asset based unemployment insurance this article studies a model of consumption savings and job search in which a borrowing constraint limits self insurance the government administers the unemployment insurance program that may condition on an individual s asset position but not on her efforts of finding a job to compensate for the impediments to self insurance benefit payments should optimally be set higher at lower wealth levels and peak for borrowing constrained individuals with zero liquid funds a quantitative exercise reveals that the u s unemployment insurance program is surprisingly close to optimal for the asset poor but far too generous for wealthier individuals

a generalization of the endogenous grid method abstract this paper extends carroll s 2005 the method of endogenous gridpoints for solving dynamic stochastic optimization problems national bureau of economic research technical working paper 309 endogenous grid method to perform value function iteration in models with more than one control variable we propose to mix the endogenous grid method with standard value function iteration to achieve higher efficiency we illustrate the method using the stochastic neoclassical growth model with and without labor leisure choice we report important gains in efficiency that make value function iteration an attractive computational method in terms of both computing time and accuracy

the incentives to make commitments in wage bargains it is commonly believed that a workforce of identical workers will be better off organised in a single union rather than separate unions that bargain independently with an employer for this will prevent the employer playing off one union against another in this paper i show that there are circumstances where this need not be the case if it is impossible for the firm and workers to sign long term binding contracts on wages and employment then the firm will wish to invest in a capital stock below the efficient level by organising in separate unions the firm will be induced to raise its level of investment to ensure it has enough capacity with each union to make a threat to switch production to another union credible the effect on workers payoffs from a higher capital stock can outweigh the loss of bargaining power as a result of the workforce being in separate unions there will also be circumstances where the firm will invest in a capital stock that exceeds the efficient level

box cox quantile regression and the distribution of firm sizes using the box cox quantile regression model we analyse the size distribution of firms in portuguese manufacturing during the 1980s specifically we estimate the effect of selected industry attributes on the location scale skewness and kurtosis of the conditional size distributions of firms we find that industry attributes affect the size of firms in the same direction across the distribution but the effects of these variables are typically much greater at the largest quantiles over time the distribution shifted towards smaller firms due mainly to the way the economy responds to industry characteristics rather than to changes of the level of these characteristics the prediction of lognormality implied by gibrat s law is soundly rejected by the observed distribution of firm sizes however we found that at least in 1983 lognormality is a reasonable description of the conditional size distribution copyright 2000 john wiley sons ltd

cost value and foreign market entry mode the transaction and the firm this paper compares and contrasts the mode of foreign market entry decision from the transaction cost internalization and organizational capability perspectives each of these perspectives operates at a different level of analysis respectively the transaction and the firm and consequently differs in the primary arena of attention namely transaction characteristics and the capabilities of firms in making the comparison a key distinction is made between the cost and the value aspects in the management of know how based on which issues pertaining to the transfer of knowledge within and across firm boundaries and the exploitation and enhancement of competitive advantage are closely examined the main purpose of this paper is to demonstrate the implications of a shift in frame from cost to value in the analysis of decisions related to firm boundaries entry into foreign markets is used primarily as a vehicle for the accomplishment of this purpose the paper shows how the value based framework of the organizational capability perspective radically and fundamentally shifts the approach towards the governance of firm boundaries and argues that even though tc internalization theory raises some valid concerns the organizational capability framework may be more in tune with today s business context some of the assumptions of the tc internalization perspective both direct opportunism exploitation of existing advantage and indirect preservation of the value of know how across locational contexts asymmetry between bounded rationality for transaction and production purposes are critically examined and questioned implications of a shift from a cost to a value based framework are discussed and the need for a shift in research focus is emphasized

endogenous incomplete contracts a bargaining approach in this paper we argue that by modelling the contracting process as a bargaining game one can endogenize the choice between complete and incomplete contracts this point is demonstrated within a stylized model in which agents can allocate an endowment stream either via a once for all bargain over the entire stream a long term contract or through a series of bargaining rounds a short term contract within this structure short term contracts arise as equilibrium outcomes under very general conditions because a short term contract implies reduced bargaining costs for one of the agents in essence reduced transaction costs produce a short term contract jel classification l14 c78

vertical organization of production and firm growth this paper empirically explores if different vertical organizational forms i e vertical integration versus dis integration give rise to unlike growth behaviors within the same industry an econometric analysis is conducted in a sample of around 500 italian machine tool mt builders for the period 1998 2007 implementing instrumental variables to control for the endogeneity of the organizational form in the relation ceteris paribus vertically integrated firms result to be characterized by a less dispersed distribution of growth rates than their dis integrated counterparts several concurring factors such as adjustment costs organizational slacks and a better management of fluctuations in the markets of intermediate and final products may explain the more a stablea growth profile of vertically integrated firms by means of analyzing how different organizational forms map into the distribution of output growth rates this work provides insight into the firm dynamics in a mature industry in which both vertically integrated and dis integrated firms coexist

greener more integrated and less volatile a quantile regression analysis of italian wholesale electricity prices abstract this paper provides estimates of quantile regression models of the relationship between italian day ahead electricity prices the supply of renewables and the inception of a new cable sapei linking sardinia with the italian peninsula in the 2006 2015 time window the results confirm the merit order effects detected in the existing literature both for photovoltaics and wind power more strongly in market conditions characterised by moderately low price levels and with some implied increase in volatility the new cable has apparently challenged the ability of power generating companies to extract value through price spikes has mitigated volatility and its effects have been complementary with those of renewables effects from photovoltaics are more sensitive to robustness checks differences across zonal markets are nonetheless detected

do unions reduce investment evidence from canada the authors test for a link between unionization and net investment rates in canadian manufacturing analysis of data on 18 industries for the years 1967 87 reveals a negative non linear relationship the presence of unions appears to have reduced investment when the percentage of firms in the industry that were unionized was between 0 and approximately 50 with a plateau or slight positive marginal effect above this level in an industry moving from no unions to the mean level of unionization net investment and gross investment are predicted to fall by 66 74 and 18 25 respectively

unemployment insurance and unemployment accounts the best of both worlds unemployment accounts are mandatory individual savings accounts that can be used only during unemployment or retirement unlike unemployment insurance unemployment accounts solve the moral hazard problem but provide no public insurance to workers i study a hybrid system that borrows from concepts of both unemployment insurance and unemployment accounts in which workers are mandated to save when employed and can withdraw from the account when unemployed once the account is exhausted the unemployed worker receives unemployment benefits this hybrid policy provides insurance to workers more efficiently than an unemployment insurance system because it provides government benefits selectively as a consequence young workers can reduce their precautionary savings and better smooth their consumption over the life cycle calibrating the model to the us economy i find that relative to an optimal unemployment insurance system the optimal hybrid policy leads to a welfare gain of 2 4 measured as consumption equivalent variation jel classification e24 e61 j64 j65

gibrat s law and persistence of growth in greek manufacturing this study makes use of a sample of greek manufacturing firms during 1995 2001 in order to analyze gibrat s law we find gibrat s law is rejected for the total sample of firms since persistence of growth plays a key role the classification of firms in size and age groups however yields more interesting results gibrat s law is rejected for micro small and young firms since an inverse relationship between firm growth and initial firm size is found along with a persistence of growth rates in subsequent periods in contrast gibrat s law is accepted for medium large and old firms implying that the growth patterns of these categories follow a random walk and do not tend to persist in subsequent periods

designing unemployment insurance for developing countries abstract the high incidence of informality in the labor markets of middle income economies challenges the provision of unemployment protection we show that despite informational frictions the introduction of an unemployment insurance savings account uisa system may provide substantial benefits this system improves welfare by providing insurance to the unemployed and creating incentives to work in the formal sector the optimal scheme generates a reduction in unemployment from 4 to 3 percent an increase in formality from 68 to 72 percent and a rise in total output by 4 percent overall individuals obtain welfare gains equivalent to a 2 4 percent increase in consumption in every period

on the relationship between firm size and export intensity export marketing literature supports the view that firm size is positively related to export intensity although the empirical findings have been mixed a number of theoretical arguments are used to support this proposition i e international marketing economies of scale limited managerial and financial resources of small firms decisionmaker s risk perception based on a large survey of the italian manufacturing industry the article falsifies the proposition and challenges some widely held assumptions in export marketing literature

the function of authority in transaction cost economics abstract this paper questions the transaction cost characterization of observed authority relations as efficient governance structures various inadequacies in the transaction cost account of work organization and the limits of firm size are traced to its neglect of the possibility that authority may be abused opportunistically this exemplifies a more general propensity in the transaction cost literature that of explaining economic organization in functionalist terms with little attention to the causal mechanisms through which efficient governance structures might actually arise three such mechanisms are considered but none is found to provide an adequate rationale for the imputation of efficiency to observed structures

are there non linearities between sme growth and its determinants a quantile approach this article uses quantile regressions to study the relationship between the growth of portuguese small and medium enterprises smes and its determinants to control a sample selection bias we use a two step estimation in the first stage we verified that past growth size age rd ii debt and rd iii age is a restrictive factor of portuguese sme growth only when there is an increase in size and iv cash flow although a determinant promoting portuguese sme growth regardless of the level of growth takes on greater importance when there is a reduction in size copyright 2010 the author 2010 published by oxford university press on behalf of associazione icc all rights reserved oxford university press

labor market matching with precautionary savings and aggregate fluctuations we analyze a bewley huggett aiyagari incomplete markets model with labor market frictions consumers are subject to idiosyncratic employment shocks against which they cannot insure directly the labor market has a diamond mortensen pissarides structure firms enter by posting vacancies and match with workers bilaterally with match probabilities given by an aggregate matching function wages are determined through nash bargaining we also consider aggregate productivity shocks and a complete set of contingent claims conditional on this risk we use the model to evaluate a tax financed unemployment insurance scheme higher insurance is beneficial for consumption smoothing but because it raises workers outside option value it discourages firm entry we find that the latter effect is more potent for welfare outcomes we tabulate the effects quantitatively for different kinds of consumers we also demonstrate that productivity changes in the model in steady state as well as stochastic ones generate rather limited unemployment effects unless workers are close to indifferent between working and not working thus recent findings are corroborated in our more general setting

contract duration and relationship specific investments empirical evidence from coal markets this paper examines the importance of specific relationship investments in determining the duration of coal contracts negotiated between coal suppliers and electric utilities data for 277 coal contracts are used to perform the analysis the results provide strong support for the view that buyers and sellers make longer commitments to the terms of future trade at the contract execution stage and rely less on repeated bargaining when relationship specific investments are more important

corporate growth and industrial structures some evidence from the italian manufacturing industry this work analyses the properties of corporate growth in a large longitudinal sample of italian manufacturing firms in particular it focuses on the statistical properties of growth rates and on the influence of proxies for relative efficiency upon relative growth in line with previous work the emergence of fat tails in growth rate distributions and the idiosyncratic nature of autocorrelation coefficients confirm the existence of a structure in the growth process richer than the one normally assumed by the gibrat law hypothesis and suggest the presence of firm specific drivers of growth at the same time there is a remarkable puzzle concerning the absence of any negative relationship between size and growth variance and only weak influences of relative efficiencies upon growth dynamics

rethinking social insurance economics 1 social insurance programs have become the most important the most expensive and often the most controversial aspect of government domestic policy not only in the united states but also in many other countries including developing and industrialized nations in the united states these programs include social security retirement disability and survivor insurance unemployment insurance and medicare insurance for those age 65 and older together these programs accounted for 37 percent of federal government spending and more than 7 percent of gdp in 2003 these ratios have increased rapidly in the past and are projected to increase even faster in the future because of the more rapid aging of the population i will discuss how the major forms of social

the relationship between firm growth size and age estimates for 100 manufacturing industries this study uses a sample of all firms operating in 100 manufacturing industries to examine some aspects of firm dynamics it finds that firm growth the variability of firm growth and the probability that a firm will fail decrease with firm age it also finds that firm growth decreases at a diminishing rate with firm size even after controlling for the exit of slow growing firms from the sample gibrat s law therefore fails although the severity of the failure decreases with firm size copyright 1987 by blackwell publishing ltd

age size growth and survival uk companies in the 1980s this paper examines growth and survival amongst quoted and unquoted u k companies in the period 1975 85 and compares the results with earlier u k and u s studies an examination of death rates shows that smaller companies had higher death rates but the largest and smallest companies were least vulnerable to takeover careful attention is therefore paid to problems of sample selection bias it is shown that smaller companies grew faster than larger companies that gibrat s law does not hold amongst smaller firms that age is negatively related to growth and that these results are not an artifact of sample selection bias copyright 1994 by blackwell publishing ltd

rent sharing holdup and wages evidence from matched panel data rent sharing by workers can reduce the incentives for investment if some of the returns to sunk capital are captured in higher wages we propose a simple measure of this holdup effect based on the size of the wage offset for firm specific capital accumulation using social security earnings records for workers in the veneto region of italy linked to detailed financial data for their employers we find strong evidence of rent sharing with an elasticity of wages with respect to potential rents per worker of around 4 arising mainly at larger firms with higher price cost margins on the other hand we find little evidence that bargaining lowers the return on investment instead firm level bargaining appears to split the rents after deducting the full cost of capital

gibrat s law and diversification this article presents an analysis of the growth patterns of the worldwide top 200 firms in the pharmaceutical industry a test of the gibrat s law of proportionate effect is performed and we find in line with previous literature a violation concerning the variance of growth using disaggregated data on sub markets we are however able to show that this violation can be completely accounted for by a diversification effect namely a scale relation between the number of sub markets in which a firm is active and its size to interpret these findings we propose a stochastic branching model of firm diversification consistent with a notion of cumulative corporate competences

effective tax rates in macroeconomics cross country estimates of tax rates on factor incomes and consumption abstract this paper proposes a method for computing tax rates using national accounts and revenue statistics using this method we construct time series of tax rates for large industrial countries the method identifies the revenue raised by different taxes at the general government level and defines aggregate measures of the corresponding tax bases this method yields estimates of effective tax rates on factor incomes and consumption consistent with the tax distortions faced by a representative agent in a general equilibrium framework these tax rates compare favorably with existing estimates of marginal tax rates and highlight important international differences in tax policy

early life cycle behaviour of micro firms in scotland the paper reports on the behaviour of young less than three years old micro firms less than ten employees in scotland with an emphasis on life cycle effects two main tests were carried out the first took gibrat s law that growth is independent of size as the null hypothesis and a life cycle effects model as the alternative the gibrat s law model was rejected in favour of the life cycle model smaller micro firms grow faster than larger micro firms robust nonlinear variants of the life cycle model were discussed and shown to display stable equilibrium characteristics which were consistent with the sample evidence the second took a classical simultaneous equations model as the null hypothesis for which growth and profitability were mutually reinforcing a managerial model was set up as the alternative for which growth and profitability were in a trade off relationship the classical model was rejected in favour of the managerial in the short run young micro firms experience a trade off between profitability and growth the managerial model was shown to imply a stable equilibrium with characteristics consistent with sample evidence

why are distributions of firm growth rates tent shaped abstract recent empirical analyses on different datasets have revealed a common exponential behavior in the shape of the probability density of the corporate growth rates we present new evidence on this topic from the italian manufacturing industry and propose a very simple mechanism that under rather general assumptions provides a robust explanation for the observed regularities

bargaining structures and delay in innovation it is sometimes argued that fears about the employment consequences of introducing new technology may lead unions to wish to delay innovations and this may reduce incentives for firm to carry out r d we explore these issues in a model of two countries that compete over both market share and r d and we restrict attention to cases where unions would wish to delay innovation we show that allowing unions to bargain over the timing of innovation need not reduce the possibility of a firm successfully competing for r d however simulations suggest that for a particular model allowing unions to delay innovation does not help a firm compete over r d

long term relationships governed by short term contracts this paper studies the effects of contract duration on the incentive to invest in a relationship when its parties are rational and have perfect information and contracts are complete ex cept that short term contracts specify only current period actions t hen short term contracting distorts investment decisions only when t he efficient plan involves mainly sunk cost investment and the relati onship plays a consumption smoothing role there is a general but no t universal tendency to underinvest copyright 1988 by american economic association

short term contracts and long term agency relationships abstract long term contracts are valuable only if optimal contracting requires commitment to a plan today that would not otherwise be adopted tomorrow we show that commitments are unnecessary and hence short term contracts are sufficient if 1 all public information can be used in contracting 2 the agent can acess a bank on equal terms with the principal 3 recontracting takes place with common knowledge about technology and preferences and 4 the frontier of expected utility payoffs generated by the set of incentive compatible contracts is downward sloping at all times

the nature of the agricultural firm abstract models explaining the choice between rent wage and share contracts in agriculture abstract from the large variations within the classes of rent share and owner managed forms of organization regarding the extent to which a specific form accommodates specialization between labor and management as a result modern explanations of agricultural organizations are misleadingly dependent on risk aversion or the assumption that landowners have an absolute advantage in production decisions viewing the agricultural firm as a constitution instead of as a nexus of contracts facilitates an agency explanation of alternative organizational forms and their amenability to specialization

the role of unemployment insurance in an economy with liquidity constraints and moral hazard the potential welfare benefits of unemployment insurance along with the optimal replacement ratio are studied using a quantitative dynamic general equilibrium model to provide a role for unemployment insurance agents in our economy face exogenous idiosyncratic employment shocks and are unable to borrow or insure themselves through private markets in the absence of moral hazard replacement ratios as high as 65 are optimal and the welfare benefits of unemployment insurance are quite large however if there is moral hazard and the replacement ratio is not set optimally but is instead set to an empirically plausible value the economy can be much worse off than it would be without unemployment insurance

moral hazard vs liquidity and optimal unemployment insurance this paper presents new evidence on why unemployment insurance ui benefits affect search behavior and develops a simple method of calculating the welfare gains from ui using this evidence i show that 60 percent of the increase in unemployment durations caused by ui benefits is due to a liquidity effect rather than distortions on marginal incentives to search moral hazard by combining two empirical strategies first i find that increases in benefits have much larger effects on durations for liquidity constrained households second lump sum severance payments increase durations substantially among constrained households i derive a formula for the optimal benefit level that depends only on the reduced form liquidity and moral hazard elasticities the formula implies that the optimal ui benefit level exceeds 50 percent of the wage the exact identification approach to welfare analysis proposed here yields robust optimal policy results because it does not require structural estimation of primitives

explaining the distribution of firm growth rates empirical analyses on aggregated datasets have revealed a common exponential behavior in the shape of the probability density of corporate growth rates we present clear cut evidence on this topic using disaggregated data we explain the observed regularities proposing a model in which firms ability to take up new business opportunities increases with the number of opportunities already exploited a theoretical result is presented for the limiting case in which the number of firms and opportunities go to infinity moreover using simulations we show that even in a small industry the agreement with asymptotic results is almost complete

growth acquisition activity and firm size evidence from the united kingdom this paper provides new empirical evidence on the relationship between size growth and acquisition activity of quoted companies in the united kingdom the evidence is based on some two thousand companies and covers the period i960 76 there has been no detailed systematic study for this period the results suggest some revisions to generally accepted views in the area and they have certain implications for industrial and competition policy pursued in the u k and the factors affecting aggregate concentration the paper is arranged as follows section i considers the broader economic context for the study whilst section ii notes some a priori expectations regarding the relationship between size and growth and size and acquisition activity sections iii v present empirical evidence and the last section provides a summary and policy implications of the results

optimal unemployment insurance in search equilibrium should unemployment benefits be paid indefinitely at a fixed rate or should the rate decline or increase over a worker s unemployment spell we examine these issues using an equilibrium model of search unemployment the model features worker firm bargaining over wages free entry of new jobs and endogenous search effort among the unemployed the main result is that an optimal insurance program implies a declining benefit sequence over the spell of unemployment numerical calibrations of the model suggest that there may be nontrivial welfare gains associated with switching from an optimal uniform benefit structure to an optimally differentiated system

on the survival of contracts assessing the stability of technology licensing agreements in the brazilian seed industry abstract the present study focuses on contract duration as defined ex post meaning that the survival of contractual relationships is observed over time our empirical study employs hazard rate models with time varying covariates using data from technology licensing contracts between seed companies and a governmental rd 2 decrease as a function of past satisfactory outcomes 3 increase with the extent of disturbances affecting the technology s demand and other things being equal 4 increase rather than decrease over time

integration of unemployment insurance with retirement insurance abstract this paper analyzes a social insurance system that integrates unemployment insurance with a pension program allowing workers to borrow against their future wage income to finance consumption during an unemployment episode and thus improving search incentives while reducing the risks arising from unemployment this paper identifies the conditions under which integration improves welfare and the factors which determine the optimal degree of integration we show that when the duration of unemployment is very short compared to the period of employment or retirement the optimal system involves exclusive reliance on pension funded self insurance this system imposes a negligible risk burden for workers while avoiding attenuating search incentives we also argue that joint integration of several social insurance programs with a pension program through an individual account is desirable unless the risks are perfectly correlated with each other

holdups simple contracts and information acquisition abstract in a typical procurement setup several recent papers have shown that when complete contracting is not possible simple noncontingent contracts may suffice to solve the under investment problem this paper points out that a noncontingent contract offer such as a fixed price contract may induce the seller to acquire information on the future course of costs and only to accept the offer if the cost is low it is shown that sometimes the buyer prefers to wait and buy on the spot market than to offer a long term contract when the seller rejects a contract offer or the buyer chooses not to make one the seller will not make efficient investments because he expects to be held up on the spot market

contracting on time the paper shows how the time considerations especially those concerning contract duration affect incomplete contract theory time is not only a dimension along which the relationship unfolds but also a continuous verifiable variable that can be included in contracts we consider a bilateral trade setting where contracting investment trade and renegotiation take place in continuous time we show that efficient investment can be induced either through a sequence of constantly renegotiated fixed term contracts or through a renegotiation proof evergreen contract a perpetual contract that allows unilateral termination with advance notice we provide a detailed analysis of properties of optimal contracts

optimal unemployment insurance this paper considers the design of an optimal unemployment insurance system the problem is modeled as a repeated principalagent problem involving a risk averse agent the unemployed worker and a risk neutral principal which cannot monitor the agent s search effort the optimal long term contract subject to the associated incentive constraints is characterized this contract involves a replacement ratio that decreases throughout the unemployment spell and a wage tax after reemployment that under some mild regularity conditions increases with the lenght of the unemployment spell some numerical results are presented that suggest that the gains from switching to this optimal unemployment insurance scheme could be quite large the performance of this optimal contract is also compared to alternative liquidity provision mechanisms

to invest or screen efficiently a potential conflict in relationships governed by incomplete contracts abstract we consider a dynamic trade relationship where quality is not contractible and potential sellers retain quality relevant private information we show that the presence of an investment technology to improve the incumbent seller s innate quality may impair the efficiency of the screening process if the conflict is effective the buyer has to induce an inefficient screening process or reduce the productivity of the investment technology this conflict suggests that the hold up problem may be more severe than predicted by models of incomplete contracts that assume complete information

can the shadow of the future harm cooperation abstract it is generally thought that in long term relationships high valuations of the future are conducive to cooperation in an intertemporal model of conflict however we demonstrate the possibility of the opposite effect a longer shadow of the future may harm cooperation in particular we show that the degree of inefficiency is positively related to i the agents valuation of the future ii potential growth rates in resources iii the size of initial resource endowments and iv the effectiveness of conflict

long term short term and renegotiation on the value of commitment in contracting spot contracting generally involves efficiency losses relative to long term contracting it is proved here that short term contracting and renegotiation allow to achieve long run efficiency when transfers are not limited objectives are conflicting and no relevant asymmetric information appears at recontracting dates this last assumption excludes adverse selection but not moral hazard when technologies and preferences are time separable copyright 1990 by the econometric society

the effects of unions on research and development an empirical analysis using multi year data a link between unionization and research and development rates research and development expenditures divided by output is tested for in thirteen aggregate canadian industries a balanced panel of thirteen industries covering 1968 to 1986 reveals a negative relationship between industry unionization rates and research and development the results hold when a number of techniques are used to control for unobserved industry heterogeneity and non linear responses to unionization in an industry that moves from the 25th to the 75th percentile of unionization research and development is predicted to fall by about 40 per cent jel classification j51 les effets des syndicats sur l intensite de la recherche et developpement une analyse empirique sur plusieurs annees ce memoire examine le lien entre le degre de syndicalisation et les taux de depenses en recherche et developpement en proportion de la production dans treize industries canadiennes pour ces treize secteurs industriels entre 1968 et 1986 il semble qu il y ait une relation negative entre les taux de syndicalisation et les taux de depenses en recherche et developpement ces resultats sont robustesmeme quand on utilise des techniques pour tenir compte de l heterogeneite des secteurs et des reponses non lineaires a la syndicalisation pour une industrie qui voit son taux de syndicalisation passer du 25e au 75e percentile on prevoit une chute de 40 dans la recherche et developpement

do liquidity constraints matter in explaining firm size and growth some evidence from the italian manufacturing industry the paper investigates whether liquidity constraints affect firm size and growth dynamics using a large longitudinal sample of italian manufacturing firms we run standard panel data gibrat regressions suitably expanded to take into account liquidity constraints proxied by cash flow scaled by firm sales moreover we characterize the statistical properties of fi rms size growth age and scaled cashflow distributions pooled data show that i liquidity constraints engender a negative statistically significant effect on growth once one controls for size ii smaller firms grow more and experience more volatile growth patterns after controlling for liquidity constraints iii the stronger liquidity constraints the more size negatively affects firm growth we find that pooled size distributions depart from log normality and growth rates are well approximated by fat tailed tent shaped laplace densities we also study the evolution of growth size distributions over time our exercises suggest that the strong negative impact of liquidity constraints on firm growth which was present in the pooled sample becomes ambiguous when one disaggregates across years finally firms who were young and strongly liquidity constrained at the beginning of the sample period grew persistently more than those who were old and weakly liquidity constrained

reconciling quantile autoregressions of firm size and variance size scaling the aim of this paper is to understand what economic mechanisms may cause the law of proportionate effect to break down for fast growing and shrinking firms recent evidence has highlighted that the first order coefficients of quantile auto regression of firm size decline across quantiles our theoretical results show that negative variance size scaling is sufficient to yield a decline in quantile auto regression coefficients if firm log size is laplace distributed conditional on size one period ahead however it is sufficient only for declining auto regression coefficients for fast growing firms under asymmetric laplace conditional log size if skewness is decreasing with size in other words if the growth of large firms is less dispersed and more left skewed size is a disadvantage for the growth of fast growers but not necessarily an advantage for fast decliners thus size related determinants of negative growth skewness such as diseconomies of growth market power and managerial attention issues impact on how the lpe is violated using data on dutch manufacturing companies from the business register of enterprises observed between 1994 and 2004 our empirical estimates of quantile regression models confirm the evidence of declining quantile regression coefficients for small medium firms 20 199 employees mainly in the right most quantiles and for the same subsample we find that growth rates variance and skewness are decreasing with size the theoretical propositions of the paper are thus corroborated

short term contracting and strategic oil reserves the effect of short term contracting on resource extraction is studied in a two country model of international trade in oil countries planners are assumed to be fully rational with perfect information and perfect foresight contracts are assumed perfectly enforceable and complete except that short term contracts do not allow commitments to actions taken beyond the contract period we show that short term contracting limits countries opportunities for intertemporal consumption smoothing reducing their collective tolerance for temporal variation in consumption this tends to make them extract more slowly than in the efficient plan that results from long term contracting contractual relationships often outlive the contracts that govern them it is therefore common for a long term relationship to be governed by a sequence of short term contracts when these contracts allow complete control of the organization of the relationship within each contract period any outcome that can be achieved in a long term contract covering the entire life of the relationship is also feasible with a sequence of short term contracts short term contracting can nevertheless have significant effects on resource allocation because each contract must be voluntarily negotiated in the environment created by its predecessors an allocation that is acceptable to both parties as a long term contract might not be voluntarily negotiable as a sequence of short term contracts because short term contracting is so prevalent it is worth asking what sorts of relationship can be organized efficiently only by long term contract and what kinds of distortion are caused by short term contracting two kinds of answers to these questions have been given in the literature one important line of investigation considers the use of memory in contracts designed to control parties incentives under asymmetric information baron and besanko 1985 rubinstein and yaari 1983 sanchez and zapater 1985 stiglitz and weiss 1983 tirole 1986 and townsend 1982 among others have shown how parties can use

firm size and firm growth rate distributions the case of denmark there has been a recent renewed interest in the study of firm size distributions and firm growth rate distributions gibrat s law assumes firm growth rates are independent and identically distributed and that size is determined by a firstorder integrated process leaving the size distribution log normal this article analyzes these distribution patterns in an empirical context questioning the foundation of this model in a cross section analysis of four industries using danish data we show that the foundation and the outcome of gibrat s law are empirically far fetched in particular significant deviations from normality are found

innovation and corporate growth in the evolution of the drug industry abstract this work studies the processes of growth of the worlds top 150 pharmaceutical firms on the grounds of an original database which also allows disaggregate analysis at the level of single therapeutical classes and chemical entities our findings show that the industry whose long term evolution is driven by innovation imitation and permanent creation of new markets displays i fat tails in the distribution of growth shocks present at all levels of aggregation with relatively rare big spurs of growth ii a significant autocorrelation of growth rates iii a fall of variance of growth rates with size entirely dependent on corporate diversification patterns in turn plausibly shaped by the competence scope of each firm and iv different lifecycles of diverse types of products and persistent forms of heterogeneity across firms in terms of innovative output which however do not not seem to affect comparative growth performances

unionization incomplete contracting and capital investment this article examines empirically the hypothesis that incomplete contracts and resulting opportunistic behavior over the return to sunk assets reduces investment union firm contracts are incomplete because they 1 do not prevent all actions aimed at changing the existing contract 2 cover a relatively short time period and 3 do not extend to union members yet to be hired the primary response of firms is to reduce investment in specific durable assets and also to reduce employment growth and increase debt the authors find fairly strong evidence of these effects in a sample of large publicly traded firms using firm specific measures of unionization copyright 1993 by university of chicago press

licensing duration in foreign markets a real options perspective licensing can be considered an initial trial of a foreign market before a firm fully commits to it through other investment modes the length of trial has great importance because licensing duration represents part of the licensing agreement when it is too short the firm may not acquire the necessary experience and knowledge of the foreign market but if it is too long the firm misses optimal expansion timing arguing that licensing can be considered as a european style real option with a fixed holding period we develop and test a model of the determinants of licensing duration in foreign markets empirical results based on a sample of firms in various countries show that uncertainty and threat of competitive pre emption in the foreign market are related to shorter duration of the technology licensing agreements we also find that irreversibility of the impending investment moderates the relationships between uncertainty and duration specifically market and technology uncertainties in the foreign market induce shorter contracts under low levels of irreversibility

optimal life cycle unemployment insurance we argue that us welfare would rise if unemployment insurance were to be increased for young workers and decreased for old this is because young workers have little means to smooth consumption during unemployment and want jobs to accumulate high return human capital so unemployment insurance is highly valuable to them while the induced moral hazard problem is mild we consider a life cycle model with unemployment risk and endogenous search eort that we calibrate to match us labor market institutions we nd that allowing unemployment replacement rates and other government transfers to decline with age yields sizeable welfare gains which amount to around two thirds of the gains attained under the constrained optimal scheme for unemployment insurance over the life cycle

defending gibrat s law as a long run regularity according to gibrat s law of proportionate effect the growth rate of a given firm is independent of its size at the beginning of the period examined while earlier studies tended to confirm the law more recent research generally rejects it this article reconciles these two streams of literature taking into account the role of market selection and learning in reshaping a given population of firms through time consistently with previous studies we find that gibrat s law has to be rejected ex ante since smaller firms tend to grow faster than their larger counterparts however a significant convergence toward gibrat like behavior can be detected ex post this finding is an indication that market selection cleans the original population of firms so that the resulting industrial core does not depart from a gibrat like pattern of growth from a theoretical point of view this result is consistent with those models based on passive and active learning and can be seen as a defense of the validity of the law in the long run

human capital and earnings distribution dynamics abstract earnings heterogeneity plays a crucial role in modern macroeconomics we document that mean earnings and measures of earnings dispersion and skewness all increase in us data over most of the working life cycle for a typical cohort as the cohort ages we show that i a human capital model can replicate these properties from the right distribution of initial human capital and learning ability ii differences in learning ability are essential to produce an increase in earnings dispersion over the life cycle and iii differences in learning ability account for the bulk of the variation in the present value of earnings across agents these findings emphasize the need to further understand the role and origins of initial conditions

does the alternative investment market nurture firm growth a comparison between listed and private companies the creation of stock market segments with low admission requirements was welcomed in the 1990s as an essential move to release small and medium sized enterprises from their dependency on banks for external funding thereby removing the financial barriers that hinder their growth and competitiveness but does easier access to public equity really translate into superior real performance we explore this issue by focusing on the alternative investment market aim a junior segment of the london stock exchange that has experienced long lasting growth in capitalization

food price policy the rationale for government intervention abstract policy makers in the most successful developing countries have not accepted either of the two major schools of thought on food price policy the neo classical school favours free trade to maximize efficiency of resource allocation the structuralist school favours interventions to satisfy goals for income distribution especially in the rapidly growing rice based economies of asia policy makers have been more concerned about stability of domestic prices than their level relative to world prices this concern traditionally dismissed by economists as purely political is justified on economic grounds because of improved macroeconomic and dynamic efficiency from stable food prices the paper identifies both the benefits from food price stability and the costs of achieving it

opportunism and the dynamics of incomplete contracts this paper studies a buyer seller relationship where quality is not contractible but is affected by effort and the seller s privately known innate value the seller s cost of effort is also private knowledge assuming constant outside opportunities we show that more than two contracts is redundant the sequence of contracts exhibits increasing prices and durations and commitments for prices beyond the actual contract invite opportunism not effort the seller uses effort during the screening process which improves noncontractible quality as a result type related information may have negative value when contracts are incomplete copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

invariances and diversities in the evolution of manufacturing industries this work explores and compares some basic properties of corporate growth process at both aggregate manufacturing level and disaggregated sectoral levels using an extensive dataset on italian manufacturing firms we investigate which properties of firm growth dynamics are robust under disaggregation we compare the results obtained with three different definitions of firm size namely total sales number of employees and value added our analysis suggests that while different sectors are characterized by significant differences in firm size distributions in the degrees of concentration and in the autoregressive structure of the growth processes there are also regularities which hold across all of them such as the approximate unit root nature of the growth process and the power exponential shape of the growth rates density together these stylized facts suggest challenging puzzles on the drivers of corporate growth and the resulting industrial structures