small firms and the merger mania empirical research has found an average or even superior performance of small firms this seems to be at variance with the secular concentration process and the recurrent merger waves this paper tries to integrate size and merger research higher profitability of small firms is explained by their incentive structure and shorter decision lags but also by lower wages and higher individual risk premia their faster growth in the eighties was in addition fostered by diversification of demand miniaturization of technology and a need for flexibility under uncertainty the merger wave on the other hand does not necessarily prove that large firms are superior managers and shareholders may be seduced by stockmarket optimism a sizeable industry of banks agents and lawyers have their own interests in mergers mergers may be important in declining markets and for the acquisition of technology on average mergers do not improve efficiency profits or internal growth small and large firms serve different purposes performance depends on the market incentives and technology the establishment growth and closure of small firms as well as mergers are attempts to find the optimal organization for utility maximization in a world of severe uncertainty and diverse needs

specialization of labor and the distribution of income abstract we analyze a model in which workers must be allocated to tasks to produce there are differences among the workers in absolute ability that are independent of the activity they perform we demonstrate a unique competitive equilibrium that determines both wages and the allocation of workers to tasks the equilibrium wage has the property that workers assigned to the lowest value added tasks will receive a premium above their identifiable contribution to value simply for filling these least valuable positions we examine how the equilibrium wage function changes as the production process becomes more specialized and the division of labor increases journal of economic literature classification numbers d31 d33 j31

factor inputs and japanese manufacturing trade structure the japanese international trade structure in manufactured goods has been analyzed using cross section regression analysis in which labor capital human capital and energy are regressed on japanese net exports exports and imports with the world oecd and developing countries for 1967 and 1975 skill and wage differential measures have been utilized for the measuring of human capital contrary to the dualism found in earlier studies the estimated results show that in 1967 japan exported unskilled labor intensive goods with respect to the developing countries as well as the oecd countries in 1975 japan exported capital intensive goods to all regions and imported unskilled labor intensive goods from the world and the developing countries skilled labor intensive goods were imported from the oecd countries in both years drastic changes between 1967 and 1975 are noted japanese exports shifted from unskilled labor intensive goods to capital intensive goods while imports did the opposite this result conforms to the changes in unskilled labor and capital usage in japan and her major trading partners

the factor content of foreign trade in the factor proportions trade theory the heckscher ohlin theory the factor content of the pattern of trade plays a major role both in theoretical and in empirical investigations it is therefore valuable to identify restrictions on permissible vectors of the factor content of trade which necessarily hold in equilibrium if certain restrictions are empirically testable they can be used for preliminary testing of the theory before a more thorough examination is undertaken or they can be used to reject the theory it is my intention to develop in this paper a set of restrictions on the vectors of the factor content of trade which can be used for these purposes it is well known that autarky commodity prices impose restrictions on possible patterns of trade these restrictions provide a precise prediction of the pattern of trade for a two country two commodity world in the sense that the exporter of a good is readily identifiable from autarky price data as the country with the lower relative price of the good i will start by showing that in the presence of factor price equalisation autarky factor rewards impose restrictions on the factor content of trade patterns which are completely analogous to the restrictions imposed by autarky commodity prices on the commodity patterns of trade this result is in line with the view that in the factor proportions model trade in commodities represents indirect trade in factor services unfortunately these restrictions rely on autarky information and they are therefore not very useful for empirical work in order to overcome this difficulty i explore an alternative approach i argue that common predictions of the factor content of trade flows which are based on post trade observable data the data relevant for empirical studies rely on unnecessarily restrictive assumptions i e the assumption that preferences are homothetic and identical across countries and the assumption of factor price equalisation the assumption of identical homothetic preferences seems to be necessary when factor price equalisation is assumed because in this case there is an indeterminancy in the pattern of production nevertheless the two assumptions taken together imply the same factor content of a country s net import vector from the rest of the world for every equilibrium production pattern however in a many country world the factor content of bilateral trade flows depends on the realised production patterns and they cannot therefore be predicted i will show that in the absence of factor price equalisation which many

determinants of the structure of u s foreign trade 1958 1976 abstract the heckscher ohlin model with three direct factor inputs is borne out for u s net exports of manufactures in annual cross section regressions for 1958 1976 the coefficient on unskilled labor became significantly more negative over the period and there is evidence that the negative sign on physical capital may reflect the inclusion of natural resource industries further analysis based upon 1960 and 1970 census years suggests the importance as well of skill and technological variables calculations of the total factor requirements of u s trade uphold the leontief paradox for 1958 but not for 1972

specialization and human capital in search equilibrium this paper constructs a general equilibrium search matching model with heterogeneous workers workers choose whether to invest in general human capital or specific human capital when they enter the labor market we analyze how unemployment benefits affect the choice of the type of human capital investment jel e24 j41 j64 j65

an inverse relationship between efficiency and profitability according to size of upper austrian firms some further tentative results this paper examines the relationships between profitability and firm size and efficiency and firm size based on firms in upper austria there is considerable evidence suggesting that the average profitability of small enterprises exceeds that of large firms however productivity tends to be positively related to firm size these empirical findings present something of a paradox

specialization and human capital incentives for specialization trade and the production of comparative advantage through investment are shown to arise from increasing returns to utilization of human capital indivisibilities imply fixed cost elements of investment that are independent of subsequent utilization hence the rate of return is increasing in utilization and is maximized by utilizing specialized skills as intensively as possible identically endowed individuals have incentives to specialize their investments in skills and trade with each other for this reason even if production technology exhibits constant returns to scale

the factor content of international trade without factor price equalization abstract within the basic two factor multi commodity model of a two country world the present paper shows that international factor price equalization is unnecessary for deriving the heckscher ohlin theorem in its factor content version according to which the bundle of goods exported by the capital abundant country will use more capital and less labour than the bundle exported from the labour abundant country the factor content version remains valid when the model is generalized to include trade impediments intermediate goods or additional countries except perhaps if the first of these extensions is combined with either of the other two

marriage specialization and the gender division of labor we consider why the gender division of labor is so often enforced by custom and why customary gender divisions of labor generally involve both direction and prohibition in our formal model agents first learn skills and then enter the marriage market we show that wasteful behavior may emerge due to strategic incentives in specialization choice and human capital acquisition and that both problems may be mitigated through a customary gender division of labor this division is not pareto improving both the distributional effects and welfare gains of a customary gender division of labor decrease as opportunities for market exchange increase

parental leave a policy evaluation of the swedish daddy month reform abstract many governments are making attempts to increase fathers share of parental leave in order to correct for unequal labor market outcomes using swedish data we ask whether fathers can be encouraged to take more parental leave in order to mitigate the negative consequences of mothers career interruptions the unique data stem from a reform of parental leave resulting in a clean natural experiment data comprise all children born before control group and after treatment group the date of implementation of the reform in cohorts of up to 27 000 newborns mothers and fathers we find strong short term effects of the incentives on male parental leave but no behavioral effects in the household fathers in the treatment group do not take larger shares of the leave taken for care of sick children which is our measure for household work we also investigate a second data set on fathers and mothers long term wages and employment without finding evidence for substantial effects of the reform

testing the heckscher ohlin vanek theory with a natural experiment i use the historical episode of near elimination of commuting from the west bank into israel to test three key predictions of the heckscherohlinvanek model of trade and find strong support for them on the production side i use variation between districts and find that wage changes were not correlated with the size of the shock to the labour force factor price insensitivity and that districts that received larger influx of returning commuters shifted production more towards labour intensive industries rybczynski effect on the consumption side data are consistent with identical homothetic preferences which combined with the production results supports the heckscherohlinvanek theorem on the factor content of trade

effort wages and the international division of labor this paper embeds variable effort into a traditional two sector heckscher ohlin model of international competition effort enters a production function as total factor productivity and on the assumption that effort does not affect capital depreciation the capital cost savings from high effort operations are passed on to workers the labor market thus offers a set of contracts with higher wages compensating for higher effort this has implications for growth openness minimum wages collective bargaining public support of education efficiency of state enterprises the distribution of wealth childbearing and much more

global production sharing and trade in the services of factors this article develops an approach to measuring the factor content of trade when intermediate inputs are traded and techniques differ for reasons such as factor price differences an empirical section documents the importance of intermediates and shows that they mitigate cross country differences in the factor content of finished goods the performance of recent models of factor service trade is also evaluated existing approaches impute the factor content of imported intermediates with domestic techniques and tend to overstate how well those models perform the framework developed here can help reconcile generalequilibrium trade models with actual patterns of trade d 2005 elsevier b v all rights reserved

the firm strikes back non compete agreements and the mobility of technical professionals this study explores how firms shape labor markets and career paths using employee non compete agreements the sociology of work has overlooked non competes but data indicate that nearly half of technical professionals in the united states are asked to sign such employment contracts fearing loss of investments in talent and trade secrets firms use non competes to strike back against technical professionals increased mobility following the decline of internal labor markets in depth interviews with 52 randomly sampled patent holders in a single industry coupled with a survey of 1 029 engineers across a variety of industries reveal that ex employees subject to non competes are more likely to take career detours that is they involuntarily leave their technical field to avoid a potential lawsuit moreover firms strategically manage the process of getting workers to sign such contracts waiting for workers bargaining position to weaken these findings inform our understanding of the social organizati

diversification cones trade costs and factor market linkages abstract this paper finds non uniform differences in the distribution functions of factor usage intensities among 10 rich oecd countries the 10 countries form three distinct groups such that the between group differences are more pronounced than within group differences and capital abundant countries are in capital abundant groups the estimation works even if the same industry codes represent different goods across countries in the data the finding is consistent with the multiple cone factor proportions theory with zero trade costs with each group being one cone an alternative interpretation is non zero trade costs both interpretations imply weak factor market linkages between the countries in different groups

austrian and neoclassical economics any gains from trade austrian economics has been important to the development of modern economics but its role in current practice is much diminished the neoclassical approach dominates today s thinking many austrians bemoan this state of affairs most neoclassical economists just ignore it but austrian and neoclassical economics aren t mutually exclusive each represents a distinctive point of view although with little meaningful intellectual exchange between them these days this is unfortunate many different concepts are associated with both austrian and neoclassical economics to concentrate on where the most exchange of ideas might occur i am concerned about those aspects of austrian economics primarily dealing with the process of competition and that portion of neoclassical economics primarily dealing with the determination of economic equilibrium this in a nutshell is the main intellectual difference between them some consequences of this difference are discussed in what follows i hope to show that mutually advantageous gains from trade exist austrian economics offers a valuable perspective of the economy as an evolutionary process akin to biological evolution with entrepreneurial activities representing the main instruments of change it is primarily a macroeconomic theory of the economy as a whole with keen insights on the nature of decentralization and the process of competition that deserve more attention neoclassical economics offers a microeconomic theory of economic behavior that is especially useful for analyzing specific economic problems and for orienting analysis around more sharply described empirical phenomena and data

measurement of the factor content of foreign trade with traded intermediate goods abstract in a recent article helpman 1984 develops readily testable bilateral restrictions in a model of international trade which preserves the spirit of heckscher ohlin trade theory important in any empirical exploration of the heckscher ohlin model is the decision of whether to employ direct or direct plus indirect calculations in determining the factor content of trade this paper extends helpman s analysis to a world of freely traded intermediate goods and shows that direct factor content calculations are the theoretically appropriate measure for use in evaluating these empirical implications of the heckscher ohlin model

labour skills and the uk s comparative advantage with its european union partners this paper assesses the extent and sources of the uk comparative advantage within the european union eu it finds that both inter industry and intra industry trade are important despite clear aggregation effects having established that there is a significant degree of inter industry specialization the sources of this are analysed using a factor content approach results are reported for aggregate factors of production and in the case of labour by disaggregated skill categories a key finding is that the uk s net trade with the eu is driven more by a specialization in specific types of skill than by an overall endowment of human capital the results also suggest that the inter industry specialization cannot be explained by comparative advantage alone

the mess of the public industrial production in austria a typical case of public sector inefficiency the economics of property rights the x efficiency approach the economic theory of bureaucracy the public choice theory and the findings about union controlled firms have been used to explain inefficiency in the public sector in general these approaches however have been rarely applied specifically to public industrial production in competitive markets with private goods characteristics in austria a sixth of the industrial production takes place in public enterprises until lately there were neither thorough audits nor strict efficiency controls by the government or administration for a long time the obvious inefficiencies were tolerated by the taxpayers the government and even by the opposition moreover in the austro keynesian era the public industrial firms were implicitly used for reaching the government s stabilization policy goals immediately this brought about big losses and created a heavy burden on the federal budget nonetheless the microeconomic consequences of this kind of austrian public industrial policy have not been analysed satisfyingly

thick market effects and churning in the labor market evidence from u s cities using u s census microdata we show that on average workers change occupation and industry less in more densely populated areas the result is robust to standard demographic controls as well as to including aggregate measures of human capital and sectoral mix analysis of the displaced worker surveys shows that this effect is present in cases of involuntary separation as well on the other hand we actually find the opposite result higher rates of occupational and industrial switching for the subsample of younger workers these results provide evidence in favor of increasing returns to scale matching in labor markets results from a back of the envelope calibration suggest that this mechanism has an important role in raising both wages and returns to experience in denser areas

taxation and the allocation of talent taxation affects the allocation of talented individuals across professions by blunting material incentives and thus magnifying nonpecuniary incentives of pursuing a calling estimates from the literature suggest that high paying professions have negative externalities whereas low paying professions have positive externalities a calibrated model therefore prescribes negative marginal tax rates on middle class incomes and positive rates on the rich the welfare gains from implementing such a policy are small and are dwarfed by the gains from profession specific taxes and subsidies these results depend crucially on externality estimates and labor substitution patterns across professions both of which are very uncertain given existing empirical evidence

the general validity of the heckscher ohlin theorem despite a number of attempts to extend it the heckscher ohlin theorem remains woefully restricted in terms of the generality of the assumptions needed for its proof in its traditional form as a statement about the commodity composition of trade the theorem is valid only in the highly abstract environment of the two factor two good twocountry model that has been the mainstay of trade theory for half a century a weaker version of the theorem involving the factor content of trade rather than its commodity composition has been proved for any number of factors goods and countries but this generality has so far been bought only at the cost of other and perhaps equally restrictive assumptions 2 the purpose of this paper is to provide statements and proofs of the heckscher ohlin h o theorem that are more general than those currently available the approach taken is similar to that used in my 1980 article for an extension of the theory of comparative advantage in terms of correlations between autarky prices and trade in section i i lay out the assumptions on which the analysis is based these assumptions provide the outlines of a reasonably general model in which there may be any numbers of goods and factors and in which factor prices may be equalized or not trade impediments in the form of tariffs or export taxes are permitted though transportation costs are not 3 in section ii i discuss the difficulty of inferring the factor content of trade in a world of unequal factor prices and i provide several alternative definitions of that concept for use later in the paper these together with the assumptions of section i are used in section iii to prove a theorem on the value at autarky prices of the factor content of trade in section iv this theorem is used to prove a first corollary that makes a more direct statement about the pattern of trade it says that worldwide there must be a negative correlation between the factor content of trade by factor and country and the corresponding autarky factor prices it is precisely these autarky factor prices that constitute the ohlin measure of factor scarcity therefore the corollary provides a formal statement of the general idea that countries tend to export the services of those factors which they have in relative abundance and it may be regarded as a generalization of the factor content version of the h o theorem finally a generalization of the commodity version of the theorem is proved in section v the concept of a covariance is generalized university of michigan i have benefitted greatly from the comments of paul degrauwe wolfgang mayer michael mussa carl simon and robert stern as well as others who participated in seminars at the universities of michigan chicago and cincinnati and at the national bureau of economic research an anonymous referee also made valuable comments with additional goods and factor price equalization the theorem runs afoul of the indeterminacy of production and trade noted by paul samuelson 1953 and james melvin 1968 without factor price equalization trade impediments and intermediate production can cause reversals of the pattern of trade as shown in my 1979 article if additional factors and countries are also added it becomes difficult even to state the theorem let alone to prove it 2melvin stated such a theorem for the three good two factor case and jaroslav vanek 1968 proved it for the general case but only by assuming factor price equalization trent bertrand 1972 and jon harkness 1979 were able to drop the factor price equalization assumption but replaced it with restrictions on consumption of either goods or factors by country of origin it is unclear to me however that these restrictions can ever be met in a model that is otherwise plausible harkness 1978 has also used the factor content version of the theorems as the motivation for a regression equation relating commodity trade to factor intensities this bears some resemblance to my analysis below in section v see however james anderson 1981 and edward leamer and harry bowen 1981 who have criticized his result with a reply by harkness 1981 3for ease of exposition i do not allow here for transportation costs these were included in an earlier version of this paper following the technique in my 1980 article

the comparative advantages of firms markets and contracts a unified theory the most efficient labour market mechanism depends on the advantages of specialization workers costs of switching between entrepreneurs and the frequency with which needs change multilateral mechanisms are more efficient when specialization is more advantageous when it is cheap for workers to switch between entrepreneurs and when individual entrepreneurs cannot occupy a worker on a full time basis given a bilateral mechanism employment a firm is more efficient than contracts when in process adjustments arise more frequently there exist three regions in which firms markets and sequences of bilateral contracts are weakly more efficient than all other mechanisms in a big class

introduction economic performance and small business this paper introduces the special issue of small business economics on performance the concept of economic performance refers to the degree to which society s resources are being used as efficiently as possible where the field of industrial organization has emphasized the influence of market concentration on economic performance the papers of this special issue zoom in on the link between firm size and economic performance

plant size and industry mix effects on uk regional productivity wage costs and operating surplus roper s 1998 plant size and industry mix effects on uk regional productivity wage costs and operating surplus reg studies 32 325 332 the ability of a region to create wealth depends both on the competitiveness of its individual firms and its industrial structure this paper examines the effect of industry mix and plant size structure on the wealth generating capacity of the uk regions from 1980 91 reflecting the findings of similar us studies the analysis suggests that in general uk regions structural disadvantages act to reinforce rather than counter plant level productivity wage cost and operating surplus profitability differentials thus lagging regions face a three fold disadvantage poorly performing plants disadvantageous industry mix and plant size structure this suggests a need for a strategic approach to policy which must aim to counter regions structural disadvantages as well as to improve the competitiveness of existing plants roper s 1998 les effets de la taille des et

education matching and the allocative value of romance societies are characterized by customs governing the allocation of non market goods such as marital partnerships we explore how such customs affect the educational investment decisions of young singles and the subsequent joint labour supply decisions of partnered couples we consider two separate matching paradigms for agents with heterogeneous abilities one where partners marry for money and the other where partners marry for romantic reasons orthogonal to productivity or debt these generate different investment incentives and therefore have a real impact on the market economy while marrying for money generates greater investment efficiency romantic matching generates greater allocative efficiency since more high ability individuals participate in the labour market the analysis offers the possibility of explaining cross country differences in educational investments and labour force participation based on matching regimes

efficiency and profitability an inverse relationship according to the size of austrian firm this paper tries to shed some light on the austrian situation of the efficiency of firms according to their size class for total austria we find that large firms seem to be more efficient with respect to value added per employee but small firms are more efficient with respect to the gross residual quota and to profitability value added wages value added on the other side a similar analysis for upper austria does not show this result here firms with the size of 500 employees or more seem to be the most efficient with respect to efficiency and profitability and only the employment cost efficiency criteria reveals the picture the smaller the firm the more cost effective it seems to be hence the result obtained from most studies in europe that at least the biggest firms are not the most efficient can only be confirmed to a limited extent for upper austria

new classical versus neoclassical frameworks a review of yang abstract yang 2001 summarizes new classical economics pioneered by yang 1988 individuals are consumer producers consumption is linked to the level of productive specialization the key parameter is an iceberg transaction cost i e one dollar spent means less than one dollar received autarky specialization occurs when transactions costs are above below a certain threshold firms are collections of consumer producers tied together by contracts trade occurs even if individuals have identical preferences and productive capabilities because there are increasing returns to specialization the division of labor the extent of the market and economic organization are characterized by aggregating

some empirical support for the heckscher ohlin model of production this paper develops empirically feasible tests of the production side of the heckscher ohlin model of international trade in the case where factor prices are not equal between countries to allow for factor price differences across industries within each country three variants of the model are considered tests of these variants are implemented for canada and the united states results are favourable to all three variants especially the variant that allows imperfect factor mobility within each country thus the paper finds some support for the heckscher ohlin model of production support empirique pour le modele de production heckscher ohlin ce memoire developpe des tests empiriques realisables de l aspect production du modele heckscher ohlin de com merce international dans l hypothese que les prix des facteurs de production ne sont pas egaux entre pays on considere trois variantes du modele permettant des diff6rences entre les facteurs de production a l interieur de chaque pays des tests de ces variantes sont calibres pour le canada et les etats unis les resultats supportent les trois variantes mais specialement celle qui postule une mobilite imparfaite des facteurs de production a l interieur de chaque pays donc le memoire donne un support empirique au modele de production heckscher ohlin

firms boundaries and the division of labor empirical strategies a large theoretical literature focuses on the question what determines firms boundaries recently garicano and santos and holmstrom and milgrom have proposed theories in which firms boundaries reflect the division of labor across individuals this paper discusses strategies for generating and testing empirical propositions from this emerging class of theories we propose that variation in the returns to specialization is extremely useful to test and quantify the effect of the division of labor on firms boundaries we discuss the use of two shifters to the returns to specialization and relate how we exploit one of these market size in preliminary work on the determinants of law firms boundaries in the united states jel l14 l22 l24 l84

technology endowments and the factor content of bilateral trade we derive testable restrictions relating the factor content of bilateral trade to bilateral differences in technology and endowments this departs from the heckscher ohlin vanek theorem which compares the factor content of net trade with factor abundance we test the theoretical restrictions using a unique dataset that covers 41 developed and developing countries with disparate endowments and technology we find evidence supporting the predictions in addition 1 the factor content predictions perform best for country pairs with larger endowment differences and 2 for trade between capital abundant countries ricardian international technology differences matter more than heckscher ohlin factor endowment differences

altruism in the family and selfishness in the market place adam smith argued in a famous passage that people are selfish in their market transactions it is not from the benevolence of the butcher the brewer or the baker that we expect our dinner but from their regard to their own interest we address ourselves not to their humanity but to their self love and never talk to them of our own necessities but of their advantages 1937 p 14 in an earlier study he said with irony we are not ready to suspect any person of being defective in selfishness 1853 p 446 selfishness in market transactions has been assumed in practically all subsequent discussions of the economic system objections were dismissed with vague allusions to human nature or with an assertion that altruism loses out to selfishness in the struggle to survive in the market sector yet altruism is generally recognized to be important within a family again adam smith said

history and the sizes of cities abstract we contrast evidence of urban path dependence with efforts to analyze calibrated models of city sizes recent evidence of persistent city sizes following the obsolescence of historical adv

the division of labor coordination costs and knowledge this paper considers specialization and the division of labor a more extensive division of labor raises productivity because returns to the time spent on tasks are usually greater to workers who concentrate on a narrower range of skills the traditional discussion of the division of labor emphasizes the limitations to specialization imposed by the extent of the market we claim that the degree of specialization is more often determined by other considerations especially emphasized are various costs of coordinating specialized workers who perform complementary tasks and the amount of general knowledge available