaced workers, and that low-skilled workers suffer greater and more persistent earnings losses than high-skilled workers. |
| JEL: | F16 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17496&r=bec |
| By: | Görtz, Christoph; Tsoukalas, John |
| Abstract: | We develop a two-sector DSGE model with financial intermediation to investigate the role of news as a driving force of the business cycle. We find that news about future capital quality is a significant source of aggregate fluctuations, accounting for around 37% in output variation in cyclical frequencies. Financial intermediation is essential for the importance and propagation of capital quality shocks. In addition, news shocks in capital quality generate aggregate and sectoral comovement as in the data and is consistent with procyclical movements in the value of capital. From a historical perspective, news shocks to capital quality are to a large extent responsible for the recession following the 1990s investment boom and the latest recession following the financial crisis, but played a much smaller role during the recession at the beginning of the 1990s. This is in line with the belief that revisions of overoptimistic expectations contributed to the last two recessions while movements in fundamentals played a much bigger role for the recession at the beginning of the 1990s. |
| Keywords: | News; Anticipation effects; Business cycles; DSGE; Bayesian estimation |
| JEL: | E2 E3 |
| Date: | 2011–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34113&r=bec |
| By: | Kieron Meagher |
| Abstract: | In Hotelling style duopoly location games the product variety (or firm locations) is typically not socially optimal. This occurs because the competitive outcome is driven by the density of consumers at the margin while the socially optimal outcome depends on the whole distribution of consumer locations/tastes. We consider a natural extension of the standard model in which firms are imperfectly informed about the distribution of consumers, in particular firms are uncertain about the consumer mean. In the uniform case, as the aggregate uncertainty about the mean becomes large relative to the dispersion of consumers about the mean, competitive locations become socially optimal. A limit result on prices for discontinuous, log-concave densities shows the result will hold in a range of cases. |
| JEL: | C72 D43 D81 L10 L13 R30 R39 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:acb:cbeeco:2011-555&r=bec |
| By: | Noriaki Matsushima; Fumitoshi Mizutani |
| Abstract: | We provide a theoretical framework to discuss the relation between market size and vertical structure in the railway industry. The framework is based on a simple downstream monopoly model with two input suppliers, labor forces and the rail infrastructure firm. The operation of the downstream firm (i.e., the train operating firm) generates costs on the rail infrastructure firm. We show that the downstream firm with a larger market size is more likely to integrate with the rail infrastructure firm. This is consistent with the phenomenon in the railway industry. |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:0820&r=bec |
| By: | Miriam Schwartz-Ziv; Michael Weisbach |
| Abstract: | We analyze a unique database from a sample of real-world boardrooms – minutes of board meetings and board-committee meetings of eleven business companies for which the Israeli government holds a substantial equity interest. We use these data to evaluate the underlying assumptions and predictions of models of boards of directors. These models generally fall into two categories: “managerial models” assume boards play a direct role in managing the firm, and “supervisory models” assume that boards’ monitor top management but do not make business decisions themselves. Consistent with the supervisory models, our minutes-based data suggest that boards spend most of their time monitoring management: 67% of the issues they discussed were of a supervisory nature, they were presented with only a single option in 99% of the issues discussed, and they disagreed with the CEO only 3.3% of the time. In addition, managerial models describe boards at times as well: Boards requested to receive further information or an update for 8% of the issues discussed, and they took an initiative with respect to 8.1% of them. In 63% of the meetings, boards took at least one of these actions or did not vote in line with the CEO. |
| JEL: | G3 L2 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17509&r=bec |
| By: | Doan, Tinh |
| Abstract: | Understanding the degree and evolution of competition across industries is an important step towards understanding the impact of economic reform and competition on economic growth in Vietnam during the economic transition. In this paper, we investigate evolution of competition in Vietnam during the economic transition using the Price-Cost Margin (PCM) or Mark-up that has been widely applied in the economic literature and the Profit Elasticity (PE) recently developed by Boone (2000). This paper provides the first empirical study of intensity and evolution of competition across selected industries in Vietnam in the last decade using firm-level data from the Vietnam Enterprise Census (VEC) conducted annually since 2000 by the Vietnam General Statistical Office (GSO). |
| Keywords: | Competition; industry; economic transition; Vietnam |
| JEL: | L5 P30 L11 P20 D40 |
| Date: | 2011–10–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34254&r=bec |
| By: | Onour, Ibrahim; Sergi, Bruno |
| Abstract: | This paper investigates volatility spillover across crude oil market and wheat and corn markets. The corn commodity is taken here to assess the impact of change in demand for biofuel on wheat market. Results of multivariate GARCH model show evidence of corn price volatility transmission to wheat market . Our results indicate that while shocks (unexpected news) in crude oil market have significant impact on volatility in wheat and corn markets, the effect of crude oil price changes on corn and wheat markets is insignificant. The impulse response analysis indicate shocks in oil markets have permanent effect on food commodity price changes. Also indicated that fertilizers markets influenced by own-shocks and shocks in oil markets. |
| Keywords: | Volatility; global food; impulse response |
| JEL: | C53 Q18 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:34079&r=bec |
| By: | Rena M. Conti; Haiden A. Huskamp; Ernst R. Berndt |
| Abstract: | The US Food and Drug Administration (FDA) expends considerable efforts in regulating medications approved for use. Yet the impact of medication labeling changes on brand pharmaceutical products, and whether and what firms do to respond to increased information regarding the safety and efficacy of a drug, have not be characterized. We propose a behavioral framework for examining the effects of FDA advisories on branded pharmaceutical firms and their products. We empirically assess the impact of recent FDA advisories on the stock market valuations of a sample of branded pharmaceutical manufacturing firms using event study methods. We examine whether and how branded pharmaceutical manufacturers respond to an advisory by assessing changes in promotion compared to non-affected firms. We find firms targeted by an advisory have average stock price declines of 3% in three days and 11% in five days following the advisory release, and in turn appear to decrease total physician-directed promotion spending, journals ads and detailing visits significantly six months following the advisory release; the provision of free samples is unaffected. We find no changes among therapeutic substitutes unaffected by the advisory. Results of sensitivity analyses suggest firms with market dominant positions experience similar decreases in stock market valuations and physician-directed promotion compared to pooled results. The results are also robust to alternative definitions of the timing of advisory release dates and the severity of advisories’ wording. Theory and empirical results suggest the public release of FDA advisories negatively impacts firm’s short-term market valuations. The results suggest an additional rationale for previously documented declines in prescribing after FDA advisory releases – significant declines in physician-directed promotion following FDA advisory releases; the combined (and likely correlated) effects of the release of the advisory and declines in physician-directed promotion on prescribing behavior are likely larger than the sum of the independent effects. |
| JEL: | D43 I11 I18 K23 L1 L11 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17528&r=bec |
| By: | John Y. Campbell; João F. Cocco |
| Abstract: | This paper solves a dynamic model of a household's decision to default on its mortgage, taking into account labor income, house price, inflation, and interest rate risk. Mortgage default is triggered by negative home equity, which results from declining house prices in a low inflation environment with large mortgage balances outstanding. Not all households with negative home equity default, however. The level of negative home equity that triggers default depends on the extent to which households are borrowing constrained. High loan-to-value ratios at mortgage origination increase the probability of negative home equity. High loan-to-income ratios also increase the probability of default by tightening borrowing constraints. Comparing mortgage types, adjustable-rate mortgage defaults occur when nominal interest rates increase and are substantially affected by idiosyncratic shocks to labor income. Fixed-rate mortgages default when interest rates and inflation are low, and create a higher probability of a default wave with a large number of defaults. Interest-only mortgages trade off an increased probability of negative home equity against a relaxation of borrowing constraints, but overall have the highest probability of a default wave. |
| JEL: | E21 G21 G33 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17516&r=bec |
| By: | Uwe Jirjahn; Vanessa Lange |
| Abstract: | Using unique survey data from the German Socio-Economic Panel, this study examines the influence of reciprocal inclinations on workers¿ sorting into codetermined firms. Employees with strong negative reciprocal inclinations are more likely to work in firms with a works council while employees with strong positive reciprocal inclinations are less likely to work in such firms. We argue that these findings conform to hypotheses derived from the experimental literature. Moreover, the results show striking gender differences in the relationship between reciprocity and taste for representation. These differences can be partially explained by gender-specific differences in the average degree of labor force attachment. |
| Keywords: | Works council, negative reciprocity, positive reciprocity, sorting, gender |
| JEL: | J52 J53 M50 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwsop:diw_sp402&r=bec |
| By: | Massimo Guidolin; Francesco Ravazzolo; Andrea Donato Tortora |
| Abstract: | This paper uses a multi-factor pricing model with time-varying risk exposures and premia to examine whether the 2003-2006 period has been characterized, as often claimed by a number of commentators and policymakers, by a substantial missprcing of publicly traded real estate assets (REITs). The estimation approach relies on Bayesian methods to model the latent process followed by risk exposures and idiosynchratic volatility. Our application to monthly, 1979-2009 U.S. data for stock, bond, and REIT returns shows that both market and real consumption growth risks are priced throughout the sample by the cross-section of asset returns. There is weak evidence at best of structural misspricing of REIT valuations during the 2003-2006 sample. Key words: REIT returns, Bayesian estimation, Structural instability, Stochastic volatility, Linear factor models. JEL codes: G11, C53. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:igi:igierp:416&r=bec |