dynamic market models in industrial organization abstract this paper surveys empirical work done on dynamic models of market performance these fall into one of two categories structural models which model how market structure and performance change in response to entry and reduced form models which describe change regardless of how it is brought about a typical example of each type of model is chosen from the literature and simulations are used to draw out the implications of the estimated coefficients both models depict the competitive process in the us economy as being extremely slow

history friendly models of industry evolution the computer industry the model presented in this paper is the first of a new generation of evolutionary economic models history friendly models history friendly models are formal models that aim to capture in stylized form qualitative and appreciative theories about the mechanisms and factors affecting industry evolution technological advance and institutional change put forth by empirical scholars of industrial economics technological change business organization and strategy and other social scientists in this paper we have analyzed the long term evolution of the computer industry in particular we have examined the emergence of a dominant firm in mainframes the introduction of a major innovation microprocessor the opening up of a new market segment personal computers ad the competition there between newcomers and diversified old established firms we have taken a body of verbal appreciative theorizing developed a formal representation of that theory and found that the formal version of that theory is consistent and capable of generating the stylized facts the appreciative theory purports to explain going through this analytic exercise has significantly sharpened our theoretical understanding of the key factors behind salient aspects of the evolution of the computer industry copyright 1999 by oxford university press

decomposing learning by doing in new plants the paper examines learning by doing in the context of a production function in which the other arguments are labor human capital physical capital and vintage as a proxy for embodied technical c

a mismatch made in heaven a hedonic analysis of overeducation and undereducation in this paper a hedonic pairing process is modeled in which some workers may be overeducated or undereducated as an equilibrium outcome of a dynamic labor market undereducated workers are those whose abilities and training permit them to move into a job with higher qualifications whereas overeducated workers are highly qualified workers who select into lower skill entry level jobs that provide the training or signal necessary for promotion the empirical model shows that these pairing types cannot be directly identified in a cross section since all workers are exactly educated during a portion of their career however pairing types may be imputed by comparing predicted and observed qualifications of the worker and predicted and observed requirements of the firm using a rich cross section and a panel of british working age males to identify the pairing types we confirm the predicted career development patterns with regard to on the job training promotion and wages

advertising sunk costs and barriers to entry this paper tests hypotheses about the entry deterring effects of advertising the model isolates three separate effects of advertising on entry the effect on the irrecoverable costs of entry the effect on the uncertainty underlying the entry environment and the effect on the measured rates of profit we find that advertising impedes entry since necessary advertising expenditures give rise to a sunk cost which raises the risk of entry however we also find a countervailing force due to advertising in that the entrant perceives a greater likelihood of success in markets where advertising is important our analysis shows that the overall impact of advertising on entry is positive

sources procedures and microeconomic effects of innovation fabio arcangeli paul david frank engelman christopher freeman massimo moggi richard nelson luigi orsenigo nathan rosenberg michele salvati g n von tunzelman two anonymous referees and the participants at the meeting of the committee on distribution growth and technical progress of the italian national research council cnr rome november 16 1985 have helped with various redraftings a particularly grateful acknowledgment is for the insightful and patient help of moses abramovitz this work has been undertaken at the science policy research unit spru university of sussex as part of the research program of the designated research centre sponsored by the economic and social research council esrc earlier support to the research that led to this paper by the italian national research council cnr is also gratefully acknowledged the statistical research has been undertaken with the assistance of stephano brioschi ilaria fornari and giovannu prennushi

learning curve spillovers and market performance this paper examines the effect of learning curve spillovers on market structure and performance we derive a simple characterization of the true marginal cost for a broad class of learning curves and use calculated examples to show that spillovers substantially undercut the barriers to entry erected by proprietary learning unlike the case of cost reducing research and development spillovers also tend to improve market performance the increased efficiency of the industrywide reduction process typically outweighs the decrease in firms incentives to reduce costs by expanding output

mismatch in the spanish labor market overeducation the objective of this article is to explain the job match which is assessed by comparing attained education and job required education as reported by workers we frame our empirical work according to the occupational mobility theory using a cross section of workers from a representative survey of the spanish labor force we consider overeducated workers to be those who report that the level of education their jobs require is below the level of education they have attained our results indicate that overeducated workers have less experience decreased on thejob training and higher turnover than other comparable workers we also observe an improvement in the job match over age and mobility

does education expansion increase intergenerational mobility education expansion may lead to over education where the social connections of parents may exert more significant influence on the return to education of children with the assumption of a positive correlation between return on human capital and parental income in the presence of over education we show that i the expansion of education may cause horizontal inequity in education opportunities and inefficiency in human capital accumulation ii the positive correlation between return on human capital and parental income causes a more persistent intergenerational immobility iii an expansion of education especially higher education leads to more persistent intergenerational immobility

determinants of the demand for education in spain the aim of this paper is to estimate an equation for household demand for both secondary and university education using an estimation of the opportunity cost associated with the decision to invest in education limited dependent variable models are applied to the data provided by the family budget survey 1991 for spain the results show that the social and economic status of the family has a comparatively greater impact on household expenditure on secondary education than on university education the opportunity cost is also shown to be a decisive variable in the decision to invest in secondary education although the results are less conclusive in the case of university education

overeducation undereducation and the theory of career mobility the theory of career mobility sicherman and galor journal of political economy 98 1 169 92 1990 claims that wage penalties for overeducated workers are compensated by better promotion prospects sicherman journal of labour economics 9 2 101 22 1991 was able to confirm this theory in an empirical study using panel data however the only retest using panel data so far robst eastern economic journal 21 539 50 1995 produced rather ambiguous results in the present paper random effects models to analyse relative wage growth are estimated using data from the german socio economic panel it is found that overeducated workers in germany have markedly lower relative wage growth rates than adequately educated workers the results cast serious doubt on whether the career mobility model is able to explain overeducation in germany the plausibility of the results is supported by the finding that overeducated workers have less access to formal and informal on the job training which is usually foun

skills mismatch concepts measurement and policy approaches the term skills mismatch is very broad and can relate to many forms of labour market friction including vertical mismatch skill gaps skill shortages field of study horizontal mismatch and skill obsolescence in this paper we provide a clear overview of each concept and discuss the measurement and inter relatedness of different forms of mismatch we present a comprehensive analysis of the current position of the literature on skills mismatch and highlight areas which are relatively underdeveloped and may warrant further research using data from the european skills and jobs survey we assess the incidence of various combinations of skills mismatch across the eu finally we review the european commission s country specific recommendations and find that skills mismatch when referring to underutilized human capital in the form of overeducation and skills underutilization receives little policy attention in cases where skills mismatch forms part of policy recommendations the policy advice is either vague or addresses the areas of mismatch for which there is the least available evidence

overeducation job mobility and earnings mobility among holders of first degrees abstractovereducation has been researched extensively for nearly three decades but some major issues in regard to it are still topics of ongoing debate by using a panel data that combines a survey of two cohorts of israeli first degree holders and data from administrative sources on jobs and wages we examine the contribution of job turnover cognitive abilities and continuing graduate studies to the likelihood of overeducation and wage dynamics the study produces four main findings first rapid job switching makes a negative contribution to the increase in employee s wage and there is a negative correlation between two variables an employee s tenure and the number of past employers in the years after the completion of degree studies and the probability of being overeducated second the contribution of the individual s cognitive abilities and quantitative reasoning skills to the likelihood of becoming overeducated is negative third the wages of overeducated employees are some 11 lower and ris

profit entry and changes in concentration abstract the simultaneity between profit entry and changes in concentration is examined the sample includes 481 observations on 4 digit industries over the years 1972 1977 and 1977 1982 results show that profits respond positively to entry barriers and initial concentration net entry responds positively to initial profits and responds negatively to entry barriers concentration moves toward its steady state level but the rate of adjustment is very slow the competitive process left on its own does not seem to move quickly toward equilibrium

gender wage differentials and educational mismatch an application to the spanish case this article aims to analyse gender wage differentials in spain by taking into account the levels of educational attainment and by studying whether the educational mismatch affects the gender wage gap focusing on returns to education evidence is found on the existence of educational mismatch and on its contribution to determine wages with women suffering greater wage penalties that are associated with educational mismatch furthermore although the gender wage gap is lower for individuals with low educational levels we find that the part of this gap due to differences in returns is greater in this group on the contrary the gender gap is greater among highly educated workers but in this case most of the wage differentials are due to differences in productive characteristics in any case our results suggest that gender wage discrimination tends to be greater for those workers who show educational mismatch

a theory of career mobility this paper analyzes theoretically and empirically the role and significance of occupational mobility in the labor market focusing on individuals careers it provides additional dimensions to the analysis of investment in human capital wage differences across individuals and the relationships among promotions quits and interfirm occupational mobility it is shown that part of the returns to education is in the form of higher probabilities of occupational upgrading within or across firms given an origin occupation schooling increases the likelihood of occupational upgrading furthermore workers who are not promoted despite a high probability of promotion are more likely to quit

graduate overeducation as a sheepskin effect evidence from northern ireland this article examines the nature of graduate overeducation amongst a group of applicants to a graduate conversion programme it was found that while a substantial proportion of earnings differentials were associated with a mismatch between individual skill levels and job requirements wage gaps were still likely to occur should such mismatches be eliminated the evidence suggests that graduate wage levels are heavily related to sheepskin effects associated with the attainment of jobs with graduate level entry requirements these sheepskin effects suggest that the process of job categorization is arbitrary in nature with stated job requirements somewhat independent of actual skill requirements the analysis suggests that graduate overeduction is better understood within the context of both skill and categorization mismatches as opposed to skill matches alone

double penalty in returns to education informality and educational mismatch in the colombian labour market abstractthis article examines the returns to education taking into consideration the existence of educational mismatches in the formal and informal employment of a developing country results show that the returns of surplus required and deficit years of schooling are different in the two sectors moreover they suggest that these returns vary along the wage distribution and that the pattern of variation differs for formal and informal workers in particular informal workers face not only lower returns to their education but suffer a second penalty associated with educational mismatches that puts them at a greater disadvantage compare to their formal counterparts

entry and exit on the competitive fringe microeconomic theories of industry evolution reserve key roles for the entry and exit of firms competitive models of industry supply often assume that individual firms have ushaped long run average cost curves in consequence an industry s output adjustment in movement from one long run equilibrium to another is entirely accomplished through the entry and exit of firms rather than through changes in long run equilibrium output of individual firms in empirical applications the speed of movement to new equilibrium levels of output and price measured by the time it takes for profits to return to competitive levels following a demand shock clearly depends upon the ease of entry and exit however the simplest competitive models have a clear theoretical weakness abundant evidence against u shaped long run average cost curves precludes a simple identification of entry with industry expansion and exit with industry contraction expansion of industry supply can be met either by incumbents or entrants and we have little empirical evidence of the division entry conditions are also a staple of oligopoly and monopoly models potential entry constrains the pricing options open to industry leaders and actual entry of new firms and new products erodes at varying rates the market power of incumbent firms if actual entry responds rapidly to profit opportunities then the persistent exercise of monopoly power will be rare however analyses of monopoly and oligopoly models typically approach entry indirectly by inferring that persistent profit differentials reflect high barriers to entry there are few direct tests of the effects of such barriers on actual entry despite their importance very few empirical studies of entry and exit exist severe data limitations restrict both the number of studies and the scope of extant analyses the research reported in this paper provides measures of entry and exit in 46 food manufacturing industries during the 1976 82 period measures of incidence the number of firms as well as extent the size of firms are provided the analysis also distinguishes between diversified firms and specialist producers entry and exit rates vary considerably across industries and the paper reports the results of statistical analyses that account for industry differences in entry and exit rates by specialist firms

overqualification permanent or transitory this article analyses job mismatches in switzerland based on a subjective measure of overqualification according to job search and job matching theories overqualification is a transitory problem other theories show that overqualification can also be of a permanent nature we test the perpetuity of overeducation using panel data from the first eight waves of the swiss household panel shp covering the period 1999 to 2006 our empirical analysis reveals little evidence for lasting rigidities that would cause permanent job mismatches rather spells of overqualification are relatively short about half of all individuals who were overqualified in a given year had an adequate job match 1 year later while a short duration of overqualification would be consistent with job search and job matching theories our observation that the probability of a job mismatch does not significantly decrease with experience is at odds with these theories our article provides an alternative explanation for this phenomenon

overeducation undereducation and asymmetric information in occupational mobility due to short term asymmetric information overeducated and undereducated workers are shown to have different optimal strategies in seeking upward occupational mobility into their next positions undereducated workers typically have other human capital strengths but these strengths are not marketable to outsiders overeducated workers typically have other human capital weaknesses that are not apparent to outsiders while their excess schooling is marketable in labour markets with dynamic asymmetric information this article presents empirical evidence showing that job tenure increases the probability of upward occupational mobility more if individuals are undereducated moreover the probability of finding upward occupational mobility is increased by overeducated workers engaging in firm switching this article also validates prior empirical studies finding overeducated workers more likely to self report engaging in firm switching activities and more likely to experience upward occupational mobility than o

entry industry growth and the microdynamics of industry supply entry is widely discussed but rarely subjected to empirical study this study develops a competitive theory of entry with primary focus on the relationship between entry and industry growth the main ingredients are adjustment costs to firms already in the industry and the distribution of fixed entry cost to potential entrants the theory suggests sufficient conditions under which the entry rate is an increasing convex function of the industry growth rate a regression model correcting for severe heteroscedasticity is applied to data from swedish manufacturing industries the results are consistent with the theoretical prediction for growth and other key variables expected to influence entry significantly

the evolution of new industries and the determinants of market structure several empirical regularities concerning firm growth rates and industry firm size distributions have been developed by studying primarily mature industries the primary purpose of this article is to bring together and extend empirical regularities on the evolution of new industries and to use these regularities to gain further insight into the forces governing industry evolution to explain these regularities a model is constructed which emphasizes how factors governing the early evolution of industries may shape their market structure at maturity it stresses how chance events and exogenous factors that influence the number of potential entrants to the industry the growth rate of incumbents and the ease of imitation of industry leaders will influence the ultimate number and size distribution of firms in the industry

the impact of surplus schooling on earnings some additional findings this paper examines the impact of overeducation or surplus schooling on earnings overeducated workers are defined as those with educational attainments substantially above the mean for their specific occupations two models are estimated using data from the 1980 census though our models data and measure of overeducation are different from those used by rumberger 1987 our results are similar our results show that overeducated workers often earn less than their adequately educated and undereducated counterparts

overeducation in the labour market abstract this paper presents a review of the literature on overeducation the paper assesses the consistency of overeducation within the context of a number of theoretical frameworks including human capital theory hct and assignment theory the analysis goes on to discuss the various measurement controversies associated with the study of overeducation in order to provide an assessment of the extent to which the impacts of the phenomenon represent an economic reality as opposed to a statistical artefact after reviewing the literature it is concluded that the impacts of overeducation are likely to be non trivial and that the phenomenon may potentially be costly to individuals and firms as well as the economy more generally the existence of overeducation also raises some doubts with respect to the validity of some of the central assumptions and predictions of hct that are unlikely to be fully explained by gaps in the standard wage equation framework

small firm entry in us manufacturing a cross section empirical analysis examining the entry behavior of small firms is provided in this paper while the authors find that certain traditional market structure characteristics and entry barriers have a strong impact on small firm entry behavior the reliance upon innovative strategy by small firms also explains a significant amount of the variation in the pattern of entry by small firms they conclude that small firm entry is at least partially determined by entry barriers industry specific characteristics facilitating retaliatory conduct by incumbent firms and the reliance upon innovative strategy by small firms copyright 1989 by the london school of economics and political science

i m too clever for this job a bivariate probit analysis on overeducation and job satisfaction in australia using data from the first wave of the household income and labour dynamics in australia data set this article establishes an empirical relationship between overeducation and workplace satisfaction for australian adult males in the labour force in a departure from much of the existing literature both univariate and bivariate probit models are used to account for potential unobserved heterogeneity we find that estimates in the univariate probit models are positively biased for three of the six measures of workplace satisfaction studied this suggests that consideration should be given to the use of bivariate models when studying the determinants of workplace satisfaction and overeducation results show although levels of satisfaction remain high that across all measures of workplace satisfaction overeducated workers are less satisfied compared to their nonovereducated counterparts this intimates that satisfaction levels should be viewed from a relative rather than an absolute perspective pleasure in the job puts perfection in the work aristotle 384bc 322bc

the life cycle of the u s tire industry 1 introduction a recent literature has emerged focusing on industry evolution or the dynamic patterns that industries and firms follow as they systematically evolve over time this literature is important because of the insights provided about how industries change why they change and the consequences of industrial change the year 1982 saw three fundamental contributions made to the research on the evolution of industry boyan jovanovic published the first formal model of industry evolution richard nelson and sidney winter presented their influential book on the causes and effects of this phenomenon and michael gort and steven klepper published their careful analysis of the stages of the product life cycle knowledge concerning industry dynamics and industry evolution has expanded since then despite this progress in the field of industry evolution considerable gaps remain for example we lack an adequate empirical understanding of the evolutionary process at the single industry level from the early to the late stages of its life cycle shakeouts have been identified in the literature as an integral component of this evolutionary process the sudden disappearance of large numbers of firms have been documented across a broad spectrum of industries such as steel airline carriers financial intermediaries automobiles and tires an important strand in the literature argues that the catalyst for these shakeouts is the introduction of a new dominant innovation confronted by a new technology introduced by a competitor the inability of other firms to adopt this new dominant technology presumably forces them out of the market jovanovic and macdonald 1994 made a pioneering and parsimonious contribution in this field of research by explaining patterns of number of firms output and prices of the u s tire industry despite the importance of their contribution we argue that their model does not adequately describe the key historic developments that have taken place in this or many other industries that faced a shakeout of producers 2 the domain of relevance of the jovanovic macdonald model is limited it assumes that one innovation followed by just one refinement is responsible for the nonmonotonicity in firm numbers this implies that the model is applicable only for those industries having experienced just two technologies in their entire history an initial low tech and a subsequent high tech phase most industries including the automobile tire industry that was the testing ground of jovanovic and macdonald have an ongoing history of significant improvements in product quality and productivity it seldom occurs that one innovation is dominant this is certainly true for the tire industry nelson 1987 in his study on the u s tire industry observed that there was no single technical breakthrough that unlocked the industry s potential for highspeed production nor was any individual or firm of overriding importance the advent of mass production was a cumulative process resulting from a vast number of successive small changes pp 331 2 italics added almost half a century ago reynolds 1938 p 463 described a similar process the great improvement in tire quality during the past 30 years is undoubtedly due to constant repetition of the cycle of invention and imitation we take a different approach than jovanovic and macdonald and explain the nonmonitonicity in firm numbers as resulting from gradual unit cost reduction over time leading to declining profit margins in the present paper we relate this cumulative process to the concept of learning by doing we will test the model using data of the american tire industry we do this to facilitate the comparison between our model and that of jovanovic and macdonald and because this industry is one of the few for which data are available for a long time period the process of learning by doing leading to decreasing marginal costs over time has an important impact on the number of firms in the industry

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

is there a genuine under utilization of skills amongst the over qualified two theories of over qualification are considered namely mismatch whereby workers do not find the most appropriate jobs for their skills because of imperfect information or labour market rigidities and heterogeneous workers whereby individuals with the same qualifications have different actual skill levels so that they can be over qualified in terms of formal qualifications while their skills are actually appropriate for the jobs that they do the evidence suggests that both theories are relevant in certain situations

youth labour markets in spain education training and crowding out abstract the stylised facts describing the poor performance of the youth labour market in spain over the last two decades entailing high unemployment rates for both higher and lower educated workers over education and low intensity of on the job training are explained through a simple matching model where higher educated workers crowd out lower educated ones from their traditional entry jobs in this model a combination of rigid labour market institutions and an increase in the relative supply of higher educated workers harms the training prospects of lower educated workers

the effects of japanese interventions on fx forecast heterogeneity we investigate the determinants of forecast heterogeneity in the jpy usd market using panel data from consensus economics we find that past exchange rate volatility increases forecast dispersion while foreign exchange intervention of the japanese ministry of finance dampens expectation heterogeneity

the dynamics of company profits an international comparison 1 profits and the process of competition dennis c mueller 2 modelling persistent profitability paul a geroski 3 the persistence of profits in the united states dennis c mueller 4 the persistence of profits in us manufacturing industries ioannis kessides 5 the persistence of profitability in canada r shyam khemani and d m shapiro 6 persistence of corporate profits in the federal republic of germany joachim schwalbach and talat mahmood 7 the persistence of profits in france frederic jenny and andre paul weber 8 the persistence of profits in japan hiroyuki odagiri and hideki yamawaki 9 the persistence of profits in the uk john cubbin and paul a geroski 10 the persistence of profits international comparison hiroyuki odagiri and hideki yamawaki 11 the persistence of profits in perspective paul a geroski and dennis c mueller