role of country and firm level determinants in environmental social and governance disclosure in recent years companies receive pressure to release environmental social and governance esg disclosure since these are perceived as critical issues by society despite this pressure esg disclosure practices considerably vary by firm prior academic literature investigated country and firm level factors determining such variation alternatively adopting the institutional and legitimacy theory by combining these theories in a unique framework this study investigates the extent to which social structures i e institutional theory and social legitimization i e legitimacy theory influence esg disclosure practices and each pillar results obtained using a cross country sample of 14 174 firm year observations during 2005 2012 provide evidence that country level characteristics such as a political system legal framework and corruption labor system labor protection and unemployment rate and cultural system social cohesion and equal opportunities significantly affect firms esg disclosure practices however their impact is heterogeneous in that they either reduce or enhance disclosure levels and may differ by pillar results for firm level characteristics related to a firm s visibility analysts coverage cross listing leverage and size demonstrate a positive and homogeneous effect on esg disclosure and each pillar these results inform policy makers and regulators aiming to enhance esg disclosure levels of the risk they incur when managing variables related to social structure and the benefits of exposing firms to higher visibility

short run strategies for attracting foreign direct investment this paper empirically investigates the effectiveness and feasibility of two fdi policies fiscal incentives and deregulation aimed at improving the attractiveness of a country in the short run using disaggregated data on sales by us mnes foreign affiliates in 43 developed and developing countries over the 1982 94 period results show that the provision of fiscal incentives or the deregulation of the labour market would exert a positive impact on total fdi given the drawbacks frequently associated with the use of incentive packages economy wide policies which ease firing procedures and reduce severance payments would certainly be the best policy option this paper also highlights the different aggregation and omitted variable biases that have affected results of previous studies and provides some support to recent theoretical models of fdi by showing that third country effects and spatial interdependence influence respectively the location of export platform fdi and vertical fdi

subjective interest rate uncertainty and the macroeconomy a cross country analysis abstract we ask whether uncertainty about interest rates is important for economic activity the effects of interest rate uncertainty on the economy are examined through the lens of a small var where the assumption that uncertainty can affect real activity contemporaneously but not vice versa is indeed in line with the data our measure of uncertainty stems from professional forecasts of short and long term interest rates and accounts for both disagreement among forecasters and the perceived variability of future aggregate shocks studying a panel of countries we find that subjective interest rate uncertainty has large negative and persistent effects on the economy

oligarchic family control social economic outcomes and the quality of government wealthy families as opposed to small public shareholders characterize ownership of the large corporate sectors of many countries around the world this paper shows that greater oligarchic family control over large corporations is associated with worse social economic outcomes it also correlates with more bureaucratic and more interventionist governments and less developed financial markets further tests show that red tape price controls and the lack of shareholder rights protection are the paramount factors relating to the extent of family control of large firms these results are broadly consistent with olson and others who argue that economically entrenched wealthy insiders pursue rent seeking activities to preserve the status quo and that this increases corruption and impedes growth

sudden stops financial frictions and labor market flows evidence from latin america abstract while the aggregate effects of sudden stops and international financial crises are well known the disaggregated channels through which they work are not well explored yet in this paper using job flows from a sectoral panel dataset for four latin american countries we find that sudden stops are characterized as periods of lower job creation and increased job destruction moreover these effects are heterogeneous across sectors we find that when a sudden stop occurs sectors with higher dependence on external financing experience lower job creation in turn sectors with higher liquidity needs experience significantly larger job destruction this evidence is consistent with the idea that dependence on external financing affects mainly the creation margin and that exposure to liquidity conditions affects mainly the destruction margin overall our results provide evidence of financial frictions being an important transmission channel of sudden stops and in the restructuring process in general

labor protection laws and bank loan contracting abstractthis paper examines the impact of labor regulations that restrict firms flexibility to adjust labor resources on the cost of corporate bank loans using within country variation in employment protection legislation across 25 countries i find that increases in employment protection lead to higher loan spreads tighter nonprice loan contract terms and more diffuse loan ownership structure the effects of labor regulations are greater in industries with a higher rate of labor turnover and among borrowers with a higher probability of default these results suggest that rigidities imposed by labor regulations have a significant impact on firms cost of capital

the long run determinants of inequality what can we learn from top income data this paper studies determinants of income inequality using a newly assembled panel of 16 countries over the entire twentieth century we focus on three groups of income earners the rich p99 100

beliefs about the determinants of success and employment protection abstract we show that part of the international variation in employment laws is due to different beliefs about the impact of hard work as opposed to luck and connections on success in societies where a greater proportion of people relate their life prospects to chance and connections stronger employment protection is in place the prevalence of such beliefs is likely to hamper labor market reforms

top income shares in oecd countries the role of government ideology and globalisation this paper investigates how government ideology and globalisation are associated with top income shares in 17 oecd countries over the period 1970 to 2014 we use top income shares of the world wealth and income database wid globalisation is measured by the kof index of globalisation static and dynamic panel model results show that the top income shares increased more under right wing governments than under left wing governments the ideology induced effect was stronger when globalisation proceeded more rapidly globalisation was positively correlated with income shares of the upper middle class p99 p90 but negatively with income shares of the rich top 1 in the overall sample we show that the relationship differs between anglo saxon countries and other oecd countries globalisation was more pro rich in anglo saxon countries than in other oecd countries government ideology does not turn out to have a statistically significant effect on top income shares in anglo saxon countries after the 1980s whereas ideology induced differences in the distributional outcomes continued in other oecd countries

legal standards enforcement and corruption stricter laws require more incisive and costlier enforcement because enforcement activity depends both on available tax revenue and the honesty of officials the optimal legal standard of a benevolent government is increasing in per capita income and decreasing in officials corruption in contrast to the tollbooth view of regulation the standard chosen by a self interested government is a non monotonic function of officials corruption and can be either lower or higher than that chosen by a benevolent regulator international evidence on environmental regulation shows that standards correlate positively with per capita income and negatively with corruption consistent with the model s predictions for benevolent governments jel d73 k42 l51

owning versus renting do courts matter abstract we develop a legal contract enforcement theory of the decision to own or lease the allocation of ownership rights will minimize enforcement costs when the legal system is inefficient in particular when legal enforcement of contracts is costly there will be a shift from arrangements that rely on such enforcement such as a rental agreement toward other forms that do not such as direct ownership we then test this prediction and show that costly enforcement of rental contracts hampers the development of the rental housing market in a cross section of countries we argue that this association is not the result of reverse causation from a developed rental market to more investor protective enforcement and is not driven by alternative institutional channels the results provide supportive evidence for the importance of legal contract enforcement for market development and the optimal allocation of property rights

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

stock market development and cross country differences in relative prices abstract we document a positive correlation between stock market capitalization and price levels wages within the group of countries with poorly developed stock markets and a negative correlation between these two variables within the group of countries with more developed stock markets this paper argues that there is a causal relationship behind these correlations stock markets initially stimulate growth pushing the demand for nontradables and increasing prices and wages stock markets also promote a shift toward more capital intensive technologies in the tradable sector increasing the migration of workers to services and eventually putting downward pressure on wages and prices

a positive theory of the earnings relationship of unemployment benefits in a wage bargaining model a stronger earnings relationship of unemployment benefits may reduce wages therefore the benefit structure significantly influences profits and trade union utility raising the question as to how the benefit structure is determined in the political process we consider a government that chooses the earnings relationship in order to maximize its political support our model predicts a strong earnings relationship under right wing governments and a weak relationship when unions are influential using panel data for 19 oecd countries we find support for these theoretical predictions moreover we show that the earnings relationship varies negatively with openness

the impact of stakeholder power on corporate reputation a cross country corporate governance perspective corporate reputation has roots in national beliefs about the role of the business corporation in society these beliefs are constructed in accordance with the preferences of powerful stakeholders building on a stakeholder power approach to corporate governance we investigate whether differences in the legal rights and protections of shareholders creditors and workers across countries affect the general public s reputation assessments of business corporations using a sample of 593 of the largest publicly traded companies in the world from 32 countries during 2007 to 2011 we find that in societies where shareholders enjoy a high degree of legal rights the impact of stock market returns on corporate reputation becomes more positive likewise the negative relationship between earnings volatility and reputation becomes greater when creditor rights are stronger contrary to expectations we found no evidence of an interaction effect between labor rights and corporate social performance on corporate repu

regulation and growth why some countries grow faster than others is one of the most important questions in economics solving this puzzle has the obvious appeal of improving the living standards for a significant proportion of the world population we go further towards answering this question by studying a major determinant of growth regulations governing business activity our results also have significant implications for policy they suggest that countries should put priority on reforming their business regulations when designing growth policies measures of institutions currently used in the growth literature indicate the extent of problems but not how to resolve them by contrast the indicators in the doing business database are directly linked to specific reforms for example the procedures to register a business or property can be cut by combining them at a one stop shop for businesses establishing a credit bureau or reducing mandated severance pay for workers will also improve performance on the business regulations index our findings imply that identifying and implementing such reforms can accelerate economic growth

barriers to exit unlike previous empirical studies that focus on barriers to entry in international trade we focus on barriers to exit as measured by passport costs for a cross section of countries we test four common theories on the determinants of such exit barriers and find that macroeconomic and brain drain explanations do explain high barriers to exit however institutional and cultural hypotheses do not appear to be empirically robust explanations of such high barriers our findings hold when applying instrumental variables changes in specification and changes in cross country periods

enforcement and compliance with labor regulations in argentina the author analyzes the effect of government enforcement on compliance with labor regulations in argentina a country where only half of the workforce receives all the benefits to which they are legally entitled constructing panel data for the period 1995 2002 across provinces and using the number of labor inspectors per capita as a proxy for enforcement he estimates the effect of enforcement on compliance with six employment and social security regulations minimum wage maximum hours paid vacation time annual extra monthly wage workers compensation insurance and health insurance because of potential simultaneity between enforcement and compliance the author explores instrumenting enforcement by electoral years two stage least squares estimates suggest enforcement increases compliance

the finnish great depression from russia with love during the period 1991 93 finland experienced the deepest economic downturn in an industrialized country since the 1930s we argue that the collapse of the finnish trade with the soviet union in and of itself resulted in a large contraction of the economy and a costly restructuring of the manufacturing sector similar to the transition suffered by countries in eastern europe finland and these transition countries show almost identical u shaped dynamics of output in the early 1990s yet as a western democracy with fully developed capital markets and well functioning legal and political institutions finland faced none of the large institutional adjustments experienced in the formerly centrally planned economies thus by studying the finnish experience we can isolate the adjustment costs due solely to the collapse of trade from the other burdens of adjustment borne by transition economies we develop and calibrate a multisector dynamic general equilibrium model of the finnish economy and show that the collapse of soviet finnish trade can indeed go a long way in explaining finland s great depression

protection of property rights and growth as political equilibria abstract this paper presents a survey of the literature on property rights and economic growth different theoretical mechanisms that relate property rights to economic development are discussed lack of protection of property rights can result in slow economic growth through different channels expropriation of private wealth corruption of civil servants excessive taxation and barriers to adoption of new technologies the origins of property rights are also considered different theories are illustrated but more attention is paid to the social conflict view and its success and limitations the second part of the paper illustrates relevant empirical works on property rights and growth

financial development and pathways of growth state branching and deposit insurance laws in the united states 1900 1940 abstract this paper studies the effect of state level banking regulation on financial development and on components of state level growth in the united states from 1900 to 1940 we use these banking laws to assess the findings of a large recent literature that has argued that financial development contributes to economic growth we contend that the institutional mechanism leading to financial development is important in determining its consequences and that some types of financial development can even retard economic growth for the united states from 1900 to 1940 we argue that the financial expansion induced by expanded bank branching accelerated the mechanization of agriculture and spurred growth in manufacturing in contrast financial expansions induced by state deposit insurance had negative consequences for both the agricultural and manufacturing sectors

does labour regulation affect technical and allocative efficiency evidence from the banking industry in light of the ongoing restructuring of the european banking industry and the challenging macroeconomic environment banks have increased their efforts to reduce operating costs yet the institutional features that affect banks ability to adjust costs and in particular personnel expenses which comprise a significant part of banks non interest cost structure have not been adequately studied this paper investigates the effect of labour market institutions and regulations on bank performance in 15 european countries over the period 2005 2010 using the fraser index for labour regulation and its disaggregated sub components we propose a novel methodology to measure performance based on the seminal work of kumbhakar and tsionas 2005 which allows the estimation of technical and allocative efficiency and the examination of the effect of labour market regulations in a single stage results indicate the existence of a positive relationship between the liberalisation of eu labour markets and allocative efficiency while the effect on technical efficiency appears to be negative although not statistically significant when looking at the disaggregated components of the labour index we further confirm that different forces are at play

corruption and the shadow economy an empirical analysis this paper analyzes the influence of the shadow economy on corruption and vice versa we hypothesize that corruption and the shadow economy are substitutes in high income countries while they are complements in low income countries the hypotheses are tested for a cross section of 98 countries our results show that there is no robust relationship between corruption and the size of the shadow economy when perceptions based indices of corruption are used employing an index of corruption based on a structural model however corruption and the shadow economy are complements in countries with low income but not in high income countries

globalization and the right to free association and collective bargaining an empirical analysis summary economies that are more open to trade and foreign direct investment fdi face greater competitive pressure than closed ones globalization critics are concerned that this pressure induces countries to lower labor standards in order to remain competitive and retain or attract foreign investment defenders of globalization counter that countries that are more closely integrated into global markets are likely to have higher rather than lower standards this article tests the effect of globalization on a specific labor right which forms part of what are commonly regarded as core or fundamental labor standards employing a new measure of free association and collective bargaining rights we find that countries that are more open to trade have fewer rights violations than more closed ones this effect holds in a global sample as well as in a developing country sub sample and holds also when potential feedback effects are controlled via instrumental variable regression the extent of an economy s penetration by fdi has no statistically significant impact globalization might not be beneficial for outcome related labor standards but it is likely to promote the process related standard of a right to free association and collective bargaining

the institutional foundations of inequality and growth abstract after a decade of research the effect of inequality on long run economic growth remains unresolved in part because researchers have treated omitted variable bias as an estimation problem rather than a deeper question of causality in this article we argue that the key omitted variable is the quality of economic institutions using both cross country and panel data specifications we find no direct effect of inequality on growth in the long run rather the protection of property rights simultaneously raises growth rates and reduces income inequality we interpret these findings as evidence that insecure property rights disproportionately disadvantage the poor

macroenvironmental determinants of operational loss severity abstract we investigate the relationships between the severity of operational loss events reported in the banking sector and various regulatory legal geographical and economic indicators based on a data sample of over 57 000 losses incurred in more than 130 countries reported by the operational riskdata exchange orx consortium we identify the most relevant exposure indicators for losses in four basel ii event categories internal fraud external fraud employment practices and workplace safety and clients products and business practices we find evidence of significant correlations between internal fraud and constraints on executive power and the prevalence of insider trading clients products and business practices losses are significantly related to securities and shareholder protection laws restrictions on banking activity supervisory power and the prevalence of insider trading other event types are sensitive to per capita gdp and a governance index

shadow economies size causes and consequences using various methods the size of the shadow economy in 76 developing transition and oecd countries is estimated average size varies from 12 percent of gdp for oecd countries to 23 percent for transition countries and 39 percent for developing countries increasing taxation and social security contributions combined with rising state regulations are driving forces for the increase of the shadow economy especially in oecd countries according to some findings corruption has a positive impact on the size of the shadow economy and a growing shadow economy has a negative effect on official gdp growth

migration and institutions evidence from internal eu mobility despite the formal achievement of the free movement of labour within the eu the institutional characteristics of the labour markets of the member states may influence european mobility the paper seeks empirical evidence of the relationship between labour market institutions and intra eu migrations estimating a gravity model for bilateral migration for the period 2001 11 the results indicate that trade union density negatively correlates with the size of bilateral migrations destinations with relatively high union density are associated with lower migration inflows since these countries tend to have a relatively flat earnings distribution it is also investigated whether their earnings structure reduces their attractiveness as destinations hindering the access to their labour market even if a dependence between the earnings dispersion and migrations is found trade union density remains the main driver of migration patterns clear effects of employment protection on eu mobility are not found

institutional voids or organizational resilience business groups innovation and market development in latin america summary the paper compares the innovativeness of group affiliated firms gafs and standalone firms safs and it investigates how country specific institutional factors affect the group innovation relationship the paper analyzes the contrasting predictions of two competing views the institutional voids and the organizational resilience theses the empirical analysis focuses on a large sample of firms in latin america in line with the organizational resilience thesis the results point out that the superior innovation performance of gafs is stronger for national economies with more efficient financial legal and labor market institutions

national accounts and environmental resources in the paper optimal growth theory is used to derive the appropriate definition of the net national product concept when there are environmental resources and environmental damage to take into account the basic conclusions are that conventional defined np should be corrected by deducting environmental damage and adding the value of the net change of all resources

deadweight costs and the size of government abstract we provide a model for analyzing effects of the tax system and spending programs on the determination of government spending and taxpayer welfare an improvement in the efficiency of either taxes or spending would reduce political pressure for suppressing the growth of government and thereby increase total tax revenue and spending we demonstrate the similarity of the political responses to revenue shocks spending shocks changes in tax efficiency and changes in spending program efficiency empirical analysis of oil shocks intergovernmental grants and other autonomous changes in taxes or spending indicates that cause and effect is not only from spending to tax structures

the welfare economic theory of green national accounts this paper takes a critical look at the literature on green national accounts the problem studied is to find a linear index of economic variables that responds to perturbations in the same direction as social well being the thesis of a large literature that net national product which is a flow is that index in closed economies is shown in some interpretations to be simply false and in others to suffer from deep estimation problems it is argued that capital depreciation using shadow prices should certainly be included in national accounts but that the right welfare index is a comprehensive measure of wealth defined as the shadow value of an economy s stock of all capital assets it is shown that comprehensive wealth is usable as a criterion for policy evaluation as well as for determining sustainable economic development

national accounting with natural and other types of capital we do double entry national accounting and incorporate zero profit arbitrageconditions euler equations for different types of capital includingnatural capital in non balanced growth capital gains terms for capitalgoods appear in the income side of the accounts depreciation terms appearon the product or expenditure side we consider renewable natural capital aswell as non renewable of both durable and non durable types

international trade and unemployment theory and cross national evidence abstract we present a model of trade and search induced unemployment where trade results from heckscher ohlin h o and or ricardian comparative advantage using cross country data on trade policy unemployment and various controls and controlling for endogeneity and measurement error problems we find fairly strong and robust evidence for the ricardian prediction that unemployment and trade openness are negatively related this effect dominates the positive h o effect of trade openness on unemployment for capital abundant countries which turns negative for labor abundant countries using panel data we find an unemployment increasing short run impact of trade liberalization followed by an unemployment reducing effect leading to the new steady state

macroeconomic effects of ownership structure in oecd countries the paper investigates the impact of ownership concentration on gdp growth for a sample of 18 oecd countries over the period 1980 to 2004 the econometric analysis shows that more concentrated ownership can speed up growth for countries approaching the technological frontier provided that labour market regulation is sufficiently tight in the absence of employment regulation the logic of financial markets discipline applies and dispersed ownership appears as more favorable for growth based on econometric results impact coefficients are calculated allowing to evaluate the growth points gained lost following a given change in ownership concentration this exercise reveals that a reform in the domain of ownership structure can yield sizeable effects in terms of growth importantly these effects are unequally distributed across countries anglo saxon countries would take more advantage of deregulation i e increased dispersion of ownership in a context of deregulated labour markets while continental european countries would benefit more from increased concentration of ownership in a context of reinforced labour regulation

perverse incentives labor market regulation and performance in the public sector we test the link between labor market regulations and job performance in the public sector using a novel outcome variable namely the number of days it takes the postal service to return letters sent to nonexistent foreign addresses a measure that we argue is an excellent proxy for job performance we find a positive and statistically significant link between these two variables regardless of the labor regulation measure employed changes in specification and even unlikely endogeneity considerations which suggest that this finding may be causal

regulation and investment use newly assembled data on regulation in several sectors of many oecd countries to provide evidence that regulatory reform of product markets is associated with an increase in investment a component of reform that plays a very important role is entry liberalization but privatization also has a substantial effect on investment sensitivity analysis suggests that our results are robust jel e22 l5

institutional quality and international trade institutions quality of contract enforcement property rights shareholder protection and the like have received a great deal of attention in recent years yet trade theory has not considered the implications of institutional differences beyond treating them simply as different technologies or taxes the purpose of this paper is twofold first we propose a simple model of international trade in which institutional differences are modeled within the framework of incomplete contracts we show that doing so reverses many of the conclusions obtained by equating institutions with productivity institutional differences as a source of comparative advantage imply among other things that the less developed country may not gain from trade and factor prices may actually diverge as a result of trade second we test empirically whether institutions act as a source of trade using data on us imports disaggregated by country and industry the empirical results provide evidence of institutional content of trade institutional differences are an important determinant of trade flows

spike models in contingent valuation spike models allow for a nonzero probability of zero willingness to pay in referendum style contingent valuation experiments they include many of the often used models as special cases and allow various analyses that are not possible in standard applications in this paper the economic rationale for the spike models and their estimation techniques are discussed and empirical illustrations are provided one study suggests that mean willingness to pay is zero and both studies strongly suggest that median wtp is zero these results have some bearing on the continuing debate of the incentive properties of hypothetical surveys and the construction of scenarios in contingent valuation experiments

statehood experience legal traditions and climate change policies this study investigates how the implementation of modern climate change policies is related to former colonies length of state history and their legal heritage we argue that countries with longer statehood experience around the time of colonization were better equipped to implement the legal philosophies transplanted by their colonial powers therefore the implications of receiving british common law versus french civil law should be particularly important in countries with a greater accumulated history of statehood using a cross section of up to 78 former colonies our results provide support for this hypothesis in particular our estimates demonstrate that common law countries have weaker modern climate change policies than civil law countries and the difference is inflated by a longer statehood experience measured by the length of state history from 1 to 1800 ad legal origin has no effect in areas which by the time of colonization had no statehood experience finally we report similar results for the pattern of labor market regulations jel k15 k31 k32 o44 q54 q58

family values and the regulation of labor flexible labor markets requires geographically mobile workers to be e cient otherwise rms can take advantage of the immobility of workers and extract monopsony rents in cultures with strong family ties moving away from home is costly thus individuals with strong family ties rationally choose regulated labor markets to avoid moving and limiting the monopsony power of rms even though regulation generates lower employment and income empirically we do nd that individuals who inherit stronger family ties are less mobile have lower wages are less often employed and support more stringent labor market regulations there are also positive cross country correlations between the strength of family ties and labor market rigidities finally we nd positive correlations between labor market rigidities at the beginning of the twenty rst century and family values prevailing before world war ii which suggests that labor market regulations have deep cultural roots

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

sunk capital unions and the hold up problem theory and evidence from cross country sectoral data abstract in this paper we study the hold up problem by considering the effect of union bargaining power on the level of investment per worker across sectors characterised by different levels of sunk capital investment we develop a search and matching model with heterogeneous sectors and ex post collective wage bargaining and test the predictions of the model using a difference in difference approach on manufacturing sector data in a set of oecd countries during the period 1980 2000 we find that union power reduces investment per worker particularly in sunk capital intensive industries we refine our empirical analysis showing that the underlying hold up problem is exacerbated when strikes are not regulated after a collective contract is signed and there is no arbitration while the presence of social pacts may sustain cooperative equilibria that alleviate the hold up problem our results are robust to a series of controls and possible endogeneity of union power

the evolution of unjust dismissal legislation in the united states in the past decade many state courts have ruled in favor of employees alleging they were improperly dismissed the author of this paper advances an evolutionary theory of unjust dismissal legislation in which employer groups responding to the threat of large and variable damage awards imposed by the judicial system eventually support unjust dismissal legislation in order to clearly define property rights reduce uncertainty and limit employer liability based on evidence from a case study of legislation enacted in montana and an empirical analysis of the determinants of proposed unjust dismissal legislation in a panel of states the author concludes that proposals of unjust dismissal legislation are a response to court rulings that weaken and obfuscate the employer s right to dismiss employees at will

job security provisions and employment european countries have enacted various job security provisions over the last 30 years employers are required to pay workers on separation or to give advance notice of termination in anything less than a perfectly functioning market there are effects of the provisions on employment incumbents are more likely to retain their jobs but new workers are less likely to be hired an examination of the european data suggests that severance pay requirements reduce employment

losing heart the effect of job displacement on health job reallocation is considered a key characteristic of well functioning labor markets as more productive firms grow and less productive ones contract or close despite its potential benefits for t

trade theorems with search unemployment we revisit the heckscher ohlin samuelson model in the presence of labour market frictions a la mortensen pissarides relaxing the assumption of the one worker one firm matching rule we show that the stolper samuelson theorem and the rybczynski theorem may not hold in specific circumstances we also demonstrate that the factor price equalization theorem is valid only for capital and unemployed labour across countries but not for employed labour in equilibrium trade patterns are determined by countries factor endowments and relative factor intensities in sectors independent of factor intensities in production finally our results suggest an additional explanation for the missing trade phenomenon jel classification f 16 j64

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

national account of timber and forest environmental resources in sweden this paper outlines an extension of the national account of income from forest resources in sweden 1987 incorporating changes in timber inventories production of nonmarketed timber and nontimber goods and depletion or improvement in vital environmental stocks such as soil nutrients biodiversity and carbon sinks the total net value added provided by forest resources and forestry labour 1987 is estimated to 22 billions sek this is one third more than the contribution of forestry to ordinary gnp

red tape and delayed entry does cutting red tape foster entrepreneurship in industries with the potential to expand we address this question by combining the time needed to comply with government entry procedures in 45 countries with industry level data on employment growth and growth in the number of establishments during the 1980s our main empirical finding is that countries where it takes less time to register new businesses have seen more entry in industries that experienced expansionary global demand and technology shifts our estimates take into account that proxying global industry shifts using data from only one country or group of countries with similar entry regulations will in general yield biased results

does average size matter court enforcement business demography and firm growth previous literature finds that the quality of judicial enforcement has a positive impact on average firm size but it has not disentangled its effect on the growth of incumbent firms from that on business demography this distinction is crucial as entrants are generally smaller than incumbents but both high entry rates and high firm growth are associated with better economic performance this paper fills this gap finding that judicial efficacy fosters the growth of incumbents and promotes entry in spain the paper also shows for the first time that the specific type of judicial procedure that companies face in case of a conflict rather than the overall functioning of courts is the relevant matter specifically judicial efficacy at the declaratory stage when a debt is verified by a judge has a positive impact on both firm growth and entry while it has no impact at the execution stage when the judge requires its payment

the structural determinants of external vulnerability the authors examine empirically how domestic structural characteristics related to openness and product and factor market flexibility influence the impact that terms of trade shocks can have on aggregate output for this purpose they apply an econometric methodology based on semi structural vector auto regressions to a panel of 90 countries with annual observations for the period 1974 2000 using this methodology the authors isolate and standardize the shocks estimate their impact on gdp and examine how this impact depends on the domestic conditions outlined above they find that larger trade openness magnifies the output impact of external shocks particularly the negative ones while improvements in labor market flexibility and financial openness reduce their impact domestic financial depth has a more nuanced role in stabilizing the economy it helps reduce the impact of external shocks particularly in environments of high exposure that is when trade and financial openness are high firm entry is unrestricted and labor markets are rigid

the injustice of inequality in many countries the operation of legal political and regulatory institutions is subverted by the wealthy and the politically powerful for their own benefit this subversion takes the form of corruption intimidation and other forms of influence we present a model of such institutional subversion focusing specifically on courts and of the effects of inequality in economic and political resources on the magnitude of subversion we then use the model to analyze the consequences of institutional subversion for the law and order environment in the country as well as for capital accumulation and growth we illustrate the model with historical evidence from gilded age united states and the transition economies of the 1990s we also present some cross country evidence consistent with the basic prediction of the model

government size and unemployment evidence from industrial countries using data from 19 industrial countries for the period 1985 to 2002 this paper analyzes how the size of the government sector affects unemployment controlling for the impact of the business cycle as well as for the impact of all major labor market institutions and unobserved country effects we find that a large government sector is likely to increase unemployment it appears to have a particularly detrimental effect on women and the low skilled and to substantially increase long term unemployment it seems that dominant stateowned enterprises a large share of public investment in total investment as well as high top marginal income tax rates and low income threshold levels at which they apply are particularly detrimental

union recognition by multinational companies in china a dual institutional pressure perspective over the last decade chinese authorities have pressed foreign multinational companies to recognize official trade unions employing cross classified multilevel modeling on a large data set 10 108 foreign owned firms cross embedded in 32 home countries and 755 chinese cities this study examines the antecedents of the varied positions of foreign owned firms toward union recognition around the midpoint of the first decade of the 2000s a time when the government led union recognition campaign in china was gaining strength drawing on a dual institutional pressure perspective the authors theorize that the likelihood that a foreign owned firm will recognize a union depends on both the industrial relations system in the home country and the location of its operations in the host country specifically a foreign owned firm is more likely to recognize unions if it originated from a nation where the legitimacy of collective representation is high and if it is located in a chinese city where union recognition is prevalent among chinese owned firms

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

impact of off farm income on household energy expenditures in china implications for rural energy transition abstract this study examines the impact of off farm income on rural household energy expenditures paying special attention to clean energies such as electricity and gas and non clean energy such as coal we use instrumental variable approaches to address the endogeneity issues of off farm income and analyze household survey data collected from rural gansu henan and shandong provinces of china econometric results show that off farm income promotes rural energy transition in particular off farm income significantly increases both electricity and gas expenditures but decreases coal expenditure of rural households further analyses reveal that the energy transition effects generated by off farm income are more pronounced for households in shandong where the economy is relatively better developed relative to henan and gansu our findings highlight the importance of income diversification through off farm activities by farm households to enhance clean energy accessibility and boost sustainable rural economic development

bargaining frictions labor income taxation and economic performance abstract this paper is an attempt to explain differences in economic performance between a subset of oecd countries we classify countries in terms of their degree of rigidity in the labor market and use a matching model with labor leisure choice bargaining frictions and labor income taxation to capture these rigidity differences added flexibility improves economic performance in different ways depending on whether income taxation is high or low feeding income taxation rates estimated from the countries at hand we find that the model is able to replicate the observed rigidity levels the model is also shown to reproduce well cross country differences in non employment population ratios and the share of part time jobs in the absence of rigidity differences taxation shows little promise to replicate cross country differences as it has insufficient quantitative effects on production and productivity however the interaction of rigidity and income taxation is crucial in explaining the empirical patterns of the non employment rate and of the share of part time jobs

investigating capitalism aversion capitalism aversion there are two non mutually exclusive theories of individual variations in pro capitalism opinions the first theory views pro capitalism opinions as self serving individuals are opposed to market forces when they threaten their economic rents the second theory views differences in such opinions as reflecting genuine disagreement on the efficiency of various economic systems using individual data we investigate the validity of both theories focusing on attitudes toward private ownership private profit and competition we find evidence that the first theory explains some of the variations in attitudes however consistent with the second theory we also find evidence of individual learning about the comparative virtues of economic systems the learning is slow home biased and path dependent long run cultural and historical determinants of pro market attitudes such as religion and legal origins explain more than 40 of the cross country variations in capitalism aversion last we provide tentative evidence that at the country level pro market opinions affect the nature of economic institutions our results suggest that the feasibility of economic reform does not depend solely on its impact on the distribution of rents ideological a prioris are likely to be important as well

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

accounting for cultural heritage a theoretical and empirical exploration with focus on swedish reindeer husbandry the aim of this paper is to explore some of the theoretical and empirical aspects of an economy which includes cultural capital we use a simple dynamic growth model and the concept of a social acc

egalitarianism cultural distance and foreign direct investment a new approach this study addresses an apparent impasse in the research on organizations responses to cultural distance we posit that cross country differences in egalitarianism a cultural orientation manifested in intolerance for abuses of market and political power and support for protection of less powerful actors affect multinational firms choices of destinations for foreign direct investment fdi using historically motivated instrumental variables we observe that egalitarianism distance has a negative causal impact on fdi flows this effect is robust to a broad set of competing accounts including the effects of other cultural dimensions various features of the prevailing legal and regulatory regimes other features of the institutional environment economic development and time invariant unobserved characteristics of origin and host countries we further show that egalitarianism correlates in a conceptually compatible way with an array of organizational practices pertinent to firms interactions with nonfinancial stakeholders such that national differences in these egalitarianism related features may affect firms international expansion decisions

the impact of financial crises and tolerance for uncertainty abstract financial crises can have severe negative effects on investment one reason for this is that financial crises increase uncertainty increasing the real option value of delaying investment in this paper we show that the negative effect of crises on investment differs significantly across countries in countries with low tolerance for uncertainty the negative effect is strong the negative effect is absent in countries that are more tolerant of uncertainty these findings are similar across different types of financial crisis they vary as predicted across type of investor asset and industry and they are not driven by uncertainty averse countries adopting more rigid institutions

labor regulations and contract labor use evidence from indian firms abstract labor regulations in india differ by states and apply differently across types of laborers the most restrictive laws make it harder to fire permanent workers for firms however these laws do not apply to workers hired through contractors contract workers using firm level data from india i find that compared to firms in flexible labor regulations those in more restrictive labor regimes hire more contract workers as a response to transitory local demand shocks i find no differential response in hiring of permanent workers by firms faced with these shocks this suggests that firms circumvent labor laws by hiring workers indirectly through contractors in the face of economic fluctuations

egalitarianism and international investment abstract this study identifies how country differences on a key cultural dimension egalitarianism influence international investment flows a society s cultural orientation toward egalitarianism is manifested by intolerance for abuses of market and political power and a desire for protecting less powerful actors we show egalitarianism to be based on exogenous factors including social fractionalization dominant religion circa 1900 and war experience from the 19th century we find a robust influence of egalitarianism distance on cross national flows of bond and equity issuances syndicated loans and mergers and acquisitions an informal cultural institution largely determined a century or more ago egalitarianism exercises its effect on international investment via an associated set of consistent contemporary policy choices but even after controlling for these associated policy choices egalitarianism continues to exercise a direct effect on cross border investment flows likely through its direct influence on managers daily business conduct

good and bad institutions is the debate over cross country firm level evidence from the textile industry using firm level data from nine developing countries we demonstrate that certain institutions like restrictive labour market regulations that are considered bad for economic growth might be beneficial for production efficiency whereas good business environment which is considered beneficial for economic growth might have an adverse impact on production efficiency we argue that our results suggest that there might be significant difference in the macro and micro impacts of institutional quality such that the classification of institutions into good and bad might be premature

institutions and concentration abstract in a new dataset of 1 3 million firms from over 100 countries i establish a number of regularities in cross country differences in economic concentration concentration of sales and employment is substantially higher in smaller countries and in less developed countries these two factors alone explain roughly half the cross country variation in concentration nevertheless a number of institutional factors offer additional explanatory power for concentration concentration is higher in countries with higher entry costs for new firms in countries with weaker antitrust policy in countries with less financial development in countries with weaker rule of law and in countries with more burdensome regulation weak institutions are associated with higher concentration especially in industries that do not have naturally high levels of concentration in addition the relationships between institutions and concentration are more pronounced in nontradable and investment intensive industries suggesting that natural barriers to competition facilitate the monopolization of sectors especially when institutions are weak

varieties of capitalism and institutional comparative advantage a test and reinterpretation how do national level institutions relate to national comparative advantages we seek to shed light on this question by exploring two different sets of hypotheses based on the varieties of capitalism and other branches of comparative capitalisms literature applying fuzzy set qualitative comparative analysis to data from 14 industries in 22 countries across 9 years we find that comparative advantages in industries with radical innovation emerge in specific configurations mixing coordinated and liberal institutional features institutional comparative advantage in industries with radical innovation may thus be based on the beneficial constraints of opposing institutional logics rather than on the self reinforcing institutional coherence envisioned in much of the varieties of capitalism literature by contrast we find that coordinated market economies may have comparative advantages in industries with incremental innovation as envisioned in the varieties of capitalism literature our article contributes to our understanding of the so what related to capitalist diversity and its implications for location decisions of multinational enterprises we further present a coordination index going beyond hall and gingerich br j polit sci 39 449 482 2009 with annual values for 22 oecd countries from 1995 through 2003

the heterogenous impact of taxation on fdi a note on djankov et al 2010 abstract summary taxes in the host country matter a lot for fdi inflows but only for non oecd countries taking advantage of the rich dataset constructed by djankov et al 2010 we show for example that raising the first year effective corporate income tax rate by 10 pp reduces fdi inflows by 3 4 to 1 9 pp in non oecd countries and the effect is null for oecd countries not taking this heterogeneity into account upward downward biases the estimated impact of the corporate tax on fdi inflows for oecd non oecd countries

labor market institutions and long term effects of youth unemployment graduating from a school during a time of adverse economic conditions has a persistent harmful effect on workers subsequent employment opportunities an analysis of panel data from oecd countries during the 1960 2010 periods reveals that a worker who experiences a 1 percentage point higher unemployment rate while the worker is 16 24 years old has a 0 14 percentage point higher unemployment rate at ages 25 29 years and 0 03 percentage points higher at ages 30 34 years the persistence of this negative effect is stronger in countries with stricter employment protection legislation a composite index for labor market rigidity is constructed and the index is shown to have positive correlation with the persistence moderating macroeconomic fluctuations is more important in countries that have more persistent labor market entry effects on subsequent outcomes

growth volatility and financial liberalization we examine the effects of both equity market liberalization and capital account openness on real consumption growth variability we show that financial liberalization is mostly associated with lower consumption growth volatility our results are robust surviving controls for business cycle effects economic and financial development the quality of institutions and other variables countries that have more open capital accounts experience a greater reduction in consumption growth volatility after equity market openings we also find that financial liberalizations are associated with declines in the ratio of consumption growth volatility to gdp growth volatility suggesting improved risk sharing our results are weaker for liberalizing emerging markets but we never observe a significant increase in real volatility moreover we demonstrate significant differences in the volatility response depending on the size of the banking and government sectors and certain institutional factors

an integrated system for management and policy analysis this paper develops an analytical framework to simulate management and policy driven environmental changes in swedish mountain environments the framework is based on a dynamic model that includes economic connections between timber and reindeer economic benefits are obtained in the timber sector and the reindeer sector by harvesting forest and reindeer stocks and selling the harvests in markets unharvested forest and reindeer stocks provide benefits outside of markets reindeer stocks provide benefits by supporting the reindeer husbandry lifestyle for members of the indigenous saami population the paper analyzes decisions made by a hypothetical planner of a geographical area corresponding to a swedish sameby saami village decision outcomes are measured using the present value of net benefits measured in economic terms and are obtained both inside and outside of economic markets the final section gives examples of management and policy decisions that might be simulated for swedish mountain environments such as market based policies to increase the economic welfare derived from private timber and reindeer harvests

incentive contracts and total factor productivity we propose a transactions cost theory of total factor productivity tfp in a world with asymmetric information and transactions costs productivity must be induced by incentive schemes labor contracts trade off marginal benefits and costs of effort the latter include in addition to the workers marginal disutility of effort organizational costs and rents as the economy grows contracts change endogenously inducing higher effort and productivity transactions costs are also affected by societal characteristics that determine the power of incentives differences in these characteristics may explain cross economy productivity differences numerical experiments demonstrate the model s consistency with time series and cross country observations

a race to the bottom in labor standards an empirical investigation abstract one of the concerns over globalization is that as nations compete for investment they relax labor standards to attract firms using spatial estimation on panel data for 135 countries over 17 years we find that the labor standards in one country are positively correlated with those elsewhere i e a cut in labor standards in other countries reduces labor standards in the country in question this interdependence is more evident in labor practices i e enforcement than in labor laws further while we find evidence of competition in both developed and developing countries it is strongest among developing countries with weak standards