nep-bec New Economics Papers
on Business Economics
Issue of 2012‒09‒09
nineteen papers chosen by
Christian Calmes
Universite du Quebec en Outaouais

  1. The Firm's Management in Production: Management, Firm and Time Effects in an Indian Ocean Tuna Fishery By François-Charles Wolff; Dale Squires; Patrice Guillotreau
  2. Housing Dynamics over the Business Cycle By Kydland, Finn; Rupert, Peter; Sustek, Roman
  3. Promotion policy, wage and firm size By Zax, Ori
  4. International Trade, Offshoring and Heterogeneous Firms By Richard Baldwin; Toshihiro Okubo
  5. Disaggregating the international business cycle By Gilhooly, Robert; Weale, Martin; Wieladek, Tomasz
  6. Strategic delegation in price competition By Güth, Werner; Pull, Kerstin; Stadler, Manfred
  7. From Living Well to Working Well: Raising Canada's Performance in Non-residential Investment By Benjamin Dachis; William B.P. Robson
  8. Coase meets Tarski: New Insights from Coase's Theory of the Firm By Tomoo Kikuchi; Kazuo Nishimura; John Stachurski
  9. Does workers’ control affect firm survival? Evidence from Uruguay By Gabriel Burdin
  10. Employee referral, social proximity and worker discipline By Dhillon, Amrita; Iversen, Vegard; Torsvik, Gaute
  11. Deconstructing Growth - A Business Cycle Accounting Approach with application to BRICs By Suparna Chakraborty; Keisuke Otsu
  12. Strategy Formulation Approach, Industry Factors, Competition and the Notion of Learning Organization: Evidences from KAO Corporation. By Dissanayake, D.M.N.S.W.
  13. Firms' use of FTA schemes in exporting and importing : is there a two-way relationship? By Hayakawa, Kazunobu
  14. Quality Differentiation with Flavors: Demand Estimation of Unobserved Attributes By Daniel Toro-Gonzalez; Jia Yan; Karina Gallardo; Jill McCluskey
  15. Different Types of Firms, Products, and Directions of Trade: The Case of the People’s Republic of China By Lee, Hyun-Hoon; Park, Donghyun; Wang, Jing
  16. Noncooperative Oligopoly in Markets with a Continuum of Traders: A Limit Theorem By Busetto, Francesca; Codognato, Giulio; Ghosal, Sayantan
  17. Industrial Espionage with a Noisy Intelligence By Yair Tauman; Alex Barrachina
  18. Exports, R&D and Productivity in German Business Services Firms: A test of the Bustos-model By Alexander Vogel; Joachim Wagner
  19. A Spatial Econometric Analysis of the Effect of Vertical Restraints and Branding on Retail Gasoline Pricing By Stephen Hogg; Stan Hurn; Stuart McDonald; Alicia Rambaldi

  1. By: François-Charles Wolff (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272, INED - Institut National d'Etudes Démographiques Paris - INED); Dale Squires (National Marine Fisheries Service - University of California, San Diego); Patrice Guillotreau (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272)
    Abstract: The firm's management in production is a critical, but unobserved input. Within a panel data framework, the firm's management and firm effects have to date been conflated. Exploiting variability in the managerial dimension, this paper identifies the firm's management from firm and time effects in a production function using a three-way fixed effect model and a unique panel data set tracking multiple managers for each firm in each year for an industry over 27 years. We also allow for time-varying firm management through learning. The model is applied to the French purse-seine fleet harvesting tunas in the Indian Ocean. We find that fishing hours and number of sets on floating objects and on free-swimming schools explain more than 70% of variation in tuna catches over the period. The skipper and vessel fixed effects have a rather similar influence (around 5% each). Skipper learning-by-doing as measured by experience and job tenure plays no significant role, meaning that managerial ability is time-invariant in this industry.
    Keywords: Firm's management ; firm effect ; management effect ; time effect ; tuna fisheries
    Date: 2012–08–31
  2. By: Kydland, Finn; Rupert, Peter; Sustek, Roman
    Abstract: Over the U.S. business cycle, fluctuations in residential investment are well known to systematically lead GDP. These dynamics are documented here to be specific to the U.S. and Canada. In other developed economies residential investment is broadly coincident with GDP. Nonresidential investment has the opposite dynamics, being coincident with or lagging GDP. These observations are in sharp contrast with the properties of nearly all business cycle models with disaggregated investment. Including mortgages and interest rate dynamics aligns the theory more closely with U.S. observations. Longer time to build in housing construction makes residential investment coincident with output.
    Keywords: Economics, General, Economics, Other, residential investment, nonresidential investment, business cycle, mortgages, time to build
    Date: 2012–08–01
  3. By: Zax, Ori
    Abstract: In contrast to the predictions of conventional economic theory, it is well documented that similar workers receive wages positively correlated with the size of the firm employing them. To explain these findings the author augments the Waldman framework (Job Assignments, Signaling, and Efficiency, 1984) by adding a size variable and construct a dynamic model of promotion and workers' transitions where the firms' competition over workers is via the promotion policy and the wage levels. In equilibrium, managers in larger firms are on average better, thus commanding and receiving a higher wage than their counterparts in smaller firms, while the laborers of the larger firms receive higher wages to compensate them for the lower promotion rates in such firms. Hence the wage-size correlation is shown to be consistent with conventional economic theory in a large class of plausible environments. --
    Keywords: Firm size and wages,promotion decisions,hierarchies
    JEL: J30 J31 M51
    Date: 2012
  4. By: Richard Baldwin (Graduate Institute, Geneva); Toshihiro Okubo (Faculty of Economics, Keio University)
    Abstract: Recent trade models determine the equilibrium distribution of firm-level efficiency endogenously and show that freer trade shifts the distribution towards higher average productivity due to entry and exit of firms. These models ignore the possibility that freer trade also alters the firm-size distribution via international firm migration (offshoring); firms must, by assumption, produce in their 'birth nation.' We show that when firms are allowed to switch locations, new productivity effects arise. Freer trade induces the most efficient small-nation firms to move to the large nation. The big country gets an 'extra helping' of the most efficient firms while the small nation's firm-size distribution is truncated on both ends. This reinforces the big-nation productivity gain while reducing or even reversing the small-nation productivity gain. The small nation is nevertheless better off allowing firm migration.
    Date: 2012–08
  5. By: Gilhooly, Robert (Monetary Policy Committee Unit, Bank of England); Weale, Martin (Monetary Policy Committee Unit, Bank of England); Wieladek, Tomasz (Monetary Policy Committee Unit, Bank of England)
    Abstract: This paper investigates the international business cycle with new sector level data on hours and output for Canada, Germany, France, Italy, the United Kingdom and the United States from 1992 Q1 to 2011 Q3. We estimate a Bayesian dynamic common factor model on this disaggregate data to decompose the quarterly growth rates of output, hours worked and labour productivity into contributions from global, country, sector and idiosyncratic factors. During the ‘Great Recession’ our results suggest that the global factor became the most important determinant of output, hours and labour productivity growth. Before the ‘Great Recession’, on the other hand, the global factor was not very important; country and idiosyncratic factors were the dominant influences on output, hours and productivity; sector factors never matter very much.
    Keywords: Labour productivity; international business cycles; dynamic common factor model
    JEL: F44
    Date: 2012–08–17
  6. By: Güth, Werner; Pull, Kerstin; Stadler, Manfred
    Abstract: We study price competition in heterogeneous markets where price decisions are delegated to agents. Principals implement a revenue sharing scheme to which agents react by commonly charging a sales price. The results of our model exemplify the importance of both intrafirm- and interfirm interactions of principals and agents in competition. We show that price delegation can increase or decrease the firms' surplus depending on the heterogeneity of the market and the number of agents employed by the firms. --
    Keywords: Strategic delegation,Agency theory,Revenue sharing
    JEL: C72 L22 M52
    Date: 2012
  7. By: Benjamin Dachis (C.D. Howe Institute); William B.P. Robson (C.D. Howe Institute)
    Abstract: Investment in plant and equipment per worker by Canadian businesses is picking up relative to counterparts elsewhere after years of underperformance. Canada’s relative improvement owes much to outperformance by resource-rich provinces, Newfoundland and Labrador being the most recent star, while Ontario continues to slip. Policies that increase competitive pressures to invest and remove biases against non-residential investment could boost capital spending by businesses and improve Canadian workers’ prospects for higher incomes in the future.
    Keywords: Tools for Workers, Canada, non-residential investment, business investment
    JEL: E22 E23
    Date: 2012–08
  8. By: Tomoo Kikuchi (Department of Economics, National University of Singapore); Kazuo Nishimura (Institute of Economic Research, Kyoto University); John Stachurski (Research School of Economics, The Australian National University)
    Abstract: This paper formulates a model embedding the key ideas from Ronald Coase’s famous essay on the theory of the firm in a simple competitive equilibrium setting with anarbitrary number of firms. The model studies the structure of production when transaction costs and diminishing returns to management are treated as given. In addition to recovering Coase’s main insights as equilibrium conditions, the model yields many new predictions on prices, firm boundaries and division of the value chain.
    Keywords: Transaction costs, vertical integration, production chains
    JEL: D02 D21 L11 L23
    Date: 2012–08
  9. By: Gabriel Burdin (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía / University of Siena (Italia). Department of Economics.)
    Abstract: Worker-managed firms (WMFs) represent a marginal proportion of total firms and aggregate employment in most countries. The bulk of firms in real economies is ultimately controlled by capital suppliers. Different theoretical explanations suggest that WMFs are prone to failure in competitive environments. Using a panel of Uruguayan firms based on social security records and including the entire population of WMFs over the period January 1997-July 2009, I present new evidence on worker managed firms´ survival. I find that the hazard of exit is 24%-38% lower for WMFs than for conventional firms. This result is robust to alternative estimation strategies based on semi-parametric and parametric frailty duration models that impose different distributional assumptions about the shape of the baseline hazard and allow to consider firm-level unobserved heterogeneity. The evidence suggests that the marginal presence of WMFs in market economies can hardly be explained by the fact that these organizations exhibit lower survival chances than conventional firms. This paper adds to the literature on labor-managed firms, shared capitalism and to the industrial organization literature on firm survival.
    Keywords: labor-managed firms, capitalist firms, survival analysis.
    JEL: P13 P51 C41
    Date: 2012–05
  10. By: Dhillon, Amrita (University of Warwick); Iversen, Vegard (University of Manchester); Torsvik, Gaute (University of Bergen)
    Abstract: We study ex-post hiring risks in low income countries with limited legal and regulatory frameworks. In our theory of employee referral, the new re- cruit internalises the rewards and punishments of the in-house referee meted out by the hiring firm. This social mechanism makes it cheaper for the rm to induce worker discipline. The degree of internalization depends on the un- observed strength of the endogenous social tie between the referee and the recruit. When the referee's utility is increasing in the strength of ties, referee workplace incentives do not matter and referee and employer incentives are aligned, in this case industries and jobs with high costs of opportunism and where dense kinship networks can match the skill requirements of employers will have clusters of close family and friends, they will show a high incidence of referrals rather than anonymous hiring and will show a wage premium to referred workers matched by their higher productivity. This no longer applies if the referee's utility is decreasing in the strength of ties: referrals are then more costly for firms, they will be used less frequently by employers and will require higher referee wages (or status). We illustrate how these insights add to our understanding of South-Asian labour markets.
    Keywords: Efficiency wage Contracts, Moral hazard, Referee incentives, Referrals, Networks, Strength of ties, Spot market
    Date: 2012
  11. By: Suparna Chakraborty; Keisuke Otsu
    Abstract: What are the economic mechanisms that account for sudden growth spurts? Are these mechanisms similar across episodes? Focusing on the economic resurgence of the BRICs over the last decade, we employ the Business Cycle Accounting methodology developed by Chari, Kehoe and McGrattan (2007) to address these questions. Our results highlight that while efficiency wedges do contribute in a large part to growth, especially in Brazil and Russia, there is an increasing importance of investment wedge especially in the late 2000s, noted in China and India. The results are typically related to the stages of development with Brazil and Russia coming off a crisis to grow in the 2000s, while India and China were already on a stable growth path. Our conclusions are robust to alternative methodological extensions where we allow shocks to the trend component of efficiency as opposed to traditional shocks to the cyclical component, as well as to standard modifications where we allow for investment adjustment costs. Relating improvements in wedges to institutional and financial reforms, we find that financial development and improvements in effective governance in BRICs are consistent with improvements in investment and efficiency wedges that led to growth.
    Keywords: BRIC; business cycle accounting; efficiency; market frictions; trend shocks; investment adjustment costs
    JEL: E32
    Date: 2012–08
  12. By: Dissanayake, D.M.N.S.W.
    Abstract: Particularly this report defines the strategic aspects of the KAO Corporation in Japan. The KAO Corporation is one of the leading consumer product providers in the Japanese market. Though the company exists in the FMCG industry, it can be stated that the company has attained a competitive advantage over the existing players in the market. At the outset the report defines a clear introduction with regards to the company philosophy. The activities of the business and the market position of the company. Following, a clear understanding has been provided with regards to the company strategic formulation. And the steps of the strategic formulation have also been provided. And predominantly, the report encompasses an industry analysis. Moving along with the report, the learning has been defined with regards to the company perspective, since the company constantly engaging with the notion or learning organization. Last but not the least the report defines how the company has engaged with the idea of learning organization.
    Keywords: Competition; Learning organization; Strategy formulation
    JEL: M00
    Date: 2012–08–29
  13. By: Hayakawa, Kazunobu
    Abstract: In this paper, we examine the roles of firm size in the use of FTA schemes in exporting and importing. Also, it is investigated as to whether FTA users in importing (exporting) are more likely to use FTA schemes in exporting (importing). To do that, we employed a unique survey in which the detailed information on FTA use is available for Japanese affiliates in ASEAN. Our findings are summarized as follows. First, firm size matters in the use of FTA schemes only in exporting, not in importing. Second, the past experience of FTA use in exporting (importing) does not help firms use the FTA schemes in importing (exporting). Thus, it is necessary to assist firms to use FTA schemes in exporting even if they are already using FTA schemes in importing.
    Keywords: International trade, FTA, International economic integration, Micro data, Firm size
    JEL: F15 F53 O53
    Date: 2012–08
  14. By: Daniel Toro-Gonzalez; Jia Yan; Karina Gallardo; Jill McCluskey (School of Economic Sciences, Washington State University)
    Abstract: This article estimates the demand for mint-flavored gum products using grocery store sales data and accounting for consumers’ valuation of quality. Unobserved product attributes, such as flavor quality, are important elements to consider when estimating the demand for gum. The estimation results suggest that gum is an inelastic product. A positive relationship between willingness to pay and unobserved quality was identified, implying that gum industry should be able to command a premium for higher quality mint flavored products.
    Keywords: Quality Differentiation, Unobserved Product Attributes, Demand Estimation, Gum
    JEL: C61 C62 D92
    Date: 2012–08
  15. By: Lee, Hyun-Hoon (Department of International Trade and Business); Park, Donghyun (Asian Development Bank); Wang, Jing (Department of International Trade and Business)
    Abstract: Using highly disaggregated, Harmonized System (HS) 8-digit, product-category level data collected by the People’s Republic of China’s (PRC) Customs Office for 2000 and 2008, we perform an in-depth anatomy of the PRC's trade in manufactured goods. First, we distinguish between foreign firms and domestic firms, with the latter further divided into private firms and public firms. Second, we distinguish products as either final goods or intermediate goods. Third, we look at not only the PRC's exports but also its imports, and test for the relative importance of the extensive margin—number of goods—versus the intensive margin—the amount traded per good. Fourth, we estimate gravity equations from the perspective of dynamics utilizing a dynamic adjustment model. Overall, our analysis yields a number of new stylized facts and generates some interesting puzzles about the PRC's exports and imports.
    Keywords: People’s Republic of China; intermediate goods; fragmentation; foreign enterprises; firm heterogeneity
    JEL: F14 F21 F23
    Date: 2012–08–01
  16. By: Busetto, Francesca (Dipartimento di Scienze Economiche e Statistiche, Universitµ a degli Studi di Udine); Codognato, Giulio (Dipartimento di Scienze Economiche e Statistiche, Universitµ a degli Studi di Udine); Ghosal, Sayantan (Department of Economics, University of Warwick)
    Abstract: In this paper, in an exchange economy with atoms and an atomless part, we analyze the relationship between the set of the Cournot-Nash equilibrium allocations of a strategic market game and the set of the Walras equilibrium allocations of the exchange economy with which it is associated. In an example, we show that, even when atoms are countably infinite, Cournot-Nash equilibria yield different allocations from the Walras equilibrium allocations of the underlying exchange economy. We partially replicate the exchange economy by increasing the number of atoms without affecting the atomless part while ensuring that the measure space of agents remains ¯nite. We show that any sequence of Cournot-Nash equilibrium allocations of the strategic market game associated with the partially replicated exchange economies approximates a Walras equilibrium allocation of the original exchange economy. JEL classification:
    Date: 2012
  17. By: Yair Tauman (Department of Economics, Stony Brook University); Alex Barrachina (University of Valencia and ERI-CES.)
    Abstract: We analyze industrial espionage in a model of two firms: a monopoly incumbent, M, and a potential entrant, E, who owns a noisy intelligence system (IS) of a certain precision a . The IS generates a signal on M’s action and E decides whether or not to enter based on this signal. We show that if a is commonly known, M is the one who benefits from a perfect IS and E who spies on M prefers a less accurate IS. If however a is a private information of E, the opposite result is obtained. E is best off with a perfect IS and M with a less accurate one.
    Keywords: Espionage; Monopoly; Entry; Asymmetric information; Signaling game.
    JEL: C72 D82 L10 L12
    Date: 2012–08
  18. By: Alexander Vogel (Leuphana University Lueneburg, Germany); Joachim Wagner (Leuphana University Lueneburg, Germany)
    Abstract: This paper uses newly available data for German business services firms to test a hypothesis derived by Bustos (AER 2011) in a model that explains the decision of heterogeneous firms to export and to engage in R&D. Using a non-parametric test for first order stochastic dominance it is shown that, in line with this hypothesis, the productivity distribution of firms with exports and R&D dominates that of exporters without R&D, which in turn dominates that of firms that neither export nor engage in R&D. These results are in line with findings for firms from manufacturing industries. The model, therefore, seems to be useful to guide empirical work on the relation between exports, R&D and productivity for services firms, too.
    Keywords: Exports, R&D, productivity, business services firms, Germany
    JEL: F14
    Date: 2012–08
  19. By: Stephen Hogg (UQ); Stan Hurn (QUT); Stuart McDonald (UQ); Alicia Rambaldi
    Abstract: This paper builds an econometric model of retail gas competition to explain the pricing decisions of retail outlets in terms of vertical management structures, input costs and the characteristics of the local market they operate within. The model is estimated using price data from retail outlets from the South-Eastern Queensland region in Australia, but the generic nature of the model means that the results will be of general interest. The results indicate that when the cost of crude oil and demographic variations across different localities are accounted for, branding (i.e. whether the retail outlet is affiliated with one of the major brand distributers - Shell, Caltex, Mobil or BP) has a statistically significant positive effect on prices at nearby retail outlets. Conversely, the presence of an independent (non-branded) retailer within a locality has the effect of lowering retail prices. Furthermore, the results of this research show that service stations participating in discount coupon schemes with the two major retail supermarket chains have the effect of largely off-setting the price increase derived from branding affiliation. While, branding effects are not fully cancelled out, the overall effect is that prices are still higher than if branding did not occur.
    Keywords: Retail Gasoline Pricing, Vertical Restraints, Shop-a-Docket Discount Scheme, Spatial Econometrics, Australia
    JEL: C21 L13
    Date: 2012–08–27

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