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on Heterodox Microeconomics |
| By: | Michel, Christian |
| Abstract: | This paper proposes and empirically implements a framework for analyzing industry competition and the degree of joint profit maximization of merging firms in differentiated product industries. Using pre- and post-merger industry data, I am able to separate merging firms' intra-organizational pricing considerations from industry pricing considerations. The insights of the paper shed light on a long-standing debate in the theoretical literature about the consequences of organizational integration. Moreover, I propose a novel approach to directly estimate industry conduct that relies on ownership changes and input price variation. I apply my framework using data from the ready-to-eat cereal industry, covering the 1993 Post-Nabisco merger. My results show an increasing degree of joint profit maximization of the merged entities over the first two years after the merger, eventually leading to almost full maximization of joint profits. I find that between 9.7 and 19.1 percent of industry markups can be attributed to cooperative industry behavior, while the remaining markup is due to product differentiation of multi-product firms. -- |
| JEL: | L22 L11 C52 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc13:80488&r=hme |
| By: | Pfeifer, Christian |
| Abstract: | This paper uses German linked employer-employee data in order to estimate the impact of intra-firm wage dispersion on the probability that firms pay for continuous training. About half of all firms in the estimation sample cover all direct and indirect training costs, which contradicts the standard human capital approach with perfect labor markets. The main finding of my cross-section, panel, and instrumental variable Probit estimations is that firms with larger intra-firm wage compression are indeed more likely to cover all direct and indirect training costs, which is consistent with theoretical considerations of the "new training literature" about imperfect labor markets. -- |
| JEL: | J24 J31 M53 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc13:80030&r=hme |
| By: | Dwenger, Nadja; Rattenhuber, Pia; Steiner, Viktor |
| Abstract: | This study empirically investigates the direct incidence of the corporate income tax through wage bargaining, using an industry-region level panel data set on all corporations in Germany over the period 1998 to 2006. Our measure of direct incidence for the first time accounts for employment effects which result from tax induced wage changes. Workers share in reductions of the CIT burden; yet, direct incidence is small and confined to 0.19 0.29. Thus, the net effect of wage bargaining on the corporate wage bill, after an exogenous 1 decrease in the CIT burden, is as little as 19 to 29 cents. This is about half of the effect obtained in prior literature under the assumption that employment remained constant. A focus on wages alone leads to an overestimation of direct tax incidence. -- |
| JEL: | H22 H25 J21 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc13:80040&r=hme |
| By: | Bueren, Eckart; Hüschelrath, Kai; Veith, Tobias |
| Abstract: | Public and private action against cartels is an internationally recognized cornerstone of antitrust enforcement. Effective private enforcement requires that cartel victims can receive (at least) full compensation for the harm suffered. Academics and competition authorities support this goal with guidance for the calculation of cartel damages. However, they usually neglect that the prosecution of competition law infringements can be very time-consuming, so that it often takes several years until cartel victims obtain damages. Interest and inflation are thus two key drivers of adequate compensation. This paper is the first to provide a comparative law and economics perspective on this topic: We investigate how various legal systems treat interest and inflation as part of competition law actions for damages, and, using real-world data from the lysine cartel, simulate the economic differences, which turn out to be substantial. By comparing and evaluating the regulatory techniques, our paper provides important insights for regulators, litigation practitioners and the ongoing reform discussions in the EU and the US. At the same time, our approach is a first step towards a quantitative comparative law and economics analysis of the law on interest in the field of tort law. -- |
| Keywords: | Antitrust policy,cartels,private enforcement,damages,interest,inflation |
| JEL: | K21 L41 L61 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:14008&r=hme |
| By: | Susan Helper; Rebecca Henderson |
| Abstract: | General Motors was once regarded as one of the best managed and most successful firms in the world, but between 1980 and 2009 its share of the US market fell from 62.6 to 19.8 percent, and in 2009 the firm went bankrupt. In this paper we argue that the conventional explanation for this decline – namely high legacy labor and health care costs – is seriously incomplete, and that GM’s share collapsed for many of the same reasons that many of the other highly successful American firms of the 50s, 60s and 70s were forced from the market, including a failure to understand the nature of the competition they faced and an inability to respond effectively once they did. We focus particularly on the problems GM encountered in developing the relational contracts essential to modern design and manufacturing. We discuss a number of possible causes for these difficulties: including GM’s historical practice of treating both its suppliers and its blue collar workforce as homogeneous, interchangeable entities, and its view that expertise could be partitioned so that there was minimal overlap of knowledge amongst functions or levels in the organizational hierarchy and decisions could be made using well-defined financial criteria. We suggest that this dynamic may have important implications for our understanding of the role of management in the modern, knowledge based firm, and for the potential revival of manufacturing in the United States. |
| JEL: | J24 L2 L21 L23 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19867&r=hme |
| By: | Philipp Mundt (Department of Economics, University of Bamberg, Bamberg, Germany); Mishael Milakovic (Department of Economics, University of Bamberg, Bamberg, Germany); Simone Alfarano (Department of Economics, Universitat Jaume I, Castellón, Spain) |
| Abstract: | The basic philosophy behind Gibrat's rule of proportionate effect has been to find some common mechanism in the growth process of business firms, based on the idea that growth rates are independent of size and drawn from the same distribution. After decades of research, however, it seems fair to say that the ÒlawÓ fails to provide a universal mechanism for the growth of firms. Here we take the position that it is more plausible for GibratÕs approach to apply to firm profitability rather than firm growth, in line with the classical idea of economic competition as a dynamic process of capital reallocation. Considering a sample of more than five hundred long-lived US corporations from virtually all sectors, we compare the statistical properties of growth and profit rates over a time span of thirty years, and find that profit rates and their volatilities are independent of size, which is not true of growth rates. We also find that the empirical densities of both profitability and growth can be described by exponential power (or Subbotin) distributions, but there are pronounced differences in their parameterizations and autocorrelation structures. We argue that a recently proposed diffusion process not only reproduces the cross-sectional distribution of profit rates, but is also consistent with the empirical time series of individual firms and their autocorrelations. In the natural sciences such a situation is commonly referred to as a statistical equilibrium, while econometricians speak of ergodicity and stationarity. Our economic interpretation of this property is that all surviving firms are subject to the same competitive pressures of capital reallocation, irrespective of their industry or particular line of business. They all face the same profitability benchmark and volatility, while their idiosyncratic efforts merely have an effect on the persistence of abnormal profits. In other words, survivors have to participate in the same game and can only choose to do so at different ÒspeedsÓ. We conclude with the empirical observation that the speed of convergence from abnormal profits to the system-wide average depends negatively on firm size, diversification, and capital intensity. |
| Keywords: | Profit rates, diffusion process, statistical equilibrium, dynamic competition, persistence |
| JEL: | C16 L10 D21 E10 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:jau:wpaper:2014/02&r=hme |
| By: | Rickert, Dennis; Wey, Christian; Haucap, Justus; Heimeshoff, Ulrich; Klein, Gordon J. |
| Abstract: | Given various recent antitrust investigations on the retail sector, we deal with uncovering demand systems substitution patterns for a particular market (diapers) to investigate the inter-format competition (supermarkets vs. discounters vs. drugstores). Using the uncovered demand system we compute retail and manufacturer margins and combine those with standard market delineation techniques, showing that the strongest substitution patterns are between the leading brand as well as private labels sold at drugstores and discounters. This result is important given controversies among competition authorities, firms and academic researchers. -- |
| JEL: | L40 L81 C50 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc13:79797&r=hme |
| By: | Gollier, Christian; Pouget, Sébastien |
| Abstract: | This paper studies shareholder engagement in companies' strategic decisions. Differences of objective among shareholders arise in our model due to the presence of socially responsible investors. These investors take externalities into account when valuing their portfolio while conventional investors do not. Shareholders may affect corporate behavior via two mechanisms. They can vote with their feet: responsible investors may shy away from firms producing negative externalities, thereby raising their cost of capital. Investors can also engage in activism. Our main contribution is to show that a large activist investor can generate positive abnormal returns by investing in non-responsible companies and turning them into responsible. We call this strategy the \Washing Machine" and show that its successful implementation relies on a long-term horizon and a credible pro-social orientation. |
| Keywords: | Asset pricing, corporate social responsibility, socially responsible investments, corporate engagement, shareholder activism. |
| JEL: | G34 H23 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:27827&r=hme |
| By: | Eduardo Viegas; Stuart P. Cockburn; Henrik Jeldtoft Jensen; Geoffrey B. West |
| Abstract: | Company mergers and acquisitions are often perceived to act as catalysts for corporate growth in free markets systems: it is conventional wisdom that those activities lead to better and more efficient markets. However, the broad adoption of this perception into corporate strategy is prone to result in a less diverse and more unstable environment, dominated by either very large or very small niche entities. We show here that ancestry, i.e. the cumulative history of mergers, is the key characteristic that encapsulates the diverse range of drivers behind mergers and acquisitions, across a range of industries and geographies. A long-term growth analysis reveals that entities which have been party to fewer mergers tend to grow faster than more highly acquisitive businesses. |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1401.5314&r=hme |
| By: | Schaffer M.E.; Dohmen T.J.; Lehmann H. (ROA) |
| Abstract: | We use a rich personnel data set from a Russian firm for the years 1997 to 2002 to analyze how the firm adjusts wages and employment during this period in which local labor market conditions changed in the aftermath of the financial crisis in 1998. We relate the development of turnover and wages for various employment categories to alternative models of wage and employment determination. We argue that the firms behavior is consistent with the predictions of efficiency wage models of the shirking and turnover type. |
| Keywords: | Labor Demand; Wage Level and Structure; Wage Differentials; Socialist Systems and Transitional Economies: Factor and Product Markets; Industry Studies; Population; |
| JEL: | J23 J31 P23 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umaror:2013012&r=hme |
| By: | Alan B. Krueger; Andreas I. Mueller |
| Abstract: | This paper provides evidence on the behavior of reservation wages over the spell of unemployment using high‐frequency longitudinal data. Using data from our survey of unemployed workers in New Jersey, where workers were interviewed each week for up to 24 weeks, we find that self‐reported reservation wages decline at a modest rate over the spell of unemployment, with point estimates ranging from 0.05 to 0.14 percent per week of unemployment. The decline in reservation wages is driven primarily by older individuals and those with personal savings at the start of the survey. The longitudinal nature of the data also allows us to test the relationship between job acceptance and the reservation wage and offered wage, where the reservation wage is measured from a previous interview to avoid bias due to cognitive dissonance. Job offers are more likely to be accepted if the offered wage exceeds the reservation wage, and the reservation wage has more predictive power in this regard than the pre-displacement wage, suggesting the reservation wage contains useful information about workers’ future decisions. In addition, there is a discrete rise in job acceptance when the offered wage exceeds the reservation wage. In comparison to a calibrated job search model, the reservation wage starts out too high and declines too slowly, on average, suggesting that many workers persistently misjudge their prospects or anchor their reservation wage on their previous wage. |
| JEL: | E0 H0 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19870&r=hme |
| By: | Acheson, Graeme G.; Campbell, Gareth; Turner, John D.; Vanteeva, Nadia |
| Abstract: | Using ownership and control data for 890 firm-years, this paper examines the concentration of capital and voting rights in British companies in the second half of the nineteenth century. We find that both capital and voting rights were diffuse by modern-day standards. This implies that ownership was separated from control in the UK much earlier than previously thought, and given that it occurred in an era with weak shareholder protection law, it undermines the influential law and finance hypothesis. We also find that diffuse ownership is correlated with large boards, a London head office, non-linear voting rights, and shares traded on multiple markets. -- |
| Keywords: | corporate ownership and control,law and finance hypothesis,shareholder protection law,British financial history |
| JEL: | G32 K22 N24 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:eabhps:1402&r=hme |