union coverage and profitability among u s firms this paper utilizes unique survey data on labor union coverage at the firm level to examine union effects on the profitability of 705 u s companies during the 1970s market value and earnings are estimated to be about 10 15 percent lower in an average unionized company than in a nonunion company following extensive control for firm and industry characteristics deleterious union effects on firm profitability are sizable throughout the 1972 80 period but vary considerably across industries the relatively poor profit performance of unionized companies may help explain the recent decline in u s union membership the author thanks the w e upjohn institute for employment research for financial support elizabeth gregory for assistance with the union coverage survey zvi griliches for providing access to the rd donald deere terry seaks and anonymous referees for helpful suggestions and seminar participants at connecticut florida state harvard texas a m and william and mary for comments on earlier versions of this research

the political economy of corporate control and labor rents in a democracy a political majority can influence both the corporate governance structure and the return to human and financial capital we argue that when financial wealth is sufficiently concentrated there is political support for high labor rents and a strong governance role for banks or large investors the model is consistent with the great reversal phenomenon in the first half of the twentieth century we offer evidence that in several financially developed countries a financially weakened middle class became concerned about labor income risk associated with free markets and supported a more corporatist financial system

the tradeoff between wages and employment in trade union objectives this paper demonstrates that contrary to a widely held opinion the determination of the goals of unions is fully amenable to empirical analysis a characterization of the wage and employment setting process in unionized markets is adopted and its qualitative implications examined the first order condition for this model is fitted to time series data on the newspaper industry from ten cities the international typographical union s objective function reveals very restricted opportunities for substituting wages for employment in response to a change in the slope of the employer s labor demand function larger union locals place greater emphasis on wages versus employment than smaller union locals

private equity jobs and productivity private equity critics claim that leveraged buyouts bring huge job losses and few gains in operating performance to evaluate these claims we construct and analyze a new dataset that covers us buyouts from 1980 to 2005 we track 3 200 target firms and their 150 000 establishments before and after acquisition comparing to controls defined by industry size age and prior growth buyouts lead to modest net job losses but large increases in gross job creation and destruction buyouts also bring tfp gains at target firms mainly through accelerated exit of less productive establishments and greater entry of highly productive ones jel d24 g24 g32

an empirical investigation of the market for comex gold futures options option pricing models that assume a constant interest rate may misprice futures options if the interest rate fluctuates significantly or if the price of the underlying asset is correlated with the interest rate the futures option pricing model of ramaswamy and sundaresan allows for a stochastic interest rate and correlation of the underlying asset s price with the interest rate using a data set of daily closing prices for comex gold futures options this paper tests the ramaswamy and sundaresan model against a constant interest rate model results indicate that the stochastic interest rate model is a superior predictor of market prices the past several years have witnessed many innovations in contingentclaims markets the introduction of gold futures options by the commodity exchange of new york comex in october 1982 has proven particularly successful volume and open interest have been large and growing the combination of futures and futures options trading makes comex the principal market for gold in north america the existence of gold futures options represents a dual challenge to conventional option pricing models first the variability of interest rates affects futures prices and thus the value of futures options second if the price of gold is correlated with inflation or the real interest rate it will also be correlated with the nominal interest rate option pricing models that assume that the nominal rate is constant will misprice gold futures options if these factors are significant this paper tests whether market prices for gold futures options are best described by an alternative model that allows the price of gold to covary with the rate of interest section i describes comex gold contracts and notes differences between futures option contracts and stock option contracts which have been studied more extensively section ii describes the data set of market prices that has been collected and tests for violations of boundaries by the prices section iii describes and tests the competing option valuation models section iv is a summary and conclusion

an empirical note on wages in an internal labour market abstract earnings functions are estimated using personnel data of a german company results support a positive correlation between human capital hierarchical levels promotions and wages moreover promoted and newly hired employees start at the bottom of a level s wage distribution

on the efficiency of the gold options market standardized gold options were introduced on the european options exchange in 1981 in the paper we investigate the efficiency of its pricing procedures specifically the put call parity conditions are verified virtually no evidence of profitable riskless arbitrage opportunities could be found a riskless hedging strategy using the black scholes call option pricing model was used to test market efficiency and to check for consistent discrepancies between model and market prices again no evidence of market inefficiency could be found however there are indications that the black scholes model is not appropriate to price out of the money gold options an alternative option pricing model is studied which may remedy this problem

the price of gold and the exchange rate abstract this paper examines the theoretical relationship between the major exchange rates and the prices of internationally traded commodities in the empirical section the case of gold is analyzed using forecast error data among other things it is found that since the dissolution of the bretton woods international monetary system floating exchange rates among the major currencies have been a major source of price instability in the world gold market and as the world gold market is dominated by the european currency bloc appreciations or depreciations of european currencies have strong effects on the price of gold in other currencies

the politics of m a antitrust antitrust regulators play a critical role in protecting market competition we examine whether the political process affects antitrust reviews of merger transactions we find that acquirers and targets located in the political districts of powerful u s congressional members who serve on committees with antitrust regulatory oversight receive relatively favorable antitrust review outcomes to establish causality we use plausibly exogenous shocks to firm politician links and a falsification test additional findings suggest congressional members incentives to influence antitrust reviews are affected by three channels special interests voter and constituent interests and ideology in aggregate our findings suggest that the political process adversely interferes with the ability of antitrust regulators to provide independent recommendations about anticompetitive mergers

employment protection and takeovers labor restructuring is a key driver of takeovers and the associated synergy gains worldwide in a difference in differences research design we show that major increases in employment protection reduce takeover activity by 14 27 and the combined firm gains synergies by over half consistent with the labor channel behind these effects deals with greater potential for workforce restructuring show a greater reduction in volume number and synergies the reforms do impede layoffs and the associated wage costs match the magnitude of synergy losses offer prices are not fully adjusted with both bidders and targets exhibiting lower returns following the reforms

bank credit and trade credit evidence from natural experiments abstract prior studies find mixed evidence about the substitution relation between bank credit and trade credit in this paper using two bank interest rate deregulations in china we revisit the substitution hypothesis by examining how exogenous increases in the availability of bank credit affect trade credit we find that firms with higher credit risk increased their use of bank credit and reduced their use of trade credit after the 2004 bank interest rate ceiling deregulation whereas firms with lower credit risk increased their use of bank credit and reduced their use of trade credit after the 2013 bank interest rate floor deregulation our results provide supportive evidence for the substitution hypothesis that firms reduce their use of trade credit after the relaxation of bank credit and suggest that bank credit is more favorable short term financing than trade credit

taxing away m a capital gains taxation and acquisition activity abstract capital gains taxation distorts the market for corporate control by imposing a cost on selling shareholders in acquisitions this lock in effect increases premiums required for deal completion preventing some m as from taking place at all we estimate the effect of capital gains taxation on the quantity of realized m a deals and compute the deadweight loss related to taxing these transactions we find that a one percentage point increase in the capital gains tax rate reduces acquisition activity by around 1 annually for the united states this implies unrealized synergy gains of 9 3 billion each year due to capital gains taxes

how do mergers create value a comparison of taxes market power and efficiency improvements as explanations for synergies there is little evidence in the literature on the relative importance of the underlying sources of merger gains prior literature suggests that synergies could arise due to taxes market power or efficiency improvements based on value line forecasts we estimate the average synergy gains in a broad sample of 264 large mergers to be 10 03 of the combined equity value of the merging firms the detailed data in value line projections allow for the decomposition of these gains into underlying operating and financial synergies we estimate that tax savings contribute only 1 64 in additional value while operating synergies account for the remaining 8 38 operating synergies are higher in focused mergers while tax savings constitute a large fraction of the gains in diversifying mergers the operating synergies are generated primarily by cutbacks in investment expenditures rather than by increased operating profits overall the evidence suggests that mergers generate gains by improving resource allocation rather than by reducing tax payments or increasing the market power of the combined firm

the effect of marital endowments on domestic violence in india abstract numerous studies have documented a relationship between income and wealth of a woman and domestic violence one such factor that could potentially impact domestic violence is the gold endowment a woman receives at the time of marriage india presents a unique setting in which to test this relationship as despite being unlawful both dowry practices and domestic violence continue to prevail as actual marital endowments may endogenously affect spousal match quality i use the deviation of the price of gold at the time of marriage from its long term trend as a source of exogenous variation to proxy for initial marital endowment and examine its effect on domestic violence results show a positive and significant effect of an unusually high price of gold at the time of marriage on domestic violence

do union wealth concessions explain takeover premiums the evidence on contract wages abstract this paper investigates whether union wealth concessions caused by changes in real wage growth following takeovers explain target firm share price premiums point estimates imply that union wealth changes in the six years following the acquisition account for 1 to 2 of shareholder premiums this figure rises to 5 over 18 years for hostile takeovers union wealth increases by roughly 3 and 10 of shareholder gains over 6 and 18 year periods the 95 confidence interval for wage changes implies that unions may lose up to a quarter or gain up to a fifth of what target shareholders gain

the internal economics of the firm evidence from personnel data we analyze twenty years of personnel data from one firm the hierarchical structure is quite simple and stable career movements suggest that the employee s rate of learning and the firm s learning about ability are important there are promotion fast tracks exit rates vary little with tenure or salary the firm has personnel policies like those described in the internal labor markets literature although several theoretical preconditions for ilms such as ports of entry and exit are lacking job levels are important to compensation but there is also substantial individual variation in pay within levels our companion paper in this issue explores the wage policy of this firm

unionization and profitability evidence from the capital market this paper examines the effect of unionization on the profitability of firms abnormal monthly common stock returns for a sample of 253 nyse listed firms are estimated for the month in which the union petitions for an election and for the month in which the national labor relations board certifies the election outcome the results suggest that unionization on average is associated with a reduction in equity value when unions win an election the average loss associated with the unionization drive is 3 8 percent of equity value when unions lose an election there is an average net reduction of 1 3 percent in the equity value of the firm

the regulation of labor author s botero juan djankov simeon la porta rafael lopez de silanes florencio shleifer andrei abstract we investigate the regulation of labor markets through employment collective relations and social security laws in 85 countries we find that the political power of the left is associated with more stringent labor regulations and more generous social security systems and that socialist french and scandinavian legal origin countries have sharply higher levels of labor regulation than do common law countries however the effects of legal origins are larger and explain more of the variation in regulations than those of politics heavier regulation of labor is associated with lower labor force participation and higher unemployment especially of the young these results are most naturally consistent with legal theories according to which countries have pervasive regulaory styles inherited from the transplantation of legal systems

labor market regulations and cross border mergers and acquisitions this article exploits changes in country level employment protection regulations as a source of plausibly exogenous variation in labor laws and finds that these regulations play an important role in cross border merger activity over the 1991 2009 period countries that tighten employment regulations attract more foreign acquirers especially those from countries with relatively more flexible labor regulations the results appear to be robust to alternative specifications importantly these patterns are pronounced in those recipient country sectors in which foreign acquirers may find attractive targets at bargain prices sectors with relatively high productivity and skill the article also provides evidence suggesting that because pro labor reforms allow foreign acquirers to cherry pick more skilled and productive local firms these transactions are associated with greater deal synergies and improved post merger operating performance

determinants of the physical demand for gold evidence from panel data although the role of gold in the world economy has declined since the gold standard was abandoned it remains important as a central bank reserve a hedge against risks a barometer of geopolitical uncertainty and an input for jewellery while portfolio demand for gold has been well studied determinants of physical demand are less understood certain emerging market countries such as china and india import substantial amounts of gold with several factors that may contribute low financial development need for precautionary savings and or strong cultural valuation of gold itself this article uses panel data on gold imports of 21 countries to examine determinants of physical demand we find that determinants of physical demand differ from those of portfolio demand and that they differ between the developed and developing worlds

the real product market impact of mergers i document sources of value creation in mergers by analyzing novel data on the quality and price of goods sold by merging firms when two competitors in a product market merge their products converge in quality and prices fall relative to the competition these effects take two to three years to be fully realized and are stronger in mature industries prices do not fall however when the acquirer is diversifying into a new product market this direct evidence of real changes induced by merger activity is consistent with consolidation by related merging firms to achieve operational efficiencies and lower costs

labor protection and leverage this paper exploits inter temporal variations in employment protection across countries and finds that rigidities in labor markets are an important determinant of firms capital structure decisions over the 1985 2007 period we find that reforms increasing employment protection are associated with a 187 basis point reduction in leverage we interpret this finding to suggest that employment protection increases operating leverage crowding out financial leverage this result is robust across measures of employment protection and leverage and does not appear to be due to pre treatment differences between treated and control firms omitted variables unobserved changes in regional economic conditions and reverse causality heterogeneous treatment effects are consistent with our economic intuition we find that the negative effect is more pronounced in firms that are subject to frequent hiring and firing

enjoying the quiet life corporate governance and managerial preferences much of our understanding of corporations builds on the idea that managers when they are not closely monitored will pursue goals that are not in shareholders interests but what goals would managers pursue this paper uses variation in corporate governance generated by state adoption of antitakeover laws to empirically map out managerial preferences we use plant level data and exploit a unique feature of corporate law that allows us to deal with possible biases associated with the timing of the laws we find that when managers are insulated from takeovers worker wages especially those of white collar workers rise the destruction of old plants falls but the creation of new plants also falls finally overall productivity and profitability decline in response to these laws our results suggest that active empire building may not be the norm and that managers may instead prefer to enjoy the quiet life

the effect of wage bargains on the stock market value of the firm the author estimates the change in the value of common stock resulting from an unexpected change in collectively bargained labor costs using bargaining unit wage data and nyse stock returns he estimates a dollar for dollar trade off between these variables this result is consistent with stock valuations based on present value maximizing managerial decisions that is the results are consistent with hotelling s lemma the author also finds support for the hypothesis that collective bargains maximize the sum of shareholder and union member wealth that is the results are consistent with strong efficiency in the contracting environment copyright 1989 by american economic association

the incidence of regulatory rents in the motor carrier industry this article focuses on two questions in the debate over motor carrier regulation first did regulation create eliminate or have no effect on monopoly rents in the trucking industry second ifthere were rents what was their incidence were they received by owners oftrucking firms dissipated through higher costs or captured by the teamsters union data on share price responses to deregulation announcements reveal declines in expected profits of 8 19 of totalfirm value this suggests that regulation created monopoly profits and indicates that at least some of these rents accrued to owners of trucking firms firms responses to regulatory change are modelled as functions of company s operating characteristics and measures of unionization operating efficiency and service characteristics are shown to affect the impact of deregulation on share values

personnel economics past lessons and future directions presidential address to the society of labor economists san francisco may 1 1998 in 1987 the journal of labor economics published an issue on the economics of personnel since then personnel economics defined as the application of labor economics principles to business issues has become a major part of labor economics now accounting for a substantial proportion of papers in this and other journals much of the work in personnel economics has been theoretical in large part because the data needed to test these theories have not been available in recent years a number of firm based data sets have surfaced that allow personnel economics to be tested using two such data sets i give support to the implications of theories that relate to life cycle incentives tournaments piecework incentives pay compression and peer pressure i conclude that personnel economics is real it is far more than a set of clever theories it has relevance to the real world additionally firm based data make asking and answering new kinds of questions feasible the value of research in this area is h

firm leverage consumer demand and employment losses during the great recession this article argues that firms balance sheets were instrumental in the transmission of consumer demand shocks during the great recession using micro level data from the u s census bureau we find that establishments of more highly levered firms experienced significantly larger employment losses in response to declines in local consumer demand these results are not driven by firms being less productive having expanded too much prior to the great recession or being generally more sensitive to fluctuations in either aggregate employment or house prices likewise at the county level we find that counties with more highly levered firms experienced significantly larger declines in employment in response to local consumer demand shocks accordingly firms balance sheets also matter for aggregate employment our results suggest a possible role for employment policies that target firms directly besides conventional stimulus