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on Business Economics |
| By: | Nicola Meccheri (Department of Economics, University of Pisa, Italy); Luciano Fanti (Department of Economics, University of Pisa, Italy) |
| Abstract: | In this paper we study how managerial delegation schemes in a duopoly product market interact with wage decisions taken by a monopoly central (industry-wide) union in the labour market. We analyse a model where, at the first stage, firms’ owners optimally choose for their managers a delegation contract that can be “sales delegation” or “relative profit delegation”; at the second stage, the union fixes the wage for all (non-managerial) workers in the industry; and finally, at the third stage, managers compete in the product market. Interestingly, our results prove to be more varied with respect to findings by the managerial delegation literature with exogenous production costs for firms. Most notably, it is pointed out that, in equilibrium, both firm profitability and welfare outcomes can be superior under both sales delegation and relative profit delegation, depending on various factors such as the degree of product differentiation and the competition regime. |
| Keywords: | sales delegation, relative profit delegation, unionised duopoly, endogenous wage |
| JEL: | J33 J51 L13 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:rim:rimwps:44_12&r=bec |
| By: | Hackl, Franz (Department of Economics, University of Linz); Kummer, Michael E. (Department of Economics, University of Mannheim, and ZEW, Mannheim); Winter-Ebmer, Rudolf (Department of Economics, Johannes Kepler University, Linz, and Institute for Advanced Studies, Vienna, Austria); Zulehner, Christine (Department of Economics, University of Linz, and WIFO, Vienna) |
| Abstract: | We investigate the causal effect of market structure on market performance in the consumer electronics. We combine data from Austria’s largest online site for price comparisons with retail data on wholesale prices provided by a major hardware producer for consumer electronics. We observe input prices of firms, and all their moves in the entry and the pricing game over the whole product lifecycle. Using this information for 70 digital cameras, we generate instrumental variables for the number of firms in the market based on the shops’ entry decisions on other product markets in the past. We find that instrumenting is particularly important for estimating the effect of competition on the markup of the price leader. |
| Keywords: | Retailing, product lifecycle, market structure, market performance, markup, price dispersion |
| JEL: | L11 L13 L81 D43 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:ihs:ihsesp:287&r=bec |
| By: | Gaigne, Carl; Le Mener, Leo |
| Abstract: | In this paper, we set up a simple model that explains the relation between low input price, high exit rates and industrial oncentration. More precisely, we argue that falling input prices force firms with low productivity to exit and induce expansion of more efficient incumbents at the expense of less productive producers. Our model helps reconcile some well‐established empirical results regarding the food processing industry. Indeed, agricultural prices have been declining between the early 1900s until 2006 while, over the same period, concentration and firm productivity have been increasing in the agri‐food industry. |
| Keywords: | Input price, Downstream industry, Entry/exit, Industrial concentration, Firm heterogeneity, Agricultural and Food Policy, Industrial Organization, International Relations/Trade, D24, L11, L25, L66, |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:ags:spaawp:125221&r=bec |
| By: | Jose Antonio Rodriguez-Lopez (Department of Economics, University of California-Irvine) |
| Abstract: | I present a model of offshoring decisions with heterogeneous firms, random adjustment costs, and endogenous markups. The model shows an inverted-U relationship between firm-level productivity and the probability of offshoring; hence, the most productive firms are less likely to offshore than some lower-productivity firms. A tougher competitive environment has two opposing effects on firm-level offshoring likelihood: a Schumpeterian effect--accounting for the negative effect of competition on offshoring profits--and an escape-competition effect--accounting for the effect of competition on the incremental profits from offshoring. A productivity level separates non-offshoring firms according to the dominant effect, with the Schumpeterian effect dominating for the least productive firms. |
| Keywords: | Competition; Offshoring; Heterogeneous firms; Endogenous markups; Adjustment costs |
| JEL: | F12 F23 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:irv:wpaper:111213&r=bec |
| By: | Hubert De La Bruslerie (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine); Imen Latrous (Département de sciences économiques et administratives - Université du Québec à Chicoutimi - Département de sciences économiques et administratives) |
| Abstract: | Debt may help to manage type II corporate agency conflicts because it is easier for controlling shareholders to modify the leverage ratio than to modify their share of capital. A sample of 112 firms listed on the French stock market over the period 1998-2009 is empirically tested. It supports an inverted U-shape relationship between shareholders' ownership and leverage. At low levels of ownership, controlling shareholders use more debt in order to inflate their stake in capital and to resist unfriendly takeovers attempts. When ownership reaches a certain point, controlling shareholders' objectives further converge with those of outside shareholders. Moreover, financial distress will prompt controlling shareholders to reduce the firm's leverage ratio. Empirically, it is shown that the inflection point where the sign of the relationship between ownership and debt changes is around 40%. Debts may help in curbing private appropriation and appears also as a governance variable. |
| Keywords: | Corporate Governance, Private Benefits, Controlling Shareholders, Debt Leverage |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00674250&r=bec |
| By: | Andres, Christian; Fernau, Erik; Theissen, Erik |
| Abstract: | In the German two-tiered system of corporate governance, it is common practice for chief executive officers (CEOs) to become the chairman of the supervisory board of the same company upon retirement. As members of the supervisory board, they are involved in setting the pay for their successors as well as for their former colleagues. We analyze a panel covering 150 listed firms and the period 1998-2007. We show that firms in which a former CEO serves as the chairman of the board of directors pay their executives significantly more. We find no difference in the compensation for the members of the supervisory board. Thus, former CEOs apparently exert their influence to increase the pay of their former colleagues and their successor, but not their own pay. -- |
| Keywords: | executive compensation,board structure,two-tiered board |
| JEL: | G30 G38 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cfrwps:1202&r=bec |
| By: | Ben Ferrett (School of Business and Economics, Loughborough University, UK) |
| Abstract: | The substantial within-industry variation in firm productivity typically observed in the data suggests that there is ample scope for catch-up by laggard firms. We analyse the normative effects of such catch-up. In the short run, where firms’ process technologies are fixed, catch-up can reduce social welfare if the initial unit-cost gap between firms is sufficiently large (the Lahiri/Ono effect). However, in the long run, where firms invest in process R&D to maximize profits, social welfare jumps upwards following catch-up if it causes the major firm’s R&D spending lead to grow. Both qualitative insights appear quite general. |
| Keywords: | asymmetric duopoly, catch-up, social welfare, process R&D. |
| JEL: | D61 L13 O33 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:lbo:lbowps:2012_05&r=bec |
| By: | Ben Ferrett (School of Business and Economics, Loughborough University, UK) |
| Abstract: | Foreign-owned firms exhibit widely-documented productivity advantages over domestic firms. Building on this stylized fact, we model the relationships between FDI flows and productivity differences across firms within an international oligopoly. Industrial structure is determined endogenously, and both greenfield and acquisition-FDI are allowed for. The technology gap between firms interacts with localized spillovers to determine greenfield-FDI incentives and with within-firm technology transfer to determine the profitability of acquisition-FDI. Greenfield and acquisition-FDI also affect the profitability of entry into the industry differently. We contrast our results with the insights of Dunning’s well-known OLI framework on the causes of FDI flows. |
| Keywords: | acquisition-FDI, greenfield-FDI, technology transfer, spillovers, foreign-owned firms’ productivity advantages |
| JEL: | F23 L13 O33 |
| Date: | 2012–04 |
| URL: | http://d.repec.org/n?u=RePEc:lbo:lbowps:2012_03&r=bec |
| By: | Bruno Biais (Toulouse School of Economics (CNRS-CRM, IDEI), 21 Allée de Brienne, 31000 Toulouse, France.); Florian Heider (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Marie Hoerova (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | We analyze optimal hedging contracts and show that although hedging aims at sharing risk, it can lead to more risk-taking. News implying that a hedge is likely to be loss-making undermines the risk-prevention incentives of the protection seller. This incentive problem limits the capacity to share risks and generates endogenous counterparty risk. Optimal hedging can therefore lead to contagion from news about insured risks to the balance sheet of insurers. Such endogenous risk is more likely to materialize ex post when the ex ante probability of counterparty default is low. Variation margins emerge as an optimal mechanism to enhance risk-sharing capacity. Paradoxically, they can also induce more risk-taking. Initial margins address the market failure caused by unregulated trading of hedging contracts among protection sellers. JEL Classification: G21, G22, D82. |
| Keywords: | Insurance, moral hazard, counterparty risk, margin requirements, derivatives. |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20121413&r=bec |
| By: | Eichberger, Jürgen; Mueller-Langer, Frank |
| Abstract: | The regulation of vertical relationships between firms is the subject of persistent legal and academic controversy. The literature studying vertical trade relationships seems to assume that an upstream monopolist prefers downstream competition over exclusive distribution arrangements. We derive precise conditions for when an upstream monopolist prefers competing distribution systems over exclusive distribution in the downstream market. We also show that the welfare effects of downstream competition are ambiguous. A downstream oligopoly may have negative welfare properties compared to a downstream monopoly. |
| Keywords: | Exclusive distribution; Competing distribution; Vertical foreclosure; Cournot competition |
| JEL: | F10 L42 D4 L12 |
| Date: | 2012–05–24 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:39691&r=bec |
| By: | George Alessandria; Joseph Kaboski; Virgiliu Midrigan |
| Abstract: | The large, persistent fluctuations in international trade that can not be explained in standard models by changes in expenditures and relative prices are often attributed to trade wedges. We show that these trade wedges can reflect the decisions of importers to change their inventory holdings. We find that a two-country model of international business cycles with an inventory management decision can generate trade flows and wedges consistent with the data. Moreover, matching trade flows alters the international transmission of business cycles. Specifically, real net exports become countercyclical and consumption is less correlated across countries than in standard models. We also show that ignoring inventories as a source of trade wedges substantially overstates the role of trade wedges in business cycle fluctuations. |
| JEL: | F41 F44 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:18191&r=bec |
| By: | Hüschelrath, Kai; Müller, Kathrin |
| Abstract: | We study the competitive effects of five liquidations and six mergers in the domestic U.S. airline industry between 1995 and 2010. Applying fixed effects regression models we find that route exits due to liquidation lead to substantially larger price increases than mergerrelated exits. Within the merger category, our analysis reveals significant price increases on all affected routes immediately after the exit events. In the medium and long-run, however, realized merger efficiencies and entry-inducing effects are found to be strong enough to drive prices down to pre-exit levels. -- |
| Keywords: | airline industry,exit,liquidation,merger,efficiencies,entry-inducing effects |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:12037&r=bec |
| By: | Marko Melolinna (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | This paper studies oil market and other macroeconomic shocks in a structural vector au- toregression with sign restrictions. It introduces a new indicator for oil demand, and uniquely, performs a sign restriction set-up with a penalty function approach in an oil market vector au- toregression. The model also allows for macroeconomic shocks in the US. The results underline the importance of the source of an oil shock for its macroeconomic consequences. Oil supply shocks have been less relevant in driving real oil prices, and had less of an e¤ect on US ination than demand shocks. Overall, the e¤ects of oil shocks on US real activity have been relatively limited, as also highlighted by a counterfactual experiment of recent oil market developments. JEL Classification: C01, C32, E32 |
| Keywords: | oil demand shocks, oil supply shocks, business cycle, Bayesian econometrics |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20121432&r=bec |
| By: | Giacomo de Giorgi; Luca Gambetti |
| Abstract: | We study consumption heterogeneity over the business cycle. Using household panel data from 1984 to 2010 in the US we find that the welfare cost of the business cycle is non-negligible, once agents heterogeneity is taken into account, and sums to about 1% of yearly consumption. This is due to the structure of comovements between the different parts of the consumption distribution, in particular the tails are highly volatile and negatively related to each other. We also find that business cycle fluctuations originating from exogenous financial shocks only hit the top end of the consumption distribution and therefore reduce consumption inequality. |
| Keywords: | Consumption, Heterogeneity, Aggregate Shocks, Structural Factor Model, FAVAR |
| JEL: | E21 E63 D12 C3 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:646&r=bec |
| By: | Jordi Brandts; Gary Charness; Matthew Ellman |
| Abstract: | We study experimentally how the ability to communicate affects the frequency and effectiveness of flexible and inflexible contracts in a bilateral trade context where sellers can adjust trade quality after observing a post-contractual cost shock and a discretionary buyer transfer. In the absence of communication, we find that rigid contracts are more frequent and lead to higher earnings for both buyer and seller. By contrast, in the presence of communication, flexible contracts are much more frequent and considerably more productive, both for buyers and sellers. Also, both buyer and seller earn considerably more from flexible with communication than rigid without communication. Our results show quite strongly that communication, a normal feature in contracting, can remove the potential cost of flexibility (disagreements caused by conflicting perceptions). We offer an explanation based on social norms. |
| Keywords: | Communication, contracts, perceptions and cooperation. |
| JEL: | C91 D03 D63 J41 D86 |
| Date: | 2012–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:aub:autbar:908.12&r=bec |
| By: | Marczak, Martyna; Gómez, Víctor |
| Abstract: | This article provides new insights into the cyclical behavior of consumer and producer real wages in the USA and Germany. We apply two methods for the estimation of the cyclical components from the data: the approach based on the structural time series models and the ARIMA-model-based approach combined with the canonical decomposition and a band-pass filter. We examine the extracted cycles drawing on two wavelet concepts: wavelet coherence and wavelet phase angle. In contrast to the analysis in the time or frequency domains, wavelet analysis allows for the identification of possible changes in cyclical patterns over time. From the findings of our study, we can infer that the USA and Germany differ with respect to the lead-lag relationship of real wages and the business cycle. In the USA, both real wages are leading the business cycle in the entire time interval. The German consumer real wage is, on the other hand, lagging the business cycle. For the German producer real wage, the lead-lag pattern changes over time. We also find that real wages in the USA as well in Germany are procyclical or acyclical until 1980 and countercyclical thereafter. -- |
| Keywords: | real wages,business cycle,wavelet analysis,wavelet phase angle,trend-cycle decomposition,structural time series model,ARIMA-model-based approach,band-pass filter |
| JEL: | E32 C22 C32 J30 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fziddp:502012&r=bec |
| By: | Laure ATHIAS; Raphael SOUBEYRAN |
| Abstract: | This article investigates the allocation of demand risk within an incomplete contract frame- work. We consider an incomplete contractual relationship between a public authority and a private provider (i.e. a public-private partnership), in which the latter invests in non-verifiable cost-reducing efforts and the former invests in non-verifiable adaptation efforts to respond to changing consumer demand over time. We show that the party that bears the demand risk has fewer hold-up opportunities and that this leads the other contracting party to make more effort. Thus, in our model, bearing less risk can lead to more effort, which we describe as a new example of ‘counter-incentives’. We further show that when the benefits of adaptation are important, it is socially preferable to design a contract in which the demand risk remains with the private provider, whereas when the benefits of cost-reducing efforts are important, it is socially preferable to place the demand risk on the public authority. We then apply these results to explain two well-known case studies. |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:lam:wpaper:12-20&r=bec |
| By: | Shaun K. Roache |
| Abstract: | Shocks to aggregate activity in China have a significant and persistent short-run impact on the price of oil and some base metals. In contrast, shocks to apparent commodity-specific consumption (in part reflecting inventory demand) have no effect on commodity prices. China’s impact on world commodity markets is rising but, perhaps surprisingly, remains smaller than that of the United States. This is mainly due to the dynamics of real activity growth shocks in the U.S, which tend to be more persistent and have larger effects on the rest of the world. |
| Keywords: | China , Commodity markets , Demand , External shocks , Spillovers , Supply , |
| Date: | 2012–05–08 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:12/115&r=bec |
| By: | Maximo Camacho; Jaime Martinez-Martin |
| Abstract: | This paper proposes two refinements to the single-index dynamic factor model developed by Aruoba and Diebold (AD, 2010) to monitor US economic activity in real time. First, we adapt the model to include survey data and financial indicators. Second, we examine the predictive performance of the model when the goal is to forecast GDP growth. We find that our model is unequivocally the preferred alternative to compute backcasts. In nowcasting and forecasting, our model is able to forecast growth as well as AD and much better than several baseline alternatives. In addition, we find that our model could be used to predict more accurately the US business cycles. |
| Keywords: | real-time forecasting, US GDP, business cycles. |
| JEL: | E32 C22 E27 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:bbv:wpaper:1210&r=bec |
| By: | Juan-Pablo Montero; Esperanza Johnson |
| Abstract: | We study the static and dynamic implications of non-linear pricing schemes (i.e., bundling) for otherwise unrelated products but for multimarket contact. Bundling is always present in competition but unlikely in a cartel agreement. Although it brings extra profits to the cartel –sometimes charging a premium rather than a discount for the bundle–, bundling makes deviation from the agreement far more attractive. Depending on the correlation of consumers’ preferences, this deviation effect is either reinforced with milder punishments (for positive correlations) or partially offset with harsher punishments (for negative correlations). The deviation effect is so strong that it even dominates a zero-profit (pure-bundling) punishment. |
| Keywords: | multimarket contact, conglomerate merger, bundling, collusion |
| JEL: | L13 L41 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ioe:doctra:420&r=bec |
| By: | John Addison (University of South Carolina and GEMF); Paulino Teixeira (University of Coimbra, Portugal and GEMF); Katalin Evers (Institut für Arbeitsmarkt- und Berufsforschung, Bundesagentur für Arbeit); Lutz Bellmann (Friedrich-Alexander-Universität Erlangen-Nürnberg and Institut für Arbeitsmarkt- und Berufsforschung, Bundesagentur für Arbeit) |
| Abstract: | It is sometimes claimed that the coverage of collective bargaining in Germany is considerably understated because of orientation, a process whereby uncovered firms profess to shadow the wages set under sectoral bargaining. Yet importantly, at a time when collective bargaining proper has been in retreat, little is known of corresponding trends in the frequency of indirect coverage, still less of the degree to which wages are aligned in practice. Using nationally representative data for 2000–2010, this paper charts the extent of orientation in the uncovered sector, and tracks average wages across bargaining regimes as well as changes in wages from switches in regime. It is reported that orientation is growing with the decline in sectoral bargaining and that orienting firms do pay higher wages than their counterparts in the collective bargaining free zone. Yet in neither case – frequency nor remuneration – is the degree of ‘compensation’ recorded other than partial. |
| Keywords: | Orientation, Erosion of Collective Bargaining, Uncovered Sector, Sectoral Bargaining, Wages, Regime Shifts. |
| JEL: | J31 J5 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:gmf:wpaper:2012-07&r=bec |
| By: | Anania, Giovanni; Nistico, Rosanna |
| Abstract: | Price dispersion, i.e. a homogeneous product being sold at different prices by different sellers, is among the most replicated findings in empirical economics. The paper assesses the extent and determinants of spatial price dispersion for 14 perfectly homogeneous food products in more than 400 retailers in a market characterized by the persistence of a large number of relatively small traditional food stores, side by side large supermarkets. The extent of observed price dispersion is quite high, suggesting that monopolistic competition prevails as a result of the heterogeneity of consumers and services offered. When prices in an urban area (where the spatial concentration of sellers is much higher and consumer search costs significantly lower) are compared with those in smaller towns and rural areas, differences in search costs and the potentially higher degree of competition do not yield lower prices; quite the contrary, they are, on average, higher in the urban area for 11 of the 14 products considered. Supermarkets proved to be often, but not always, less expensive than traditional retailers, although average savings from food shopping at supermarkets were extremely low. Finally, the results of the study suggest that retailers have different pricing strategies; these differences emerge both at the firm level and for supermarkets within the same chain. The results presented in the paper suggest that what is important in explaining price dispersion is the contemporaneous heterogeneity of retailers (in terms of services) and consumers (in terms of search and shopping preferences), which makes it possible for a monopolistic competition structure of the market to emerge and for small traditional food retailers to remain in business. |
| Keywords: | price dispersion, retail pricing, food markets., Agribusiness, Consumer/Household Economics, Demand and Price Analysis, Industrial Organization, L81, D83, D43, Q13., |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iaae12:125594&r=bec |
| By: | Â Leif Brandes (Department of Business Administration, University of Zurich); Â Marc Brechot (Department of Business Administration, University of Zurich); Â Egon Franck (Department of Business Administration, University of Zurich) |
| Abstract: | We introduce agency concerns to social capital theory and predict that managers can use individual social capital to reduce personal effort costs, which is not in the best interest of the firm. To test this prediction, we collect data on all 8,019 hiring decisions from general managers in the National Basketball Association between 1981 and 2011. We find that managers have a clear preference for hiring players through social ties. The probability that a manager hires players from an NBA franchise to which he is socially tied is 27.6% higher than for an untied franchise. To isolate the motivation for this behavior, we complement our data with information on the sporting performance of teams. In line with agency theory, we find that the hiring of players through social ties reduces team performance. The effect is large: on average, each social-tie player reduces team winning percentage by 5.4%. Overall, this paper documents first empirical evidence that decision makers’ use of individual social capital can lead to reduced firm-level performance.  |
| Keywords: | Social Networks, Social Capital, Principal-Agent-Relationship, Worker Allocation, Basketball |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:iso:wpaper:0159&r=bec |
| By: | Philip Vermeulen (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany and CEPR.) |
| Abstract: | The survey based monthly US ISM production index and Eurozone manufacturing PMI output index provide early information on industrial output growth before the release of the official industrial production index. I use the Carlson and Parkin probability method to construct monthly growth estimates from the qualitative responses of the US ISM production index and the Eurozone manufacturing PMI output index. I apply the method under different assumptions on the cross-sectional distribution of output growth using the uniform, logistic and Laplace distribution. I show that alternative distribution assumptions lead to very similar estimates. I also test the performance of the different growth estimates in an out of sample forecasting exercise of actual industrial production growth. All growth estimates beat a simple autoregressive model of output growth. Distribution assumptions again matter little most of the time except during the financial crisis when the estimates constructed using the Laplace distributional assumption perform the best. My findings are consistent with recent findings of Bottazzi and Sechi (2006) that the distribution of firm growth rates has a Laplace distribution. JEL Classification: C18, E27. |
| Keywords: | Diffusion index, forecasting, purchasing managers’ surveys, ISM, PMI, qualitative response data, Carlson-Parkin method |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20121417&r=bec |
| By: | Nattavudh Powdthavee; Yohanes E. Riyanto |
| Abstract: | We investigated experimentally whether people can be induced to believe in a non-existent expert, and subsequently pay for what can only be described as transparently useless advice about future chance events. Consistent with the theoretical predictions made by Rabin (2002) and Rabin and Vayanos (2010), we show empirically that the answer is yes and that the size of the error made systematically by people is large. |
| Keywords: | Behavioral finance, hot-hand, random streak, expertise, information |
| JEL: | C91 D03 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1153&r=bec |
| By: | Massimo Del Gatto (G.d’Annunzio University and CRENoS); Filippo di Mauro (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Joseph Gruber (Federal Reserve Board.); Benjamin Mandel (Federal Reserve Board.) |
| Abstract: | We analyze the decline in the U.S. share of world merchandise exports against the backdrop of a model-based measure of competitiveness. We preliminarily use constant market share analysis and gravity estimations to show that the majority of the decline in export shares can be associated with a declining share of world income, suggesting that the dismal performance of the U.S. market share is not a sucient statistic for competitiveness. We then derive a computable measure of country-sector specic real marginal costs (i.e. competitiveness) which, insofar it is inferred from actual trade ows, is referred to as 'revealed'. Brought to the data, this measure reveals that most U.S. manufacturing industries are losing momentum relative to their main competitors, as we nd U.S. revealed marginal costs to grow by more than 38% on average. At the sectoral level, the "Machinery" industry is the most critical. JEL Classification: F12, F17, F19. |
| Keywords: | Productivity, competitiveness, export shares, marginal costs, rm heterogeneity, rm selection, gravity equation, trade costs. |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20121443&r=bec |