nep-bec New Economics Papers
on Business Economics
Issue of 2014‒08‒25
twelve papers chosen by
Vasileios Bougioukos
Bangor University

  1. Is Productivity Growth Correlated with Improvements in Management Quality? An empirical study using interview surveys in Korea and Japan By MIYAGAWA Tsutomu; Keun LEE; EDAMURA Kazuma; YoungGak KIM; Hosung JUNG
  2. Firm Productivity and Carbon Leakage: A Study of Swedish Manufacturing Firms By Ferguson, Shon; Sanctuary, Mark
  3. Zipf’s Law, Pareto’s Law, and the Evolution of Top Incomes in the U.S. By Shuhei Aoki; Makoto Nirei
  4. Did trade crisis affect different exporters differently? Case of Mexico By Rahul Giri; Enrique Seira; Kensuke Teshima
  5. Firms’ Heterogeneity and Incomplete Pass-Through By STEFANIA GARETTO
  6. Adverse Effects of Competition and Rents on Collective Bargaining Status – Evidence from Germany By Finn Martensen
  7. Employment and Wage Insurance within firms - Worldwide Evidence By Andrew Ellul; Marco Pagano; Fabiano Schivardi
  8. Acquisitions, Productivity, and Profitability: Evidence from the Japanese Cotton Spinning Industry By Tetsuji Okazaki; Chad Syverson; Atsushi Ohyama; Serguey Braguinsky
  9. Occupational Mobility and Wage Dynamics Within and Between Firms By Jean-Marc Robin; Fabien Postel-Vinay; Francis Kramarz
  10. Modeling Firm Heterogeneity in International Trade: Do Structural Effects Matter? By Roberto Roson; Kazuhiko Oyamada
  11. The Impact of Mergers on Quality Provision: Evidence from the Airline Industry By Jeffrey T. Prince; Daniel H. Simon
  12. Can firms learn by observing? Evidence from cross-border M&As By Francis, Bill B.; Hasan, Iftekhar; Sun, Xian; Waisman , Maya

  1. By: MIYAGAWA Tsutomu; Keun LEE; EDAMURA Kazuma; YoungGak KIM; Hosung JUNG
    Abstract: Bloom and Van Reenen (2007) show that differences in management practices are correlated with productivity differences at the firm level. In this paper, we conducted similar interview surveys on management practices in Japanese and Korean firms in 2008 and 2012. We find that overall management scores in Japan—as an average of organizational and human resource management scores—are higher than those in Korea. However, the second survey shows that the gap in management scores between the two countries has shrunken over time. In addition, the average management quality in Korean large firms has surpassed that of Japanese large firms. This result is consistent with the literature comparing big businesses in Korea and Japan. This study also compares additional aspects of management styles, such as speed in decision making and the role of various communication channels, which is not done in the literature. When we estimate a production function including management score using all samples, we find a positive and significant relationship between management scores and productivity. Most estimation results show that organizational management scores are correlated with firm performances in Japanese firms, while human resource management scores are correlated with performance in Korean firms. We also find that management practices are correlated with improvements in capital and labor efficiencies. In the case of Japan, better organizational management practices in the past improve current firm performance. Our results show that the Japanese government and firms should promote management reforms to restore international competitiveness.
    Date: 2014–08
  2. By: Ferguson, Shon (Research Institute of Industrial Economics (IFN)); Sanctuary, Mark (Beijer Institute of Ecological Economics)
    Abstract: This paper examines the intensive and extensive margins of carbon leakage. The analysis uses an increase in the Swedish electricity price to identify the impact on imports at the firm and product level. Our model of heterogenous firms predicts that higher domestic electricity prices lead firms to substitute towards imports of electricity-intense products.
    Keywords: Firm heterogeneity; Carbon leakage; Energy; Importing
    JEL: D21 F18
    Date: 2014–08–12
  3. By: Shuhei Aoki; Makoto Nirei (Institute of Innovation Research, Hitotsubashi University)
    Abstract: This paper presents a tractable dynamic general equilibrium model of income and firm-size distributions. The size and value of firms result from idiosyncratic, firm-level productivity shocks. CEOs can invest in their own firms’ risky stocks or in risk-free assets, implying that the CEO’s asset and income also depend on firm-level productivity shocks. We analytically show that this model generates the Pareto distribution of top income earners and Zipf’s law of firms in the steady state. Using the model, we evaluate how changes in tax rates can account for the recent evolution of top incomes in the U.S. The model matches the decline in the Pareto exponent of income distribution and the trend of the top 1% income share in the U.S. in recent decades. In the model, the lower marginal income tax for CEOs strengthens their incentive to increase the share of their firms’ risky stocks in their own asset portfolios. This leads to both higher dispersion and concentration of income in the top income group.
    Keywords: income distribution; wealth distribution; Pareto exponent; top income share; firm size distribution; Zipf’s law
    JEL: D31 L11 O40
    Date: 2014–04
  4. By: Rahul Giri (Centro de Investigación Económica (CIE), Instituto Tecnológico Autónomo de México (ITAM)); Enrique Seira (Centro de Investigación Económica (CIE), Instituto Tecnológico Autónomo de México (ITAM)); Kensuke Teshima (Centro de Investigación Económica (CIE), Instituto Tecnológico Autónomo de México (ITAM))
    Abstract: How did small exporters fare relative to large exporters during the 2008-09 crisis? Examining the performance of Mexican exporters reveals that crisis did not make smaller exporters more likely to exit, growless, or expand their product line less. Workhorse models of trade, in response to an aggregate demand or credit shock, would predict the opposite. The same models, however, are consistent with the data before and after the crisis: within industry, (i) firm exit rate is decreasing in size; (ii) conditional on survival, export growth is largely decreasing in size, (iii) net product addition is increasing in size.
    Keywords: firm level trade, firm size, crisis, margins of trade adjustment
    JEL: F11 F15
    Date: 2013
  5. By: STEFANIA GARETTO (Department of Economics, Boston University)
    Abstract: A large body of empirical work documents that prices of traded goods change by a smaller proportion than real exchange rates between the trading countries (incomplete pass-through). The wedge between exchange rates and relative prices also varies a cross countries (pricing-to-market). I present a model of trade and international price-setting with heterogeneous firms, where firms’ strategic behavior implies that: 1) firm-level pass-through is incomplete and a U-shaped function of firm market share; 2) exchange rate fluctuations affect both the prices of traded goods and the prices of goods sold domestically; and 3) firm-level pass-through varies across destination countries. Estimates from a panel data set of cars prices support the predictions of the model.
    Keywords: Heterogeneous firms, incomplete pass-through, pricing to market
    JEL: F12 F31 L13
    Date: 2014–03
  6. By: Finn Martensen (Department of Economics, University of Konstanz, Germany)
    Abstract: Why do firms and workers bargain individually or collectively? I test the effect of product market competition and rents with German establishment data. Against intuition, competition and rents have opposite effects. Competition has a u-shaped effect on the probability of collective bargaining. This contradicts the existing theory (Ebell and Haefke 2006; Boeri and Burda 2009). By contrast, firms with higher rents are more prone to collective bargaining. For both competition and rents, the effect is stronger for sector-level than for firm-level collective bargaining. Indicators of higher productivity also matter: A higher export share drives firms into individual wage bargaining, while a higher share of workers with higher education drives firms into firm-level bargaining. Thus, the interplay between productivity, competition, and the wage setting regime is much more subtle than suggested by the existing theory.
    Keywords: Collective bargaining, Wage determinations, Productivity, Product market competition, Establishment data
    JEL: J24 J52 J64 C25
    Date: 2014–08–07
  7. By: Andrew Ellul (Kelley School of Business, Indiana University, CSEF and ECGI); Marco Pagano (University of Naples "Federico II", CSEF, EIEF, CEPR and ECGI); Fabiano Schivardi (LUISS, EIEF and CEPR)
    Abstract: We investigate the determinants of firms’ implicit employment and wage insurance to employees against industry-level and idiosyncratic shocks. We rely on differences between family and nonfamily firms to identify the supply of insurance, and between national public insurance programs to gauge workers’ demand for insurance. Using firm-level data from 41 countries, we find that family firms provide greater employment protection but less wage stability. Employment protection comes at a price: family firms pay 5 percent lower wages, controlling for country, industry and time effects. The additional protection afforded by family firms is greater, and the wage discount larger, the less generous the public unemployment insurance program, indicating that firm and government employment insurance are substitutes. The cross-country evidence is broadly confirmed by Italian employee-employer matched data, which also show that in family firms the adjustment to shocks occurs mostly through the hiring margin, while separations are not responsive to shocks.
    Date: 2014
  8. By: Tetsuji Okazaki (University of Tokyo); Chad Syverson (University of Chicago Booth School of Business and NBER); Atsushi Ohyama (Hokkaido University); Serguey Braguinsky (Carnegie Mellon University)
    Abstract: We explore how changes in ownership and managerial control affect the productivity and profitability of producers. Using detailed operational, financial, and ownership data from the Japanese cotton spinning industry at the turn of the last century, we find a more nuanced picture than the straightforward “higher productivity buys lower productivity†story commonly appealed to in the literature. Acquired firms’ production facilities were not on average less physically productive than the plants of the acquiring firms before acquisition, conditional on operating. They were much less profitable, however, due to consistently higher inventory levels and lower capacity utilization—differences which reflected problems in managing the uncertainties of demand. When purchased by more profitable firms, these less profitable acquired plants saw drops in inventories and gains in capacity utilization that raised both their productivity and profitability levels, consistent with acquiring owner/managers spreading their better demand management abilities across the acquired capital.
    Date: 2014
  9. By: Jean-Marc Robin (Sciences-Po); Fabien Postel-Vinay (University College London); Francis Kramarz (CREST)
    Abstract: Recent research has emphasized the key importance of the equilibrium allocation of heterogeneous workers into heterogeneous jobs or occupations as a determinant of economic efficiency. Most of the literature on this subject envisions worker (re-)allocation as occurring between employers. Yet, the data suggest that a very large amount of reallocation occurs within firms, in the form of internal promotions or de-motions. We construct a structural job search model with internal and external labor markets. Internal labor markets mediate occupational mobility and wage dynamics within firms, whereas the external labor market organizes any mobility involving an employer change, and related wage dynamics. The aim of this construction is to understand and quantify the role of within-firm reallocation in the assignment process of workers into jobs. The model is estimated on a large-scale matched employer-employee data set covering the entire French business sector.
    Date: 2014
  10. By: Roberto Roson (Department of Economics, University Of Venice Cà Foscari); Kazuhiko Oyamada (Institute of Developing Economies, Japan External Trade Organization)
    Abstract: This paper analyzes the qualitative properties of a multisectoral, multiregional computable general equilibrium model where some industries include heterogeneous firms as in Melitz (2003). The model, formulated according to Roson, R. and Oyamada (2014), adds endogenous productivity effects to a standard Walras-Ricardian framework. We argue that the inclusion of such effects changes the magnitude and distribution of welfare benefits obtainable by reductions in trade barriers, due to of comparative advantages. Abstract We illustrate the point through a numerical example, in which alternative model formulations are assessed. A standard neoclassic GE model, a basic Melitz model and a hybrid model are then compared. The three model versions are all calibrated with the same data set and an identical simulation experiment (a 50% reduction of transport costs between two regions) is carried out in the three cases. The results show that the hybrid model displays the largest welfare gains, as it combines Ricardian comparative advantages with Melitz average productivity improvements. However, they also show that new effects, not present in the original Ricardo and Melitz frameworks, are at a work.
    Keywords: Computable General Equilibrium Models, Melitz, Firm Heterogeneity, International Trade.
    JEL: C63 C68 D51 D58 F12 L11
    Date: 2014
  11. By: Jeffrey T. Prince (Department of Business Economics and Public Policy, Indiana University Kelley School of Business); Daniel H. Simon (School of Public and Environmental Affairs, Indiana University)
    Abstract: We examine how mergers affect quality provision by analyzing five U.S. airline mergers, focusing on on-time performance (OTP). We find mild evidence that merging carriers’ OTP worsens in the short run. However, we find consistent evidence that in the long run, their OTP improves. Subsequent analyses indicate efficiency gains, not reduced load factor or passenger volume, underlie our long-run result. Additional analyses of quality provision (e.g., flight cancellations) show no long-run worsening in these areas by merging firms. In the long run, airline mergers do not result in worsening performance, at least along several measures, and provide some time-saving efficiencies.
    JEL: L0
    Date: 2014–01
  12. By: Francis, Bill B. (Lally School of Management, Rensselaer Polytechnic Institute); Hasan, Iftekhar (Fordham University and Bank of Finland); Sun, Xian (Johns Hopkins University); Waisman , Maya (Fordham University)
    Abstract: In the presence of high uncertainty and limited experience, can observing the actions of other acquiring predecessors help firms make better acquisition decisions? Using a sample of cross-border M&As conducted by US acquirers in developing countries, we document a positive and significant relationship between an acquirer’s performance and its predecessors’ acquisition activity. This relationship is especially pronounced in the prevalence of news events about the outcome of predecessors’ acquisitions, when predecessors consist of US peers from the same industry and/or when targets are based in culturally distant countries. Our findings shed light on one channel through which information spillovers across industries and acquiring firms could be a key driver of value creation in developing market cross-border M&As.
    Keywords: learning; observing; cross-border M&As performance
    JEL: D23 D83 G14 G32 G34
    Date: 2014–07–09

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