a multiplicative model of optimal ceo incentives in market equilibrium this paper presents a unified theory of both the level and sensitivity of pay in competitive market equilibrium by embedding a moral hazard problem into a talent assignment model by considering multiplicative specifications for the ceo s utility and production functions we generate a number of different results from traditional additive models first both the ceo s low fractional ownership the jensen murphy incentives measure and its negative relationship with firm size can be quantitatively reconciled with optimal contracting and thus need not reflect rent extraction second the dollar change in wealth for a percentage change in firm value divided by annual pay is independent of firm size and therefore a desirable empirical measure of incentives third incentive pay is effective at solving agency problems with multiplicative impacts on firm value such as strategy choice however additive issues such as perk consumption are best addressed through direct monitoring jel d2 d3 g34 j3

the uk regional distribution of foreign direct investment analysis and determinants hill s and munday m 1992 the uk regional distribution of foreign direct investment analysis and determinants reg studies 26 535 544 this paper analyses the regional distribution of foreign direct investment fdi within the uk following an examination of those regions that have been successful in winning new inward investment the paper goes on to consider hypotheses that can be used to explain relative regional success in attracting new fdi projects and jobs empirical testing of these hypotheses suggests that both financial incentives and access to markets are important determinants of the regional distribution of new fdi projects and jobs hill c et munday m 1992 la distribution regionale de l investissement direct etranger au royaume uni analyse et determinants reg studies 26 535 544 cet article cherche a analyser la distribution regionale de l investissement direct etranger au sein du royaume uni suite a une examination des regions qui ont reussi a attirer de nouvel investissement

environmental regulation technological innovation and energy consumption a cross region analysis in china abstract china has encountered the environmental issues and energy pressures in the middle income stage strengthening environmental regulation is a crucial measure to prevent environment deterioration and energy dilemma this paper investigates the three types of environmental regulations on energy consumption using feasible generalized least squares method during 1997 2015 in direct and indirect path the main conclusions are as follows in the direct path the economical and supervised types of environmental regulations have inhibited energy consumption whilst legal environmental regulation has no significant impact as for indirect path the rebound effect of energy is greater than the energy conservation generated by technological innovation which is embodied as an inhibitory effect the effects of environmental regulation display regional difference the legal and supervised types of environmental regulations have significant cost effect and rebound effect on energy consumption in the entire samples on the contrary the economical environmental regulation shows the opposite sigh in eastern regions the counterfactual simulation results show that the net effects of environmental regulations on energy consumption are negative which is beneficial for relieving energy pressures based on the findings this paper provides pertinent policy implications

you can t manage right what you can t measure well technological innovation efficiency abstract this paper proposes a new approach to tackle the innovation performance relationship it addresses the so far mixed and inconclusive results of studies analyzing this relationship we argue that the undifferentiated use of innovation inputs and outputs to measure firm innovativeness is not without problems and that from a productive perspective they should be simultaneously analyzed this study follows a two stage empirical analysis using a sample of spanish manufacturing firms for the period 1992 2005 by examining two inputs and two outputs of the innovation process in the first stage we estimate technological innovation efficiency by means of an intertemporal data envelopment analysis dea bootstrap and also observe the yearly efficiency changes based on a global malmquist index in the second stage we analyze the effect of technological innovation efficiency on firm performance through a generalized method of moments gmm system the results support our arguments that the best measurement of outcomes of technological innovations is through the efficiency with which they are developed in addition we test the moderating effect of technological intensity level and firm size on the efficiency performance relationship

the comparative advantage of cities abstract what determines the distributions of skills occupations and industries across cities we develop a theory to jointly address these fundamental questions about the spatial organization of economies our model incorporates a system of cities their internal urban structures and a high dimensional theory of factor driven comparative advantage it predicts that larger cities will be skill abundant and specialize in skill intensive activities according to the monotone likelihood ratio property we test the model using data on 270 us metropolitan areas 3 to 9 educational categories 22 occupations and 19 industries the results provide support for our theory s predictions

a study of the relationship between competitiveness and technological innovation capability based on dea models researchers and managers have been searching for appropriate methods to explore the relationship between technological innovation capability and competitiveness in recent years this study attempts to find a systematic quantitative methodology to tackle this problem in a recent survey covering 182 industrial innovative firms in china the traditional data envelopment analysis dea model was employed to analyze the data collected the research results show that only 16 of the enterprises operate on the best practice frontier and there are some inconsistencies between organizational innovation capability and competitiveness in many enterprises decreasing returns to scale were found among about 70 of the inefficient enterprises and increasing returns to scale were found among the remaining 30 of the inefficient enterprises thus the internal innovation harmonizing process in these enterprises is considerably inefficient based on the restricted ranges of the input output factors a multi objective dea projection model has also been developed in this study to provide a benchmark for auditing competitiveness research results further indicate that there is still much room for enterprises to improve competitiveness in situations of confining score ranges of technological innovation capability and competitiveness

firm size wage gaps job responsibility and hierarchical matching i present the fact that wage gaps due to firm size increase with job responsibility i use swedish data to determine whether wage gaps increase with a direct measure of job responsibility to compare the age patterns of the wage gaps for blue and white collar workers and to compare wages by job responsibility and spans of control with u s data i compare supervisory to nonsupervisory occupations and find that wage gaps increase with job responsibility for most occupational ladders this fact is consistent with hierarchical matching models in which the larger number of subordinates amplifies managerial talent

allocation of individuals to job levels under rationing summary we augment an ordered response model for the job level at which individuals desire to work with allowance for individual reporting of a discrepancy between actual and desired job level and we also investigate possible biases from restricting the observations to the employed and omitting the unemployed we find that the latter bias can be ignored and interpret this as evidence that the unemployed are not choosier than the employed people claiming inadequate capability utilization are not markedly differently allocated than those claiming a proper match women s lower job levels cannot be explained from rationing by capability utilization

risky business the decline of defined benefit pensions and firms shifting of risk since the early 1980s employment in the united states has undergone significant transformation as the large corporations that once safeguarded employees with stable jobs and rewards for loyalty have replaced these employment relationships with ones based on cost containment and flexibility one important consequence of these developments is that firms have abdicated their role as a critical risk bearer in society although evidence suggests that firms have increasingly shifted market risks onto their workforce to date there have been few detailed analyses exploring what factors have driven this phenomenon this study adds to our understanding of why firms have transferred risk to their employees by examining the decline of a highly institutionalized practice wherein large u s firms used to bear retirement risk the defined benefit db pension plan through a detailed analysis i show that variance in the presence power and interests of shareholders and employees at the firm level differentially affect a firm s willingness to shift the risk of retirement onto its workers specifically i demonstrate empirically that different types of shareholders have differential effects on a firm s retirement practices suggesting that the changing equity ownership structure of large u s firms has played a key role in how risk is allocated between workers and firms declines in employee power have also played a role because firm levels of unionization positively affect rates of db participation for both unionized and nonunionized workers

production functions and distributions of unit factor productivities uncovering the link abstract we derive a reversible endogenous technology choice transform according to which firm level production functions and distributions of unit factor productivities are two sides of the same coin the cobb douglas function relates to pareto distributions and the ces to weibull distributions

firm size and the nature of innovation within industries the case of process and product r d the effect of firm size on the allocation of r d effort between process and product innovation is examined it is hypothesized that relative to product innovations process innovations are less saleable in disembodied form and spawn less growth this implies that the returns to process r d will depend more on the firm s output at the time it conducts its r d than the returns to product r d incorporating this distinction in a simple model the authors derive and test predictions about how the fraction of r d devoted to process innovation varies with firm size within industries

ability and power over production in the distribution of earnings t he aggregate distribution of earnings in all western countries is approximately lognormal over most of its range but the earnings of the top 10 or 20 of individuals follow the pareto form which generates a great excess of very high earnings compared with the tail of a lognormal distribution individuals at the top appear to be paid according to the job they perform rather than their ability this paper explains these features in terms of profit maximising behaviour from time to time a single new manager or management team improves a company s profit by millions of dollars per year this shows that a senior manager can influence the company s total output far more than a junior employee his greater influence over output derives from having much more control over the company s resources profit maximising companies offer high salaries for senior management jobs because even a small improvement in their performance leads to a worthwhile increase in output and competitive bidding for the best managers then drives their salaries up to high levels this in outline is the explanation for high earnings developed formally in the rest of this paper

how the market solves an assignment problem the matching of lawyers with legal claims in the market for lawyers observable data on promotion and turnover can be explained by reference to the idea that there is positive assortative mating of lawyers and legal claims there is a scale of resources effect under which it is optimal to assign larger claims to lawyers of higher quality in a law firm the institution of tenure performs a sorting function lawyers found to be of high quality are given tenured positions and the rest leave the value of legal claims handled by a firm determines its sorting problem which in turn determines its promotion ladder and turnover

jockeying for position what it means and why it matters to regional development policy when places compete malecki e j 2004 jockeying for position what it means and why it matters to regional development policy when places compete regional studies38 1093 1112 the realization that places compete for investment has expanded in recent years to encompass competition among places for the attention of migrants tourists and media glow as well as investment the most competitive places have been multidimensional in their attractions and have made the transition to the knowledge based economy the latest priority is being placed on attracting mobile workers and mobile investment creative workers are the core of the knowledge economy and of its geographies such as intelligent places and learning regions knowledge metrics innovation indices and report cards are increasingly common each seemingly developed to sort the list of places in a different order lists or league tables of the best places for business to live retire and visit are key features of economies and societies whose factors of success

self selection bias in longitudinal estimation of wage gaps cross sectional regression analyses of wage gaps may be biased by omission of unobserved worker characteristics recent studies therefore have used longitudinal data to difference out the effects of such variables this paper however shows that self selection of job changers may cause longitudinal estimation of wage gaps to be inconsistent

estimating gender differences in access to jobs this paper proposes a new measure of gender differences in access to jobs based on a job assignment model this measure is the probability ratio of getting a job for a female and a male at each rank of the wage ladder we derive a nonparametric estimator of this access measure and estimate it for french full time executives aged 40 45 in the private sector our results show that the gender difference in the probability of getting a job increases along the wage ladder from 9 to 50 females thus have a significantly lower access to high paid jobs than to low paid jobs

learning about the nature of production from equilibrium assignment patterns this paper exploits empirically a key insight from lucas 1978 and rosen 1982 that the organization of production and the distribution of earnings across individuals are jointly determined by the equilibrium assignment of individuals to firms and hierarchical positions we study how different classes of production functions generate alternative equilibrium assignments we then use confidential census data on u s law offices to investigate the form that the production function should take to rationalize earnings patterns in legal services we argue that earnings patterns in this industry are consistent with a production function that is characterized by asymmetric sensitivity to the skill of agents in different organizational positions complementarity between managers and workers skill and scale effects in individual skill

search sorting and urban agglomeration studies have suggested that urban agglomeration enhances productivity by facilitating the firm worker matching process this article develops a model that formalizes this notion and demonstrates that when firm capital and worker skill are complementary in production urban agglomeration will tend to generate more efficient yet segregated matches as a result not only will local market size be positively associated with average productivity it will also generate greater between skill group wage inequality and a higher expected return to skill acquisition recent data from the counties and metropolitan areas of the united states is consistent with each of these implications

the housing market s of san diego this paper uses an assignment model to understand the cross section of house prices within a metro area movers demand for housing is derived from a lifecycle problem with credit market frictions equilibrium house prices adjust to assign houses that dier by quality to movers who dier by age income and wealth to quantify the model we measure distributions of house prices house qualities and mover characteristics from micro data on san diego county during the 2000s boom the main result is that cheaper credit for poor households was a major driver of prices especially at the low end of the market

a microfoundation for production functions assignment of heterogenous workers to heterogenous jobs in very different fields of economics economic inference and policy evaluation require economists to parametrize a production function that links measures of input factors to measures of output while doing so strong assumptions are implicitly made about microeconomic variables governing the shape of the aggregate production function in this paper i develop an assignment model that provides a microeconomic foundation for aggregate production functions the shape of the production function depends crucially on the distribution of workers and jobs and the type of technological changes depends crucially on the evolution of these distributions sufficient and necessary conditions are provided for the production function to be of the constant ratio of elasticities of substitution form a form nesting the broadly used constant elasticity of substitution form this model provides a way to evaluate how stringent assumptions about the type of production function or technological change are by comparing the implied distribution of jobs and its evolution over time to observations of the distribution of jobs and its evolution over time

distribution of ability and earnings in a hierarchical job assignment model we examine the mapping of the distribution of ability onto earnings in a hierarchical job assignment model workers are assigned to a continuum of jobs in fixed proportions ordered by sensitivity to ability the model implies a novel marginal productivity interpretation of wages we derive comparative statics for changes in technology and in the distribution of ability we find conditions under which a more unequal distribution of ability maps onto a more less unequal distribution of earnings we also analyze an assignment model with variable proportions and find that in the cobb douglas case a rise in the inequality of ability always narrows the range of earnings

on the optimal realignment of a contest the case of college football this article examines the relationship between demand and scheduling in college football we first derive two different metrics for team quality and then use those metrics to see how they impact attendance we find that there is a positive interaction between the quality of the teams then various simulations are run to see how attendance would change under different scheduling scenarios if teams are put into conferences based on the team quality measures the average per game attendance only rises 1 2 this is true if 1 year or 10 year quality measures are used however our simulation suggests that this effect would be more than offset mainly because schools with larger capacity would play fewer home games and so aggregate attendance would fall we discuss whether this effect would be mitigated by capacity adjustments in the longer term jel l83 z20 c78

some models for estimating technical and scale inefficiencies in data envelopment analysis in management contexts mathematical programming is usually used to evaluate a collection of possible alternative courses of action en route to selecting one which is best in this capacity mathematical programming serves as a planning aid to management data envelopment analysis reverses this role and employs mathematical programming to obtain ex post facto evaluations of the relative efficiency of management accomplishments however they may have been planned or executed mathematical programming is thereby extended for use as a tool for control and evaluation of past accomplishments as well as a tool to aid in planning future activities the ccr ratio form introduced by charnes cooper and rhodes as part of their data envelopment analysis approach comprehends both technical and scale inefficiencies via the optimal value of the ratio form as obtained directly from the data without requiring a priori specification of weights and or explicit delineation of assumed functional forms of relations between inputs and outputs a separation into technical and scale efficiencies is accomplished by the methods developed in this paper without altering the latter conditions for use of dea directly on observational data technical inefficiencies are identified with failures to achieve best possible output levels and or usage of excessive amounts of inputs methods for identifying and correcting the magnitudes of these inefficiencies as supplied in prior work are illustrated in the present paper a new separate variable is introduced which makes it possible to determine whether operations were conducted in regions of increasing constant or decreasing returns to scale in multiple input and multiple output situations the results are discussed and related not only to classical single output economics but also to more modern versions of economics which are identified with contestable market theories

the aggregate production function is not neoclassical standard postulates concerning the aggregate production function are about marginal productivities and the associated demands for labour and capital these demands are supposed to be negatively related to the factor prices namely the wage rate and the interest rate the theoretical cases in which these neoclassical properties fail to hold are regarded as anomalies we compute the aggregate values for production capital and labour and find that the neoclassical postulates do not hold for the detailed dataset that we consider the obvious implication of this result is that the models and analysis based on the aggregate neoclassical production functions are ill founded as they are based on something that does not exist

the polarization of the u s labor market this paper analyzes a marked change in the evolution of the u s wage structure over the past fifteen years divergent trends in upper tail 90 50 and lower tail 50 10 wage inequality we document that wage inequality in the top half of distribution has displayed an unchecked and rather smooth secular rise for the last 25 years since 1980 wage inequality in the bottom half of the distribution also grew rapidly from 1979 to 1987 but it has ceased growing and for some measures actually narrowed since the late 1980s furthermore we find that occupational employment growth shifted from monotonically increasing in wages education in the 1980s to a pattern of more rapid growth in jobs at the top and bottom relative to the middles of the wage education distribution in the 1990s we characterize these patterns as the u201cpolarization u201d of the u s labor market with employment polarizing into high wage and low wage jobs at the expense of middle wage work we show how a model of computerization in which computers most strongly complement the non routine abstract cognitive tasks of high wage jobs directly substitute for the routine tasks found in many traditional middle wage jobs and may have little direct impact on non routine manual tasks in relatively low wage jobs can help explain the observed polarization of the u s labor market this abstract was borrowed from another version of this item

inward investment in the uk and the single european market the impact of completing the single european market sem on the economies ofthe member states is predicted as a combination of economies of scale and greater competition cecchini1 988 in spatial terms this implies a reallocation of resources to exploit the comparative advantage of different regions and countries for the problem regions especially those on the periphery of europe the integration process could lead to a variety of adverse sectoral and regional consequences the effect of greater competition for example may reduce indigenous sectoral strengths and diversity and increase external control the emergence or strengthening of agglomeration tendencies in core regions may lead to a growing centralization of investment and decision making

human capital pricing equations with an application to estimating the effect of schooling quality on earnings this paper formulates and estimates alternative models for the pricing of labor services we present economic models that rationalize empirical specifications in the literature and we offer evidence on the validity of those specifications widely used efficiency units models of labor services are inconsistent with evidence from the u s labor market a model of heterogeneous skills provides a more accurate description of earnings data we present evidence that the pursuit of comparative advantage and selective migration are important features of the u s labor market when these features are included in the model the only support for an effect of schooling quality on earnings is through the return to college education three interactions are empirically important in explaining log wage equations a between schooling quality and education b between regional labor market shocks and education and c between region of residence and regionof birth because of this third interaction which can arise from comparative advantage in the labor market no unique quality effect on returns to education can be defined independently of the market in which it is used

worker allocation hierarchies and the wage distribution economists have traditionally viewed the allocation of workers among jobs through the concept of comparative advantage this paper investigates hierarchical production models which display an absence of comparative advantage in order to demonstrate that for hierarchical production there is a second allocating factor which plays an important role two results are found first the allocation of workers among jobs tends to match high ability workers with positions which value ability highly second despite the fact that the models display an absence of comparative advantage i e the standard theoretical explanation for why wage distributions might be skewed the models wage distributions are skewed to the right relative to the underlying ability distributions

computerisation and wage dispersion an analytical reinterpretation the rich countries have recently seen a dramatic rise in income inequality all the more surprising because the long term trend had been toward equality this paper examines one of the leading explanations computerisation in the workplace i offer a theory of computers impact on white collar work which goes far toward explaining the timing form and locus of recent labour market changes the theory looks at the bureaucratic and organisational applications of computers that have been first largest and most influential they have two effects on firms demand for labour at different skill levels

the importance of bundling in a gorman lancaster model of earnings the idea that the labor market of individuals can be decomposed into payments to separate productive attributes has an enduring appeal in economics assuming that demographic groups differ only in their endowments of productive characteristics it is possible to rationalize observed demographic earnings differentials without invoking the arguments that characteristics specific to a particular demographic group are direct objects of employer demand by aggregating skills over all demographic groups it is possible to produce a theory of the market determination of the prices of skills held in different amounts by different demographic groups this paper considers conditions under which characteristics are uniformly priced across sectors of a multisector economy the paper presents empirical evidence that rejects uniform pricing of characteristics as a description of the us labor market bundling may account for this evudence but other hypotheses do as well authors

a spillover based theory of credentialism i propose a model in which credentials such as diplomas are instrumentally valuable to workers the model avoids an important criticism of standard job market signalling models by tying a worker s wage to their output a worker s productivity is influenced by the skills of their co workers where such skills arise from an ability augmenting investment that is made prior to matching with co workers credentials allow workers to demonstrate their investment to the labour market thereby allowing them to match with high skill co workers in equilibrium despite the positive externality associated with a worker s investment i show how overinvestment is pervasive in equilibrium

housing assignment with restrictions theory and evidence from stanford university s campus this paper studies housing markets where a subset of houses in a restricted area is available exclusively to a subset of eligible buyers an empirical part shows that houses on stanford campus available only to faculty trade at substantial discounts to comparable houses off campus the theoretical part describes an assignment model with heterogeneous houses and buyers which predicts such discounts if the matchup of quality and buyer pools is sufficiently different inside versus outside the restricted area the restriction can distort allocations by making eligible buyers choose either higher or lower qualities than ineligible buyers with the same characteristics

sorting through search and matching models in economics toward understanding assortative matching this is a self contained introduction to research on search and matching we first explore the nontransferable and perfectly transferable utility matching paradigms and then a unifying imperfectly transferable utility matching model motivated by some unrealistic predictions of frictionless matching we flesh out the foundational economics of search theory we then revisit the original matching paradigms with search frictions we finally allow informational frictions that often arise such as in college student sorting

the driving forces of process eco innovation and its impact on performance insights from slovenia this study endeavors to explore the driving forces of process eco innovation and its effect on company performance by adopting an integrative approach we focus on process eco innovation which pertains to technological and non technological solutions that result in a reduction of material and energy costs for companies in this regard the study sheds light on the drivers and outcomes of process eco innovation adoption using data collected from 223 slovenian companies the results reveal that certain determinants i e competitive pressure customer demand managerial environmental concern command and control instrument and economic incentive instrument are conducive to the deployment of process eco innovation empirical evidence reveals competitive pressure as the most influential driving force of process eco innovation followed by managerial environmental concern and customer demand effectiveness in spurring process eco innovation is also found to be a command and control instrument and an economic incentive instrument while expected benefits do not spur process eco innovation pertaining to the outcomes of process eco innovation adoption we can conclude that it pays to be eco process eco innovation is worthwhile in terms of company profitability growth and competitive benefits these findings suggest several courses of action for both policy makers and companies hence we conclude by providing implications for both

frictional assignment i efficiency abstract this paper examines the two sided matching problem where the agents on each side of the market are heterogeneous and the matching process is time consuming this is cast in a labor market setting where workers of different skills match with different machine qualities i characterize the efficient allocation and then show that it can be decentralized by a market mechanism the efficient assignment is not always positively assortative despite the fact that machine qualities and skills are complementary in production to decentralize the efficient allocation the market mechanism requires the firms to post wages and commit each machine quality to a particular skill implications on wage inequality are briefly examined journal of economic literature classification numbers j31 e24 j64

an analysis of the factors determining the geographical distribution of japanese manufacturing investment in the uk 1984 91 the purpose of this paper is to discover which factors have been important in determining the geographical distribution of japanese manufacturing establishments in the uk during 1984 91 a multivariate statistical analysis is undertaken based on the poisson model to investigate the inter county variation in the number of establishments locating in each uk county during two separate time periods 1984 88 and 1989 91 in addition to examining the influence of variables such as labour costs labour availability and industry mix on the locational choice of japanese firms the statistical analysis attempts to capture the influence of regional policy multivariate regression analysis reveals that the geographical distribution of japanese owned investment in the uk is only statistically associated with a small number of variables the main explanatory variable in the model is whether an area had assisted area status other key explanatory variables are those reflecting an area s industry mix

inequality and the organization of knowledge since the seminal work of lawrence f katz and kevin m murphy 1992 the study of wage inequality has taken as its starting point a neoclassical constant elasticity of substitution production function using as inputs capital and lowand high skill labor this approach assumes that the organization of production is fixed and determined by a particular specification of technology and it ignores both the source of the interaction between workers and the organizational aspects of this interaction these shortcomings are particularly important in light of growing empirical evidence that points first to the importance of decreases in the cost of processing and communicating information and second to the complementarity between organizational change and adjustments in the distribution of wages e g timothy f bresnahan et al 2002 this paper argues that theories that seek to guide empirical research on these areas must put knowledge and information at the center of the analysis of organizations and link the organizational structure with aggregate variables via equilibrium frameworks in garicano and rossi hansberg 2003 we present a model of this kind it determines the patterns of organization as manifested by the communication and specialization patterns and the implied wage structure that result from different costs of acquiring and communicating information here we present a simple variant of this theory that allows us to focus on one of the main aspects of that framework the sorting of agents into teams and the wage and organizational structure that accompanies that sorting we use this simple model to analyze the changes in organization and wages that result from a very specific type of technological change a reduction in the cost of communicating knowledge or information this model allows us to consider the effect on within class wage inequality and the impact of information technology on the creation and form of organizations e g size distribution of hierarchies however because knowledge is exogenously given and agents cannot invest in learning an important margin of the model in garicano and rossi hansberg 2003 is fixed namely the degree of decentralization or the extent to which problems are solved at lower levels that model allows the simultaneous study of the acquisition of knowledge spans of control and matching in equilibrium moreover it goes beyond the current analysis in that it allows for organizations with an unconstrained number of layers and in that it studies two aspects of the impact of information technology communication technology like here and the technology to acquire knowledge or information e g processing power through cheaper database access

a microfoundation for normalized ces production functions with factor augmenting technical change based on a tractable endogeneous technology choice framework we provide a microfoundation for aggregate normalized constant elasticity of substitution ces production functions with non neutral factor augmenting technical change in this framework firms are allowed to choose unit productivities of capital and labor optimally from a technology menu constructed under the assumption that unit factor productivities ufps are independently weibull distributed the weibull distribution itself is also microfounded here based on extreme value theory it is found to be an accurate and robust approximation of the true ufp distribution if technologies consist of a large number of complementary components

pay technology and the cost of worker absence i introduction the complexity of patterns of worker absence is well known but is yielding reluctantly to studies that use highly detailed information about individual workers and their work environments to date these studies have focussed on how specific contractual details affect worker absenteeism rates 1 in this paper we instead take an equilibrium perspective where we assume heterogeneous firms and heterogeneous workers participate in a competitive labor market by understanding why firms with different technologies may have different policies toward absenteeism we can begin to explain observed differences in absenteeism rates across workers and firms the empirical framework is based on coles and treble 1996 which considers an equilibrium assignment model with heterogeneous firms and workers the standard assignment framework 2 assumes that each filled job is characterized by one machine of quality q and one employee with skill level s a competitive equilibrium yields a wage schedule w and an assignment rule q where a worker of skill s is hired at wage w w s by a firm holding machine q q s coles and treble 1996 do not assume that workers are differently skilled instead workers have different propensities to go absent also instead of a one worker one machine production process firms utilize different production technologies some use an assembly line technology where output requires that a sufficient number of workers show up for work and others use a linear production technology in which there are constant marginal returns to labor for reasons that will become clear a competitive equilibrium yields a wage schedule and an assignment rule that depend on worker propensities to go absent specifically workers with a lower propensity to go absent earn a higher wage and are employed in firms using assembly line technologies the key insight is that firms who operate assembly line technologies have a different shadow cost of absenteeism from those which operate a linear technology as in weiss 1985 and coles and treble 1993 in the latter technology an absence by one particular worker does not affect the marginal productivity of other workers at the firm this is not true in an assembly line firm or in production functions where labor inputs are strict complements as in kremer 1993 coles and treble 1996 consider a market equilibrium in which workers are also heterogeneous say workers have different family responsibilities in this case a competitive labor market implies equilibrium sorting by firms and workers assembly line firms require a low level of absenteeism and pay a relatively high wage to compensate workers for attending work reliably we refer to this as the shadow cost of absenteeism workers who have a comparative advantage in attending work reliably say those who do not have to look after children when the children are sick take employment in assembly line firms and enjoy the wage premium attached to employment there we refer to this as the shadow price of absenteeism conversely those who appreciate greater flexibility in work attendance take employment in the linear technology firms and in equilibrium earn a lower average wage rate although absenteeism may be costly to firms observed absenteeism rates are not necessarily inefficient the worker who misses a day at work to look after sick children or enjoy a sports event is expressing a trade off between workplace production and home production where home productivity is perhaps subject to idiosyncratic shocks efficient contracting implies that firms and workers agree to an acceptable absenteeism rate and a compensating wage differential efficient sorting implies that those workers who can commit to attending work reliably accept employment in assembly line occupations and so earn a wage premium reflecting the shadow price of absenteeism our goal is to identify and measure this shadow price using a unique data set from france

inter industry mobility and the cyclical upgrading of labor we investigate whether a market clearing model is consistent with industry employment and wage patterns related to the cyclical upgrading of labor we demonstrate that roy s 1951 market clearing

what is behind the recent surge in patenting abstract we investigate the cause of an unprecedented surge of us patenting over the past decade conventional wisdom points to the establishment of the court of appeals of the federal circuit by congress in 1982 we examine whether this institutional change which has benefited patent holders explains the burst in us patenting using both international and domestic data on patent applications and awards we conclude that the evidence is not favorable to the conventional view instead it appears that the jump in patenting reflects an increase in us innovation spurred by changes in the management of research

the relationship between federal contract r d and company r d according to recent estimates federal budget outlays for research and development rd this component will rise 28 percent and absorb 70 percent of all federal r d spending in 1984 compared to under 50 percent in 1980 since work corresponding to about one half of the dollar value of the federal r d program is generally performed by private industrial firms under contract with federal agencies the rapid increase in federal r d outlays will presumably be reflected in a similar increase in the value of commitments by industrial firms to perform government r d one of the most important economic questions posed by the large prospective increase in resources allocated to federal contract r d concerns its consequences for the economy s rate of technical progress of productivity growth in the next section i argue that the ultimate impact on productivity depends on how company decisions to finance r d are affected by the availability of federal contract r d funds i then provide a brief review and critique of previous studies of the relationship between companyand federalfinanced r d performed in industry and present new estimates which differ from existing ones with respect to both methodology and implications these estimates are consistent with the hypothesis that increases in federal r d activity tend to be associated with significant reductions in companyfinanced r d a number of studies have attempted to determine the ceteris paribus effects of company and federal r d on the rate of productivity growth p by estimating variants of the equation

labor supply as a choice among latent jobs unobserved heterogeneity and identification this paper discusses aspects of a framework for modeling labor supply where the notion of job choice is fundamental in this framework workers are assumed to have preferences over latent job opportunities belonging to worker specific choice sets from which they choose their preferred job the observed hours of work and wage is interpreted as the job specific hours and wage of the chosen job the main contribution of this paper is an analysis of the identification problem of this framework under various conditions when conventional cross section micro data are applied

regions in competition inward investment and regional variation in the use of incentives 2000 regions in competition inward investment and regional variation in the use of incentives regional studies vol 34 no 3 pp 291 296

does unmeasured ability explain inter industry wage differentials this paper provides empirical assessments of the two leading explanations of measured inter industry wage differentials 1 true wage differentials exist across industries and 2 the measured differentials simply reflect unmeasured differences in workers productive abilities first we summarize the existing evidence on the unmeasured ability explanation second we construct a simple model which shows that if matching is important then endogenous job change decisions can create important self selection biases even in first differenced estimates of industry wage differentials third we analyze a sample that approximates the experiment of exogenous job loss we find that i the wage change experienced by a typical industry switcher closely resembles the difference in the relevant industry differentials estimated in a cross section and ii pre displacement industry affiliation plays an important role in post displacement wage determination

the patent paradox revisited an empirical study of patenting in the u s semiconductor industry 1979 1995 we examine the patenting behavior of firms in an industry characterized by rapid technological change and cumulative innovation recent survey evidence suggests that semiconductor firms do not rely heavily on patents to appropriate returns to r d yet the propensity of semiconductor firms to patent has risen dramatically since the mid1980s we explore this apparent paradox by conducting interviews with industry representatives and analyzing the patenting behavior of 95 u s semiconductor firms during 1979 1995 the results suggest that the 1980s strengthening of u s patent rights spawned patent portfolio races among capital intensive firms but it also facilitated entry by specialized design firms

the effect of risk on the ceo market this article presents a market equilibrium model of ceo assignment pay and incentives under risk aversion and moral hazard each of the three outcomes can be summarized by a single closed form equation in the presence of moral hazard assignment is distorted from positive assortative matching on firm size as firms with higher risk or disutility choose less talented ceos such firms also pay higher salaries in the cross section but economywide increases in risk or the disutility of being a ceo do not affect pay the strength of incentives depends only on the disutility of effort and is independent of risk and risk aversion if the ceo can affect firm risk incentives rise and are increasing in risk and risk aversion we calibrate the losses from various forms of poor corporate governance such as failures in monitoring and inefficiencies in ceo assignment jel g34 j33 this article presents a market equilibrium model of ceo assignment pay and incentives risk averse managers of different talents are hired in a competitive market by heterogeneous firms which vary in their size risk and level of effort required the level of pay drives the assignment of talent to firms the strength of incentives induces the efficient effort level and is determined by an optimal contracting approach our main contribution is to incorporate risk into a ceo market equilibrium in a tractable manner a large empirical literature has shown that risk is a firstorder determinant of compensation contracts demsetz and lehn 1985 garen 1994 core and guay 1999 oyer and schaefer 2004 peters 2009 peters and wagner 2009 but most theories assume risk neutrality this assumption is

why has house price dispersion gone up we calibrate a dynamic general equilibrium island model to investigate the 30 year increase in the level of house prices and their dispersion across u s metropolitan areas the model is based on two main assumptions households o w in and out metropolitan areas in response to local productivity shocks and the housing supply cannot adjust instantly because of technological and regulatory constraints the calibration reveals that the observed tightening of housing supply regulation cannot quantitatively account for the rise in the level and dispersion of house prices in equilibrium workers o w out of tightly regulated towards less regulated metropolitan areas undoing most of the price impact of local supply restrictions in contrast the observed increase in wage dispersion across metropolitan areas does create the observed increase in the level and dispersion of house prices workers o w towards exceptionally productive metropolitan areas and drive house prices up the calibration also suggests that the welfare eects of housing supply regulation are large when wages become more dispersed

the dynamics of inequality the past forty years have seen a rapid rise in top income inequality in the united states while there is a large number of existing theories of the pareto tail of the long run income distributions almost none of these address the fast rise in top inequality observed in the data we show that standard theories which build on a random growth mechanism generate transition dynamics that are too slow relative to those observed in the data we then suggest two parsimonious deviations from the canonical model that can explain such changes scale dependence that may arise from changes in skill prices and type dependence that is the presence of some high growth types these deviations are consistent with theories in which the increase in top income inequality is driven by the rise of superstar entrepreneurs or managers

market forces and ceo pay shocks to ceo demand induced by ipo waves i develop a simple competitive equilibrium model and derive the prediction that ceo pay size elasticity increases when more firms compete for an inelastic supply of managers using industry level ipo waves as a proxy for increased competition for ceos i find that pay size elasticity increases by 6 with a one standard deviation increase in ipo activity this effect is stronger in specialized industries in addition increased ipo activity leads to a greater likelihood of executive transitions between firms these findings indicate that market forces play a key role in the determination of ceo pay received august 6 2015 editorial decision september 24 2016 by editor francesca cornelli

self selection and the distribution of hourly wages this article formulates and estimates alternative equilibrium models of industrial wage determination and self selection in explaining industrial wage differentials we find that it is important to account for heterogeneous sector specific skills and self selection decisions by agents concerning their sector of employment the classical roy model is rejected so is an efficiency units model of the labor market a revised roy model that accounts for comparative advantage in the choice of industrial sectors and choice between market and nonmarket work is much more successful in explaining cross section wage distributions and their evolution over time

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

measuring the change in r d efficiency of the japanese pharmaceutical industry this paper presents a data envelopment analysis dea malmquist index methodology for measuring the change in r d efficiency at both firm and industry levels letting each of ten firms in each year be a separate decision making unit and employing one input and three outputs in a dea case of r d activity input output lag we measure total factor r d efficiency change of japanese pharmaceutical firms for decade 1983 1992 as defined by the period of r d input decomposing malmquist index into catch up and frontier shift components and using cumulative indices proposed in this study we evaluate r d efficiency change for each firm and empirically show that r d efficiency of japanese pharmaceutical industry has almost monotonically gotten worse throughout the study decade

the wage distribution in a model of the assignment of skills to jobs this paper discusses a general equilibrium model of the assignment of heterogeneous workers to heterogeneous jobs both jobs and workers are measured along a continuous one dimensional scale the c

marriage markets and assortative mating with household public goods theoretical results and empirical implications this paper analyzes marriage market equilibria when the gains from marriage result from joint consumption of household public goods assuming transferable utility within marriage the paper proves that marriage markets will be characterized by positive assortative mating on wealth when spouses differ only in endowments and the gains to marriage result only from public goods when spouses differ in wages and household public goods are produced at home the results imply offsetting effects with public good economies creating an incentive for positive assortative mating on wages and gains from specialization creating an incentive for negative assortative mating on wages the results help explain the persistent lack of empirical support for becker s prediction of negative assortative mating on wages and have implications for empirical analysis of all joint living arrangement decisions

aggregation bias in elasticities of substitution and the minimum wage paradox while the employment effects of minimum wages are usually reported to be small suggesting low substitutability between skill types direct estimates suggest a much larger degree of substitutability this article argues that this paradox is largely due to a bias induced by the aggregation of skill types into broad categories an assignment model is applied where skilled workers have a comparative advantage in complex jobs the implied pattern of substitutability reveals the sources of the bias estimation results for the united states show elasticities of complementarity to be underestimated by up to a factor 2 5 the methods laid out likewise can be applied to other markets where different quality types are close substitutes such as the housing market

introduction to the distribution of earnings and of individual output by a d roy this article summarises the lasting contribution of roy s 1950 fundamental paper roy a d 1950 the distribution of earnings and of individual output economic journal vol 60 239 pp 489 505

comparative advantage relative wages and the accumulation of human capital i apply ricardo s principle of comparative advantage to a theory of factor substitutability in a model with a continuum of worker and job types highly skilled workers have a comparative advantage in complex jobs the model satisfies the distance dependent elasticity of substitution dides characteristic substitutability between types declines with their skill distance i analyze changes in relative wages due to human capital accumulation the concept of a complexity dispersion parameter or compression elasticity is introduced empirical studies suggest its value to be equal to two a 1 percent increase in the stock of human capital reduces the mincerian return by 2 percent

labor supply with job assignment under balanced growth abstract we consider a competitive equilibrium growth model where technological progress is embodied into new jobs which are assigned to workers of different skills in every period workers decide whether to actively participate in the labor market and if so how many hours to work on the job balanced growth requires that the job technology is complementary with the worker s total labor input on the job which is jointly determined by his skill and his working hours since lower skilled workers can supply longer hours we show that the equilibrium features positive assortative matching higher skilled workers are assigned to better jobs only if differences in consumption are small relative to differences in worker skills when the pace of technological progress accelerates wage inequality increases and workers participate less often in the labor market but supply longer hours on the job this mechanism can explain why as male wage inequality has increased in the us labor force participation of male workers of different skills has fallen while their working hours have increased

what determines the elasticity of substitution between capital and labor a literature review this paper provides the first comprehensive review of the empirical and theoretical literature on the determinants of the elasticity of substitution between capital and labor our focus is on the two input constant elasticity of substitution ces production function we start by presenting four concise observations that summarize the empirical literature on the estimation of motivated by these observations the main part of this survey then focuses on potential determinants of capital labor substitution we first review several approaches to the microfoundation of production functions where the elasticity of substitution eos is treated as a purely technological parameter second we outline the construction of an aggregate elasticity of substitution aes in a multi sectoral framework and investigate its dependence on underlying intra and inter sectoral substitution third we discuss the influence of the institutional framework on the extent of factor substitution overall this survey highlights that the effective elasticity of substitution ees which is typically estimated in empirical studies is generally not an immutable deep parameter but depends on a multitude of technological non technological and institutional determinants based on these insights the final section identifies a number of potential empirical and theoretical avenues for future research

overeducation undereducation and the british labour market this paper addresses the issue of overeducation and undereducation using for the first time a british dataset which contains explicit information on the level of required education to enter a job across the generality of occupations three key issues within the overeducation literature are addressed first what determines the existence of over and undereducation and to what extent are over and undereducation substitutes for experience tenure and training second to what extent are over and undereducation temporary or permanent phenomena third what are the returns to over and undereducation and do certain stylized facts discovered for the us and a number of european countries hold for britain

education and skills mismatch in the italian graduate labour market this paper focuses on education and skills mismatch among italian graduates indicators for over and under utilization of education and under utilization of skills are included as explanatory factors in a wage equation testing theories that could explain the effect of over schooling on wages we find little evidence to support assignment theory and also identify a relatively weak wage effect arising from educational mismatch associated with employers as opposed to employees perceptions of the job requirements our interpretation is that some employers have re categorized jobs as requiring a degree when they were previously filled by non graduates and many have not altered pay scales accordingly

returns to talent and the finance wage premium to study the role of talent in finance workers pay we exploit a special feature of the french higher education system wage returns to talent have been significantly higher and have risen faster since the 1980s in finance than in other sectors both wage returns to project size and the elasticity of project size to talent are also higher in this industry last the share of performance pay varies more for talent in finance these findings are supportive of finance wages reflecting the competitive assignment of talent in an industry that exhibits a high complementarity between talent and scale received october 11 2017 editorial decision september 4 2018 by editor stijn van nieuwerburgh authors have furnished an internet appendix which is available on the oxford university press web site next to the link to the final published paper online

empirical analysis of occupational hierarchies using data on u s engineers and the position of engineering jobs within firms this paper estimates a model of hierarchies within firms the model extends rosen s 1982 model of recursive production to two skills and multiple hierarchy levels the model generates an empirical model that is nested within a general roy 1951 model of self selection maximum likelihood estimates of the parameters of the production technology and the skill experience profiles are estimated the results suggest that approximately two thirds of changes in employment shares across hierarchy levels across time are explained by demographic shifts in the stock of engineering skills most of the returns to experience and to assignment to higher hierarchy levels within firms are caused by skill accumulation and self selection rather than technological dierences across hierarchy levels

a note on aggregation of skills and labor quality we use a unique new data set that combines data on individual workers and their employers to estimate marginal productivity differentials among different types of workers we then compare these to estimated relative wages leading to new evidence on

convergence in china s high tech industry development performance a spatial panel model abstractat present there exist both regional scale and regional performance differences in china s high tech industry development performance differences will inevitably affect resource allocation in regional high tech industry and in the upgrading of industrial structure thus this article conducts a systematic study of convergence issues in china s high tech industry development performance by adopting the spatial panel econometric method and related approaches first to measure the comprehensive performance of china s high tech industry development the study applies the malmquist index and efficacy coefficient method from the perspective of rd then by adopting a spatial autoregressive sar panel data model it studies the absolute convergence and convergence mechanism of china s provincial high tech industry development performance from 2001 to 2013 the results indicate the existence of distinct absolute convergence in china s high tech industry developme

mismanagement or mismeasurement pitfalls and protocols for dea studies in the financial services sector abstract dyson et al dyson r g allen r camanho a s podinovski v v sarrico c s shale e a 2001 pitfalls and protocols in dea european journal of operational research 132 245 259 suggest that the application of dea presents a range of problems and they suggest that the systematic collection and reporting of these problems would significantly enhance dea practice it is widely accepted that dea studies may be compromised by the problem of data heterogeneity while this problem is expected in studies that cross national boundaries it may also arise in studies for a single country there can for example be significant market and regulatory differences between regions within a single country using a sample of australian credit unions this paper demonstrates the pitfalls and protocols of using dea it is intended that the guidelines provided in this study will enhance dea practice in the financial services sector

heterogeneous firms and the organization of production firms in the same industry exhibit systematic differences in the organization of production and the structure of employment entrepreneurial ability is the specific scarce input that limits the size of a firm this input must be allocated to two activities coordinating production and monitoring workers able entrepreneurs can convert calendar time into larger supplies of coordinating effort that enable them to assemble large firms greater ability implies a higher shadow price of time which increases the implicit costs of monitoring a dispersion of entrepreneurial abilities generates an equilibrium size distribution of firms differences in monitoring costs affect the choice of worker productivities the design of products and the organization of production the monitoring cost hypothesis advanced in this paper goes a long way in explaining the equilibrium of an industry containing heterogeneous firms that differ in size and behavior

hedonic prices and implicit markets estimating demand and supply functions for differentiated products in choosing the level of quality to purchase the buyer of a differentiated product also chooses a point on the marginal price schedule for that product hence in general the demand functions for product characteristics cannot be consistently estimated by ordinary least squares market equilibrium results in a matching of characteristics of demanders and suppliers this matching restricts the use of buyer and seller characteristics as instruments when estimating demand and supply functions for product characteristics the paper develops these issues a stochastic structure for hedonic equilibrium models is then proposed identification results are presented and estimation procedures are outlined

relative efficiency of r d activities a cross country study accounting for environmental factors in the dea approach abstract this paper applies the production framework associated with the data envelopment analysis dea method to evaluate the relative efficiency of r d activities across countries r d capital stocks and manpower are treated as inputs while patents and academic publications are considered as outputs a three stage approach which involves using dea for evaluating efficiency and using tobit regressions for controlling the external environment is applied to 30 countries in recent years the results show that less than one half of the countries are fully efficient in r d activities and that more than two thirds are at the stage of increasing returns to scale most countries have a more significant advantage in producing sci cum ei publications than in generating patents

field of study earnings and self selection why do individuals choose different types of post secondary education and what are the labor market consequences of those choices we show that answering these questions is difficult because individuals choose between several unordered alternatives even with a valid instrument for every type of education instrumental variables estimation of the payoffs require information about individuals ranking of education types or strong additional assumptions like constant effects or restrictive preferences these identification results motivate and guide our empirical analysis of the choice of and payoff to field of study our context is norway s post secondary education system where a centralized admission process covers almost all universities and colleges this process creates credible instruments from discontinuities which effectively randomize applicants near unpredictable admission cutoffs into different fields of study at the same time it provides us with strategy proof measures of individuals ranking of fields taken together this allows us to estimate the payoffs to different fields while correcting for selection bias and keeping the next best alternatives as measured at the time of application fixed we find that different fields have widely different payoffs even after accounting for institutional differences and quality of peer groups for many fields the payoffs rival the college wage premiums suggesting the choice of field is potentially as important as the decision to enroll in college the estimated payoffs are consistent with individuals choosing fields in which they have comparative advantage we also test and reject assumptions of constant effects or restrictive preferences suggesting that information on next best alternatives is essential to identify payoffs to field of study