nep-hme New Economics Papers
on Heterodox Microeconomics
Issue of 2013‒09‒28
nine papers chosen by
Frederic S. Lee
University of Missouri-Kansas City

  1. CEO Pay and Firm Size: an Update after the Crisis By Gabaix, Xavier; Landier, Augustin; Sauvagnat, Julien
  2. Newcomb's Paradox -- A Turing Machine Interpretation By K. Vela Velupillai
  3. Real and Financial Determinants of the Profit Share of Income: The Financial Profit Squeeze By Matthew J. Bezreh; Jonathan P. Goldstein
  4. L’économie de la fonctionnalité : perspective historique et illustration empirique By Sophie BOUTILLIER; Blandine LAPERCHE; Fabienne PICARD
  5. Micro Price Dynamics during Japan's Lost Decades By Nao Sudo; Kozo Ueda; Kota Watanabe
  6. Role of Hub Firms in Geographical Transaction Network By SAITO Yukiko
  7. DON’T QUIT YOUR DAY JOB: USING WAGE AND SALARY EARNINGS TO SUPPORT A NEW BUSINESS By M´onica Garc´ia-P´erez; Christopher Goetz; John Haltiwanger; Kristin Sandusky
  8. The Effect of Accounting Conservatism on Corporate Investment Behavior By Ishida, Souhei; Ito, Kunio
  9. Profit Sharing and its Effect on Income Distribution and Output: A Kaleckian Approach By Sasaki, Hiroaki

  1. By: Gabaix, Xavier; Landier, Augustin; Sauvagnat, Julien
    Abstract: In the "size of stakes" view quantitatively formalized in Gabaix and Landier (2008), CEO compensation is determined in a competitive talent market, and re flects the size of firms affected by talent. This paper offers empirical update on this view. The years 2004-2011, which include the recent crisis, were not part of the initial study and oer a laboratory to examine the theory as they include new positive and negative shocks to the size of large firms. Executive compensation at the top (ex ante) did closely track the evolution of average rm value during those years. During the crisis (2007 - 2009), average total firm value decreased by 17%, and CEO pay decreased by 28%. During 2009-2011, we observe a rebound of firm value by 19% and of CEO pay increased by 22%. These fairly proportional changes provide a validity check in favor of the "size of stakes" view.
    Keywords: assignment models; economics of superstars; Executive pay; inequality; matching.
    JEL: G34 J24 J3
    Date: 2013–06
  2. By: K. Vela Velupillai
    Abstract: A re-interpretation of the asymmetric roles assigned to the two agents in the genesis of Newcomb’s Paradox is suggested. The re-interpretation assigns a more active role for the ‘rational’ agent and a possible Turing Machine interpretation for the behaviour of the demon (alias, being from another planet, with an advanced technology and science,..,etc.). These modifications, while introducing new conundrums to an already diabolical interaction, do allow the ‘rational’ agent, as a computably behavioural agent, to make a clear decision, if any decision is possible at all. This latter caveat is necessary because in the Turing Machine formulation, the computably behavioural agent might have to face algorithmic undecidabilities (due to the halting problem for Turing Machines)
    Date: 2013
  3. By: Matthew J. Bezreh; Jonathan P. Goldstein
    Abstract: This paper conducts a causal analysis of determinants of the profit share of income for nonfinancial corporations in the Neoliberal era. The analysis focuses on power relations across and amongst three classes: labor, industrial capitalists and financial capitalists. Particular attention is paid to the multidimensional power spectrum of financial capitalists. Regression results establish a financial profit squeeze, the specific elements of financial capitalist’s power responsible for the squeeze and the pervasive nature of low road labor strategies in the Neoliberal era.
    Keywords: profit share, financial profit squeeze
    JEL: B51 E11 E32
    Date: 2013
    Abstract: Cet article étudie les fondements historiques et théoriques de l’économie de la fonctionnalité et analyse au travers d’une enquête qualitative la réalité de sa diffusion dans les entreprises industrielles françaises. L’économie de la fonctionnalité qui repose sur la vente d’un service aux clients plutôt que d’un bien matériel s’inscrit dans la recherche de nouveaux modes d’organisation des activités économiques compatibles avec le développement durable. Mais peut-elle être considérée comme un moteur de croissance économique ? Nous montrons que l’économie de la fonctionnalité se positionne en rupture avec certains des fondements du modèle d’organisation fordiste sur les plans de la production, de la consommation et de la prise en compte de la contrainte environnementale. Les entreprises interrogées s’intègrent peu à peu dans cette logique en développant des systèmes produits-services qui restent cependant basiques, au sens où il s’agit davantage d’une combinaison de produits et de services plutôt que d’une substitution des services aux produits. Les freins restent nombreux pour la généralisation des systèmes produits-services et pour que l’économie de la fonctionnalité soit à l’origine d’une nouvelle phase de croissance. This a rticle examines the historical and theoretical foundations of the functional economy and analyses through a qualitative survey the reality of its dissemination in the French industrial companies. The functional economy, which is based on the sale of a service to a customer rather than a physical product corresponds to the search of new ways of organizing the economic activities, consistent with the promotion of a sustainable development. But can it be regarded as an engine of economic growth? We show that the functional economics breaks out with some of the foundations of the Fordist model in terms of production, consumption and in the way the environmental constraints is taken into account. The companies surveyed are gradually implementing this logic by developing product-service systems which however remain basic in the sense they are more a combination of products and services rather than a substitution of services to products. Some brakes remain for the generalization of product-service systems into companies and so that the functional economy contributes to a new trend of growth.
    Keywords: économie de la fonctionnalité, systèmes produits-services, environnement, entreprises industrielles, functional economy, product-service systems, environment, industrial companies
    JEL: O14 Q56
    Date: 2013
  5. By: Nao Sudo; Kozo Ueda; Kota Watanabe
    Abstract: We study micro price dynamics and their macroeconomic implications using daily scanner data from 1988 to 2013. We provide five facts. First, posted prices in Japan are ten times as flexible as those in the U.S. scanner data. Second, regular prices are almost as flexible as those in the U.S. and Euro area. Third, the heterogeneity of frequency and size of price change across products is sizable and maintained throughout the sample period. Fourth, during Japan's lost decades, temporary sales have played an increasingly important role in households' consumption expenditure. Fifth, the frequency of upward regular price revisions and the frequency of sales are significantly correlated with the macroeconomic environment in particular indicators associated with a labor market while other components of price changes are not.
    Keywords: Lost decade; deflation; temporary sales; regular prices; scanner data; price stickiness
    JEL: E3 E31 E5
    Date: 2013–09
  6. By: SAITO Yukiko
    Abstract: In this study, we investigate the role of geographical proximity in an inter-firm transaction network and the role of hub firms on geographical spread of regional impact. By using inter-firm micro transaction data of over 800 thousands firms, we found that indirect transaction is geographically dispersed mainly due to a few hub firms, although firm's direct transactions mostly occur within geographically narrow areas. More precisely, median distance between indirect transaction partners (partners' partners) is 255km, which is much larger than that between direct transaction partners (29km). In a counterfactual transaction network without hub firms, whose transaction relations are no less than 100, median distance between indirect transaction partners is reduced to 70km, thereby suggesting the important role of hub firms in a geographical transaction network. We confirm this suggestion through an analysis of regional impact of the Great East Japan Earthquake.
    Date: 2013–09
  7. By: M´onica Garc´ia-P´erez; Christopher Goetz; John Haltiwanger; Kristin Sandusky
    Abstract: This paper makes use of a newly constructed Census Bureau dataset that follows the universe of sole proprietors, employers and non-employers, over 10 years and links their transitions to their activity as employees earning wage and salary income. By combining administrative data on sole proprietors and their businesses with quarterly administrative data on wage and salary jobs held by the same individuals both preceding and concurrent with business startup, we create the unique opportunity to quantify significant workforce dynamics that have up to now remained unobserved. The data allow us to take a first glimpse at these business owners as they initiate business ventures and make the transition from wage and salary work to business ownership and back. We find that the barrier between wage and salary work and self-employment is extremely fluid, with large flows occurring in both directions. We also observe that a large fraction of business owners takeon both roles simultaneously and find that this labor market diversification does have implications for the success of the businesses these owners create. The results for employer transitions to exit and non-employer suggest that there is a ”don’t quit your day job” effect that is present for new businesses. Employers are more likely to stay employers if they have a wage and salary job in the year just prior to the transitions that we are tracking. It is especially important to have a stable wage and salary job but there is also evidence that higher earnings from the wage and salary job makes transition less likely. For nonemployers we find roughly similar patterns but there are some key differences. We find that having recent wage and salary income (and having higher earnings from such wage and salary activity) increases the likelihood of survival. Having recent stable wage and salary income decreases the likelihood of a complete exit but increases the likelihood of transiting to be an employer. Having recent wage and salary income in the same industry as the non-employer business has a large and positive impact on the likelihood of transiting to being a non-employer business.
    Keywords: firm survival, self-employment, startups, firm dynamics
    Date: 2013–09
  8. By: Ishida, Souhei; Ito, Kunio
    Abstract: We examine how two types of conservatism—conditional conservatism and unconditional conservatism—affect corporate investment behavior. Conditional conservatism forces managers to recognize the loss resulting from an investment project on a timely basis. When risk-averse managers are aware that their reputation and compensation are affected adversely by recognizing the loss resulting from project failure, they are less likely to undertake the project ex ante despite its positive net present value (NPV). Thus, conditional conservatism probably inhibits corporate investment behavior. In contrast, unconditional conservatism mitigates a firm’s earning volatility, especially downward volatility, by providing an accounting slack. Thus, it is likely that unconditional conservatism promotes corporate investment behavior. Using a large sample of Japanese companies, we empirically analyze how conditional conservatism and unconditional conservatism affect corporate investment behavior. These results suggest that although firms with higher conditional conservatism take more negative investment initiatives, those firms with higher unconditional conservatism take more positive investment initiatives.
    Keywords: Conservatism, Conditional Conservatism, Unconditional Conservatism, Corporate Behavior, Capital Investment
    Date: 2013–09
  9. By: Sasaki, Hiroaki
    Abstract: This paper investigates the effect of profit sharing on the economy by using a Kaleckian model. Unlike exiting studies, we endogenize the profit share. Our analysis shows that if the size of the productivity-enhancing effect of profit sharing is small, profit sharing decreases the equilibrium rate of capacity utilization whereas if the size is large, profit sharing increases the equilibrium rate of capacity utilization.
    Keywords: profit sharing, income distribution, regular and non-regular employment, wage-gap, cyclical fluctuations, demand-led growth
    JEL: E12 E24 E25 E32 J31 J33 J53 J82 J83
    Date: 2013–09

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