nep-bec New Economics Papers
on Business Economics
Issue of 2013‒01‒12
eleven papers chosen by
Vasileios Bougioukos
Bangor University

  1. Exploration for Nonrenewable Resources in a Dynamic Oligopoly: An Arrovian Result By L. Lambertini
  2. Partial Public Ownership and Managerial Incentives By Jovanovic, Dragan
  3. Management in America By Nicholas Bloom; Erik Brynjolfsson; Lucia Foster; Ron Jarmin; Itay Saporta-Eksten; John Van Reenen
  4. Firm productivity and institutional quality. Evidence from Italian industry By A. Lasagni; A. Nifo; G. Vecchione
  5. The Home market effect with heterogeneous firms By Ha Nguyen
  6. Responding to Financial Crisis: The Rise of State Ownership and Implications for Firm Performance By Carney, Richard W.; Liu, Wai-Man (Raymond); Ngo, Phong T. H.
  7. Corporate Taxation and Productivity Catch-Up: Evidence from 11 European Countries By Norman Gemmell; Richard Kneller; Danny McGowan; Ismael Sanz
  8. State Owned Firms: Private Debt, Cost Revelation and Welfare By Pierre M. Picard; Ridwan D. Rusli
  9. Heterogeneous Firms and Substitution by Tasks: the Productivity Effect of Migrants By Lucht, Michael; Haas, Anette
  10. Business cycle determinants of US foreign direct investments By Cavallari, Lilia; D'Addona, Stefano
  11. Forward trading and collusion of firms in volatile markets By Aichele, Markus F.

  1. By: L. Lambertini
    Abstract: I investigate two versions of a differential Cournot oligopoly game with nonrenewable resource exploitation, in which each firm may either exploit its own private pool or exploit a common pool jointly with the rivals. Firms use a deterministic technology to invest in exploration activities. In both models, there emerges that (i) the individual exploration effort is higher when each firms has exclusive rights on a pool of its own, and (ii) depending on the assumptions on technology and demand, the aggregate exploration effort is either constant or increasing in the number of firms.
    JEL: C73 L13 Q30
    Date: 2013–01
  2. By: Jovanovic, Dragan
    Abstract: We analyze the impact of partial public ownership (PPO) on managerial incentives. A novelty of the paper is that it explicitly considers competition in the product market. We find that PPO negatively affects managerial incentives when all firms are partially owned by the government. When partially public firms compete with private firms, the effects on managerial incentives crucially depend on the degree of competitive pressure. Thereby, PPO induces either partially public firms or their private competitors to offer stronger managerial incentives. This result is essentially confirmed even if the government's primary concern is consumer protection rather than social welfare. --
    JEL: D82 H32 L13
    Date: 2012
  3. By: Nicholas Bloom; Erik Brynjolfsson; Lucia Foster; Ron Jarmin; Itay Saporta-Eksten; John Van Reenen
    Abstract: The Census Bureau recently conducted a survey of management practices in over 30,000 plants across the US, the first large-scale survey of management in America. Analyzing these data reveals several striking results. First, more structured management practices are tightly linked to better performance: establishments adopting more structured practices for performance monitoring, target setting and incentives enjoy greater productivity and profitability, higher rates of innovation and faster employment growth. Second, there is a substantial dispersion of management practices across the establishments. We find that 18% of establishments have adopted at least 75% of these more structured management practices, while 27% of establishments adopted less than 50% of these. Third, more structured management practices are more likely to be found in establishments that export, who are larger (or are part of bigger firms), and have more educated employees. Establishments in the South and Midwest have more structured practices on average than those in the Northeast and West. Finally, we find adoption of structured management practices has increased between 2005 and 2010 for surviving establishments, particularly for those practices involving data collection and analysis.
    Keywords: Management, productivity, organization
    Date: 2013–01
  4. By: A. Lasagni; A. Nifo; G. Vecchione
    Abstract: This paper aims at contributing to the debate on the determinants of differentials in firms’ productivity. The case of Italy looks particularly interesting, since it is characterized by a substantial and long-lasting productivity gap of industrial firms located in the Southern regions with respect to the rest of the country. We test the hypothesis that the macro factors, particularly the quality of institutions, play a central role in explaining Italian firms’ productivity. Consistent with previous studies, our results show that institutional quality is one of the basic determinants of the observed TFP differentials across firms located in different Italian regions.
    Keywords: productivity, macroeconomic factors, institutional quality, differentials
    JEL: C33 D24 L60 O43 R11
    Date: 2012
  5. By: Ha Nguyen (CREA, University of Luxembourg)
    Abstract: This paper examines the home market effect in the framework of heterogeneous firms. The paper finds that not only trade costs but also fixed trade costs cause the home market effect and the reverse home market effect can occur as the fixed trade costs are very low. In addition, the magnitude of the home market effect varies with industry characteristics. Industries with low trade costs, high fixed production costs, low fixed export costs, and high productivity dispersion tend to be more concentrated in large countries. Finally, the negative impact of trade barriers on the home market effect is dampened by the elasticity of substitution which is contrary with the result of the homogeneous firm model. An empirical model is built to test these predictions for developed countries. The empirical results are consistent with the predictions of the theoretical model.
    Keywords: Home market effect, country size, industry characteristics, heterogeneous firms, firm’s location, market structure
    JEL: F1 R1
    Date: 2012
  6. By: Carney, Richard W.; Liu, Wai-Man (Raymond); Ngo, Phong T. H.
    Abstract: We examine changes to corporate ownership in nine East Asian countries following the 1997 Asian Financial Crisis. Countries with lower incomes and in which policy making involves greater transactions costs (i.e., veto points) have more firms with state ownership. Partial state ownership appears to be effective insurance against crisis. Firms with minority state ownership exhibit 5% (annualized) lower idiosyncratic volatility in the quarter of the Lehman Brothers collapse than firms with either no or dominant state ownership. Minority state-owned firms also enjoy a higher abnormal return of 3.7% and 6.1% in the two quarters following the collapse of Lehman Brothers.
    Keywords: financial crisis; government ownership; veto players; insurance; corporate performance
    JEL: H11 G38 G34 G10
    Date: 2012–10–26
  7. By: Norman Gemmell; Richard Kneller; Danny McGowan; Ismael Sanz
    Abstract: Firms that lay far behind the technological frontier have the most to gain from imitating the technology or management practices of others. That some firms converge relatively slowly to the productivity frontier suggests the existence of factors that cause them to under-invest in their productivity. In this paper we explore whether higher rates of corporate taxation affect firm productivity convergence because they reduce the after tax returns to productivity enhancing investments for small firms. Using data for 11 European countries we find evidence for such an effect; productivity growth in small firms is slower the higher are high corporate tax rates. Our results are robust to the use of instrumental variable and panel data techniques with quantitatively similar effects found from a natural experiment following the German tax reforms in 2001.
    Keywords: Productivity, taxation, convergence JEL classification: D24, H25, L11, O31
  8. By: Pierre M. Picard (CREA, University of Luxembourg and CORE, Université Catholique de Louvain); Ridwan D. Rusli (CREA, University of Luxembourg)
    Abstract: In this paper we study the role of private debt financing in disciplining a state owned firm operating for a government that incurs a cost of public financing. We show that debt contracts allow the government to avoid socially costly subsidies by letting unprofitable state- owned firms default. Debt is never used when the firm and government share the same information about the firm. By contrast, when the state-owned firm has private information, the government has an incentive to use debt to reduce the firm's information rents. We identify the conditions under which a positive debt level benefits governments. They depend on the cost of public funds, the interbank funding rate, the share of foreign investors, the level and uncertainty of the firm's cost.
    Keywords: State-owned firms, privatization, debt, information asymmetry
    JEL: L33 G32
    Date: 2012
  9. By: Lucht, Michael; Haas, Anette
    Abstract: Economic debate about the consequences of immigration in Germany has largely focused on the wage effects for natives at an aggregate level. Especially the role of imperfect substitutability of migrants and natives gained importance. A new micro oriented approach is to focus on the firm level by estimating production functions in an equilibrium framework to gain more detailed information including firm heterogeneity. Another branch of recent literature emphasizes the role of task dimension of occupations additionally to the qualification of workers: migrants work in different jobs than natives do and are concentrated in agglomerations. The task approach is thus a key to understand imperfect substitution on the firm level. Our contribution in this article is manifold: we examine the effects of the relative (dis-)advantages in performing certain tasks and their implications on the labor market outcomes. Using this framework we construct a general equilibrium model with monopolistic competition a la Dixit-Stiglitz considering heterogeneous firms with different productivity levels and two types of jobs for migrants and natives. Firms differ in the ability to employ migrants which gives rise to wage differences between natives and migrants. Therefore firms with a higher share of migrants realize wage cost advantages. In the long run equilibrium only those firms survive in the market which are highly productive or are able to compensate their lower productivity level by wage cost advantages. We show that a higher migrant share is able to explain the increase of productivity. Further, the heterogeneous distribution of migrants in our model is the source of regional disparities. Thus part of the agglomeration advantages can be explained by the empirical stable observation that migrants tend to move to cities. The conclusions of the model are in line with three empirical facts in Germany. Firstly, the average productivity of firms is higher in cities. Secondly, the wage difference between migrants and natives in a region is increasing in the share of migrants in that region. Thirdly, less productive firms are more likely to employ a higher share of migrants, as wage advantages and productivity acts as a substitute. keywords: immigration, firm heterogeneity, skills, tasks, regional labor markets JEL: R23, J15, J24, J61 --
    JEL: R23 J15 J63
    Date: 2012
  10. By: Cavallari, Lilia; D'Addona, Stefano
    Abstract: This paper investigates the role of output fluctuations and exchange rate volatility in driving US foreign direct investments (FDI). Using a sample of 46 economies over the period 1982-2009, we provide evidence of a positive relation between US FDI and host country’s cyclical conditions. Allowing for asymmetry over the business cycle, we find that the output elasticity of foreign investments is higher in booms than in recessions. An increase in exchange rate volatility, on the other hand, has a strong deterrent effect on US foreign investments. This effect is fairly stable over the business cycle.
    Keywords: FDI; business cycle; cyclical output; exchange rate volatility
    JEL: E32 F23 C23
    Date: 2012–12
  11. By: Aichele, Markus F.
    Abstract: Assuming deterministic demand Liski and Montero (2006) show that forward trading is able to facilitate collusion. We present a more concise model incorporating the main reason for forward trading: Uncertainty. In general, fl uctuations make collusion harder to sustain (Rotemberg and Saloner, 1986). However, using forward contracts, firms are able to decrease the incentives to deviate from a collusive agreement even in very volatile markets. This makes collusive strategies more sustainable and decreases social welfare. --
    JEL: L40 D43 K21
    Date: 2012

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