growth patterns of the european venture capital industry abstract although the european venture capital industry has become nearly as important as its american counterpart little research has been done to describe its nature and importance this study gives in the first place an overview of the importance of the venture capital industry in the major european countries thereafter we look for funding and investment patterns in the different european countries we hypothesize that there is a difference between countries in which the venture capital industry is just emerging and those where the venture capital industry is since long established the data are mainly but not solely taken from the yearly statistics of the european venture capital association evca and cover the period 1984 1989 the characteristics we look at are 1 the sources of the funds flowing into the industry broken down with respect to investor type and geographical location of the investor and 2 the investments broken down with respect to investment stage using the evca definitions of the different stages geographical location degree of syndication and industrial sector of the investee companies in europe as a whole the most important group of investors are the banks 28 the pension funds 17 and the insurance companies 12 banks dominate the swiss industry 48 corporate investors dominate the german swedish and portuguese industries whereas these are nearly completely absent in denmark 2 ireland 4 and the united kingdom 5 eighty percent of all venture capital funds are raised domestically 7 in another european country and the remaining 13 in a non european country almost half of the european investments 44 are made in the expansion stage management buy outs mbos account for another 36 only 14 is invested in seed or start up companies much less than the 30 in the u s half of the venture capital investments in the united kingdom are buy outs the highest start up investment activity takes place in austria and spain on average more than half 54 of the invested amount in europe is syndicated but only 6 internationally while 10 is invested internationally we also search for similarities and dissimilarities in the characteristics of the sources of funds and of the investments the hypothesis is that a growth pattern can be distinguished determining the maturity of the venture capital industry in a particular country the characteristics that we think would discriminate most among the different industry stages are the importance of government agencies pension funds and insurance companies sources of funds of start up later stages or mbo investments and the percentage of international and syndicated investments cluster analyses show that there is a growth pattern but it is less clear than expected characteristics of mature industries are a bigger size relative to the gross national product of the country the presence of pension funds and insurance companies as investors in the industry the syndication of the deals and the absence of the government as an investor in the 1980s investments in management buy outs are mainly done by the mature industries no pattern can be distinguished for the investments in early or later stages the major implication from this study is the fact that the european venture capital industry cannot be approached as a single undifferentiated industry each country has its own structures institutions and policies which make the venture capital industries in the different countries have unique characteristics moreover the european venture capital industry has different characteristics than the american industry this has to be taken into account when comparing both industries

relative earnings and individual union membership in the united kingdom considerable attention has been focused in recent years on the empirical analysis of the effect of trade unions on the structure of earnings such empirical investigation usually entails measurement of the union non union differential in wages or earnings at the level of the individual this involves comparison of the earnings of union members with estimates of what their earnings would be were they not union members or equivalently examination of differences in earnings between individuals comparable with regard to all other relevant characteristics who differ in their union membership alone in the united kingdom all previous attempts at estimation of this differential have used aggregate data at either the industry or occupation level 1 the conventional methodology involves regression of the logarithm of the average wage on either the proportion of workers who are union members or the proportion covered by a collective agreement together with a vector of industry characteristics that are deemed to determine the non union wage however several problems are immediately apparent with this methodology first the model ignores the possibility of variation in the differential across industries which has potentially serious consequences second the vector of other characteristics customarily used is somewhat limited and raises doubts concerning the adequacy of the standardization for what might loosely be termed labour quality third only a sub sample of industries is ever used owing to lack of data those industries excluded are generally smaller in terms of employment that those included if the differential varies with the size of the industry a further bias will be induced all of these problems are either removed or lessened by the use of individual level data for an analysis of their impact at the industry level see geroski and stewart 1981 2 as a result it is now widely accepted that the appropriate way to measure such differentials is to use micro data sets at the level of the individual worker until recently suitable data have not been available for the united kingdom and hence such analysis was not possible this paper presents the first estimates for the united kingdom based on individual level data if the value of the union non union differential were the same for all workers in the unionized sector analysis at the industry level and the individual level would produce similar results however the marshallian laws of derived demand suggest that this will not be the case despite this clear prediction of variation in the differential there has been little systematic investigation of the variation this paper also presents such an analysis since variation in the differential across industries results in aggregation bias in industry level studies such an analysis is of considerable relevance to the evaluation of the evidence from such studies as well as being of interest in its own right the paper is laid out as follows section i presents a method of estimating the union non union differential at the individual level while section ii

regional disparities in the unemployment rate the role of the wage setting mechanism in spain 1987 92 bande r fernandez m and montuenga v m 2007 regional disparities in the unemployment rate the role of the wage setting mechanism in spain 1987 92 regional studies 41 the aim of this paper is to show how regional unemployment disparities in spain widen during economic upturns and to provide an explanation of this behaviour the analysis is based on the study of the wage setting mechanism that allows an estimation of the responses of wages to both labour productivity and the general situation of the labour market and an assessment of their impact on the evolution of regional unemployment the results of this estimation at the regional level with manufacturing data confirm the existence of marked differences between industries and between regions these responses these differences can be interpreted as a distinctive wage setting mechanism across industries and regions which may explain the evolution of unemployment rates within the regional labour markets bande r fernandez m et montuenga v

stochastic convenience yield and the pricing of oil contingent claims this paper develops and empirically tests a two factor model for pricing financial and real assets contingent on the price of oil the factors are the spot price of oil and the instantaneous convenience yield the parameters of the model are estimated using weekly oil futures contract prices from january 1984 to november 1988 and the model s performance is assessed out of sample by valuing futures contracts over the period november 1988 to may 1989 finally the model is applied to determine the present values of one barrel of oil deliverable in one to ten years time

economic linkages relative scarcity and commodity futures returns this paper shows that economic linkages among commodities create a source of long term correlation between futures returns we extend the theory of storage to a multi commodity level and find that the convenience yield of a commodity depends on its relative scarcity with respect to other related commodities this implies a feedback effect between commodities that is necessary to replicate the upward sloping correlation term structure of futures returns observed for related commodities we present a multi commodity affine model that validates our theoretical predictions and considerably reduces the pricing errors in out of sample crack spread options the author 2012 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oup com oxford university press

flexible specialisation the new competition and industrial districts flexible specialisation the new competition and industrial districts are concepts reviewed in this article to determine whether they can provide an alternative for the description of the industrial sector as a system of mass production the concepts mentioned are discussed and criticized in this article all three concepts stress the importance of a certain division of labour of interfirm relations of cooperation versus competition of technological development and innovation diffusion of flexibility the role of small enterprises and a local value system however a number of differences between the concepts are also highlighted as well as the problems to use them in empirical research it is concluded that the three terms are complementary and could be used in combination the flexible competitive districts would provide an alternative type of industrial organization somewhere between the large scale integrated enterprise and the atomized self contained individual firm the challenge lies in turning the positive theory into a normative one how can industrial development in eastern europe and third world countries be turned into the development of flexible competitive district which contribute significantly to the development of these countries and allow for an important role for micro small and medium enterprises it is argued that this can be done in the framework of urban and regional development policies but this requires a different role for the government and the provision of an adequate infrastructure

an investigation into the power of insiders in wage determination abstract this paper is concerned with the role of insider forces in wage determination various union and non union models of wage behaviour are considered and they imply that wages are a convex combination of internal and external factors certain union models also imply a degree of hysteresis data on fourteen british production industries reveal that i insider forces are important ii their importance is directly related to both union power and the degree of monopoly in the product market iii the state of the aggregate labour market is also important and iv hysteresis effects arising from insider power are only significant in a small minority of sectors

forward curves scarcity and price volatility in oil and natural gas markets the role of inventory in explaining the shape of the forward curve and spot price volatility in commodity markets is central in the theory of storage developed by kaldor kaldor n 1939 speculation and economic stability the review of economic studies 7 1 27 and working working h 1949 the theory of the price of storage american economic review 39 1254 1262 and has since been documented in a vast body of financial literature including the reference paper by fama and french fama e f and k r french 1987 commodity futures prices some evidence on forecast power premiums and the theory of storage journal of business 60 55 73 on metals the goal of this paper is twofold i validate in the case of oil and natural gas the use of the slope of the forward curve as a proxy for inventory the slope being defined in a way that filters out seasonality ii analyze directly for these two major commodities the relationship between inventory and price volatility in agreement with the theory of storage we find that i the negative correlation between price volatility and inventory is globally significant for crude oil ii this negative correlation prevails only during those periods of scarcity when the inventory is below the historical average and increases importantly during the winter periods for natural gas our results are illustrated by the analysis of a 15 year database of us oil and natural gas prices and inventory

imperfectly competitive labour markets and the productivity puzzle abstract we integrate imperfectly competitive labour markets in a dynamic macromodel in accordance with empirical evidence we find that temporary shocks are consistent with little real wage and large employment responsiveness while permanent shocks affect real wages and not employment

the subcontracting behavior of single vs multiplant enterprises in us manufacturing implications for economic development abstract in this paper we explore the factors shaping the production subcontracting make buy decisions of managers in the plants of both small and large firms in 21 industries that constitute the us metalworking and machinery manufacturing sector descriptive and multivariate statistical analyses of original survey data collected in 1986 1987 lead us to infer that a regional economic development strategy that promotes those manufacturing firms with a single relatively large plant making a diverse range of products and having close ties to customers but limited internal machining capacity has the greatest potential for generating local backward linkages in this respect we find empirical if nuanced support for certain normative aspects of the industrial district or networking approach to economic development policy

life after takeover economic consequences of takeovers are investigated by analyzing profitability of enterprises acquired a s a direct or indirect white knight consequence of tender offer s target companies pre tender profitability averaged 0 97 percentag e points below peer industry norms nine years after takeover acquir ed lines of business had operating income assets percentages 3 10 poi nts below those of non tender lines with similar industry bases mark et shares and merger accounting methods most of the targets postta keover profit decline stemmed from asset value writeups there is no indication that on average the acquirers raised their targets operat ing profitability net of merger related accounting adjustments copyright 1987 by blackwell publishing ltd

firm profitability regional unemployment and human capital in wage determination this paper presents an analysis of wage formation in the norwegian private sector using data for individual workers matched with firm level information and regional unemployment a key issue is to test whether or not firm specific variables affect individual wages after controlling for individual specific factors and working conditions the results imply positive effects of firm specific profitability and firm size the elasticity of wages with respect to value added per worker and firm size is 5 and 3 3 respectively empirical evidence of a downward sloping regional wage curve is also reported while there is no support of the hypothesis of compensating wage differentials since data for three levels of aggregation are used the ols estimates of the standard errors are downward biased therefore results using a random effects model are also reported taking the multi level structure of the data into account

pay and employment determination in britain what are labour contracts really like the recent growth of unemployment in western economies has prompted new research on the workings of the labour market there has been much interest in particular in the questions what determines the level of real pay and why is it apparently so insensitive to changes in aggregate demand and unemployment european economists now find it hard to take seriously the notion still taught to many undergraduate that wages are determined by the intersection of demand and supply curves roughly half of all british employees belong to trade unions a much higher percentage have their pay fixed by some kind of collective bargain in this country it is negotiations not impersonal com petitive markets which decide what most of us will be paid the difficult problem is that of how to understand this process or to put it differently of how to think up the right model of the world

insider forces in wage determination new evidence for norwegian industries using panel data for norwegian industries we establish a significant permanent relation between industry wages and industry profitability the estimated long run insider weight is above 0 2 and stable both over time and across industries industry wages are significantly affected by aggregate unemployment and the preferred wage equation implies a highly convex wage curve

the effects of commodity price stabilization programs in this paper the authors analyze the effects of commodity programs in which the government attempts to support and stabilize price through open market purchases and sales specifically they as sess the effects of such programs on the u s soybean market using a rational expectations model that allows for private storage expected price responsive production and arbitrary support and release price s a salient feature of the model is that private storage and product ion behavior adjusts to changes in government policy stochastic simu lations of the market model demonstrate that price stabilization prog rams can reduce long run market price and destabilize producer revenu e copyright 1988 by american economic association

declining share of small firms in u s output causes and consequences jang ting guo i introduction according to the small business administration s sba calculations as shown in table 1 the contribution of small firms to u s national income was 58 in 1958 which then declined steadily to 51 in 1982 and stabilized around this value until 1992 the latest year for which the figures are available 1 this decline is quite puzzling in light of recent changes in technological factors market competition and government policies that were supposed to benefit small businesses 2 in this article we construct a dynamic general equilibrium model with two production sectors representing large and small firms to examine possible causes and welfare implications of this declining trend of small firms output contribution in the u s economy moreover this study brings into focus the role of government policies such as the justice department s anti trust efforts and the tiering programs whereby many regulations impose lighter requirements on smaller firms in order to maintain their viability 3 recently there have been several developments that can be considered beneficial towards the emergence of small firms shephard 1982 has estimated that since 1958 government deregulatory efforts have raised the level of competition in the u s economy by eliminating entry barriers and lowering transaction costs these factors in turn have contributed to the viability of small firms in the marketplace furthermore the emergence of new computer based technologies in the last two decades has improved the quality and flexibility of small scale production relative to standardized mass production techniques since they reduce the fixed capital or fixed cost requirements see shephard 1982 piore and sable 1984 carlsson 1989b and carlsson audretsch and acs 1994 4 another factor that improves the viability of small firms is their higher innovation rate as documented by acs and audretsch 1990 the shift of consumers taste from standardized mass produced goods towards stylized and personalized prod ucts also promotes small firm growth given their flexible production structure small firms have become important suppliers for these new goods and services see carlsson 1989a in light of these favorable developments one would expect to observe the number of small firms as well as their share in national income to rise in the u s economy however this has not been borne out by the data regarding small firms output share this article examines this issue in a dynamic general equilibrium framework extending romer s 1987 model of specialization we develop an infinite horizon representative agent model with two production sectors that are made up of large and small firms respectively the two sectors differ from each other with respect to the level of fixed set up costs and returns to scale parameters of their production functions each sector has an intermediate good segment in which monopolistically competitive firms operate using fully mobile capital and labor inputs the number of these intermediate firms is determined endogenously from the condition of free entry and exit a final good is produced in each sector from the set of available intermediate goods in a perfec tly competitive environment these two final goods are then aggregated into a single output gdp that can be consumed or invested by the representative household in a symmetric perfect foresight equilibrium these features result in an unequal number of large and small firms which can then be used to analyze the effects of technological changes and government policies the sectoral structure of our model in which gdp is produced by combining outputs of large and small firms is different from a typical two sector model with distinct consumption and investment goods in fact our two sector economy with identical factor intensities behaves exactly like a standard one sector model in which the representative household allocates resources across the two sectors to equate marginal products to factor prices

the effects of inflation and real wages on employment this paper considers the effects of inflation on employment the absence of index linked loans and the possibility that errors are committed in times of inflation lead to a higher probability of bankruptcy during inflation if firms care about bankruptcy this implies a lower level of employment empirical results confirming this are presented and suggest that higher inflation has substantially contributed to the fall in employment in the united kingdom the authors also demonstrate that a negative real wage elasticity is not robust to changes in specification copyright 1987 by the review of economic studies limited

impact of plant size and focus on productivity an empirical study recent popular business literature has suggested that there is a significant trend in the united states for firms to decrease the size and increase the focus of manufacturing plants they operate and that this leads to higher productivity this paper tests empirically the validity of these claims we analyze data on virtually the entire population of manufacturing plants in the united states and find that contrary to the popular business literature the average size of plants increased during the period 1972 1984 however consistent with the popular notion the rate of growth in plant size slowed considerably and even turned negative for a category of large plants plant focus did increase during this period we then investigate the relationship between productivity and plant characteristics including plant size and plant focus overall our results do not support the popular argument that reduction in plant size results in productivity gains however we do find support for this argument in some two digit sic industries also scale economies in the entire population decreased over the period 1972 1982 we also find only limited support for the popular argument that plant focus increases productivity

oil futures prices in a production economy with investment constraints we document a new stylized fact that the relationship between the volatility of oil futures prices and the slope of the forward curve is nonmonotone and has a v shape this pattern cannot be generated by standard models that emphasize storage we develop an equilibrium model of oil production in which investment is irreversible and capacity constrained investment constraints affect firms investment decisions and imply that the supply elasticity changes over time since demand shocks must be absorbed by changes in prices or changes in supply time varying supply elasticity results in time varying volatility of futures prices estimating this model we show it is quantitatively consistent with the v shape relationship between the volatility of futures prices and the slope of the forward curve in recent years commodity markets have experienced dramatic growth in trad

flexibility and the theory of the firm abstract the object of this paper is 1 to bring together and integrate the various concepts of flexibility found in the economic literature 2 to flesh out the meaning of various aspects of flexibility and their implications thereby bridging the gap between the existing highly abstract theories and the empirical facts and 3 in the process to give a rich and comprehensive enough description of an industry to stimulate further theoretical as well as empirical work the study tries to combine inductive and deductive reasoning using empirical observations based on indepth interviews with manufacturers in the metalworking industry in the united states and sweden

unemployment in britain male unemployment in britain has risen from around 2 per cent in the 1950s to around 17 per cent in 1985 see figure 1 the figures are for male unemployment because there is no consistent series for women 1 even more remarkably unemployment has fallen in only three years out of the last twenty 1973 1978 and 1979 to account for this we need a model that explains both changes in the natural or non accelerating inflation rate of unemployment nairu and deviations from it we use a three equation supply side model centred on the labour market this has two main features the first concerns the determination of employment in the short run the labour demand function that we use cuts through the fruitless debate now raging especially in europe as to whether current unemployment is classical or keynesian according to the classical view employment is too high because real wages are too high according to the keynesian view real wages are not binding and unemployment is high because the product market does not clear with prices too high relative to nominal demand the whole debate is set in the framework of perfect competition yet in perfect competition prices are set by impersonal forces and it is not clear what could possibly stop prices clearing the market it is much more reasonable to think of prices as being set by imperfectly competitive firms existing prices being the best they can think of given the demand they face in this context firms demand for labour will depend on both the real product wage and the level of real aggregate demand this is the demand function we estimate and it conforms both to common sense and to the data however this does not imply that employment can be made to grow without limit by pumping up real demand for in the medium term when price surprises are eliminated our model determines three variables employment real wages and real demand on the basis of three equations an employment equation a price equation and a wage equation thus in the medium term there is a natural level of employment and corresponding to this a natural level of real aggregate demand the second key feature of our model concerns the medium term determination of unemployment in the medium term the planned mark up of wages over prices in wage settlements must be consistent with the mark up of prices over wage costs in employers pricing behaviour for if wage setters try to set real product wages higher than is consistent with employers pricing behaviour this generates ever increasing inflation thus the key to understanding unemployment in the medium term is the behaviour of wage setters if events occur that push them towards too high real wages then unemployment has to rise to offset these influences we shall call these influences wage pressure variables or push factors and they are clearly crucial in understanding unemployment the variables here include the social security system employment protection

free entry and social inefficiency our goal is to provide a simple yet general exposition of the conditions under which the number of entrants in a free entry equilibrium is excessive insufficient or optimal our analysis compares the number of firms that enter a market when there is free entry with the number that would be desired by a social planner who is unable to control the behavior of firms once they are in the market that is we consider the second best problem of choosing the welfare maximizing number of firms while we take as given their noncompetitive behavior after entry we demonstrate that the crucial conditions for establishing the presence of an entry bias can be stated quite simply in terms of the outcome of the postentry game played by entrants in contrast to previous work we do not need to model this postentry game explicitly

flexible technology and industrial structure in the u s this paper analyzes the development over the postwar period of output employment and the number of plants in manufacturing in the united states it is shown that the distribution of flexible technology in the form of machine tools ncmts shifted markedly toward small plants during the 1980s it is found that the probability of adoption and the penetration rate of ncmts are higher in large than in small plants even though the number of ncmts per worker is much higher in small plants this apparent paradox is explained it is also suggested that the shift of output towards smaller plants is correlated with the increased use of flexible technology and that this reflects changes in the division of labor among plants of various sizes as well as changes in the composition and organization of production in large plants

causes of increased competition in the u s economy 1939 1980 examines the sources of increased competition in the united states u s between 1939 to 1980 in this paper authors consider the review of related literature trends and patterns of competitive structure in the u s economy influence of antirust actions on competition

wage interactions comparisons or fall back options this paper examines the degree to which the importance of wages elsewhere in wage determination stems from comparisons made by workers as opposed to re ecting unions fall back options in the bargaining process the di culty of distinguishing these hypotheses is shown in the context of a bargaining model

monopoly behaviour with speculative storage abstract we analyze the effects of competitive storage when the production of the good is controlled by a monopolist the existence of competitive storers serves to reduce the monopolist s effective demand when speculators are selling and to increase it when they are buying this results in the monopolist manipulating the frequency of stockouts and hence the price smoothing effects of competitive storage we find that competitive storage affects both the level and the volatility of price under monopoly the average price level is higher with storage due to the monopolist s desire to induce stockouts by occasionally keeping the price just at the level that induces a stockout although storage does reduce the volatility of prices under monopoly production prices are more volatile than they would be under perfectly competitive production even though stockouts occur less frequently under monopoly these results are demonstrated through closed form solutions of the two period version of the model and computational solutions to the infinite horizon version of the model

stocks to use ratios and prices as indicators of vulnerability to spikes in global cereal markets we identify critical stocks to use ratios surs for major grains and for an index of total calories from these grains the latter appears to be a promising indicator of vulnerability to large price spikes when the current price shows no cause for concern more generally our results suggest that stocks data though no doubt unreliable can be valuable complements to price data as indicators of vulnerability to shortages and price spikes

firm size and employment determination in dutch manufacturing industries this paper examines whether the determination of employment differs between large and small firms an employment equation is estimated on panel data of 67 35 three digit industries in dutch manufacturing 1974 1986 the conclusions are as follows firstly employment adjustment appears to be faster in small firms than in large ones secondly the elasticity of factor substitution and the real wage elasticity at constant output are nearly the same for large and small firms thirdly the estimated output elasticities suggest constant returns to scale in large firms and increasing returns in small ones finally the number of working hours has less impact on employment in small firms than in large ones

maximum likelihood estimation of the standard commodity storage model evidence from sugar prices we present a maximum likelihood estimator for the standard commodity storage model with stockouts based on prices only while it imposes no additional assumptions on the model the maximum likelihood estimator has small sample properties superior to those of the pseudo maximum likelihood approach we provide a proof that is crucial for applying our estimator to the model with normal harvests and possibly unbounded prices thereby eliminating an inconsistency in the empirical storage model literature applying our maximum likelihood estimator to a series of annual sugar prices from 1921 to 2009 provides new evidence for the empirical relevance of the standard storage model our results imply a cutoff price at which discretionary stocks go to zero which is higher than the price obtained by applying the pseudo maximum likelihood estimator to the same data the implied frequency of stockouts is lower and price correlations skewness and kurtosis implied by the model closely match those seen in the annual sugar price data we find the price of sugar to be highly responsive to small changes in consumption when inventories are not available to buffer the effects of negative supply shocks on consumption prices must increase sharply to induce the consumption changes needed to clear the market our results show why production shocks are not necessarily aligned with price spikes the same production shock can give rise to very different price responses depending on whether or not there are sufficient stocks to buffer its impact

the role of small firms in the industrial development and transformation of czechoslovakia this article presents an analysis of the role of small firms in the formation and reform of the czechoslovak manufacturing sector it attempts to give an understanding of the industrial structure formed under the past regime within the framework of the mass production paradigm as manufacturing productivity gradually declined over the past 25 years and small firms have been virtually eliminated systemic preference has been given to the development of large monopolies consequently a monolithic coalition structure of enterprise managers state bureaucrats and political nomenklatura has arisen and continues to present itself as a serious hindrance to economic transformation while small firms have the potential to play a critical role in the democratic marketization of czechoslovakia current government preoccupation with the rapid privatization of the state sector risks damaging the development of a balanced distribution of firm size and in turn the revitalization of the society

equilibrium exhaustible resource price dynamics we develop equilibrium models of exhaustible resource markets with endogenous extraction choices and prices our analysis demonstrates how adjustment costs can generate oil and gas forward price dynamics with two factors consistent with the behavior these commodities exhibit in the schwartz and smith 2000 calibration our two factor model predicts that stochastic volatility will arise in these markets as a natural consequence of production adjustments however and we provide supporting empirical evidence differences between endogenous price processes from our general equilibrium model and exogenous processes in earlier papers can generate significant differences in both financial and real option values

small business dynamics in europe this paper examines how the firm size distribution has shifted over the last two decades across a broad spectrum of european countries the evidence suggests that a shift away from large firms and towards small business has taken place particularly is the southern regions and in the high technology indutries

a simple competitive model with production and storage we study a rational expectations partial equilibrium model of a market for a single storable commodity whose output each period is a function of previous period effort on production and a realization of a shock that affects equally all producers i he final demand is non random and depends only on each period s price risk neutral producers make production and storage decisions based on forecasts of future price distributions existence of equilibrium is proved and for the case of i i d shocks several comparative statics results are established as well as the existence and stability of a unique stationary distribution and whose output at each period is a multiplicative function of previous period s planting and of the realization of a shock that affects equally all producers the final demand for this good is non random and depends only on this period s price this describes approximately markets for agricultural products which are not traded internationally and where most of the price uncertainty stems from supply shocks risk neutral producers make their decisions based on forecasts of future price distributions and of known cost functions of storage and production to maximize their discounted profits in order to close the model an assumption on how such price forecasts are made is needed we assume that agents make equilibrium forecasts i e that their forecast is common and that when producers act taking the forecasted prices as given they make decisions that yield the forecasted prices as equilibrium prices this is of course what has been sometimes called rational expectations the assumption of equilibrium expectations and the presence of risk neutral pro ducers will imply that the equilibrium variables may be obtained by considering a related market surplus maximization problem 1 this places strong restriction on the stochastic process of equilibrium prices for the case where the basic shocks are assumed to be independently and identically distributed over time one may thus show that equilibrium prices are a function of a certain state variable the total stocks kept from last period plus this period s output and this allows us to derive properties of equilibrium solutions our main results concerning this case are a storage is a non increasing function of price and expected production a non decreasing one b the elasticity of expected future prices with respect to today s prices is positive and less than one c this elasticity is non constant being zero for high enough prices d the price process follows a renewal process if prices are low

shareholder wealth and wages evidence for white collar workers we present empirical evidence on the relationship between individual wages conditional on worker characteristics and equity returns using a unique survey from the bureau of labor statistics equity returns affect the wages only of workers with three or more years of tenure a 4 percent increase in a firm s market value raises pay by 0 3 percent within three years our estimates suggest that each 10 increase in shareholder wealth raises the present value of a firm s wage bill by 1 the elasticity of white collar wages with respect to equity returns is one third smaller than the ceo salary elasticities in our sample

estimating a nonlinear rational expectations commodity price model with unobservable state variables this paper is concerned with the estimation of a model in which a possibly serially correlated stochastic process the harvest of an agricultural commodity generates a competitive price in a market comprising both final consumers and risk neutral speculators who can store the commodity at a cost in the anticipation of profit because storage cannot be negative the relationship between prices and harvests is inherently nonlinear and is an unpromising candidate for a linear quadratic model or for linearization more generally instead we calculate numerically a policy function in which price is a function of two unobservable state variables the harvest and current availability and we use the result to fit the price data

the nature and importance of economic competence this chapter takes on three tasks 1 to survey the study of economic competence as it appears in economic literature 2 to give a meaningful and operational definition of economic competence as one of the factors contributing to macroeconomic growth and 3 to suggest a methodology pursued in greater depth elsewhere to generalize and link economic competence as defined at the micro firm individual level to macroeconomic growth through simulation on the micro based macroeconomic model of the swedish economic system moses by introducing knowledge in the micro setting of firm organizational competence we arrive at a very different interpretation measured at the macro industry level from that of standard neoclassical theory

price dynamics in biological production processes exposed to environmental shocks this paper demonstrates a mechanism by which environmental shocks in biological production processes can lead to extreme price movements and thus be a contributing factor to short term food price volatility in biological production processes environmental shocks can lead to a stock out when the harvest transitions to a new stock year class with a different marginal value the result in the market is a temporary price spike or bubble bounded by the marginal value of the new stock we highlight this phenomenon in a cohort or year class biological production setting each year class in the model is a finite non renewable capital stock and capital theory is used to solve for the stochastic dynamic competitive equilibrium the model is parameterized to be representative of the norwegian salmon aquaculture industry results suggest that the model can replicate much of the observed patterns in price harvest and capital stock dynamics including the infrequent occurrence of extremely high prices in the market

the development and use of machine tools in historical perspective abstract improvements and diffusion of machine tools have had a major impact on productivity in manufacturing industry since the industrial revolution the impact has been both direct and indirect the direct impact consists of rising labor productivity through the use of faster more accurate more mechanized machines and of the higher capital productivity through higher operating rates greater reliability and higher utilization rates the indirect impact arises as the use of new or improved machine tools has necessitated or facilitated organizational changes affecting both labor capital raw materials and energy the magnitude of these impacts has varied over the years with the areas of application as new production methods have made possible entirely new products or lowered the cost of existing products sufficiently to create new markets the first part of the paper contains a review of the historical development of machine tool technology since the industrial revolution paying particular attention to the role of interaction between producers and users of machine tools the second part focuses on the way in which recent development differs from that in earlier periods in particular it is found that the major changes in machine tool technology from the so called american system of manufactures in the early 19th century to the development of detroit automation in the 1950s have tended to improve mass production methods by contrast the development of numerical control beginning in 1948 has opened up the possibility of extending industrial production methods and automation to areas previously characterized more by handicraft methods even though this technology is not yet fully utilized it is clear that the economics of industrial production has been revolutionized by the cost reduction of small scale production relative to large scale and the degree of flexibility offered by the technology the third section of the paper deals with the present development trends particularly discussing the increasing importance of flexibility and the shifting emphasis from development of individual pieces of machinery to integration and control of entire manufacturing processes i a through the use of industrial robots the reasons for the need for greater flexibility in manufacturing are also identified

the economics of change in rural america communities perceptions of economic development prospects and alternatives are conditioned by previous experiences and anecdotal success stories thus small towns in traditionally agricultural regions equate economic development with prosperity in agriculture and the agricultural development program of the day sustainable agriculture value added enhancement alternative crops prosperity in nonmetro manufacturing centers is linked with industrial retention and recruitment and small business development and rural areas with natural historic or climatic amenities associate development with expanded tourism activity and the attraction of retirees

the evolution of manufacturing technology and its impact on industrial structure an international study this paper shows that plant and firm size in manufacturing and especially in engineering industry in several western industrial countries has declined since the early 1970s two hypotheses explaining the decline are advanced one is de glomeration or specialization the divestiture of non core businesses in order to free up scarce resources particularly management time to defend and nurture core business activities the second hypothesis is that the emergence of new computer based technology has improved the quality and productivity of small and medium scale production relative to standardized mass production techniques which dominated previously

insider forces and wage determination this paper investigates the relative importance of firm specific factors i e insider forces in wage determination using firm level data on 219 u k companies over 1974 82 it finds that a 1 percent rise in a firm s prices or productivity relative to the aggregate economy leads to a rise in relative wages of 0 1 0 2 percent as a corollary to this outside factors like the aggregate wage and the unemployment rate also play an important role there is evidence for insider based hysteresis effects but these are inversely related to the extent to which firms take national agreements into account copyright 1990 by royal economic society

the cyclical behavior of marginal cost and price the author examines the cyclical behavior of price marginal cost margins for u s manufac turing after 1956 short run marginal cost is markedly procyclical this is primarily due to procyclical overtime payments incurred beca use employment is not perfectly flexible in most industries output price fails to respond to the cyclical movement in marginal cost so price marginal cost margins are markedly countercyclical the res ults contradict business cycle theories that explain low production i n a recession by a high real cost of producing they support theories that explain low production in a recession by the inability of firms to sell their output copyright 1987 by american economic association

tobin s q and financial policy abstract recent research in macroeconomics has emphasized the importance of linking the financial and real sectors and working with optimizing models tobin s q model of investment would appear to provide a framework satisfying these two criteria in contrast to the original presentation of the q model the formal development has not recognized that the firm actively participates in a number of financial markets in this broader context q may be an uninformative and possibly misleading signal for investment expenditures we then endeavor to turn this negative theoretical result to positive advantage in resolving a number of empirical problems with q models

the economics of casino gambling america s casino industry expanded rapidly in the 1990s spreading from nevada and atlantic city to mining towns riverboats race tracks and tribal lands and moving from isolated resort settings to urban and suburban venues this article examines economic characteristics of the casino industry including the evolution of major casino markets pricing of gaming products market structures regulatory constraints and social and economic impacts attributable to casinos when competitive casinos show strong economies of scale and scope but many new jurisdictions limit the number or size of operations thus creating substantial economic rents allocation of these rents are fundamentally politically determined

the employment financing nexus evidence from a panel of west german firms the objective of the paper is to investigate the linkage between financial factors and employment decisions of west german firms the underlying model is based upon rational expectations and convex adjustment costs the time series cross section estimates for the period 1989 1994 are obtained using information on individual firms contained in business surveys we find that financial constraints can indeed restrain the level of employment in small firms on the contrary there is no evidence that this result applies to larger firms as well

casino regulations and economic welfare this paper studies the entry and tax regulation of oligopolistically competitive privately run casinos and government run casinos in a jurisdiction we highlight three important external effects from casino style gambling non casino income creation social disorder costs and cross border gambling the laissez faire equilibrium need not be overcrowding compared with regulated or government run regimes entry regulation may lead to higher jurisdiction welfare than tax regulation government run casinos always operate on a larger scale and achieve higher welfare than other regimes given the same number of casinos with an endogenous fraction of external gamblers a dispersed casino configuration yields higher welfare than a centralized one jel classification h2 d62 d21

small businesses as a research subject some reflections on knowledge of small businesses and its effects on economic theory most economists agree in their view of small and medium sized enterprises or small businesses smes as a marginal scientific subject they may go so far as to ignore them either because they think these economic units do not lend themselves to conventional economic studies studies which for instance take into account the sacred cow theory of economies of scale or because they see them as being not really different from big businesses

higher growth through the blue ocean strategy implications for economic policy a b s t r a c t higher growth is a key goal of companies governments and societies economic policies often attempt to attain this goal by targeting companies of certain sizes that operate in specific industries and focus on a specific business activity this approach to policy making has considerable shortcomings and seems to be less than fully effective in increasing economic growth we suggest a new approach to policy making that stems directly from the entrepreneurial perspective this approach examines a successful business strategy framework the blue ocean strategy to discover conditions for high growth we test the propositions on empirical data for two cases of successful high growth business namely slovenian gazelles and amazon com the results reveal a gap between the macro level of economic policy making to achieve higher growth and the micro level of business growth the findings call for a change in the focus of economic policies on specific size companies industries and business activities to intraindus try cooperation collaboration between companies of different sizes value innovation and creation of uncontested markets

on the behavior of commodity prices when speculative storage is bounded abstract this paper investigates the implications of bounded speculative storage storage bounded from below at zero and above at a capacity on commodity prices binding capacity mirrors the non negativity constraint on storage and leads to negative price spiking and higher volatility when the market is in deep contango i e low current prices at high stock levels with bounded storage there is no need to restrict storage to be costly to ensure a rational expectations equilibrium this allows the model to cover a wide range of storage technologies including free and productive storage we also provide an alternative expression for speculative prices that highlights the key role of the storage boundaries the competitive equilibrium price is the sum of discounted future probability weighted boundary prices the boundary prices can be viewed as dividends on commodities in storage reflecting the realization of economic profits from storage

promoting entrepreneurship in eastern europe the past decade has seen a revival of entrepreneurship in the modern industrial economies characterized by a wave of enterprise restructuring and of new developments in business and technology in this paper we argue that market transitions of the post socialist economies of eastern europe cannot be successful without similar entrepreneurial restructuring to address the massive structural distortions that still plague the post reform economies the governments of the region must promote entrepreneurship through policies that 1 make use of all possible sources of entrepreneurship including in particular the former state and social sectors and 2 establish a macroeconomic environment and property rights framework conducive to entrepreneurship a successful promotion strategy will need to operate on several fronts by 1 redirecting entrepreneurial activities into legal productive activities 2 increasing the supply and effectiveness of entrepreneurs 3 developing markets for complementary inputs and 4 increasing the demand for entrepreneurship an unsuccessful approach we argue will be one that regards the pre reform small private sector as the only source of entrepreneurship and as the only arena for its productive use

labor demand and the structure of adjustment costs this study examines the costs firms face in adjusting labor demand to exogenous shocks evidence on monthly plant level data shows that adjustment proceeds in jumps employment is unchanged in response to small shocks but moves instantaneously to a new equilibrium if the shocks are large results in the large literature that assumes smooth adjustment are due to aggregation of this nonlinear relation the finding has implications for cyclical changes in productivity for severance pay layoff and plant closing restrictions and for all other policies that affect the cost of adjusting employment copyright 1989 by american economic association

corporate takeovers the efficiency arguments in recent years the tender offer takeover has been praised and damned with a ferocity suggesting that the survival of capitalism is at stake the truth as in most disputes with substantial metaphysical content is more prosaic some takeovers enhance economic efficiency some degrade it and the balance of effects though not fully known is most likely a close one in this essay i try to lay bare the debate s foundations and bring it back to earth with an injection of evidence

competitive storage and commodity price dynamics by buying cheap and selling dear risk neutral commodity speculators can smooth commodity prices and induce serial dependence in price even when none would exist under a simple process of supply and demand commodity prices are variable and strongly positively correlated from one year to the next the variability is often explained by supply factors and the autocorrelation by the activities of speculators we show that this explanation is not consistent with the evidence speculation can substantially increase autocorrelation for prices that are weakly autocorrelated in its absence but not to the high levels that are observed in the data

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

insider effects in wage determination abstract the paper attempts to shed new light on the determinants of industry wages by a cross country comparison of wage setting relationships making use of comprehensive and consistent panel data on industries from the early 1960s to the mid 1980s the empirical analysis involves estimations of identically specified industry wage equations for each of five countries sweden norway finland germany and the united states a key finding is that industry wages in the u s are the most responsive to sectoral price and productivity changes by contrast industry wages in the nordic countries are largely unaffected by sectoral conditions the results cast doubt on the competitive model as an accurate characterization of wage setting under decentralization

employment determination in british industry investigations using micro data this paper derives and then estimates a model of employment where unions and firms bargain over wages and possibly employment and efficiency wage considerations may be important it illustrates the difficulties associated in interpreting many existing attempts to discriminate between alternative models the results based on over 200 u k firms suggest that employment is negatively related to the firm s own wage and the change in the own wage relative to outside opportunities the latter may be an efficiency wage effect various financial factors are also seen to have a significant effect on employment

evidence on the role of cash flow for investment abstract recent work in macroeconomics argues that imperfections in capital markets may lead to business cycle fluctuations by propagating relatively modest shocks evidence for such a mechanism also known as the financial accelerator consists largely of firm level studies showing that cash flow is an important predictor of investment but this evidence is often viewed with skepticism because cash flow is also a good indicator of investment opportunities in this paper we develop a framework for estimating the extent to which the predictive power of cash flow can be attributed to its role as a fundamental versus its role in alleviating credit frictions for firms with access to commercial paper and bond markets we find that the perfect capital markets model of investment can fully account for the role of cash flow for firms with only limited access to capital markets as indicated by lack of participation in public debt markets however investment appears to be excessively sensitive to fluctuations in cash flow these results thus clarify the role of cash flow in investment equations and provide support for the existence of a financial accelerator

rules versus discretion in food storage policies this article compares various policies in a rational expectations food storage model with risk averse consumers and missing insurance markets calibrated to represent a developing country i consider an optimal storage policy under discretion and two optimal simple rules a constant private storage subsidy and a price band the storage subsidy achieves welfare gains similar to the discretionary policy the price band maximizing social welfare is a price peg scheme the floor and ceiling prices are the same and the capacity constraint represents 11 of the steady state production level this price band achieves three quarters of the gains from the optimal policy under discretion

asset specificity and the political behavior of firms lobbying for subsidies in norway previous research into endogenous trade policy has described extensively the political incentives of firms with specific assets but no studies have shown directly that firms behave as predicted we adopt insights from transaction costs economics to develop measures of asset specificity and to investigate how variation in these measures affects the political behavior of firms in particular we examine the lobbying choices of norwegian firms in the 1980s given available subsidy funds from norway s oil boom and some government decisions in the 1970s firms with more specific assets faced potentially greater losses from adjusting to new activities in the face of competitive pressures and thus had greater incentives to lobby for subsidies to protect themselves joint contacting of parliament and government on behalf of firm interests by representatives of both management and labor should be particularly likely where firms had specific assets data analysis shows that asset specificity as indicated by r d intensity and job immobility predicts joint contacting independently of plausible alternative explanatory variables like firm size and export orientation

firm size efficiency and employment a review article s j s book contains much careful and interesting discussion of small firm employment data and related issues and will be read by all workers in the field however it also contains too much detailed quantification and international comparison of doubtful relevance at least for most economists and misses much background material of direct importance for evaluating the role of small firms as a result the authors seriously under estimate the contribution of small business to both employment and efficiency of modern economies as well as the importance of policy to correct the traditional and still pervasive bias towards large organizations

price rigidities and market structure conventional wisdom has it that a large part of the explanation of keynesian unemployment is the observed rigidities of wages and prices what has been lacking however is a satisfactory theory or conjunction of theories which explains how wages and prices can be at non market clearing levels the objective of this paper is to sketch out several alternative theoretical explanations of this phenomenon each in contrast with keynesian theory is consistent with the observation that as the economy goes into a recession real product wages do not increase and may in fact decrease all of the theories assume rational profit maximizing firms and all entail some important departure from the standard competitive paradigm the first three explanations represent minor adaptations of standard models

an ampirical assessment of the contribution of small business employment to u s state economic performance small business proponents regularly couple their arguments for favorable government policies and reduced tax and regulatory burdens to the presumed benefits of increased proportions of small versus large sector employment though regularly espoused at both the state and national level these presumptions regarding the benefits of small business employment remain an empirical issue are the presumed benefits a reality a panel analysis of 48 u s states for a ten year period was used to evaluate the contribution of small businesses to growth in productivity growth in gross state product gsp unemployment and wage inflation at the state level the system of simultaneous equations revealed that states with higher proportions of very small business employment do indeed experience higher levels of productivity growth and gross state product growth while having less wage inflation and lower unemployment rates

the efficient estimation of econometric models with rational expectations the efficient estimation of econometric models with rational expectations by the substitution method usually entails the use of a non linear simultaneous equations estimator and hence is not very attractive computationally it is shown that for a wide class of problems efficient estimates can also be obtained with standard estimation methods if instead an errors in variables approach is used for many other problems although not providing fully efficient estimates because rationality is not imposed the errors in variables method will still have a strong appeal because otherwise it uses all of the structural information in the model unlike the substitution method when an incomplete information set is used it guarantees consistent estimates and it is easy to compute

optimal food price stabilisation policy this paper proposes a framework for designing optimal food price stabilisation policies in a self sufficient developing country it uses a rational expectations storage model with risk averse consumers and incomplete markets government stabilises food prices by carrying public stock and by applying a state contingent subsidy tax to production the policy rules are designed to maximise intertemporal welfare the optimal policy under commitment crowds out all private stockholding activity by removing the profit opportunity from speculation the countercyclical subsidy tax to production helps price stabilisation by subsidising production in periods of scarcity and by taxing it in periods of glut it contributes little to welfare gains most of which come from stabilisation achieved through public storage

the role of small firms in east germany this paper examines the role which small firms in east germany have played under the system of combines and the important contribution they can make in the current reform process the evolution of a striking trend towards the centralization of economic power in the gdr during the last three decades is documented not only has the share of economic activity accounted for by the combines greatly increased but the number of establishments and particularly small establishments has drastically decreased it is concluded that the establishment of a vital entrepreneurial sector is essential if east germany is to succeed in its process of economic reform and the transition to the market economy

how do banks adjust to changing input prices a dynamic analysis of u s commercial banks before and after the crisis abstract the 2000 2013 period was characterized by substantial regulatory monetary and technological change especially after the onset of the global financial crisis this study assesses the total impact of these policy shifts and technological changes on u s commercial banks short run and long run substitution elasticities an endogenous break test divides the sample into a pre crisis period and a post crisis period during the former period banks inputs tend to be inelastic substitutes after the onset of the crisis particularly the long run substitutability of most input factors decreases to even lower levels due to changes in both cost technology and economic conditions at the same time banks response to input price changes becomes more sluggish hence especially after the onset of the crisis banks have little flexibility regarding input factor usage and are thus sensitive to input price changes from a cost perspective

venture capital in western europe abstract western europe is in the process of an entrepreneurial renaissance an integral part of this renaissance is the emergence of a venture capital industry in europe although the venture capital institution in europe is very much modeled along the lines of its american counterpart it is significantly smaller in size both in absolute terms as well as in relation to the size of the economy substantial differences in venture capital activity are also found to exist within europe it is most prevaient in the united kingdom france and netherlands surprisingly it is less developed in west germany particularly given the size of this country s economy venture capital in western europe shares some characteristics with that in the united states its investment focus is in high technology and syndication between funds is common unlike the united states however banks are a major source of venture capital funds surprisingly in spite of the economic integration to which the european community aspires the mobility of venture capital across national boundaries is low the authors try to explain differences in venture capital activity in several countries of the european community by examining four aspects of each country s environment in particular the size of the technology sector the cultural influence on entrepreneurial risk taking the government s policy to stimulate risk capital and entrepreneurship and finally the ability of venture backed firms to turn to publicly traded markets as a source of future financing one common factor shared by the three countries with the highest level of venture capital activity is the presence of a secondary stock market geared to the needs of a small relatively new venture contemplating an initial public offering the unlisted securities market in the united kingdom the seconde marche in france and the parallel market in the netherlands serve these needs and provide the mechanism by which venture capitalists can liquidate their equity position after the venture is quoted on these financial markets to the venture it provides access to public financing for funding continued growth in the united kingdom and netherlands the business enterprise has historically been regarded as a tradeable entity and hence the concept of ownership by passive investors is well accepted in france where this is a relatively recent phenomenon the government has played a strong role in stimulating an interest in stock market investing in general it has also created some extremely attractive fiscal incentives for investors in venture capital funds