capital utilization economies of scale and technical change in the growth of total factor productivity an explanation of south korean manufacturing growth abstract this paper presents a method of interpreting the growth of total factor productivity directly linking the productivity growth to key parameters of a specific cost function it shows that the productivity index can be decomposed into effects due to a technical change b non constant returns to scale and c change in capital utilization the decomposition framework was applied to data on south korean manufacturing during the 1961 1980 period in south korean manufacturing the total factor productivity was found to have grown at 3 per annum scale economies contributed about 38 of the growth of tfp the technical change 45 and the change in the capital utilization rate 17 the results of this study support of the view that for growing less developed economies the growth in capital utilization rate is a source of growth in total productivity that is too significant to be ignored

career concerns incentives and endogenous learning in labour markets models of career concerns provide a framework for analyzing the actions that may be taken by a manager in an attempt to influence performance signals that the market uses to update its beliefs on her productivity and the incentive problem that arises if such actions do not coincide with those that maximize the financial return to a firm s owner this survey provides a formal introduction to the main types of models of career concerns hidden action and hidden information and discusses some extensions of these models applications of the career concerns framework to explain aspects of managerial behavior and the form of labor market institutions are emphasized copyright 1992 by blackwell publishers ltd

productivity growth in uk manufacturing and production industries 1948 68 this paper estimates residual productivity growth for twenty eight uk manufacturing and production industries for 1948 68 using a production function approach and the importance of distinguishing between a gross output and value added from of production function is stressed the results are compared to those obtained by the cambridge growth project which uses an input output framework the value added production function gives similar results to the cambridge approach and it is shown that this is not altogether surprising the results from a gross output production function are also shown these estimates are generally lower than those obtained using a value added or net output system which is what would be expected

tying as a response to demand uncertainty this article examines requirements tying of a competitively supplied good to a monopolized good it expands the set of market conditions in which this instrument is known to be profitable with heterogeneous privately informed buyers a firm can profit by tying two goods even when demands for the goods are price independent providing the demands are stochastically dependent we investigate the profitability of tying as a response to stochastic demand as well as the effects of tying on prices and the extent of the market served

tying in two sided markets with multi homing this paper analyzes the effects of tying on market competition and social welfare in two sided markets when economic agents can engage in multi homing by participating in multiple platforms to reap maximal network benefits the model shows that tying induces more consumers to multi home and makes platform specific exclusive content available to more consumers which is beneficial to content providers as a result tying can be welfare enhancing if multi homing is allowed even in cases where its welfare impacts are negative in the absence of multi homing the analysis thus can have important implications for recent antitrust cases in industries where multi homing is prevalent

the incentive effects of levelling the playing field an empirical analysis of amateur golf tournaments levelling the playing field is an important policy instrument to guarantee an equitable competition among heterogeneous individuals however the incentive effects of those policies are usually not explicitly addressed in empirical studies in this article the performance in amateur golf tournaments is analysed to gain insights into the incentive effects of those types of policies the empirical analysis takes advantage of the fact that tournaments in amateur golf are of two distinctive types that apply different scoring rules while one scoring rule is based on gross scores i e the total number of strokes of a player the second scoring rule is based on net scores where the total number of strokes is normalized with respect to the respective player s handicap performance comparisons of players who participated in both types of tournaments suggest that levelling the playing field as in tournaments based on net score has positive and significant performance effects

growth accounting with intermediate inputs and the transmission of technical change abstract the aggregate rate of total factor productivity growth tfpg when there are intermediate inputs can be expressed either as a weighted average or as a weighted sum of the sectoral rates depending on the choice of sectoral rates being weighted the agrument that there is a magnification effect due to the transmission of tfpg through the intersectoral flows among sectors is therefore to be more illusory than real

bundling as an entry barrier in this paper we look at the case for bundling in an oligopolistic environment we show that bundling is a particularly effective entry deterrent strategy a company that has market power in two goods a and b can by bundling them together make it harder for a rival with only one of these goods to enter the market bundling allows an incumbent to credibly defend both products without having to price low in each the traditional explanation for bundling that economists have given is that it serves as an effective tool of price discrimination by a monopolist although price discrimination provides a reason to bundle the gains are small compared with the gains from the entry deterrent effect i introduction in this paper we look at the case for bundling in an oligopolistic environment we show that bundling is a particularly effective entry deterrent strategy a company that has market power in two goods a and b can by bundling them together make it harder for a rival with only one of these goods to enter the market bundling allows an incumbent to defend both products without having to price low in each while it is still possible to compete by offering a rival bundle a monopolist can significantly lower the potential profits of a one product entrant without having to engage in limit pricing prior to entry we also show that bundling continues to be an effective pricing tool even if entry deterrence fails or if there is already an existing one product rival a company with a monopoly in product a and a duopoly in product b makes higher profits by selling an a b bundle than by selling a and b independently leveraging market power from a into b and accepting some one product competition against the bundle is better than using the monopoly power in good a all by itself since bundling mitigates the impact of competition on the incumbent an entrant can expect the bundling strategy to persist even without any commitment the traditional explanation for bundling that economists have given is that it serves as an effective tool of price discrimination by a monopolist see stigler 1968 adams and yellen

incentives for helping on the job theory and evidence recent advances in incentive theory stress the multidimensional nature of agent effort and specifically cases where workers affect one anothers performance through helping efforts this article models helping efforts as determined by the compensation package and task allocation the model is tested with australian evidence on reported helping efforts within work groups the evidence consistently supports the hypothesis that helping efforts are reduced while individual efforts are increased when promotion incentives are strong piece rates and profit sharing appear to have little effect on helping efforts while task variety and helping efforts are positively correlated

do tournaments have incentive effects much attention has been devoted to studying models of tournaments or situations in which an individual s payment depends only on his or her output or rank relative to that of other competitors academic interest derives from the fact that under certain sets of assumptions tournaments have desirable normative properties because of the incentive structures they provide our paper uses nonexperimental data to test whether tournaments actually elicit effort responses we focus on professional golf tournaments because information on the incentive structure prize distribution and measures of individual output players scores are both available we find strong support for the proposition that the level and structure of prizes in pga tournaments influence players performance

economic contests comparative reward schemes contests are situations in which an individual s reward depends on his performance relative to others students are graded on a curve the candidate with the most votes gets the political office the underling who performs best is promoted to the executive position contests are useful in dealing with indivisible rewards reducing monitoring costs and minimizing risks from common uncertainties they are employed to sort potential participants and once they have entered to induce appropriate effort from them with monitoring precision and prize spreads as potential choice variables optimal contest structures are derived for fair and unfair contests among equal and unequal participants the converse problems of climbing low ability individuals enter the contest designed for high ability candidates and slumming are shown to be manageable

the sharing of total factor productivity gains in canadian manufacturing a price accounting approach 1965 1980 this papers user a price accounting approach to measure total factor productivity growth in canadian manufacturing at the two digit level over the period 1965 80 its purpose is to describe how given productivity improvements have been apportioned among labour capital materials and government through an increase in the price of these factors or through an increase in taxes levied on factor inputs and consumers through a decrease in the industry selling prices

energy price shocks and productivity growth in us and uk manufacturing because sustained changes in the trend of productivity growth are so very important for people s long run economic welfare the dramatic productivity growth slowdown of the 1970 s and early 1980 s has been the focus of much analysis and discussion for some observers it was much more than coincidence that the oil price shocks of 1973 74 accompanied the sharp slowdowns in traditionally measured productivity growth not only in the united states and the united kingdom but throughout the industrialised world however establishing quantifying and explaining sig nificant linkages between energy price shocks and productivity growth has proved to be most difficult traditional and time honoured relationships involving productivity growth have all seemed incapable of explaining this slowdown for example edward denison author of several widely cited productivity studies has concluded that energy had essentially no role in explaining the productivity growth slowdown and that moreover what happened is to be blunt a mystery 1979 p 4

a new look at incentive effects and golf tournaments abstract this paper uses data from the 1992 professional golf association tour to analyze the incentive effects offered by tournaments the results suggest that the level of the total prize money has an insignificant effect on the total score output of the players workers this conclusion contradicts the findings of an earlier paper by ehrenberg and bognanno journal of political economy 1990 98 1307 1324

quitters never win the adverse incentive effects of competing with superstars internal competition may motivate worker effort yet the benefits of competition may depend critically on workers relative abilities large skill differences may reduce efforts i use panel data from professional golf tournaments and find that the presence of a superstar is associated with lower performance on average golfers first round scores are approximately 0 2 strokes worse when tiger woods participates relative to when woods is absent the overall tournament effect is 0 8 strokes the adverse superstar effect varies with the quality of woods s play there is no evidence that reduced performance is attributable to media attention intensity or risky strategy adoption

post war productivity patterns in u s agriculture influences of aggregation procedures in a state level analysis annual data for forty eight states are used to account for changes in the composition of input and output aggregates over space and time and thereby to obtain new evidence on changes in inputs outputs and productivity in u s agriculture the measures change significantly when we use state specific rather than national prices and when we allow for changes in the composition of the aggregates especially of labor and capital inputs we compare our estimates and those reported by ball et al american journal of agricultural economics 81 1999 164 79 the national estimates are similar but substantial differences are found in state level productivity growth

the incentive effects of tournaments revisited evidence from the european pga tour this analysis of data from the 1987 european men s professional golf association pga tour strongly supports the hypothesis that the level and structure of prizes in pga tournaments influence players performance specifically players performance appears to vary positively with both the total money prizes awarded in a tournament and the marginal return to effort in the final round of play a value that varies among players largely depending on how the prize money is allocated among finishers of different ranks the authors suggest that these results together with the similar results of their earlier study of the 1984 u s men s pga tour may have implications for the design of compensation systems for certain groups of workers such as corporate executives college professors and salespeople

mergers with differentiated products the case of the ready to eat cereal industry traditional merger analysis is difficult to implement when evaluating mergers in industries with differentiated products i discuss an alternative which consists of demand estimation and the use of a model of postmerger conduct to simulate the competitive effects of a merger i estimate a brand level demand system for ready to eat cereal using supermarket scanner data and use the estimates to 1 recover marginal costs 2 simulate postmerger price equilibria and 3 compute welfare effects under a variety of assumptions the methodology is applied to five mergers two of which occurred and for which i compare predicted to actual outcomes

tournament incentives and match outcomes in women s professional tennis our research examines the effect of prize money differentials in women s professional tennis tournaments on the probability that the favoured player wins the match this study adds to the existing literature on tournament theory through its focus on rosen s 1986 elimination style match play tournament model we estimate a standard probit model using a unique data set containing detailed information on prize money player specific characteristics and match play outcomes for all tournaments played during the 2004 tour sponsored by the women s tennis association wta our results support predictions by rosen s tournament model larger prize money differentials have a positive statistically significant effect on the favoured player s probability of winning the match in addition the number of stages remaining has a significant negative effect on winning consistent with tournament theory predictions associated with the number of contestants in a tournament

testing long run productivity models for the canadian and u s agricultural sectors the primary objective of this paper is to develop the linkages between the gross and net productivity indexes and the implied production structures these linkages are developed as separability restrictions on various subgroups of inputs and time in a general production model the restricted models are arranged in sequences for nested hypotheses testing empirical evidence from the u s and canadian agricultural sectors based on a translog production function support the gross output total factor productivity structure the net output hicks neutrality hypothesis is rejected for both the united states and canada

real wage growth technical change and competition in the labor market the paper measures the rate of growth of average labor cost and the real wage for the twenty u s two digit manufacturing industries 1948 76 it is argued that these rates of growth give interesting information which other studies on the real wage ignore the results suggest that the gains from technical advance are shared equally across all labor markets consistent with the competitive paradigm a simple and appealing rationale for the observation that high growth industries show the slowest relative rate of growth of prices is also given t he general theory keynes 1936 unleashed many controversies one of the earliest and still topical controversy is the cyclical behavior of the real wage essentially the real wage employment debate has focussed on whether or not the demand schedule slopes downwards and there have been many studies on this topic producing a variety of conflicting findings a common feature of the real wage employment studies is to abstract away from the growth in the real wage that is bound to occur in a growing economy these studies are primarily concerned with deviations from trend or innovations in the real wage and the theme of this paper is that to ignore the growth in the real wage is to throw away valuable and interesting information this information on real wage growth tells us a great deal about competition in the labor market this study should be seen as being complementary rather than conflicting with the real wage employment studies the existence of a downward sloping demand curve for labor is after all not sufficient and probably not necessary for the functioning of competitive labor markets over the span of years 1948 76 i find that individual u s manufacturing industries record widely varying rates of productivity growth however these same industries tend to show a common rate of growth of the real wage this feature of productivity growth was emphasized by the late salter 1960 in his pathbreaking analysis of technical change he writes there is no tendency for above average increases in labour productivity to be accompanied by above average increases in earnings

strategic and welfare implications of bundling abstract a standard oligopoly model of bundling shows that bundling by a firm with a monopoly over one product has a strategic effect because it changes the substitution relationships between the goods among which consumers choose bundling in appropriate proportions is privately profitable reduces rivals profits and overall welfare and may drive rivals from the market

the economic design of sporting contests what is the optimal number of entrants in a race or the optimal number of teams in a baseball league what is the optimal structure of prizes for a golf tournament or degree of revenue sharing for a football championship how evenly balanced should the competing teams be in the nascar or formula one championships what is the maximum number of entrants per nation to the olympic games that should be permitted what quota of qualifying teams to the soccer world cup should be allocated to the developing nations

pay equality and industrial politics personnel managers often argue that equitable pay treatment manifested as wage compression is useful because it reduces disharmony among workers but it is far from obvious that a compressed salary structure is morale improving since better workers may feel disenchanted by this scheme however when workers rewards are based on relative comparisons salary compression reduces uncooperative behavior that is detrimental to the firm relative comparisons imply that some reference group must be selected the major result is that within the relevant groups some wage compression is efficient

an estimate of the textile and clothing sector production function for selected countries in the early 1970s abstract this paper describes the results of the estimation of sector wide production functions for textiles and clothing for nine industrialized and five industrializing countries in the early 1970s special attention is paid to relative differences between countries especially with respect to the changing role and productivity of labor although somewhat primitive in nature the results suggest that this is a fruitful way to gain a better understanding of the changing international division of labor at the sector level

tying foreclosure and exclusion in recent years the leverage theory of tied good sales has faced heavy and influential criticism in an important sense though the models used by its critics are actually incapable of addressing the leverage theory s central concerns here the author reconsiders the leverage hypothesis and argues that tying can indeed serve as a mechanism for leveraging market power the mechanism through which this leverage occurs its profitability and its welfare implications are discussed in detail copyright 1990 by american economic association

work incentives hierarchy and internal labor markets this paper argues that contracts with payment based on a ranking of employee performance can provide performance incentives even under asymmetric information that prevents payment based on individual performance only being enforceable such contracts also fit with five features of labor markets that have aroused considerable interest 1 hierarchical wage structures 2 internal promotion 3 wage rates that rise with seniority and experience more than productivity 4 the variance of earnings increasing with experience and 5 wage rates attached to jobs rather than individuals with differentials set by administrative procedures rather than by reference to external market wages

the sports business as a labor market laboratory with superior data on compensation and productivity as well as the occurrence of abrupt dramatic market structure and player allocation rules changes sports labor markets offer an excellent setting in which to test economic hypotheses this paper reviews evidence from sports in four areas employer monopsony discrimination the coase theorem and incentive contracts supervision and performance there is considerable evidence of monopsony as well as for the existence of some forms of discrimination against minority athletes incentive contracts have strong effects on player performance and behavior and there is mixed evidence on the predictions of the coase theorem

tying investment and the dynamic leverage theory the idea that an incumbent supplier may tie two complementary products to fend off potential entrants is popular among practitioners yet is not fully understood in formal economic theory this article makes sense of the argument by formally deriving a dynamic version of the old leverage doctrine we show that when an incumbent monopolist faces the threat of entry in all complementary components tying may make the prospects of successful entry less certain discouraging rivals from investing and innovating tie in sales may reduce consumer and total economic welfare copyright 2001 by the rand corporation

the effort effects of prizes in the second half of tournaments abstract the theory of tournaments predicts that a worker s effort depends on the difference between the winning and losing prizes as well as the degree that increases in effort affect the probability of winning this paper tests these predictions using a data set from arabian horse racing jockeys increase their efforts lower their times in the second half of races when the amount of prize money lost by dropping a place is greater and when there is less distance between them and their closest competitors these findings are consistent with the theory

testing the determinants of income distribution in major league baseball i introduction income of professional athletes is a frequent topic of discussion of fans sportscasters and the general public economists have also increasingly been attracted to this topic because the distribution of income of these players has both policy and business implications as a consequence the report of major league baseball s mlb blue ribbon panel formed in 1998 by mlb commissioner bud selig received quite a lot of attention this panel was charged with describing and explaining the economic condition of mlb comprised of such dignitaries as former federal reserve chairman paul volker senator george mitchell yale university president richard levin and columnist george will this panel reported that team payrolls have become increasingly disparate the gap between rich and poor teams is not only wide but is growing levin et al 2000 a case in point is the fact that the salary of the highest paid player in the 2000 season los angeles kevin brown at 15 7 million was 95 of the entire payroll of the poorest team the minnesota twins the effect according to the panel s report is a dramatic decline in parity and competitiveness of mlb since 1994 a team in the top payroll quartile has won every world series game in 1999 the teams with the five largest payrolls had an average winning percentage of 0 557 whereas the five poorest teams had a comparable figure of 0 444 the report discusses various recommendations that may narrow this gap leading to what one might call convergence in team payrolls this article examines the distribution of income in mlb for 1985 to 2000 we revive and extend a technique first suggested by thurow 1970 and show how it can be used to test for time trends versus cross sectional demographic and economic aspects influencing income distribution thurow 1970 discusses the impact of various measures on median income in the present case by calculating the gini coefficient we can discuss the impact that the explanatory variables have on income inequality in the context of mlb we attempt to shed light on the reasons why teams have greater or lesser payroll disparity we leave the question of the effect of between team payroll inequality on team wins and team revenues for future research the issue of whether to use an inequality measure that is based on a particular distribution or one that is distribution free has been widely discussed in the income distribution literature silber 1999 ryu and slottje 1999 in advocating the use of parametric distributions point to several benefits of estimating the lorenz curve in this manner these benefits include the ability to summarize thousands of observation points with a few parameters the ability to estimate the density function at any point an enhanced ability to construct inequality measures and the ability to formulate possible laws that would otherwise not be possible to detect however there are problems associated with the use of a parametric lorenz curve such as the choice of a suitable distribution the problem is compounded by the fact that income data are often grouped and have an open ended highest income category making it difficult to obtain accurate estimates one advantage of using professional sports data is the fact that the salary is available per individual and is not grouped consequently an actual number is available for the highest income this study analyzes payroll inequality in a professional sport by team that is for each year we calculate a measure of inequality for each mlb team and consider the characteristic differences in within team payroll distributions our study is not however the first to consider income inequality within professional team sports depken 2000 and jewell and molina 2004 find that mlb teams with greater wage disparity have fewer wins furthermore sommers 1998 finds a negative relationship between team success and within team payroll inequality using national hockey league data

performance responses to competition across skill levels in rank order tournaments field evidence and implications for tournament design tournaments are widely used in the economy to organize production and innovation we study individual data on 2775 contestants in 755 software algorithm development contests with random assignment the performance response to added contestants varies nonmonotonically across contestants of different abilities precisely conforming to theoretical predictions most participants respond negatively whereas the highest skilled contestants respond positively in counterfactual simulations we interpret a number of tournament design policies number of competitors prize allocation and structure number of divisions open entry and assess their effectiveness in shaping optimal tournament outcomes for a designer

men women and competition an experimental test of behavior this study reports a series of experiments that examine outcomes when agents are able to choose between a payment scheme that rewards based on absolute performance i e piece rate and a scheme that rewards based on relative performance i e a tournament we test for the presence and persistence of gender differences in performance and the rate of entry into the tournament option and whether these differences are sensitive to the structure of the tournament rewards in the winner take all wta condition only the best performer in the tournament for each round received a payment 4 50 in the graduated tournament condition the same payment 4 50 was divided among the first second and third finishers in the tournament in the wta condition men showed significantly lower forecast errors than women in addition a clear sorting effect occurs in the wta condition in early rounds of the wta condition male entrants into the tournament show significantly lower forecast errors than female tournament entrants however the difference disappears over time after controlling for forecasting skill gender did not predict entry into the tournament for the wta condition however lower forecasting skill reduced the probability of entry in the graduated tournament the situation was reversed men entered the tournament at significantly higher rates even after controlling for skill forecasting skill had no impact on the decision to enter the tournament while the average male entrant to the tournament had lower forecast errors than the average female entrant the men entered at much higher rates as a consequence men were much more likely than women to enter the tournament too frequently

how the source of the entrant s advantage limits entry deterring tying i revisit a simple model of entry deterring tyingexample 1 from whinston s 1990 seminal paperbut allow the potential entrant to have either a cost advantage or a willingness to pay wtp advantage relative to the incumbent i show that compared to the usual case in which the potential entrant is cost advantaged tying is less effective against an entrant with a wtp advantage because an entrant with a large wtp advantage may be able to induce the buyer to buy both the tied bundle and the entrant s product i also show that tying but failing to deter entry can be less costly when facing an entrant with a wtp advantage than when facing an entrant with a cost advantage for a firm facing uncertainty about for example the entrant s entry costs this makes tying a more attractive entry deterrence strategy against a wtp advantaged entrant these results shed light on the important policy question of which markets are most likely to be susceptible to entry deterring tying

incentives versus sorting in tournaments evidence from a field experiment existing field evidence on rank order tournaments typically does not allow disentangling incentive and sorting effects we conduct a field experiment illustrating the confounding effect students in an introductory microeconomics course selected themselves into tournaments with low medium or high prizes for the best score at the final exam nonexperimental analysis of the results would suggest that higher rewards induce higher productivity but a comparison between treatment and control groups reveals that there is no such effect this stresses the importance of nonrandom sorting into tournaments

the agent agents problem payment by relative output this paper begins an investigation into the incentive problems at a firm when the effort of the employer and the employees combines to determine final output the major conclusion is that optimal reward functions in this circumstance will in general value the performance of a worker relative to that of his peers the paper thus joins a growing literature associated with the work of lazear and rosen on rank order tournaments