nep-bec New Economics Papers
on Business Economics
Issue of 2017‒06‒11
twelve papers chosen by
Vasileios Bougioukos
Bangor University

  1. Mortality and the Business Cycle: Evidence from Individual and Aggregated Data By van den Berg, Gerard J.; Gerdtham, Ulf-G.; von Hinke Kessler Scholder, Stephanie; Lindeboom, Maarten; Lissdaniels, Johannes; Sundquist, Jan; Sundquist, Kristina
  2. Firm-level corruption: Unravelling sand from grease By Axel Demenet; Hoang-Anh Ho; Sarah Morcillo
  3. Regional variation of innovation activity in Poland. The positive role of location in metropolitan areas affirmed By Tomasz; Anna Golejewska
  4. Worker Overconfidence: Field Evidence and Implications for Employee Turnover and Returns from Training By Burks, Stephen V.; Hoffman, Mitchell
  5. Empirical Models of Firms and Industries By Aguirregabiria, Victor; Slade, Margaret
  6. Estimating Mark-ups and the Effect of Product Market Regulations in Selected Professional Services Sectors: A Firm-level Analysis By Anna Thum-Thysen; Erik Canton
  7. Stability and welfare effects of profit taxes within an evolutionary market interaction model By Schmitt, Noemi; Tuinstra, Jan; Westerhoff, Frank
  8. Corporate governance of insurance firms after Sovency II By Siri, Michele
  9. Relational knowledge transfers By Luis Garicano; Luis Rayo
  10. Corporate Investment in Hungary – Stylised Facts on Micro Data By Péter Bauer; Marianna Endrész
  11. Duopolistic competition in markets where consumers have switching costs By Guillem Roig
  12. Characterization of the community structure in a large-scale production network in Japan By Abhijit Chakraborty; Hazem Krichene; Hiroyasu Inoue; Yoshi Fujiwara

  1. By: van den Berg, Gerard J. (University of Bristol); Gerdtham, Ulf-G. (Lund University); von Hinke Kessler Scholder, Stephanie (University of Bristol); Lindeboom, Maarten (Vrije Universiteit Amsterdam); Lissdaniels, Johannes (Lund University); Sundquist, Jan (Lund University); Sundquist, Kristina (Lund University)
    Abstract: There has been much interest recently in the relationship between economic conditions and mortality, with some studies showing that mortality is pro-cyclical whereas others find the opposite. Some sug-gest that the aggregation level of analysis (e.g. individual vs. regional) matters. We use both individual and aggregated data on a sample of 20-64 year-old Swedish men from 1993 to 2007. Our results show that the association between the business cycle and mortality does not depend on the level of analysis: the sign and magnitude of the parameter estimates are similar at the individual level and the aggregate (county) level; both showing pro-cyclical mortality.
    Keywords: unemployment, health, recession, death, income, aggregation
    JEL: E3 I1 I12
    Date: 2017–05
  2. By: Axel Demenet; Hoang-Anh Ho; Sarah Morcillo
    Abstract: This paper adds to the recent literature on firm-level corruption by relying on rich data including detailed information on the purpose and amounts of bribe payments among Vietnamese micro, small, and medium firms. Using industry-location averages to instrument for firm-level bribe payments in both a cross-sectional and a panel setting, we provide evidence of a large and significant positive association between corruption and firm performance. We further show that the type of bribe payment does matter: only the payments that can arguably be considered ‘voluntary’ (rather than extortive) drive this association.
    Date: 2017
  3. By: Tomasz (Faculty of Economics, University of Gdansk; Institute for Development); Anna Golejewska (Faculty of Economics, University of Gdansk)
    Abstract: Poland’s innovation performance is unsatisfactory. In the context of the required shift of the present mostly-extensive growth paradigm to more knowledge and innovation-intensive one has to take into account the regional variation in innovative and economic activity in this middle-sized open economy in order to fine-tune its regional development and innovation policies. Using the firm-level data for manufacturing sector aggregated to NUTS3 regions as well as firm-level data from a unique qualitative survey carried out by the Institute for Development we try to identify the determinants of variation in innovative activity of firms within Poland in order to account for regional differences in particular between metropolitan and non-metropolitan regions. The analysis at aggregated NUTS3 level does not bring satisfactory results. The difference between metropolitan and non-metropolitan regions is statistically insignificant and the overall results are mixed. In the second step, we apply more sophisticated econometric methods controlling for firm-specific, sector-specific and region-specific features as suggested in the literature of the subject identifying the positive effect of location within metropolitan regions on the innovative performance of companies. Furthermore, the results point to the significance of firm-specific, internal, as well as region-specific – factors external to a firm, nonetheless, supporting the notion of regional innovation systems in which firms are embedded.
    Keywords: innovation, regional innovation system, regional economic performance, firm-level, logit model, Poisson model, negative binomial model
    JEL: O30 R11 R12 R58 C21
    Date: 2017–05
  4. By: Burks, Stephen V. (University of Minnesota, Morris); Hoffman, Mitchell (University of Toronto)
    Abstract: Combining weekly productivity data with weekly productivity beliefs for a large sample of truckers over two years, we show that workers tend to systematically and persistently over-predict their productivity. If workers are overconfident about their own productivity at the current firm relative to their outside option, they should be less likely to quit. Empirically, all else equal, having higher productivity beliefs is associated with an employee being less likely to quit. To study the implications of overconfidence for worker welfare and firm profits, we estimate a structural learning model with biased beliefs that ac-counts for many key features of the data. While worker overconfidence moderately decreases worker welfare, it also substantially increases firm profits. This may be critical for firms (such as the main one we study) that make large initial investments in worker training.
    Keywords: overconfidence, biased learning, turnover, truckload, firm-sponsored training, truck driver
    JEL: J24 D03 M53 J41
    Date: 2017–05
  5. By: Aguirregabiria, Victor; Slade, Margaret
    Abstract: We review important developments in Empirical Industrial Organization (IO) over the last three decades. The paper is organized around six topics: collusion, demand, productivity, industry dynamics, inter-firm contracts, and auctions. We present models that are workhorses in empirical IO, and describe applications. For each topic, we discuss at least one empirical application using Canadian data.
    Keywords: Collusion; demand for differentiated products; dynamic structural models; empirical auction models; Empirical IO; inter-firm contracts; production functions
    JEL: C57 L10 L20 L30 L40 L50
    Date: 2017–06
  6. By: Anna Thum-Thysen; Erik Canton
    Abstract: In this paper we estimate mark-ups and their association with product market regulations (PMR) in professional services sectors using the Orbis firm-level database for 13 EU member states. We will concentrate on engineering and accounting. Results indicate a significant effect of PMR on mark-ups, which confirms findings based on sectoral data (cf. Thum-Thysen and Canton, 2015) but a more granular analysis on the firm level gives additional insights. Compared to estimates of mark-ups based on sectoral data, the mark-up levels in the two analysed sectors using firm-level data are found to be higher. This may be due to a more granular sectoral definition, only covering regulated professions, where firms can gain market power and charge higher mark-ups. The new empirical findings could be useful for the analytical work on estimating the impact of structural reforms.
    JEL: D40 E31 L51
    Date: 2017–05
  7. By: Schmitt, Noemi; Tuinstra, Jan; Westerhoff, Frank
    Abstract: We develop a partial equilibrium model in which firms can locate in two separate regions. A firm's decision where to locate in a given period depends on the regions' relative profitability. If firms react strongly to the regions' relative profitability, their market switching behavior generates unstable dynamics. If the goal of policy makers is to stabilize these dynamics they can do so by introducing profit taxes that reduce the regions' relative profitability. While stability can already be obtained by imposing profit taxes in one of the two regions, total welfare is maximized if policy makers coordinate their tax setting behavior across regions. However, policy makers only interested in welfare in their own region may have the incentive to decrease their profit tax below this level, thereby attracting more firms and increasing tax revenues, at the cost of instability in both regions.
    Keywords: market interactions,evolutionary dynamics,profit taxes,policy coordination,welfare effects,stability analysis
    JEL: D83 E30 H20
    Date: 2017
  8. By: Siri, Michele
    Abstract: Under Solvency II, corporate governance requirements are a complementary, but nonetheless essential, element to build a sound regulatory framework for insurance undertakings, also to address risks not specifically mitigated by the sole solvency capital requirements. After recalling the provisions of the second pillar concerning the system of governance, the paper is devoted to highlight the emerging regulatory trends in the corporate governance of insurance firms. Among others, it signals the exceptional extension of the duties and responsibilities assigned to the Board of directors, far beyond the traditional role of both monitoring the chief executive officer, and assessing the overall direction and strategy of the business. However, a better risk governance is not necessarily built on narrow rule-based approaches to corporate governance.
    Keywords: Insurance,Corporate Governance,Board of Directors,Culture,Risk Management,Internal Controls,Principle of Proportionality,Regulation,EIOPA,Solvency,Guidelines
    Date: 2017
  9. By: Luis Garicano; Luis Rayo
    Abstract: We study how relational contracts mitigate Becker's classic problem of providing general (non-firm-specific) human capital when training contracts are incomplete. The firms profit-maximizing agreement is a multi-period "apprenticeship" in which the novice is trained gradually over time and eventually receives all knowledge. The firm adopts a "1/e rule" whereby at the beginning of the relationship the novice is trained, for free, just enough to produce a fraction 1/e of the efficient output. After that, the novice earns all additional knowledge with labor. This rule causes inefficiently lengthy relationships that grow longer the more patient the players. We discuss policy interventions.
    JEL: N0 R14 J01
    Date: 2017
  10. By: Péter Bauer (Magyar Nemzeti Bank (Central Bank of Hungary)); Marianna Endrész (Magyar Nemzeti Bank (Central Bank of Hungary))
    Abstract: This paper investigates corporate fixed investment in Hungary between 2001 and 2014 using firm-level data. We analyse the composition, heterogeneity and the drivers of corporate investment. Investments in Hungary are highly concentrated and dominated by large and foreign-owned companies. The period investigated can be split into three parts: the 2000s with moderate performance, the crisis period, and the period of weak recovery in 2013-2014. We find that structural problems were already seen before the crisis: the investment rate was stagnant and investment activity declined. However, the performance of firms was heterogeneous, as smaller and middle-aged firms became less active and dynamic. During the crisis, investment performance markedly deteriorated. Signs of recovery were seen in 2013 and 2014, but the investment rate remained subdued. We show that the ageing of the group of smaller firms played an important role in their weak investment performance, while the lack of new entrants contributed to the sluggishness of the recovery. We did not find any evidence that changes in individual sectors’ weight in the economy contributed to the low corporate investment rate or the weakening activity.
    Keywords: corporate investment, micro data
    JEL: D22 E22 G31
    Date: 2017
  11. By: Guillem Roig
    Abstract: In a dynamic competition model where firms initially share half of the market and consumers have switching costs, consumers' sophistication, lifespan and concentration impact the possibility to set collusive prices. I first show that with strategic long-run consumers, collusion is harder to implement than when consumers are not strategic: with sophisticated consumers, a deviating fi rm can cash-in the rents that a buyer obtains after switching. I then study the consequences of relaxing buyers concentration and show that collusion is then easier to maintain than with non-strategic consumers: with strategic consumers a firm must offer a low price at the moment of deviation as consumers can bene t from increased competition, emerging from an asymmetric market structure, without having to pay switching costs. The paper suggests simple policy recommendations: it does not suffice to educate consumers about the competitive effects of their current purchasing decisions, but central purchasing agencies also need to be promoted.
    Keywords: Switching cost, Price collusion; Strategic consumers
    JEL: D43 L13 L12
    Date: 2017–05–25
  12. By: Abhijit Chakraborty; Hazem Krichene; Hiroyasu Inoue; Yoshi Fujiwara
    Abstract: Inter-firm organizations, which play a driving role in the economy of a country, can be represented in the form of a customer-supplier network. Such a network exhibits a scale-free degree distribution, disassortative mixing and a prominent community structure. We analyze a large-scale data set of customer-supplier relationships containing data from one million Japanese firms. Using a directed network framework, we show that the production network exhibits the characteristics listed above. We conduct detailed investigations to characterize the communities in the network. The topology within smaller communities is found to be very close to a tree-like structure but becomes denser as the community size increases. A large fraction (~40%) of firms with relatively small in- or out-degrees have customers or suppliers solely from within their own communities, indicating interactions with a highly local nature. The interaction strengths between communities as measured by the inter-community link weights exhibit a highly heterogeneous distribution. We further present the statistically significant over-expressions of different prefectures and sectors within different communities.
    Date: 2017–06

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