nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2012‒06‒13
twenty-two papers chosen by
Frederic S. Lee
University of Missouri-Kansas City

  1. British economists on competition policy (1890-1920) By Giocoli, Nicola
  2. The network origins of aggregate fluctuations By Daron Acemoglu; Vasco Carvalho; Asuman Ozdaglar; Alireza Tahbaz-Salehi
  3. Price flexibility in British supermarkets By Seaton, Jonathan S; Waterson, Michael
  4. Firm technological innovation persistence: Organizational innovation matters By Naciba Haned; Christian Le Bas; Caroline Mothe; Uyen Nguyen
  5. Enhancement of social capital through participation in micro-finance: an empirical investigation By Kundu, AMIT
  6. Physician Market Power and Medical-Care Expenditures By Abe Dunn; Adam Hale Shapiro
  7. The Development of Trade Union theory and Mainstream Economic Methodology By Drakopoulos, Stavros A.; Katselidis, Ioannis
  8. Explaining Changes in Earnings and Labour Costs During the Recession By Bergin, Adele; Kelly, Elish; McGuinness, Seamus
  9. How Much Do Cartels Typically Overcharge? By Marcel Boyer; Rachidi Kotchoni
  10. Workforce Reductions in Theory and Practice: The Swedish Tobacco Monopoly in the 1920s By Karlsson, Tobias
  11. The Facets of Exploitation By Marc Fleurbaey
  12. The Dynamics of Nestedness Predicts the Evolution of Industrial Ecosystems By Bustos, Sebastian; Gomez, Charles; Hausmann, Ricardo; Hidalgo, Cesar A.
  13. Fines for Failure to Cooperate within Antitrust Proceedings – the Ultimate Weapon... By Stolarski, Konrad
  14. Does Culture Affect Corporate Governance? By Pascal Gantenbein; Christophe Volonté
  16. Quantitative analysis in social sciences: An brief introduction for non-economists By Niño-Zarazúa, Miguel
  17. Launching Prices for New Pharmaceuticals in Heavily Regulated and Subsidized Markets By Beatriz Gonzalez López-Valcárcel; Jaume Puig-Junoy
  18. The Extraordinary Art Critic Roger de Piles (1635-1709): An Empirical Analysis of his Rankings and Sale Prices By Kathryn Graddy
  19. The effect of foreign competition on product switching activities: A firm level analysis By Nakhoda, Aadil
  20. David Ricardo on natural and market prices By Signorino, Rodolfo
  21. "Productivity Change and Mine Dynamics: The Coal Industry in Japan during and after World War II" By Tetsuji Okazaki
  22. Progression of HR Practices in Danish Firms during Two Decades By Eriksson, Tor

  1. By: Giocoli, Nicola
    Abstract: Most late 19th-century US economists gave a rather cool welcome to the Sherman Act (1890) and, though less harshly, to the Clayton and FTC Acts (1914). A large literature has identified several explanations for this surprising attitude, calling into play the relation between big business and competition, a non-neoclassical notion of competition and a weak understanding of anti-competitive practices. Much less investigated is the reaction of British economists to the passing of antitrust statutes in the U.S. What we know is simply that none of them (including the top dog, Alfred Marshall) championed the adoption of a law-based competition policy during the three decades (1890-1920) of most intense antitrust debates in the U.S. The position of three prominent British economists will be examined in this paper: H.S. Foxwell, D.H. MacGregor, and, of course, Alfred Marshall – the latter in two moments at the extremes of our period, 1890 and 1919. It will turn out that they all shared with their American colleagues a theoretical and operational skepticism about the government and judiciary interference with the free working of markets. They also believed that British industrial structure and business habits were so different from those in the U.S. that the urge of interfering with markets in order to preserve competition was much weaker. Among the paper's insights is that Marshall’s key concept of “defending a competitor’s right to compete” foreran the modern characterization of the goal of competition policy as "the protection of the competitive process". Yet Marshall developed his concept without making recourse to the post-1930s neoclassical notion of competition as a static market structure which lies at the foundation of most contemporary antitrust policy: a useful lesson from the history of economic thought for those IO economists who still claim that the classical dynamic view of competition is unsuited as a foundation for an effective competition policy.
    Keywords: British economists; antitrust law; Sherman Act; Alfred Marshall
    JEL: B21 B31 K21 L40
    Date: 2012–05–30
  2. By: Daron Acemoglu; Vasco Carvalho; Asuman Ozdaglar; Alireza Tahbaz-Salehi
    Abstract: This paper argues that in the presence of intersectoral input-output linkages, microeconomic idiosyncratic shocks may lead to aggregate fluctuations. In particular, it shows that, as the economy becomes more disaggregated, the rate at which aggregate volatility decays is determined by the structure of the network capturing such linkages. Our main results provide a characterization of this relationship in terms of the importance of different sectors as suppliers to their immediate customers as well as their role as indirect suppliers to chains of downstream sectors. Such higher-order interconnections capture the possibility of "cascade effects" whereby productivity shocks to a sector propagate not only to its immediate downstream customers, but also indirectly to the rest of the economy. Our results highlight that sizable aggregate volatility is obtained from sectoral idiosyncratic shocks only if there exists significant asymmetry in the roles that sectors play as suppliers to others, and that the "sparseness" of the input-output matrix is unrelated to the nature of aggregate fluctuations.
    Keywords: Business cycle, aggregate volatility, diversification, input-output linkages, intersectoral network, cascades
    JEL: C67 D57 E32
    Date: 2011–10
  3. By: Seaton, Jonathan S (Loughborough University); Waterson, Michael (University of Warwick)
    Abstract: This paper delivers a significantly different empirical perspective on micro pricing behaviour and its impact on macroeconomic processes than previous studies. We examine a seven year period of pricing behaviour by the major British supermarkets encompassing the recession year 2008 and the partial recovery of 2009. Several of our findings run strongly counter to established empirical regularities, in particular the high overall frequency of regular or reference price changes we uncover, the greater intensity of change in more turbulent times and the numerical dominance of price falls over rises. The pricing behaviour revealed also significantly challenges the implicit assumption that prices are tracking cost changes. JEL classification: E30 ; E31 ; L81
    Date: 2012
  4. By: Naciba Haned (ESDES Ecole de management de Lyon - Université Catholique de Lyon); Christian Le Bas (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Caroline Mothe (IREGE - Institut de Recherche en Gestion et en Economie - Université de Savoie); Uyen Nguyen (CEPS/INSTEAD - Centre d'Etudes de Populations, de Pauvreté et de Politiques Socio-Economiques / International Networks for Studies in Technology, Environment, Alternatives, Development - Centre d'Etudes de Populations, de Pauvreté et de Politiques Socio-Economiques / International Networks for Studies in Technology, Environment, Alternatives, Development)
    Abstract: Organizational innovation favors technological innovation, but does it also influence technological innovation persistence ? This article investigates empirically the pattern of technological innovation persistence and tests the potential impact of organizational innovation using firm-level data from three waves of the French Community Innovation Surveys. Evidence shows a positive effect of organizational innovation on technological innovation persistence, according to various measures of organizational innovation. Moreover, this impact is more significant for complex innovators (i.e., those who innovate in both products and processes). These results highlight the complexity of managing organizational practices with regard to the firm's technological innovation. They also add to comprehension of the drivers of innovation persistence, through a focus on an often forgotten dimension of innovation in a broader sense.
    Keywords: Organizational Innovation; Technological Innovation; Persistence
    Date: 2012–06–01
  5. By: Kundu, AMIT
    Abstract: Generation of social capital among the poor village women through micro-finance participation emerges an important aspect of rural development programme. This paper presents a method of calculating Social Capital Index and on the basis of two periods longitudinal primary data establishes the fact that enhancement of the value of Social Capital Index is more among the participants of micro-finance programme under SGSY scheme than the nonparticipants
    Keywords: Micro-finance; Social Capital; Impact Evaluation
    JEL: C90 I38 G21
    Date: 2011–06–10
  6. By: Abe Dunn; Adam Hale Shapiro (Bureau of Economic Analysis)
    Abstract: We study the degree to which greater physician market power via consolidation leads to higher service prices in the commercially insured medical-care market. We also examine whether these potentially higher service prices translate into different levels of physician service utilization. We find that physicians in more concentrated markets charge higher service prices. However, due to the unique nature of patient cost sharing as well as the incentives of physicians, these higher prices lead to either no change or, in some cases, an expansion of services. This is in contrast to a typical market, where higher prices attributable to consolidation are thought to decrease quantity demanded.
    Date: 2012–04
  7. By: Drakopoulos, Stavros A.; Katselidis, Ioannis
    Abstract: The pre-war approaches to trade unions were mainly based on the theoretical and methodological viewpoints of early institutional economics. Trade unions were conceived of as politico-economic organizations whose members were motivated by relative comparisons and also were concerned with issues of equity and justice. In the post-war period, there was a major theoretical and methodological shift towards the idea of unions as optimizing economic units with well-defined objective functions which are optimized subject to purely economic constraints. This conceptual transformation took place mainly through the Dunlop-Ross debate, in which John Dunlop conceived unions as analogous to business firms, which was contrary to Arthur Ross’ institutional and political approach. The emerging post war mainstream methodological framework with its mathematical formalism and the exclusion of sociological, political and psychological elements from economic analysis was the main reason for the prevalence of Dunlop’s ideas. However, after decades of analytical developments, the current state of trade union theory has not produced very impressive theoretical results.The paper traces the historical development of the economic analysis of the trade unions from a methodological perspective. It examines the methodological reasons for the dominance of Dunlop’s approach and also the current state of, and the contemporary criticism towards, the established theory. Furthermore, it discusses the contemporary efforts to build a more comprehensive approach to trade union theory and to trade union objectives, also incorporating Ross’ institutional and political insights.
    Keywords: Trade Union Theory; Economic Methodology
    JEL: B0 J50
    Date: 2012–06
  8. By: Bergin, Adele; Kelly, Elish; McGuinness, Seamus
    Abstract: This paper utilises data from the National Employment Surveys to analyse movements in both earnings and labour costs during the period 2006 through to 2009. It finds that, despite an unprecedented fall in output and rise in unemployment, both average earnings and average labour costs increased marginally over the period. Although some factors, such as a rise in the incidence of part-time working and falls in construction employment, served to depress wages, these influences were more than outweighed by increases in both the share of and returns to graduate employment and a rising return to large firm employment. This analysis suggests that a good deal of the downward wage rigidity observed within Irish private sector employment since the onset of the recession has largely been driven by factors consistent with continued productivity growth. Nevertheless, particularly within the male labour market, a substantial proportion of the movements in wages cannot be explained by changes in either labour market composition or the returns to individual/job characteristics. The large unexplained component in the data is attributed to a general reluctance of firms to cut wages in order to avoid productivity losses associated with worker dissatisfaction or higher rates of labour turnover. In support of this view, the study demonstrates that firms will adopt strategies such as reducing staff numbers, hours worked and bonus payments, in preference to reducing wages.
    Keywords: cost/recession/data/employment/unemployment/wages/Productivity/growth/labour market
    Date: 2012–04
  9. By: Marcel Boyer; Rachidi Kotchoni
    Abstract: The estimation of cartel overcharges lie at the heart of antitrust policy on cartel proscution as it constitutes a basic element in the determination of fines. Connor and Lande (2008) conducted a survey of cartels and found a mean overcharge estimates in the range of 31% to 49%. By examining more sources, Connor (2010) finds a mean of 50.4% for successful cartels. However, the data used in those studies are estimates obtained in different ways, sources and contexts rather direct observations. Therefore, these data are subject to model error, estimation error and publication bias. A quick glance at the Connor database reveals that the universe of overcharge estimates is asymmetric, heterogenous and contains a number of influential observations. Beside the fact that overcharge estimates are potentially biased, fitting a linear regression model to the data without providing a carefull treatment of the problems raised above may produce distorted results. We conduct a meta-analysis of cartel overcharge estimates in the spirit of Connor and Bolotova (2006) while providing a sound treatment of those matters. We find typical bias-corrected mean and median overcharge estimates of 13.62% and 13.63% for cartels with initial overcharge estimates lying between 0% and 50% and bias-corrected mean and median overcharges estimates of 17.52% and 14.05% for the whole sample. Clearly, our results have significant antitrust policy implications. <P>L’estimation des surprix des cartels est au cœur de la politique de lutte aux cartels, car elle est un élément clé de la détermination des pénalités. Connor et Lande (2008) survolent la littérature sur les majorations de prix des cartels et concluent à une augmentation moyenne variant entre 31 % et 49 %. Considérant un échantillon plus grand, Connor (2010) trouve une moyenne de 50,4 % pour les cartels réussis. Cependant, les échantillons utilisés dans ces études sont constitués d’estimations venant de différentes études ou cas et non pas d’observations directes. De ce fait, ces échantillons héritent possiblement d’erreurs de modélisation et d’estimation, ainsi que d’un biais de publication. Une analyse sommaire des surprix dans l’échantillon de Connor révèle une distribution asymétrique, de l’hétérogénéité et la présence d’observations aberrantes. Ainsi, au-delà du fait que les estimations des surprix sont potentiellement biaisées, l’estimation d’un modèle de régression linéaire avec de telles données sans un traitement adéquat des problèmes ci-dessus pourrait produire des distorsions dans les résultats. Nous présentons une méta-analyse dans l’esprit de Connor and Bolotova (2006), mais qui tient compte adéquatement des problèmes mentionnés ci-dessus. Après correction du biais d’estimation, nos résultats suggèrent que la moyenne et la médiane des majorations de prix sont de l’ordre de 13,62 % avec une médiane de 13,63 % pour les cartels dont les majorations de prix se situaient initialement entre 0 % et 50 % et de l’ordre de 17,52 % avec une médiane de 14,05 % pour l’ensemble des cartels. Nos résultats débouchent sur des enjeux importants en politique de la concurrence.
    Keywords: Cartel overcharges, Antitrust, Heckman, Meta-analysis, Surprix de cartel, Politique de la concurrence, Heckman, Meta-analyse
    Date: 2012–05–01
  10. By: Karlsson, Tobias
    Abstract: The aim of this paper is to clarify and discuss the various ways firms can make workforce reductions. This aim is accomplished by an in-depth study of an historical case; the downsizing process undertaken in the 1920s by the Swedish Tobacco Monopoly, a state-owned company that had to balance between rational business conduct and social responsibility. The paper makes use of qualitative sources, such as board minutes and memos, and a database covering all blue-collar workers in one of the company’s factories. The paper adresses conceptual questions concerning how to theoretically and empirically distinguish between various reduction strategies and tactics. Its main contribution is to move beyond the simple characterization of reductions as being either smooth or harsh and instead emphasize the multitude of management choices involved in reducing headcount and, consequently, the diversity of downsizing processes.
    Keywords: personnel management; workforce reductions; downsizing; tobacco industry; Sweden; inter-war period
    JEL: D21 N8 J63 J21 J65 L66 J53
    Date: 2012–06–05
  11. By: Marc Fleurbaey (Economic Theory Center - Princeton University, Le Collège d'études mondiales/FMSH - Fondation Maison des sciences de l?homme)
    Abstract: This paper proposes four concepts of exploitation that encapsulate common uses of the word in social interactions: unfair advantage, unequal exchange, using persons as means, free-riding. It briefly discusses how these concepts appear in the literature (the first two are prominent in Roemer's classical work), and then examines how these forms of exploitation are related and how they can occur.
    Keywords: exploitation; unequal exchange; Roemer
    Date: 2012–02–15
  12. By: Bustos, Sebastian (Harvard University); Gomez, Charles (Stanford University); Hausmann, Ricardo (Harvard University and Santa Fe Institute); Hidalgo, Cesar A. (Harvard University and MIT)
    Abstract: Decades of research in ecology have shown that nestedness is a ubiquitous characteristic of both, biological and economic ecosystems. The dynamics of nestedness, however, have rarely been observed. Here we show that the nestedness of both, the network connecting countries to the products that they export and the network connecting municipalities to the industries that are present in them, remains constant over time. Moreover, we find that the conservation of nestedness is sustained by both, a bias for industries that deviate from the networks' nestedness to disappear, and a bias for the industries that are missing according to nestedness to appear. This makes the appearance and disappearance of individual industries in each location predictable. The conservation of nestedness in industrial ecosystems, and the predictability implied by it, demonstrates the importance of industrial ecosystems in the long term survival of economic activities.
    Date: 2012–05
  13. By: Stolarski, Konrad
    Abstract: The aim of this article is to analyse a powerful competence available to antitrust authorities in Europe in the form of the imposition of fines for the failure to cooperate within antitrust proceedings. While fines of that type are imposed in practice very rarely, the article considers the existing decisional practice of the Polish antitrust authority as well as the European Commission, and presents the way in which their approach has evolved throughout the years. The article analyses also the question of the formal initiation of proceedings concerning procedural violations and the importance of the use of a uniform and fair approach towards the scrutinized undertakings, especially as fine graduation is concerned. For that purpose, the article provides also a comparative analysis of past proceedings conducted by the European Commission and selected judgments of EU Courts.
    Keywords: fines; antitrust proceedings; dawn raid; inspection; cooperation; procedural infringements
    JEL: K21
    Date: 2011
  14. By: Pascal Gantenbein; Christophe Volonté (University of Basel)
    Keywords: Corporate governance, Culture, Law, Board of directors, Ownership structure
    JEL: G30 G32 G34 G38 Z10
    Date: 2012
  15. By: Béatrice Parguel (DRM - Dauphine Recherches en Management - CNRS : UMR7088 - Université Paris IX - Paris Dauphine); Renaud Lunardo (Bordeaux Ecole de Management - Bordeaux Management School (BEM)); Jean-Charles Chebat (HEC Montréal - HEC MONTRÉAL)
    Abstract: This paper compares the effects of anti-tobacco ad parodies and visual cigarette package warnings on emotional and cognitive responses of young adults. The findings indicate that graphic-only ad parodies can compete with warnings in their attempt to damage consumers' attitude toward tobacco brands through the health beliefs they lead consumers to associate to the brand. On the contrary, text-only ad parodies prove counterproductive and lead to a boomerang effect characterized by an increase in consumers' tobacco brand attitude.
    Keywords: ad parodies ; persuasion ; anti-tobacco activism
    Date: 2012
  16. By: Niño-Zarazúa, Miguel
    Abstract: In this paper, I present an introduction to quantitative research methods in social sciences. The paper is intended for non-Economics undergraduate students, development researchers and practitioners who although unfamiliar with statistical techniques, are interested in quantitative methods to study social phenomena. The paper discusses conventional methods to assess the direction, strength and statistical significance of the correlation between two or more variables, and examines regression techniques and experimental and quasi-experimental research designs to establish causality in the analysis of public interventions.
    Keywords: Quantitative methods; Statistics; Social Sciences; Research Design; Development
    JEL: C10 C20 C00
    Date: 2012–05
  17. By: Beatriz Gonzalez López-Valcárcel; Jaume Puig-Junoy
    Abstract: This paper provides empirical evidence on the explanatory factors affecting introductory prices of new pharmaceuticals in a heavily regulated and highly subsidized market. We collect a data set consisting of all new chemical entities launched in Spain between 1997 and 2005, and model launching prices. We found that, unlike in the US and Sweden, therapeutically "innovative" products are not overpriced relative to "imitative" ones. Price setting is mainly used as a mechanism to adjust for inflation independently of the degree of innovation. The drugs that enter through the centralized EMA approval procedure are overpriced, which may be a consequence of market globalization and international price setting.
    Keywords: pharmaceuticals; price competition; price regulation
    JEL: L11 L65 I10 I18
    Date: 2012–06
  18. By: Kathryn Graddy (Department of Economics, Brandeis University)
    Abstract: Roger de Piles (1635-1709) was a French art critic who decomposed the style and ability of each artist into areas of composition, drawing, color and expression, rating each on a 20 point scale. Based on evidence from two datasets that together span from the mid-eighteenth century to the present, this paper shows that de Piles’ four characteristics are each both currently and historically correlated with prices achieved at auction. The effect of de Piles’ drawing characteristic on price has steadily decreased over the period 1736-1960 while the effect of de Piles’ color characteristic appears to have increased over the same period. De Piles’ overall ratings have also withstood the test of a very long period of time, with estimates indicating that the works of his higher-rated artists achieved a greater return than his lower rated artists. The annual returns of all artists that he rated achieved comparable returns to other art indices.
    Date: 2012–05
  19. By: Nakhoda, Aadil
    Abstract: Pressure from foreign competition on the decision to introduce new products or on production costs may influence firms to particpate in product switching activities. Firms switch products if they either add or drop products within their product range. I test whether pressure from foreign competition is likely to influence firms that concurrently add and drop (churn) products rather than firms that i) do not undertake any product switching activity, ii) add products only, or iii) drop products only. Firms pay substantial fixed costs to switch products and their productivity levels are likely to determine such ability. I consider whether firms that invest in research and development activities and export their final products are likely to churn products as they are able to generate greater productivity levels than firms that undertake either one of the two activities. As firms constrained by the lack of adequately educated workers may have workers who cannot adapt to different set of skills necessary for product switching activities, I consider whether such firms are likely to churn products as they are exposed to pressure from foreign competition in comparison to firms not constrained by the lack of adequately educated workers. In addition, the contract-intensive nature of an industry can also dictate whether firms exposed to foreign competition can churn products as they may be constrained due to their contract obligations with their buyers and suppliers. The results indicate that pressure from foreign competition is likely to influence the decision of firms to churn products rather than add products only or undertake neither product switching activities. There is little evidence that firms facing pressure from foreign competition will churn products rather than drop products only, except for the most productive firms that invest in research and development activities and export participation.
    Keywords: Foreign competition; product switching; trade liberalization; corporate strategies
    JEL: D21 M11 F13
    Date: 2012–05–31
  20. By: Signorino, Rodolfo
    Abstract: This is an entry produced for the Elgar Companion to David Ricardo, edited by Heinz D. Kurz and Neri Salvadori. Cheltenham, UK and Northampton, MA, USA: Edward Elgar, forthcoming.
    Keywords: David Ricardo; natural and market prices
    JEL: B31 B1
    Date: 2011–06–04
  21. By: Tetsuji Okazaki (Faculty of Economics, University of Tokyo)
    Abstract: In the 1930s and 1940s, the Japanese coal industry experienced huge ups and downs of labor productivity as well as production. In this paper, I explored the micro-aspects of productivity change in the coal industry using mine-level data compiled from official statistics and the original documents of the Coal Control Association. The coal industry in this period was characterized by dynamic changes in market structure. While a number of mines entered and exited the industry, shares of incumbent mines also changed substantially. These mine dynamics had substantial productivity implications. In the early stage of the war, many low productivity mines entered the industry, which reduced average productivity considerably. On the other hand, the government and the Coal Control Association implemented a policy to concentrate productive resources and production on efficient mines during the war, which helped raise average productivity. In a deteriorating environment, coal production in Japan was maintained fairly well during the war. One of the conditions that made it possible was the policy of resource reallocation.
    Date: 2012–05
  22. By: Eriksson, Tor (Department of Economics, Aarhus School of Business)
    Abstract: This paper describes the spread of new work and pay practices in Danish private sector firms during the last two decades. The data source is two surveys directed at firms and carried out ten years apart. The descriptive analysis shows that large changes in the way work is organized in firms have occurred during both decades, whereas the progression of pay practices predominantly took place in the nineties. There is considerable firm heterogeneity in the frequency of adoption of the practices. In particular, the prevalence of both incentive pay and work practices is higher in multinational companies and firms engaged in exporting
    Keywords: High performance work practices; Pay practices; Performance pay
    JEL: M52
    Date: 2012–06–07

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