nep-bec New Economics Papers
on Business Economics
Issue of 2011‒12‒13
thirty papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. If the Unites States sneezes, does the world need paracetamol? By María Jesus Herrerias; Javier Ordóñez
  2. Must Take Cards: Merchant Discounts and Avoided Costs. By Rochet, Jean-Charles; Tirole, Jean
  3. When Credit Bites Back: Leverage, Business Cycles, and Crises By Òscar Jordà; Moritz HP. Schularick; Alan M. Taylor
  4. Managerial incentives under competitive pressure: Experimental investigation By Ahmed Ennasri; Marc Willinger
  5. A Theory of Monitoring and Internal Labor Markets By Gautam Bose; Kevin Lang
  6. Power Laws in Firm Productivity By Mizuno, Takayuki; Ishikawa, Atushi; Fujimoto, Shouji; Watanabe, Tsutomu
  7. Product Bundling and Incentives for Merger and Strategic Alliance By Sue Mialon
  8. Collective bargaining, firm heterogeneity and unemployment By Juan F. Jimeno; Carlos Thomas
  9. The Organization of European Multinationals By Marin, Dalia; Rousová, Linda
  10. Labor Market Gender Disparity and Corporate Performance in Japan By Jordan SIEGEL; KODAMA Naomi
  11. Are the Self-Employed Really Jacks-of-All-Trades? Testing the Assumptions and Implications of Lazear's Theory of Entrepreneurship with German Data By Lechmann, Daniel S. J.; Schnabel, Claus
  12. Markups and export pricing By Gullstrand, Joakim; Olofsdotter, Karin; Thede, Susanna
  13. Profit Sharing and Training By Kraft, Kornelius; Lang, Julia
  14. Change and Persistence in the German Model of Collective Bargaining and Worker Representation By John T. Addison; Alex Bryson; André Pahnke; Paulino Teixeira
  15. Taking the Twists into Account: Predicting Firm Bankruptcy Risk with Splines of Financial Ratios By Giordani, Paolo; Jacobson, Tor; von Schedvin , Erik; Villani, Mattias
  16. Using "opposing responses" and relative performance to distinguish empirically among alternative models of promotions By DeVaro, Jed
  17. Wage Dispersion and Decentralization of Wage Bargaining By Dahl, Christian M.; le Maire, Daniel; Munch, Jakob R.
  18. The Welfare Effects of Third-Degree PriceDiscrimination in a Differentiated Oligopoly By Takanori Adachi; Noriaki Matsushima
  19. Housing and Debt over the Life Cycle and over the Business Cycle By Matteo Iacoviello; Marina Pavan
  20. Corporate performances and market selection: some comparative evidence By Giulio Bottazzi; Giovanni Dosi; Nadia Jacoby; Angelo Secchi; Federico Tamagni
  21. North-South technology transfer in unionised multinationals By Lommerud, Kjell Erik; Meland, Frode; Straume, Odd Rune
  22. Why foreign ownership may be good for you By Egger, Hartmut; Kreickemeier, Udo
  23. Riding successive product diffusion waves :building a tsunami via upgrade-rebate programs By Vardan Avagyan; Mercedes Esteban Bravo; Jose Vidal-Sanz
  24. Understanding U.S. Corporate Tax Losses By Rosanne Altshuler; Alan Auerbach; Michael Cooper; Matthew Knittel
  25. Interpreting the Hours-Technology time-varying relationship By Cantore, C.; Ferroni, F.; León-Ledesma, M A.
  26. Skilled labor supply, IT-based technical change and job instability By Luc Behaghel; Julie Moschion
  27. Does Trade Globalization Induce or Inhibit Corporate Transparency? Unbundling the Growth Potential and Product Market Competition Channels By Hui Tong; Shang-Jin Wei
  28. On the relationship between tariff levels and the nature of mergers By Yildiz, Halis Murat; Ulus, Aysegul
  29. Productivity growth and ownership change in China: 1998-2007 By Liu, Jing; Cao, Shutao
  30. Building Bridges: Treating a New Transport Link as a Real Option By Grimes, Arthur

  1. By: María Jesus Herrerias (Université de la Méditerranée Aix Marseille II, GREQAM); Javier Ordóñez (Department of Economics, Universitat Jaume I (Castellón, Spain))
    Abstract: There is an old saying that states that “If the United States sneezes, the rest of the world catches a cold”. Against this background, it is argued that some countries, especifically China, can “decouple” from the US economy and sustain strong growth in the face of a US slowdown. In this paper we analyze the extent to which the US economy aects international business fluctuations across countries. A multivariate nonlinear LSTAR model is estimated for the GDP cyclical component of China, France, Germany, the UK and the USA. This nonlinear framework allows the business cycles asymmetries to be captured properly in order to identify the synchronization behavior across countries. Our results suggest that there is a relevant influence from the US cycle, since it acts as a source of international business cycle synchronization. However, spillovers from US cycle fluctuations to China are rather modest.
    Keywords: Business Cycle, nonlinearities, synchronization, decoupling
    JEL: C32 E32 F15
    Date: 2011
  2. By: Rochet, Jean-Charles; Tirole, Jean
    Date: 2011–06
  3. By: Òscar Jordà; Moritz HP. Schularick; Alan M. Taylor
    Abstract: This paper studies the role of leverage in the business cycle. Based on a study of nearly 200 recession episodes in 14 advanced countries between 1870 and 2008, we document a new stylized fact of the modern business cycle: more credit-intensive booms tend to be followed by deeper recessions and slower recoveries. We find a close relationship between the rate of credit growth relative to GDP in the expansion phase and the severity of the subsequent recession. We use local projection methods to study how leverage impacts the behavior of key macroeconomic variables such as investment, lending, interest rates, and inflation. The effects of leverage are particularly pronounced in recessions that coincide with financial crises, but are also distinctly present in normal cycles. The stylized facts we uncover lend support to the idea that financial factors play an important role in the modern business cycle.
    JEL: C14 C52 E51 F32 F42 N10 N20
    Date: 2011–11
  4. By: Ahmed Ennasri; Marc Willinger
    Abstract: We investigate the effects of competition on managerial incentives and effort in a laboratory experiment. Each owner offers compensation to his manager in two different contexts: monopoly and Cournot duopoly. After accepting the compensation, the manager chooses an effort level to increase the probability of reduced costs of his firm. Theory predicts that the entry of a rival firm in a monopolistic industry affects negatively both the incentive compensation and the effort level. Our experimental findings confirm that the entry of a rival firm reduces the incentive compensation but not the manager’s effort level. However, despite the reduction of the incentive compensation, the manager continues to accept the contract offers and exert the same level of effort.
    Keywords: Managerial Incentives, Effort, Competition, Moral hazard, Experiments
    Date: 2011–06
  5. By: Gautam Bose; Kevin Lang
    Abstract: We analyze a firm's job-assignment and worker-monitoring decisions when workers face occasional crises. Firms prefer to assign good workers to a difficult task and to not employ bad workers. Firms observe failures but only observe successfully resolved crises if they monitor the worker. If monitoring costs are positive but sufficiently small, for a range of probabilities that the worker is good, the firm assigns the worker to a low task (less sensitive to crises) and monitors her. At probabilities below this range and not too much above it, she is assigned to the low task and not monitored. At high probabilities of being good, she is assigned to the difficult task. We analyze the implications for internal labor markets of the case where a worker has the same ex ante probability of being good at all firms and learning is about ability at this particular firm.
    JEL: J01 J41
    Date: 2011–11
  6. By: Mizuno, Takayuki; Ishikawa, Atushi; Fujimoto, Shouji; Watanabe, Tsutomu
    Abstract: We estimate firm productivity for about 3.2 million firms from 30 countries. We find that the distribution of firm productivity in each country, which is measured by total factor productivity (TFP), has a power law upper tail. However, the power law exponent of a TFP distribution in a country tends to be greater than that of a sales distribution in that country, indicating that the upper tail of a TFP distribution is less heavy compared to that of a sales distribution. We also find that the power law exponent of a TFP distribution tends to be greater than the power law exponents associated with the number of workers or tangible fixed assets. Given the idea that the sales of a firm is determined by the amount of various inputs employed by the firm (i.e., "production function" in the terminology of economics), these results suggest that the heavy tail of a sales distribution in a country comes not from the tail of a TFP distribution, but from the tail of the distribution of the number of workers or tangible fixed assets.
    Date: 2011–11
  7. By: Sue Mialon
    Abstract: This paper analyzes firms' choice between a merger and a strategic alliance in bundling their product with other complementary product. We consider a framework in which firms can improve profits only from product bundling. While mixed bundling is not profitable, pure bundling is because pure bundling reduces consumers' choices, and thus, softens competition among firms. Firms benefit the most from this reduced competition if they form an alliance. Firms do not gain as much from a merger because, internalizing the complementarity between the two products, a merged firm is inclined to pursue aggressive pricing to gain market share. Yet, firms may be motivated to choose a merger over an alliance because of foreclosure possibility as foreclosure is not possible under strategic alliance. However, in response, unmerged rivals can use a strategic alliance to avert foreclosure. Hence, the possibility of counter-bundling via strategic alliance by rivals reduces the incentives for merger. In equilibrium, bundling is offered only through strategic alliances.
    Date: 2011–07
  8. By: Juan F. Jimeno (Banco de España); Carlos Thomas (Banco de España)
    Abstract: We compare labor market outcomes under firm-level and sector-level bargaining in a one-sector Mortensen-Pissarides economy with firm-specific productivity shocks. Our main theoretical results are twofold. First, unemployment is lower under firm-level bargaining Second, introducing efficient opting-out of sector-level agreements suffices to bring unemployment down to its level under decentralized bargaining. For an archetypical contintental European calibration, we find that the unemployment rate is about 5 percentage points lower under firm-level bargaining or efficient opting out than under sector-level bargaining.
    Keywords: Collective bargaining, firm-specific shocks, wage compression, unemployment
    JEL: E10 J64
    Date: 2011–12
  9. By: Marin, Dalia; Rousová, Linda
    Abstract: Recent literature on international trade has established that the most productive firms become multinationals. But our data reveal a startling variation in productivity levels of foreign affiliates across the countries in Eastern Europe of the same European multinational parent firms suggesting that not all multinationals transplant their home productivity advantage to the new EU Member States and Emerging Europe. One candidate for this startling difference in productivity levels among foreign affiliates is the ability of European multinationals to transport their business model abroad. This paper examines the conditions under which European multinationals give autonomy to their subsidiaries and delegate authority to them. We also analyse the conditions under which European multinationals transplant their business model to Eastern Europe. We collect original and unique matched parent and affiliate data on the internal organization of 660 German and Austrian parent firms and 2200 of their subsidiaries in Eastern Europe including the former Soviet Union. We test the hypothesis that the ability of European multinationals to transplant their business model to foreign affiliates is determined by the organization of European multinationals on the one hand and the market environment their affiliate firms face in Eastern Europe on the other hand. We show that the business culture of parent firms accounts for about 50 percent of the variation of the organization of subsidiaries, while the market environment of subsidiaries contributes the rest.
    Keywords: International Trade and Organizations; Multinational firm with internal hierarchies; Empirical test of the theory of the firm; Technology transfer to Eastern Europe; Organizational transfer across countries
    JEL: F F23 D21 L22 O1
    Date: 2011–12
  10. By: Jordan SIEGEL; KODAMA Naomi
    Abstract: We address a gap in prior literature on female managerial representation and corporate performance. Prior evidence linking increases in female managerial representation to corporate performance has been surprisingly mixed, due in part to data limitations and methodological difficulties. Using panel data from Japan, we are able to address several of these prior challenges. With the help of a nationally representative sample of Japanese firms covering the 2000s, we find that increases in the female executive ratio, employing at least one female executive, and employing at least one female section chief are associated with increases in corporate profitability in the manufacturing sector. Employing a female executive appears particularly helpful to corporate performance for the Japanese affiliates of North American multinationals. The results are robust to controlling for time effects and company fixed effects and the time-varying use of temporary and part-time employees. Part of the competitive benefit to employing female managers is shown to come from compensation savings, in line with Becker's economic theory of discrimination.
    Date: 2011–12
  11. By: Lechmann, Daniel S. J. (University of Erlangen-Nuremberg); Schnabel, Claus (University of Erlangen-Nuremberg)
    Abstract: Using a large representative German data set and various concepts of self-employment, this paper tests the "jack-of-all-trades" view of entrepreneurship by Lazear (AER 2004). Consistent with its theoretical assumptions we find that self-employed individuals perform more tasks and that their work requires more skills than that of paid employees. In contrast to Lazear's assumptions, however, self-employed individuals do not just need more basic but also more expert skills than employees. Our results also provide only very limited support for the idea that human capital investment patterns differ between those who become self-employed and those ending up in paid employment.
    Keywords: entrepreneurship, self-employed, Germany
    JEL: J23 J24
    Date: 2011–11
  12. By: Gullstrand, Joakim (Department of Economics, Lund University); Olofsdotter, Karin (Department of Economics, Lund University); Thede, Susanna (Department of Economics, Lund University)
    Abstract: We analyze empirically product-price variation across export destinations using detailed firm-product data. Most recent studies using highly disaggregated data emphasize variations in product quality as an explanation as to why firms charge different prices for the same product on different export markets. In this paper, we take an alternative approach and assume that variations in firms' export prices reflect market segmentation and investigate the relationship between price variation and average firm markup. We study an entire supply chain in order to see how price discrimination varies across sectors with different distribution networks. Specifically, we make use of firm-level data for exporting firms in the Swedish food supply chain. The results offer new information about the behavior of exporting firms. Hence, for the food-processing industry, firms with greater ability to discriminate between markets are associated with a higher markup. However, the results also reveal that markups are a complex function of firm characteristics and that the price-setting behavior of firms in the manufacturing sector is not necessarily observed in other sectors of the supply chain.
    Keywords: Markups; Export prices; Price discrimination; Firm-level data
    JEL: D40 F12 F14
    Date: 2011–11–24
  13. By: Kraft, Kornelius (TU Dortmund); Lang, Julia (TU Dortmund)
    Abstract: We analyze the impact of profit sharing on the share of workers receiving training. An effect is plausible because: 1) profit sharing is a credible commitment by firms to reward firm-specific skills acquired by formal or informal training, 2) profit sharing may reduce turnover and increase the returns to training, 3) a common payment for the whole workforce leads to peer group pressure to participate in training courses and raises incentives to help co-workers. In order to eliminate possible selectivity effects, we combine a matching approach with difference-in-differences. We identify the proportion of employees participating in profits and differentiate profit sharing according to the percentage of the workers covered by such remuneration schemes. Using German establishment data we find that profit sharing only has a significant effect on training intensity if the majority of the workforce benefits from it.
    Keywords: profit sharing, training, matching
    JEL: C14 J33 M52 J24
    Date: 2011–11
  14. By: John T. Addison; Alex Bryson; André Pahnke; Paulino Teixeira
    Abstract: This paper depicts and examines the decline in collective bargaining coverage in Germany. Using repeat cross-section and longitudinal data from the IAB Establishment Panel, we show the overwhelming importance of behavioral as opposed to compositional change and, for the first time, document workplace transitions into and out of collective agreeements via survival analysis. We provide estimates of the median duration of coverage, and report that the factors generating entry and exit are distinct and symmetric.
    Keywords: Sectoral and firm agreements, changes in collective bargaining/works council coverage, shift-share analysis, bargaining transitions, survivability
    JEL: J50 J53
    Date: 2011–11
  15. By: Giordani, Paolo (Research Department, Central Bank of Sweden); Jacobson, Tor (Research Department, Central Bank of Sweden); von Schedvin , Erik (CentER - Tilburg University, EBC, and Sveriges Riksbank); Villani, Mattias (Division of Statistics, Department of Computer and Information Science, Linköping University)
    Abstract: We demonstrate improvements in predictive power when introducing spline functions to take account of highly non-linear relationships between firm failure and earnings, leverage, and liquidity in a logistic bankruptcy model. Our results show that modeling excessive non-linearities yields substantially improved bankruptcy predictions, on the order of 70 to 90 percent, compared with a standard logistic model. The spline model provides several important and surprising insights into non-monotonic bankruptcy relationships. We find that low-leveraged and highly profitable firms are riskier than given by a standard model. These features are remarkably stable over time, suggesting that they are of a structural nature.
    Keywords: bankruptcy risk model; micro-data; logistic spline regression; …nancial ratios
    JEL: C41 G21 G33 G38
    Date: 2011–11–01
  16. By: DeVaro, Jed
    Abstract: Applying a simultaneous-equations estimation approach that accounts for both worker and firm behavior, I show that six alternative promotion models can be empirically distinguished to a greater extent than previously thought. I show that classic tournaments, market-based tournaments, and performance standards can be sharply distinguished when promotions induce worker effort. I also show that market-based tournaments with effort choices can be sharply distinguished from those with human capital investments. A key insight is that an empirical test can be based on the “opposing responses” property whereby workers and firms adjust their choice variables in opposite directions when the stochastic component of worker performance changes. Finally, I propose a new approach – also requiring simultaneous equations – for empirically distinguishing between classic tournaments and market-based tournaments with human capital investments, showing that the two models differ in their predictions regarding the average wage between job levels.
    Keywords: tournaments; promotions; relative performance; internal promotion competitions; wage spreads; tests of tournament theory
    JEL: M5 M51 M50
    Date: 2011
  17. By: Dahl, Christian M. (University of Southern Denmark); le Maire, Daniel (University of Copenhagen); Munch, Jakob R. (University of Copenhagen)
    Abstract: This paper studies how decentralization of wage bargaining from sector to firm-level influences wage levels and wage dispersion. We use detailed panel data covering a period of decentralization in the Danish labor market. The decentralization process provides variation in the individual worker's wage-setting system that facilitates identification of the effects of decentralization. We find a wage premium associated with firm-level bargaining relative to sector-level bargaining, and that the return to skills is higher under the more decentralized wage-setting systems. Using quantile regression, we also find that wages are more dispersed under firm-level bargaining compared to more centralized wage-setting systems.
    Keywords: wage bargaining, decentralization, wage dispersion
    JEL: J31 J51 C23
    Date: 2011–11
  18. By: Takanori Adachi (School of Economics, Nagoya University); Noriaki Matsushima (Institute of Social and Economic Research, Osaka University)
    Abstract: This paper studies the welfare effects of third-degree price discrimination under oligopolistic competition with horizontal product differentiation. We derive a necessary and sufficient condition for price discrimination to improve social welfare: the degree of substitution must be sufficiently greater in the "strong" market (where the discriminatory price is higher than the uniform price) than in the "weak" market (where it is lower). It is verified, however, that consumer surplus is never improved; social welfare improves solely due to an increase in the firms' profits.
    Keywords: Third-degree price discrimination, Oligopoly, Social welfare, Horizontal product differentiation, Substitutability, Complementarity
    JEL: D43 L11 L13
    Date: 2011–12
  19. By: Matteo Iacoviello (Federal Reserve Board); Marina Pavan (Universitat Jaume I & LEE)
    Abstract: We study housing and debt in a quantitative general equilibrium model. In the cross-section, the model matches the wealth distribution, the age pro?les of homeownership and mortgage debt, and the frequency of housing adjustment. In the time-series, the model matches the procyclicality and volatility of housing investment, and the procyclicality of mortgage debt. We use the model to conduct two experiments. First, we investigate the consequences of higher individual income risk and lower downpayments, and ?nd that these two changes can explain, in the model and in the data, the reduced volatility of housing investment, the reduced procyclicality of mortgage debt, and a small fraction of the reduced volatility of GDP. Second, we use the model to look at the behavior of housing investment and mortgage debt in an experiment that mimics the Great Recession: we ?nd that countercyclical ?nancial conditions can account for large drops in housing activity and mortgage debt when the economy is hit by large negative shocks.
    Keywords: Housing, Housing Investment, Mortgage Debt, Life-cycle Models, Income Risk, Homeownership, Precautionary Savings, Borrowing Constraints
    JEL: E22 E32 E44 E51 D92 R21
    Date: 2011
  20. By: Giulio Bottazzi (LEM - Laboratory of Economics and Management - Sant'Anna School of Advanced Studies); Giovanni Dosi (LEM - Laboratory of Economics and Management - Sant'Anna School of Advanced Studies); Nadia Jacoby (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne); Angelo Secchi (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne); Federico Tamagni (LEM - Laboratory of Economics and Management - Sant'Anna School of Advanced Studies)
    Abstract: Diverse theories of industry dynamics predict heterogeneity in production efficiency to be the driver of firms' growth, survival and industrial change, either through a direct link between efficiency and growth, or through an indirect effect via profitabilities, as more productive firms can enjoy higher profit margins which, under imperfect capital markets, allow them to invest and grow more. Does the empirical evidence bear such predictions? This paper explores the dynamics of selection and reallocation through an investigation of the productivity-profitability-growth relations at the firm level. Exploiting large panels of Italian and French industrial firms, we find that heterogeneity in efficiencies primarily yield persistent profitability differentials, whereas the relationships of corporate growth with either productivity or profitability appear much weaker, if at all existent. This suggests that selection forces are much less strong than usually assumed. The results robustly applies across different industrial sectors and across the two countries.
    Date: 2011
  21. By: Lommerud, Kjell Erik; Meland, Frode; Straume, Odd Rune
    Abstract: We study how incentives for North-South technology transfers in multinational enterprises are affected by labour market institutions. If workers are collectively organised, incentives for technology transfers are partly governed by firms' desire to curb trade union power. This will affect not only the extent but also the type of technology transfer. While skill upgrading of southern workers benefits these workers at the expense of northern worker welfare, quality upgrading of products produced in the South may harm not only northern but also southern workers. A minimum wage policy to raise the wage levels of southern workers may spur technology transfer, possibly to the extent that the utility of northern workers decline. These conclusions are reached in a setting where a unionised multinational multiproduct firm produces two vertically differentiated products in northern and southern subsidiaries, respectively.
    Keywords: Minimum wages; Multinationals; North-South technology transfer; Trade unions
    JEL: F23 J51 O33
    Date: 2011–11
  22. By: Egger, Hartmut; Kreickemeier, Udo
    Abstract: We develop a general equilibrium two-country model with heterogeneous producers and rent sharing at the firm level due to fairness preferences of workers. We identify two sources of a multinational wage premium. On the one hand, there is a pure composition effect because multinational firms are more productive, make higher profits, and therefore pay higher wages. On the other hand, there is a firm-level wage effect: A multinational firm pays higher wages in its home market than an otherwise identical national firm since it has higher global profits. We analyse how these two sources interact in determining the multinational wage premium in a setting with two identical countries, and show that in this case the wage premium is fully explained by firm characteristics. We then allow for technology differences between countries and find that a residual wage premium exists in the technologically backward country, but not in the advanced country. --
    Keywords: multinational firms,wage premium,heterogeneous firms
    JEL: D31 F12 F15 F16 H25
    Date: 2011
  23. By: Vardan Avagyan; Mercedes Esteban Bravo; Jose Vidal-Sanz
    Abstract: We discuss how trade-in rebates can be used to manage product multigenerational innovation diffusion waves, and study the optimal behavior of the firm controlling the prices and rebates associated to product upgrades. We show how this strategy accelerates the diffusion and can lead to profit increments of about 5%. The strategy is profitable even when the rebate subsidizes the upgrades entirely.
    Keywords: New product diffusion, Successive generations, Trade-in, Upgrades, Optimal strategies
    Date: 2011–11
  24. By: Rosanne Altshuler (Rutgers University, Department of Economics); Alan Auerbach (University of California, Berkeley); Michael Cooper (Department of Treasury, Office of Tax Analysis); Matthew Knittel (Department of Treasury, Office of Tax Analysis)
    Abstract: Recent data on corporate tax losses presents a puzzle this paper attempts to explain: the ratio of losses to positive income was much higher around the recession of 2001 than in earlier recessions, even those of greater severity. Using a comprehensive sample of U.S. corporation tax returns for the period 1982-2005, we explore a variety of potential explanations for this surge in tax losses, taking account of the significant use of executive compensation stock options beginning in the 1990s and recent temporary tax provisions that might have had important effects on taxable income. We find that losses rose because the average rate of return of C corporations fell, rather than because of an increase in the dispersion of returns or an increase in the gap between corporate profits subject to tax and corporate profits as measured by the national income accounts. Our analysis also suggests that the increasing importance of S corporations may help explain the recent experience within the C corporate sector, as S corporations have exhibited adifferent pattern of losses in recent years. However, we can identify no simple explanation for the differing experience of C and S corporations. Our investigation concludes with some new puzzles: why did rates of return of C corporations fall so much early in the decade and why has the incidence of losses among C and S corporations diverged?
    Keywords: corporate taxation, tax losses
    JEL: H25
    Date: 2011–05–18
  25. By: Cantore, C.; Ferroni, F.; León-Ledesma, M A.
    Abstract: We investigate the time varying relation between hours and technology shocks using a structural business cycle model. We propose an RBC model with a Constant Elasticity of Substitution (CES) production function that allows for capital- and labor-augmenting technology shocks. We estimate the model with Bayesian techniques. In the full sample, we find (i) evidence in favor of a less than unitary elasticity of substitution (rejecting Cobb-Douglas) and (ii) a sizable role for capital augmenting shock for business cycles fluctuations. In rolling sub-samples, we document that the transmission of technology shocks to hours worked has been varying over time. We argue that this change is due to the increase of the elasticity of factor substitution. That is, labor and capital became less complementary throughout the sample inducing a change in the sign and size of the response of hours. We conjecture that this change may have been induced by a change in the skill composition of the labor input.
    Keywords: Hours Worked and Business Cycles, Bayesian Methods.
    JEL: E32 E62 C11 C22
    Date: 2011
  26. By: Luc Behaghel (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CREST - Centre de Recherche en Économie et Statistique - INSEE - École Nationale de la Statistique et de l'Administration Économique); Julie Moschion (Melbourne Institute of Applied Economic and Social Research - Melbourne Institute of Applied Economic and Social Research)
    Abstract: In this paper, we provide empirical evidence on the impact of IT diffusion on the stability of employment relationships. We document the evolution of the different components of job instability over a panel of 350 local labor markets in France, from the mid 1970s to the early 2000s. Although workers in more educated local labor markets adopt IT faster, they do not experience any increase in job instability. More specifically, we find no evidence that the faster diffusion of IT is associated with any change in job-to-job transitions, and we find that it is associated with relatively less frequent transitions through unemployment. Overall, the evidence goes against the view that the diffusion of IT has spurred job instability. Combining the local labor market variations with firm data, we argue that these findings can be explained by French firms' strong reliance on training and internal promotion strategies in order to meet the new skills requirement associated with IT diffusion.
    Keywords: Technical change; labor turnover; Skill bias; Job security; Internal labor markets
    Date: 2011–11
  27. By: Hui Tong; Shang-Jin Wei
    Abstract: How does increasing globalization affect corporate transparency? Freer trade represents different facets and in theory has ambiguous effects on corporate transparency. On the one hand, by exposing firms to more product market competition, it could discourage discretionary disclosure. On the other hand, by opening up foreign markets and enhancing firms’ growth opportunities, it may promote more transparency. Rather than simply estimating a net effect, this paper pursues an approach that allows separate estimation of the two potentially opposing channels. We employ three different measures of corporate transparency and track their evolutions for 4061 firms in 49 countries during 1992-2005. By using detailed product-level tariff schedules for these countries, we construct a measure of growth opportunities enabled by foreign tariff liberalizations at the sector-country-year level, and a second measure of globalization-induced product market competition based on a country’s own tariff liberalization (again at the sector–country-year level). We find strong evidence that higher growth opportunities engendered by globalization promotes corporate transparency, especially in industries that depend heavily on external financing. At the same time, we find somewhat weaker evidence that greater product market competition engendered by globalization discourages corporate transparency. The results demonstrate the importance of disentangling the multiple and potentially conflicting effects of globalization.
    JEL: F10 G30
    Date: 2011–12
  28. By: Yildiz, Halis Murat; Ulus, Aysegul
    Abstract: This paper employs an endogenous merger formation approach in a two-country oligopoly model of trade to examine the international linkages between the nature of mergers and tariff levels. Firms sell differentiated products and compete in a Bertrand fashion in product markets. We find two effects playing key roles in determining equilibrium market structure: the tariff saving effect and the protection gain effect. The balance between these two effects implies that, when foreign country practices free trade, unilateral tariff reduction by a domestic country yields international mergers irrespective of the substitutability levels. By contrast, when foreign tariffs are sufficiently high and products are close substitutes, national mergers obtain in the equilibrium. Therefore, the implications of unilateral trade liberalization on the equilibrium market structure depends on the trade regime in foreign country especially when products are close substitutes. Unlike this asymmetric result of unilateral trade liberalization, we find that when bilateral tariffs are sufficiently low, international mergers arise. These results fit well with the fact that global trade liberalization has been accompanied by an increase in international merger activities. Finally, from a welfare perspective, we show that international mergers are preferable to national mergers and thus social and private merger incentives become aligned together as trade gets bilaterally liberalized.
    Keywords: international mergers; national mergers; tariff saving; protection gain
    JEL: F13 F12
    Date: 2011–07–03
  29. By: Liu, Jing; Cao, Shutao
    Abstract: This paper studies the industry productivity dynamics in China’s manufacturing sector from 1998 to 2007, and in particular, explores to what extent the privatization of state-owned enterprises (SOEs) contributes to the aggregate productivity growth. Our results show that, though non-SOEs on average are more productive than SOEs, the average productivity growth among SOEs is greater than the privately-owned firms. Industry concentration, taxation, and credit market all account for this difference in growth between SOEs and non-SOEs. In addition, industry productivity growth is mainly attributed to the growth of non-SOEs, entry of non-SOE firms, and the exit of SOEs. However, non-SOE firms that are transformed directly from SOEs make a small but negative contribution to industry productivity growth.
    Keywords: Productivity Growth, Industry Dynamics, Ownership Change, Reallocation
    JEL: E6 D24 O4
    Date: 2011–04–15
  30. By: Grimes, Arthur (Motu Economic and Public Policy Research)
    Abstract: A transportation investment that materially improves links between centres opens up previously unavailable options for new activities. Traditional cost-benefit analysis does not adequately take account of the value of this option; real options theory must be added to the analysis to evaluate the full benefits. This paper uses a specific example, Auckland’s Harbour Bridge, to motivate the importance of real options analysis. Using illustrative, multi-period models of the real options problem, it highlights how inclusion of real options factors may either increase or decrease the attractiveness of a proposed investment. The models identify situations in which it is optimal to invest even where a standard benefit-cost ratio is less than one.
    Keywords: Transport investment; real options; cost-benefit analysis
    JEL: O18 H43
    Date: 2011–12

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