nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2012‒09‒16
eleven papers chosen by
Frederic S. Lee
University of Missouri-Kansas City

  1. Executive Board Composition and Bank Risk Taking By Allen N. Berger; Thomas Kick; Klaus Schaeck
  2. The Distribution Dynamics of Output Multipliers in Scotland 1998-2007 By J. H. Ll. Dewhurst
  3. The Growth in Inter-connectedness in the Scottish Economy, 1998-2007; a disaggregated analysis. By J. H. Ll. Dewhurst
  4. Actions driving and legitimizing radical innovations in a large firm By Johansson Magnus; Rani Jeanne Dang; Rick Middel
  5. Catch-Down Innovation in Developing Countries and the Strategy of Japanese Companies: The Case of Karasawa Seisakusho, Ltd. in the Chinese electric bicycle industry (Japanese) By MARUKAWA Tomoo; KOMAGATA Tetsuya
  6. Labour precariousness and make do and mend after redundancy at Anglesey Aluminium: critiquing Human Capital Theory By Tony Dobbins; Alexandra Plows; Huw Lloyd-Williams
  7. Impact on firms of the use of knowledge providers: a systematic review of the literature By Vivas-Augier, Carlos; Barge-Gil, Andrés
  8. Markups and Agglomeration: Price Competition versus Externalities By Liqiu Zhao
  9. Sales-Maximization vs. Profit-Maximization: Managerial Behavior at Japanese Regional Banks 1980-2009 By Kozo Harimaya; Takao Ohkawa; Makoto Okamura; Tetsuya Shinkai
  10. Bad Jobs on the Rise By John Schmitt; Janelle Jones
  11. Financial Returns to Infrastructure and Investment Strategies during Britain's Industrial Revolution By Dan Bogart

  1. By: Allen N. Berger (University of South Carolina); Thomas Kick (Deutsche Bundesbank); Klaus Schaeck (Bangor Business School)
    Abstract: Little is known about how socioeconomic characteristics of executive teams affect corporate governance in banking. Exploiting a unique dataset, we show how age, gender, and education composition of executive teams affect risk taking of financial institutions. First, we establish that age, gender, and education jointly affect the variability of bank performance. Second, we use difference-in-difference estimations that focus exclusively on mandatory executive retirements and find that younger executive teams increase risk taking, as do board changes that result in a higher proportion of female executives. In contrast, if board changes increase the representation of executives holding Ph.D. degrees, risk taking declines.
    Keywords: Banks, executives, risk taking, age, gender, education
    JEL: G21 G34 I21 J16
    Date: 2012–02
  2. By: J. H. Ll. Dewhurst
    Abstract: In an input-output context the impact of any particular industrial sector is commonly measured in terms of the output multiplier for that industry. Although such measures are routinely calculated and often used to guide regional industrial policy the behaviour of such measures over time is an area that has attracted little academic study. The output multipliers derived from any one table will have a distribution; for some industries the multiplier will be relatively high, for some it will be relatively low. The recent publication of consistent input-output tables for the Scottish economy makes it possible to examine trends in this distribution over the ten year period 1998 – 2007. This is done by comparing the means and other summary measures of the distributions, the histograms and the cumulative densities. The results indicate a tendency for the multipliers to increase over the period. A Markov chain modelling approach suggests that this drift is a slow but long term phenomenon which appears not to tend to an equilibrium state. The prime reason for the increase in the output multipliers is traced to a decline in the relative importance of imported (both from the rest of the UK and the rest of the world) intermediate inputs used by Scottish industries. This suggests that models calibrated on the set of tables might have to be interpreted with caution.
    Keywords: Input-Output analysis, Output Multipliers, Intermediate imports
    JEL: C67 R11 R15
    Date: 2012–09
  3. By: J. H. Ll. Dewhurst
    Abstract: The measurement of inter-connectedness in an economy using input-output tables is not new, however much of the previous literature has not had any explicit dynamic dimension. Studies have tried to estimate the degree of inter-relatedness for an economy at a given point in time using one input-output table, some have compared different economies at a point in time but few have looked at the question of how interconnectedness within an economy changes over time. The publication in 2010 of a consistent series of input-output tables for Scotland offers the researcher the opportunity to track changes in the degree of inter-connectedness over the seven year period 1998 to 2007. The paper is in two parts. A simple measure of inter-connectedness is introduced in the first part of the paper and applied to the Scottish tables. In the second part of the paper an extraction method is applied to sector by sector to the tables in order to estimate how interconnectedness has changed over time for each industrial sector.
    Keywords: Extraction method, Input-Output Analysis, Inter-connectedness, Scottish economy
    JEL: R11 R12 R15
    Date: 2012–09
  4. By: Johansson Magnus (IIE - Institute for Innovation and Entrepreneurship, Université de Gothenburg, Suède - Université de Gothenburg, Suède); Rani Jeanne Dang (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - CNRS : UMR7321 - Université de Nice Sophia Antipolis (UNS)); Rick Middel (IIE - Institute for Innovation and Entrepreneurship, Université de Gothenburg, Suède - Université de Gothenburg, Suède)
    Abstract: In a longitudinal real time case study over 14 months, we follow the process of radical innovation in an incumbent Swedish firm. Applying institutional theory and the concept of legitimacy, we try to shed new light on the firm process of developing and implementing radical ideas. We deconstruct the black box of individual actions undertaken in the process and trace the effect of these actions on the development and legitimacy for the radical idea. We find that when an idea lack top management support and the process of innovation are interrupted, lower level employees' action can have a defining impact of the survival. In the literature there is a perceived need for a consistent view on how to organize the bottom up processes of innovation within a firm. Emerging from the qualitative grounded analysis we thus formalize these actions undertaken in a radical innovation process.
    Keywords: Legitimacy, Radical Innovation, Actions
    Date: 2012–04–25
  5. By: MARUKAWA Tomoo; KOMAGATA Tetsuya
    Abstract: The electric bicycle industry emerged in China in the late 1990s, and it is now a huge market which exceeds that of conventional bicycles, though such product has never existed in developed countries. This type of technological development, which diverts from the path of developed countries, is what we call "catch-down innovation" in this paper. We find several cases of catch-down innovation in China and India that have been made to cater to the demand and to adapt to the social environment and income level of these countries. China's electric bicycles have their technological origin in Japanese electrically-assisted bicycles, but they are made simpler and cheaper and are a market that is nearly 100 times larger than the latter. Japanese companies tend to think that there is no chance of selling their products and services to those who are engaged in catch-down innovation. However, there is a small Japanese company which has more than 40 percent market share of electric bicycle brakes in China. Based on a detailed case study of this company, we discuss the Japanese companies' strategies to find business opportunities in developing countries.
    Date: 2012–08
  6. By: Tony Dobbins (Bangor Business School); Alexandra Plows (School of Social Sciences, Bangor University); Huw Lloyd-Williams (College of Business, Social Sciences and Law, Bangor University)
    Abstract: This paper tracks workers experiences of and responses to redundancy, and the impact on the local labour market, following the closure of a large employer, Anglesey Aluminium (AA), on Anglesey in North Wales. We draw on these findings to produce a critical challenge to Human Capital Theory (HCT) and its influence on sustaining neo-liberal policy orthodoxy with its focus on supplying skilled and employable workers in isolation from other necessary ingredients in the policy recipe. We conclude that HCT and associated policy orthodoxy has contributed to market failure. Ex-AA workers faced a paradox of being overqualified but underemployed. Some workers re-skilled but there were insufficient (quality) job opportunities commensurate with the employment they had left. In picking up the pieces following redundancy, many workers found themselves part of an expanding labour precariat with little choice but to make do and mend.
    Keywords: Human Capital Theory, Job Quality, Opportunity Bargain, Precariat, Redundancy, Restructuring.
    Date: 2012–06
  7. By: Vivas-Augier, Carlos; Barge-Gil, Andrés
    Abstract: This study summarizes the main conclusions from a systematic review of the empirical literature regarding the impact on firms of the use of knowledge providers, including universities, technology institutes or knowledge intensive business firms. We use a criteria to classify the literature according to the research question addressed: (i) Which firms use knowledge providers?; (ii) Do firms using them achieve better results?; (iii) Which firms benefit more from using knowledge providers? Stylized facts are that larger, more R&D intensive and high tech firms are more likely to use knowledge providers and that use of knowledge providers is associated to firms higher technical results. Less attention has been paid to the third question so that no stylized facts can be developed on it. Three important recommendations for future research emerge. First, to pay more attention to methodological issues, such as sample selection and endogeneity, which may potentially bias the results. Second, to develop comparative analysis of the differential features of different knowledge providers. Third, to take depth and breadth of collaborations into account.
    Keywords: Impact Assessment; Firms; Knowledge Providers; Collaboration; Innovation; R&D; Industry; Literature Review
    JEL: O30 I20 L10
    Date: 2012–07–08
  8. By: Liqiu Zhao
    Abstract: Agglomeration can affect markups through two potential channels: agglom- erated regions toughen competition (price competition effect) and firms are more productive on average in agglomerated regions (agglomeration exter- nalities and firm selection effect). However, the literature is inconclusive on which force dominates. This paper models these two channels by in- troducing agglomeration economies to the model of Melitz and Ottaviano (2008). Under parameters from the empirical studies, I demonstrate that the price competition effect tends to dominate the others, i.e., firms in more agglomerated regions charge lower markups. Using a unique Chinese firm- level data from 2002 to 2004, I investigate the effect of spatial agglomeration on markups of firms. By addressing the potential endogeneity problems us- ing instrumental-variable method, I find that in China an increase in the number of own-industry firms in the same region has a negative causal ef- fect on markups of firms and a positive effect on productivity. But firms in agglomerated regions have higher output and profit.
    Date: 2011
  9. By: Kozo Harimaya (Faculty of Business Administration, Ritsumeikan University); Takao Ohkawa (Faculty of Economics, Ritsumeikan University); Makoto Okamura (Faculty of Economics, Ritsumeikan University); Tetsuya Shinkai (School of Economics, Kwansei Gakuin University)
    Abstract: In this paper, we analyze the managerial behavior of firms by estimating a nested objective function consistent with the framework of Fershtman and Judd (1987). Using data for Japanese regional banks for FY 1980-FY 2009, we focus on oligopolistic behavior in the domestic loan market and examine the intensity with which managers attempt to maximize sales and profits. We find that sales-maximization explains the behavior of Japanese regional banks more adequately and appropriately than profit-maximization. In particular, yearly fluctuations of the degree of managerial objectives suggest that the effort to maximize sales has intensified after full-scale liberalization of interest rates.
    Keywords: firm objective, strategic delegation, managerial incentives, financial liberalization and banking
    JEL: L13 L21 G21
    Date: 2012–09
  10. By: John Schmitt; Janelle Jones
    Abstract: The decline in the economy’s ability to create good jobs is related to deterioration in the bargaining power of workers, especially those at the middle and the bottom of the pay scale. The restructuring of the U.S. labor market – including the decline in the inflation-adjusted value of the minimum wage, the fall in unionization, privatization, deregulation, pro-corporate trade agreements, a dysfunctional immigration system, and macroeconomic policy that has with few exceptions kept unemployment well above the full employment level – has substantially reduced the bargaining power of U.S. workers, effectively pulling the bottom out of the labor market and increasing the share of bad jobs in the economy. In this paper, we define a bad job as one that pays less than $37,000 per year (in inflation-adjusted 2010 dollars); lacks employer-provided health insurance; and has no employer-sponsored retirement plan. By our calculations, about 24 percent of U.S. workers were in a bad job in 2010 (the most recently available data). The share of bad jobs in the economy is substantially higher than it was in 1979, when 18 percent of workers were in a bad job by the same definition. The problems we identify here are long-term and largely unrelated to the Great Recession. Most of the increase in bad jobs – to 22 percent in 2007 – occurred before the recession and subsequent weak recovery.
    Keywords: good jobs, bad jobs, retirement, pensions, health insurance, wages, labor, education
    JEL: J J3 J31 J32 J38 J5 J1 J11 J15 I I2 I24 I25
    Date: 2012–09
  11. By: Dan Bogart (Department of Economics, University of California-Irvine)
    Abstract: The infrastructure sector has the potential to generate wide differences in profits and economic outcomes. This paper examines financial returns and investment strategies for Britain’s turnpike roads in the early nineteenth century. There are three main findings. First, rates of return on capital invested and returns to bondholders were similar to competitive sectors. Second, there was significant variation in returns across trusts. Third, there is evidence that turnpike investors were driven by financial motives, although economic motives appear to be important in some cases. The findings have implications regarding the connection between infrastructure and Britain’s industrialization.
    Keywords: Monopoly; Regulation; Turnpike roads; Infrastructure; Britain; Industrial Revolution
    JEL: K23 N43 N73
    Date: 2012–08

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