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on Business Economics |
| By: | Bulent Unel; Elias Dinopoulos |
| Abstract: | This study proposes a simple theory of trade with endogenous firm productivity, occupational choice, and income inequality. Individuals with different managerial talent choose to become self-employed entrepreneurs or workers. Entrepreneurs enhance firm productivity by investing in managerial capital. The model generates three income classes: low-income workers facing the prospect of unemployment; middle-income entrepreneurs managing domestic firms; and high-income entrepreneurs managing global firms. A reduction in per-unit trade costs raises productivity of global firms, reduces productivity of domestic firms, and worsens personal income distribution by generating labor-market polarization. A reduction in fixed exporting costs reduces productivity of every firm and has an ambiguous effect on personal income distribution. Trade-liberalization policies raise unemployment and improve welfare. |
| URL: | http://d.repec.org/n?u=RePEc:lsu:lsuwpp:2014-04&r=bec |
| By: | Akar, Gizem; Balkan, Binnur; Tumen, Semih |
| Abstract: | This paper documents two new facts linking firm-size and gender pay gaps to informal employment using micro-level data from Turkey. First, we show that the firm-size wage gap, defined as larger firms paying higher wages to observationally equivalent workers, is greater for informal employment than formal employment. And, second, we find that the gender pay gap is constant across different firm-size categories for formal employment, while it is a decreasing function of firm size for informal employment. These two facts jointly suggest that the informality status of a job is a valuable source of information in understanding the underlying forces determining firm-size and gender wage gaps. We propose and discuss the relevance of alternative mechanisms that might be generating these facts. |
| Keywords: | Informal employment; wage differentials; firm size; gender discrimination; THLFS. |
| JEL: | C21 E24 J31 J71 |
| Date: | 2014–02–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:53835&r=bec |
| By: | Hayakawa, Kazunobu; Matsuura, Toshiyuki; Okubo, Fumihiro |
| Abstract: | In this paper, we explore the firm-level impacts of flooding in Thailand in 2011, specifically those on the procurement patterns at Japanese affiliates in Thailand. Our findings are as follow. First, the damaged small firms are more likely to lower their local procurement share, particularly the share of procurement from other Japanese-owned firms in Thailand. Second, damaged young firms and damaged old firms are more likely to raise the shares of imports from Japan and China, respectively. Third, there are no impacts on imports from ASEAN and other countries. These findings are useful for uncovering how multinational firms adjust their production networks before and after natural disasters. |
| Keywords: | Thailand, Japan, Foreign affiliated firm, International business enterprises, Industrial management, Risk management, Flood damage, Disasters, Natural disasters, Flooding, Production networks |
| JEL: | F23 D22 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:jet:dpaper:dpaper445&r=bec |
| By: | Muravyev, Alexander (St. Petersburg University GSOM and IZA); Talavera, Oleksandr (University of Sheffield); Weir, Charlie (Robert Gordon University) |
| Abstract: | This paper studies the effect on company performance of appointing non-executive directors that are also executive directors in other firms. The analysis is based on a new panel dataset of UK companies over 2002-2008. Our findings suggest a positive relationship between the presence of these non-executive directors and the accounting performance of the appointing companies. The effect is stronger if these directors are executive directors in firms that are performing well. We also find a positive effect when these non-executive directors are members of the audit committee. Overall, our results are broadly consistent with the view that non-executive directors that are executives in other firms contribute to both the monitoring and advisory functions of corporate boards. |
| Keywords: | executive directors, non-executive directors, company performance |
| JEL: | G34 G39 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7962&r=bec |
| By: | Nicholas Bloom; Erik Brynjolfsson; Lucia Foster; Ron Jarmin; Megha Patnaik; 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 higher levels of IT intensity in terms of a higher expenditure on IT and more on-line sales. Likewise, more structured management is strongly linked with superior 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: | IT, Management, Productivity, Organization |
| JEL: | M1 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1258&r=bec |
| By: | Lin Ma |
| Abstract: | How does globalization affect the income gaps between the rich and the poor? This paper presents a new piece of empirical evidence showing that access to the global market, either through exporting or through multinational production, is associated with a higher executive-to-worker pay ratio within the firm. It then builds a model with heterogeneous firms, occupational choice, and executive compensation to model analytically and assess quantitatively the impact of globalization on the income gaps between the rich and the poor. The key mechanism is that the “gains from trade” are not distributed evenly within the same firm. The compensation of an executive is positively linked to the size of the firm, while the wage paid to the workers is determined in a country- wide labor market. Any extra profit earned in the foreign markets benefits the executives more than the average worker. Counterfactual exercises suggest that this new channel is quantitatively important for the observed surge in top income shares in the data. Using the changes in the volume of trade and multinational firm sales, the model can explain around 33 percent of the surge in top income shares over the past two decades in the United States. |
| Keywords: | E25 F12 F62 J33 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:14-07&r=bec |
| By: | Janssen, Simon (University of Zurich); Tuor Sartore, Simone N. (University of Zurich); Backes-Gellner, Uschi (University of Zurich) |
| Abstract: | We analyze the relationship between social attitudes on gender equality and firms' pay-setting behavior by combining information about regional votes relative to gender equality laws with a large data set of multi-branch firms and workers. The results show that multi-branch firms pay more discriminatory wages in branches located in regions with a higher social acceptance of gender inequality than in branches located in regions with a lower acceptance. The results are similar for different subsamples of workers, and we cannot find evidence that regional differences in social attitudes influence how firms assign women and men to jobs and occupations. The investigation of a subsample of performance pay workers for whom we are able to observe their time-based and performance pay component separately shows that social attitudes on gender equality only influence the time-based pay component but not the performance pay component of the same workers. Because regional-specific productivity differences should influence the workers' performance pay and time-based pay, unobserved gender-specific productivity differences are not likely to explain the regional variation in within firm gender pay gaps. The results support theories and previous evidence showing that social attitudes influence gender pay gaps in the long run. |
| Keywords: | gender pay gaps, social attitudes, firms' pay setting |
| JEL: | J31 J33 J71 M5 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7959&r=bec |
| By: | J. Bradford Jensen; Dennis P. Quinn; Stephen Weymouth |
| Abstract: | We use the case of a puzzling decline in U.S. firm antidumping (AD) filings to explore how firm-level economic heterogeneity within U.S. industries influences political and regulatory responses to changes in the global economy. Firms exhibit heterogeneity both within and across industries regarding foreign direct investment. We propose that firms making vertical, or resource-seeking, investments abroad will be less likely to file AD petitions. Hence, we argue, the increasing vertical FDI of U.S. firms (particularly in countries with undervalued currencies) makes trade disputes far less likely. We use firm level data to examine the universe of U.S. manufacturing firms and find that AD filers generally conduct no intrafirm trade with filed-against countries. Among U.S. MNCs, the number of AD filings is negatively associated with increases in the level of intrafirm trade for large firms. In the context of currency undervaluation, we confirm the existing finding that undervaluation is associated with more AD filings. We also find, however, that high levels of related-party imports from countries with undervalued currencies significantly decrease the numbers of AD filings. Our study highlights the centrality of global production networks in understanding political mobilization over international economic policy. [192] |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:14-04&r=bec |
| By: | Bragelien, Iver (Dept. of Business and Management Science, Norwegian School of Economics); Impink, Joost (Fisher School of Accounting, Warrington College of Business Administration, University of Florida) |
| Abstract: | We investigate the relevance of relationship-specificity in explaining firm performance and firm value. First, we use an incomplete contracts model to derive hypotheses on how relationship-specificity interacts with bargaining power and growth. And, second, we test these hypotheses on US data for the period 1998 to 2012. We use contract intensity introduced by Nunn (2007) to measure relationship-specificity at the industry level. Relationship-specific investments are considered to be low when a company’s inputs are sold on an exchange and high otherwise. Using size as a measure for bargaining power, we find support for our hypothesis that the benefits of bargaining power increase with relationship-specificity. We also find that growth has a stronger impact on firm value when relationship-specificity is high, indicating that the continuation value of the relationship matters. |
| Keywords: | Relationship-specificity; firm performance; bargaining power; growth |
| JEL: | D23 L14 L25 |
| Date: | 2014–02–20 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nhhfms:2014_004&r=bec |
| By: | Felbermayr, Gabriel (University of Munich); Impullitti, Giammario (University of Nottingham); Prat, Julien (CREST) |
| Abstract: | Increasing wage inequality between similar workers plays an important role for overall inequality trends in industrialized societies. To analyze this pattern, we incorporate directed labor market search into a dynamic model of international trade with heterogeneous firms and homogeneous workers. Wage inequality across and within firms results from their different hiring needs along their life cycles and the convexity of their adjustment costs. The interaction between wage posting and firm growth explains some recent empirical regularities on firm and labor market dynamics. Fitting the model to capture key features obtained from German linked employer-employee data, we investigate how falling trade costs and institutional reforms interact in shaping labor market outcomes. Focusing on the period 1996-2007, we find that neither trade nor key features of the Hartz labor market reforms account for the sharp increase in residual inequality observed in the data. By contrast, inequality is highly responsive to the increase in product market competition triggered by domestic regulatory reform. |
| Keywords: | wage inequality, international trade, directed search, firm dynamics, product and labor market regulation |
| JEL: | F12 F16 E24 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7960&r=bec |
| By: | Emin Dinlersoz; Jeremy Greenwood; Henry Hyatt |
| Abstract: | What type of businesses do unions target for organizing and when? A dynamic model of the union organizing process is constructed to answer this question. A union monitors establishments in an industry to learn about their productivity, and decides which ones to organize and when. An establishment becomes unionized if the union targets it for organizing and wins the union certification election. The model predicts two main selection effects: unions target larger and more productive establishments early in their life-cycles, and among the establishments targeted, unions are more likely to win elections in smaller and less productive ones. These predictions find support in union certification elections data for 1977-2007 matched with data on establishment characteristics. |
| Keywords: | Unionization, Union Organizing, Union Certification Election, Diffusion of Unionization, Bayesian Learning, Productivity. |
| JEL: | J5 J50 J51 L11 L23 L25 L6 D24 D21 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:14-09&r=bec |
| By: | Dessaint , Olivier; Matray , Adrien |
| Abstract: | Consistent with salience theories of choice, we find that managers overreact to salient risks. We study how managers respond to the occurrence of a hurricane event when their firms are located in the neighborhood of the disaster area. We find that the sudden shock to the perceived liquidity risk leads managers to increase the amount of corporate cash holdings, even though the real liquidity risk remains unchanged. Such an increase in cash holdings is only temporary. Over time, the perceived risk decreases, and the bias disappears. This bias is costly for shareholders because it leads to higher retained earnings and negatively impacts firm value by reducing the value of cash. We examine alternative explanations for our findings. In particular, we find only weak evidence that the possibility of risk learning or regional spillover effects may influence our results. |
| Keywords: | managers; overreact; salient risk |
| JEL: | D03 D81 D83 G02 G31 G39 |
| Date: | 2014–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:1026&r=bec |
| By: | Serdar Aldatmaz; Paige Ouimet; Edward D Van Wesep |
| Abstract: | We show that in the years following a large broad-based employee stock option (BBSO) grant, employee turnover falls at the granting firm. We find evidence consistent with a causal relation by exploiting unexpected changes in the value of unvested options. A large fraction of the reduction in turnover appears to be temporary with turnover increasing in the 3rd year following the year of the adoption of the BBSO plan. We also find that the effect of BBSO plans is larger at market leaders, identified as firms with high industry-adjusted market-to-book ratios, market share or industry-adjusted profit margins, as measured at the time of the grant. |
| Keywords: | Employee stock options, turnover |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:14-06&r=bec |
| By: | Maurizio Bovi |
| Abstract: | To learn the people's expectations formation process, we examine shocks and survey expectations on individual and aggregate income. Data show that shocks have permanent effects on both expectations, which do not diverge systematically because agents revise forecasts. Actually, only expectations on GDP dynamics are revised. These latter overreact to shocks and are more volatile than expectations on personal stances. Disagreement is persistently high. Astonishingly, there is even less consensus when expectations deal with the same fundamental. Lastly, we elaborate a test on whether - and find evidence that - cross sectional disagreement and time series volatility in expectations are equal. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:feb:natura:00390&r=bec |
| By: | Rasi Kunapatarawong; Ester Martinez Ros |
| Abstract: | This paper reports research on the relationship between sourcing strategy of a firm and its environmental innovation propensity. The data is taken from the Spanish TechnologicalInnovation Panel (PITEC) survey during the period of 2007-2011. The uniqueness of the Spanish innovation structure and the increasing relevance of environmental issues for the Spanish economy make it a proper setting to investigate environmental innovation dynamics. The results from 5,352 firms indicate that large firms are more likely to undertake environmental innovation than small- and medium-sized firms (SMEs). These firms rely quite equally on all four sources of knowledge &- internal, market, institutional and freely-available sources &- when deciding to develop environmental innovation. The broad horizons with respect to knowledge sources are likely to increase firms' propensity to introduce environmental innovation. In addition, weprovide the evolutionary nature of firm's innovation search as firms grow in size. Small firmsrely on both internal and freely-available sources rather equally, while internal source is the most relevant for medium firms, and market is the most important source used by large firms indriving environmental innovation. Particularly important is how firms who are already innovators and who receive local funding from the Spanish government are more likely to introduce environmental innovation. |
| Keywords: | Environmental innovation , Knowledge sourcing , Discrete choice model |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:cte:wbrepe:wb140301&r=bec |
| By: | Mizuno, Takayuki; Souma, Wataru; Watanabe, Tsutomu |
| Abstract: | In this paper, we investigate the structure and evolution of customer-supplier networks in Japan using a unique dataset that contains information on customer and supplier linkages for more than 500,000 incorporated non-financial firms for the five years from 2008 to 2012. We find, first, that the number of customer links is unequal across firms; the customer link distribution has a power-law tail with an exponent of unity (i.e., it follows Zipf’s law). We interpret this as implying that competition among firms to acquire new customers yields winners with a large number of customers, as well as losers with fewer customers. We also show that the shortest path length for any pair of firms is, on average, 4.3 links. Second, we find that link switching is relatively rare. Our estimates indicate that the survival rate per year for customer links is 92 percent and for supplier links 93 percent. Third and finally, we find that firm growth rates tend to be more highly correlated the closer two firms are to each other in a customer-supplier network (i.e., the smaller is the shortest path length for the two firms). This suggests that a non-negligible portion of fluctuations in firm growth stems from the propagation of microeconomic shocks - shocks affecting only a particular firm - through customer-supplier chains. |
| Keywords: | buyer-supplier networks, supply chains, input-output analysis, power-law distributions, firm dynamics |
| JEL: | L11 L14 C67 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:hit:cinwps:27&r=bec |
| By: | Gourio, Francois (Federal Reserve Bank of Chicago); Rudanko, Leena (Boston University) |
| Abstract: | Intangible capital is an important factor of production in modern economies that is generally neglected in business cycle analyses. We demonstrate that intangible capital can have a substantial impact on business cycle dynamics, especially if the intangible is complementary with production capacity. We focus on customer capital: the capital embodied in the relationships a firm has with its customers. Introducing customer capital into a standard real business cycle model generates a volatile and countercyclical labor wedge, due to a mismeasured marginal product of labor. We also provide new evidence on cyclical variation in selling effort to discipline the exercise. |
| Keywords: | Business cycle; capital; labor wedge |
| JEL: | E13 E32 |
| Date: | 2014–01–15 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:wp-2014-02&r=bec |