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

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

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

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

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

the exchange rate and company failure in a macro micro model of the uk company sector a macro micro model is presented which is used to predict company failure it bridges the gap between previous macroeconomic models and the microeconomic approach to company failure in the finance literature it can trace the probable effects of exogenous macroeconomic shocks upon the finances and the viability of individual members of the company sector a series of simulation exercises using this model quantifies the impact of variations in the exchange rate upon the failure rate among the top one hundred u k companies this impact is shown to be substantial asymmetric and at times nonlinear copyright 1991 by royal economic society

technology intensity and agglomeration economies abstract this article investigates the relationship between industry technology intensity and the impacts of agglomeration economies on industrial growth many recent studies suggest the actual economic impacts of different forms of agglomeration economies depend on industrial characteristics such as technology intensity but systematic empirical evidence is still lacking to fill this gap we analyze employment data covering all 3 digit naics industries of u s counties the results confirm that technology intensive industries are more likely to benefit from jacobs spillovers as measured by related variety while sectors with low technology intensities can better benefit from mar spillovers as measured by regional specialization

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

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

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

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

a qualitative study of managerial challenges facing small business geographic expansion abstract geographic expansion is a common growth strategy used by small entrepreneurial firms yet despite the importance of geographic expansion as a growth strategy it is a neglected area of small business research to date research in the area of small business growth has focused on broad issues such as the common obstacles to firm growth and the relationship between firm growth and firm profitability whereas this literature is suggestive it does not provide specific prescriptive advice to small business managers pursuing geographic expansion as a growth strategy as a first step in generating prescriptive advice in this area this study examined the managerial challenges that faced one small firm during the early stages of its efforts to expand geographically the subject organization referred to as the local advertising company lac operated in a single location from 1968 to 1990 as a means to initiate firm growth the owners of the company opened eight new locations in 1991 and eight more in 1992 however problems ensued this study used a qualitative research methodology to conduct an assessment of the managerial challenges facing the lac during its geographic expansion effort seventeen key employees of lac were interviewed for the study the qualitative case study methodology used provided an opportunity to gather in depth information from informants regarding their individual assessment of the managerial challenges encountered by lac during its geographic expansion collectively the respondents identified a number of specific management issues that became problematic during lac s geographic expansion effort through a content analysis technique these issues were organized into 15 thematic categories including training recruitment and selection the relationship between the field staff and the original owners and 12 others each of these categories represents the separate managerial challenges faced by the company during its geographic expansion the study provides a descriptive analysis of each of the 15 categories of managerial challenges that emerged the research results suggest that the successful management of a geographic expansion growth strategy requires managers to deal with a unique set of issues for example the training of new employees may become problematic when the most experienced personnel in the firm reside in the home office and the new trainees are located in widely dispersed geographic locations in addition the results of the study provide an extension to both practical and theoretical knowledge in three distinct areas planning for growth managing growth and the reasons for growth first the results of the study support the importance of planning for growth but suggest that planning must be complemented by learning and a willingness to evolve one s plan as growth progresses in terms of the management of growth the case shows that running a small business and growing a small business do not include the same skill set the owners of lac had been quite successful managing their single location for 22 years however this ability to run a business did not complement the need to anticipate start up problems in new remote sites which is inherent in a strategy of geographic expansion in addition the case demonstrated that the management of growth requires a cognizance on the part of the original owners of a firm to delegate control finally with regard to the reasons for growth researchers generally characterize firm growth as being motivated by either economic e g economies of scale or emotional reasons e g employing family members the owners of lac initiated firm growth for the purpose of wealth creation to fund their retirements this illustrates that firm growth can be motivated by a combination of both economic e g wealth creation and personal e g retirement security reasons

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

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

macroeconomic forecasting and structural change the aim of this paper is to assess whether explicitly modeling structural change increases the accuracy of macroeconomic forecasts we produce real time out of sample forecasts for inflation the unemployment rate and the interest rate using a time varying coefficients var with stochastic volatility tv var for the us the model generates accurate predictions for the three variables in particular for inflation the tv var outperforms in terms of mean square forecast error all the competing models fixed coefficients vars time varying ars and the na ove random walk model these results are also shown to hold over the period commonly referred to as the great moderation

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

forecast comparisons in unstable environments we propose new methods for comparing the out of sample forecasting performance of two competing models in the presence of possible instabilities the main idea is to develop a measure of the relative local forecasting performance for the two models and to investigate its stability over time by means of statistical tests we propose two tests the fluctuation test and the one time reversal test that analyze the evolution of the models relative performance over historical samples in contrast to previous approaches to forecast comparison which are based on measures of global performance we focus on the entire time path of the models relative performance which may contain useful information that is lost when looking for the model that forecasts best on average we apply our tests to the analysis of the time variation in the out of sample forecasting performance of monetary models of exchange rate determination relative to the random walk copyright 2010 john wiley sons ltd

sectoral patterns of technical change towards a taxonomy and a theory abstract the purpose of the paper is to describe and explain sectoral patterns of technical change as revealed by data on about 2000 significant innovations in britain since 1945 most technological knowledge turns out not to be information that is generally applicable and easily reproducible but specific to firms and applications cumulative in development and varied amongst sectors in source and direction innovating firms principally in electronics and chemicals are relatively big and they develop innovations over a wide range of specific product groups within their principal sector but relatively few outside firms principally in mechanical and instrument engineering are relatively small and specialised and they exist in symbiosis with large firms in scale intensive sectors like metal manufacture and vehicles who make a significant contribution to their own process technology in textile firms on the other hand most process innovations come from suppliers these characteristics and variations can be classified in a three part taxonomy based on firms 1 supplier dominated 2 production intensive 3 science based they can be explained by sources of technology requirements of users and possibilities for appropriation this explanation has implications for our understanding of the sources and directions of technical change firms diversification behaviour the dynamic relationship between technology and industrial structure and the formation of technological skills and advantages at the level of the firm the region and the country

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

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

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

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

inverted u relationship between r d intensity and survival evidence on scale and complementarity effects in uk data existing evidence on the relationship between rd ii rd and iii creative destruction as proxied by median r d intensity in the industry and the premium on business lending have negative effects on firm survival other findings concerning age size productivity relative growth pavitt technology classes and the macroeconomic environment are in line with the existing literature the results are strongly or moderately robust to different samples stepwise estimations and controls for frailty and left truncation

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

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

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

competition imitation and growth with step by step innovation is more intense product market competition and imitation good or bad for growth this question is addressed in the context of an endogenous growth model with step by step innovations in which technological laggards must first catch up with the leading edge technology before battling for technological leadership in the future in contrast to earlier schumpeterian models in which innovations are always made by outsider firms who earn no rents if they fail to innovate and become monopolies if they do innovate here we find first that the usual schumpeterian effect of more intense product market competition pmc is almost always outweighed by the increased incentive for firms to innovate in order to escape competition so that pmc has a positive effect on growth second that a little imitation is almost always growth enhancing as it promotes more frequent neck and neck competition but too much imitation is unambiguously growth reducing the model thus points to complementary roles for competition anti trust policy and patent policy

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

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

the survival of new plants start up conditions and post entry evolution abstract this paper examines the longevity of entrants we find size to be an important determinant of the chances of survival this being particularly relevant to de novo entrants as compared with entry by established firms current size is also found to be a better predictor of failure than initial size moreover our findings indicate that after controlling for size differences past growth matters for survival suggesting a partial adjustment process for firm size in the post entry period finally new plants are more likely to live longer if they enter growing industries or industries with little entry activity

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

high tech start up firm survival originating from a combined use of internal resources although various streams in the existing literature on the resource based view rbv of the firm argue that firm survival and performance can benefit from a combined use of internal resources relatively limited empirical evidence is provided that supports this argument to fill this gap in the literature in this article we focus on how combinations of internal resources affect the survival chance of technology based start ups by using a unique dataset from a high tech park in beijing china empirical results show that firms interconnected internal resources exert a significant influence on these firms survival chance our findings imply that the survival of new technology based start ups benefits from the synergetic effect of combining resources in detail the data support the hypothesis that the combined use of r d resources internal financial resources and scientifically skilled employees as posited by the rbv has an amplifying effect on the chances to survive of high tech start ups

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

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

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

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

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

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

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

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

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

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

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

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

dynamic factor model with infinite dimensional factor space forecasting abstract the paper compares the pseudo real time forecasting performance of threedynamic factor models i the standard principal component model stock and watson 2002a ii the model based on generalized principal components forni et al 2005 iii the model recently proposed in forni et al 2015 and forni et al 2016 we employa large monthly dataset of macroeconomic and financial time series for the us economy which includes the great moderation the great recession and the subsequent recovery using a rolling window for estimation and prediction we find that iii neatly outperforms i and ii in the great moderation period for both industrial production and inflation and for inflation over the full sample however iii is outperfomed by i and ii over thefull sample for industrial production

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

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

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

the post entry performance of new small firms in german manufacturing industries while recent years have witnessed a growing interest in research on market entry by new firms evidence regarding their postentry performance is scarce this paper uses longitudinal data for small firms that entered german manufacturing industries between 1979 and 1982 and monitors their performance until 1990 entrants face a high risk of failure hazard rates tend to increase during the first years and to decrease afterwards decline of employment in a cohort due to exits and shrinking firms is compensated by growing survivors no clear cut nexus between start up size and probability of survival shows up copyright 1994 by blackwell publishing ltd

an analysis of new firm survival using a hazard function a unique data set is used to provide a detailed examination of the survival of newly established manufacturing firms in north east england using data on 781 firms established between 1973 and 2001 log logistic hazard models are estimated separately for i micro enterprises and ii small and medium establishments smes both micro enterprises and smes show clear evidence of positive duration dependence followed by negative duration dependence we find the two firm types are differentially affected by firm specific and macro economic variables increases in initial plant size impact negatively on micro enterprise survival and positively on sme survival

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

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

does entry size matter the impact of the life cycle and technology on firm survival a wave of empirical studies has recently emerged showing that smaller scale entry is confronted with a lower likelihood of survival than their larger counterparts the purpose of this paper is to examine whether the relationship between size of a firm when entering an industry and the likelihood of survival holds under different technological conditions and across the different stages of the industry life cycle the empirical evidence suggests that the relationship between firm size and the likelihood of survival is shaped by technology and the stage of the industry life cycle while the likelihood of survival confronting small entrants is generally less than that confronting their larger counterparts the relationship does not hold for mature stages of the product life cycle or in technologically intensive products in mature industries that are still technologically intensive entry may be less about radical innovation and possibly more about filling strategic niches thus negating the impact of entry size on the likelihood of survival

innovation and employment a reinvestigation using revised pavitt classes the relationship between innovation and employment is addressed in this article through a model and empirical test at industry level for eight european countries in 1994 2004 we investigate this relationship for manufacturing and services and propose a revised pavitt taxonomy covering both of them in order to identify specific patterns of technological change and job creation and loss the contrasting effects of strategies of technological or cost competitiveness are investigated using innovation variables from cis2 and cis3 together with demand wages and industry dynamics they account for changes in employees and hours worked the diversity in these relations across industries is also explored when the model is applied to each revised pavitt class different mechanisms of technological change and effects on jobs emerge

brazil s simplified tax regime and the longevity of brazilian manufacturing companies a survival analysis based on rais microdata abstract the article aims to analyze the effects of the brazilian simplified tax regime simples nacional on the longevity of manufacturing microenterprises contributing to the current debate on the expansion of the program based on the rais relacao anual de informacoes sociais microdata comprising the period between 2007 2013 a sample of manufacturing establishments homogeneous in their economic structure was selected and divided into two groups those who opted for the program and those who did not the survival analysis technique and the propensity score matching made it possible to identify that the establishments opting for simples nacional that were created in 2007 had a 30 lower chance of mortality than the companies not opting for it another main result was the indication that separating manufacturing establishments by level of technology intensiveness the simplified regime had a differentiated impact among the groups with only the manufacturing establishments of low and medium low technology intensiveness sectors being affected

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

survival of newly founded businesses a log logistic model approach based on a longitudinal database we test the liability of adolescence hypothesis which states that new firm hazard rates follow an inverted u shaped pattern that is the hazard rate is low for the initial period the end of adolescence is marked by a hazard maximum from which the rate declines monotonically we use a log logistic model which shows that the liability of adolescence argument describes the hazard rates of new establishments for all two and three digit industries fairly well further the rate shows that the desegregation of industries matters and considerable differences are found within and across two and three digit low moderate and high tech industries in assessing the effect of market environment conditions on risk we find that risk to be elevated in a relatively large number of two digit low and high tech industries in the presence of scale economies but it is substantially reduced in moderate tech industries by contrast the hazard rate tends to be reduced for quite a large number of three digit low moderate and high tech industries in comparison with the two digit industries indicating a longer adolescence the influence of start up size in reducing the hazard rate is apparently similar between two and three digit low moderate and high tech industries the impact of market growth on the risk of failure is not much different for both two and three digit low moderate and high tech industries

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

new firm survival new results using a hazard function a limitation of audretsch s 1991 study of new firm survival was the level of aggregation to industries this precluded linking establishment specific characteristics such as organizational structure and size to post entry performance the purpose of this paper is to relate the post entry performance of individual establishments not only to their technological and market structure environments but also to establishment specific characteristics we do this by estimating a hazard duration function for more than 12 000 individual establishments in u s manufacturing started in 1976 by tracking their subsequent performance over a ten year period we conclude that establishment specific characteristics which audretsch was not able to capture in his earlier study play an important role in shaping the exposure to risk confronting new establishments copyright 1995 by mit press

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

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

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

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

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

macroeconomic determinants of corporate failures evidence from the uk previous studies on the relationship between macroeconomic aggregates and business failures have been restricted to the description of the short run relationships among the variables this paper uses an error correction model ecm to investigate the determinants of uk corporate failures by modelling the short run and long run behaviours of corporate failure rates in relation to macroeconomic phenomena over the period 1966 1999 the findings indicate that failure rates are associated with interest rates credit profits price and corporate birth rates both in the short run and in the long run of these macroeconomic variables interest rate appears to be an important factor influencing failure rates and can be used as a feasible policy instrument to reduce the incidence of corporate failures the impact of the insolvency act 1986 has also been examined and its mitigating effect on corporate failures has been identified

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

macroeconomic forecasting using diffusion indexes this article studies forecasting a macroeconomic time series variable using a large number of predictors the predictors are summarized using a small number of indexes constructed by principal component analysis an approximate dynamic factor model serves as the statistical framework for the estimation of the indexes and construction of the forecasts the method is used to construct 6 12 and 24 monthahead forecasts for eight monthly u s macroeconomic time series using 215 predictors in simulated real time from 1970 through 1998 during this sample period these new forecasts outperformed univariate autoregressions small vector autoregressions and leading indicator models