inventory investment and asymmetric adjustment some evidence for the uk abstract there is now a plethora of non linear time series models of output over the business cycle and considerable empirical evidence that there are key non linear poorly understood mechanisms at work though they account for a small part of the total flow of national income inventories play a disproportionately large role in fluctuations in output it would seem natural to try to determine what role inventories play in the non linear behaviour of the business cycle the first question is are there economic models of firm behaviour suggesting that the movement of inventories over the business cycle is non linear the second issue is whether we can detect such non linearity in the data in this paper we use data on the aggregate behaviour of uk manufacturing but disaggregated according to the stage of fabrication we find that the asymmetric adjustment of inventories varies with the stage of fabrication

inventory dynamics and business cycles what has changed to what extent can information technology led improvements in inventory management account for the apparent moderation of economic fluctuations in the united states since the mid 1980s we argue that changes in inventory dynamics played a reinforcing rather than a leading role in the reduction of output volatility since the mid 1980s inventory dynamics have changed in a manner consistent with a faster resolution of inventory imbalances however these changes appear to be a consequence of changes in the response of industry level sales and aggregate economic activity to monetary policy shocks our results suggest that it is the interaction between the changes in inventory behavior at the industry level and the macroeconomic environment where the latter likely includes changes in the conduct of monetary policy and the responses of the economy to policy disturbances rather than any single factor that has contributed importantly to the observed decline in economic volatility

cost reducing and demand creating r d with spillovers this article analyzes r d policies when the returns to cost reducing and demand creating r d are imperfectly appropriable and market structure is endogenous we generalize previous characterizations of appropriability to permit the possibility that own and rival r d are imperfect substitutes we also describe how equilibrium expenditures on process and product r d as well as equilibrium market structure depend on technological opportunities and spillovers in contrast to previous work diminished appropriability does not necessarily reduce r d expenditures for example under some conditions an increase in the extent of process product spillovers will lead to an increase in product process r d we estimate several variants of the model by using manufacturing line of business data and data from a survey of r d executives

the behavior of forward looking firms in the very short run the study develops a theory of very short run forward looking behavior allowing for forward trading and storage of final good and material input production and storage are separable from hedging decisions and depend only upon current forward and cash prices comparative statics are derived regarding production purchases and sales the hypotheses advanced are tested with monthly data pertaining to the u s soybean processing industry results suggest that in short run equilibrium futures prices of the soybean complex have had little influence on crushings or production but they have been important determinants of inventory levels

a note on the econometric use of constant dollar inventory series abstract one dollar of finished goods inventories does not represent the same amount of physical goods as one dollar of sales when department of commerce constant dollar series are used this can cause seriously biased regression estimates

production sales and the change in inventories an identity that doesn t add up we examine two measures of monthly manufacturing production the first is the index of industrial production the second is constructed from the accounting identity that output equals sales plus the change in inventories we show that the means variances and serial correlation coefficients of the log growth rates differ substantially between the two series and the cross correlations are in most cases less than 0 4 a model of classical measurement error indicates that in 15 of 20 two digit industries measurement error accounts for over 35 of the variation in the monthly growth rates of seasonally adjusted industrial production

accounting for output fluctuations in manufacturing there is a substantial body of evidence to the effect that output is more volatile than sales among manufacturing industries numerous explanations have been advanced to account for this excess output volatility some examples are pro cyclical inventory movements induced by a stockout avoidance motive cost and technology shocks and decreasing marginal costs this article assesses the contribution of these different motives to output volatility for six different manufacturing industries linear quadratic models are estimated for each of the industries and then dynamic simulations are employed to determine the volatility of output when one or more of the factors are removed from the model technology shocks provide the most significant contribution to output volatility the stockout avoidance motive is also important cost shocks provide a very small contribution and marginal production costs are increasing at the margin and thus stabilize output it is also shown that output volatility declines when curre

the welfare effects of the introduction of storage this paper examines the welfare effects of introducing storage into a market with stochastic supply in which all agents are competitive profit maximizers with rational expectations these welfare effects are the net result of the initial increase in demand for stock building and the partial and asymmetric reduction in the dispersion of consumption brought about by storage the distributional impacts depend crucially on the information available to producers before storage is introduced the elasticity of supply the specification of the consumption demand curve and the cost of storage

uncertainty over future environmental taxes impact on current investment in resource conservation besides static efficiency properties environmental policies should be evaluated in terms of their longer run impacts on investment and technological change to reduce pollution and degradation of natural resources using a stochastic dynamic programming approach this paper analyzes how uncertainty about a future environmental tax on a polluting input alters investment in resource conservation and how such investment affects future demand for the polluting input the impact on investment depends crucially on price elasticities of demand and on the manner in which investment shifts and rotates the demand schedule for the polluting input in the future the expectation of a higher tax does not necessarily create stronger incentives for investment in resource conservation more uncertainty about future policies does encourage investment if it makes a firm more responsive to future price changes and discourages investment if it makes a firm less responsive to price changes

the mismanaged integration of zaporizhzhya with the world economy implications for regional development in peripheral regions van zon h 1998 the mismanaged integration of zaporizhzhya with the world economy implications for regional development in peripheral regions reg studies 32 607 618 in soviet times zaporizhzhya a major industrial town in south eastern ukraine developed in almost complete isolation from the world economy and world society after the independence of ukraine in 1991 zaporizhzhya endured rapid industrial decline the internationalization that has taken place was mostly confined to markets rather than to productive structures the export base became very weak mainly based on the export of subsidized steel and aluminium this paper analyses the modalities of the integration of zaporizhzhya into the world economy and the impact this had upon endogenous development potential in particular the institutional barriers such as the lack of social capital to zaporizhzhya s beneficial integration into the world economy are considered van zon h 1998 l integration mal dirigee de zaporizhzhya dans l eco

where does an industry locate abstract this paper presents an econometric model of industrial location and estimates the model for two industries in brazil based on a comprehensive data set the model predicts which cities will or will not have the industry and for these cities with the industry what the scale of operation will be the parameters estimated in a full information context represent the technology of production supply of entrepreneurs and equilibrating error in markets the results are strong and very suggestive and the explanatory power of the model is relatively high the results are used to simulate the impact of industry subsidies on locational patterns

assessing the impacts of foreign manufacturing on regional economies the cases of wales scotland and the west midlands brand s hill s and munday m 2000 assessing the impacts of foreign manufacturing on regional economies the cases of wales scotland and the west midlands reg studies 34 343 355 this paper examines the direct and indirect contributions made by foreign manufacturing companies to the regional economies of wales scotland and the west midlands survey data derived from foreign manufacturers in each region were used in conjunction with regional input output tables to assess the comparative contributions of defined foreign and domestically owned sectors to regional value added the analyses are a starting point for the more accurate targeting of regional resources to industry sectors in the respective regional economies brand s hills s et munday m 2000 evaluer les retombees de l industrie etrangere sur les economies regionales etude de cas du pays de galles de l ecosse et des west midlands reg studies 34 343 355 cet article cherche a examiner les roles direct et indirect joue par les en

governing the workplace the workplace and regional development implications of automotive foreign direct investment in hungary swain a 1998 governing the workplace the workplace and regional development implications of automotive direct foreign investment in hungary reg studies 32 653 671 this paper examines the connections that exist between the workplace implications of automotive foreign direct investment in hungary and the unfolding uneven development of capitalism in east central europe it develops a conceptual framework in order to critically analyse the role played by foreign direct investment in the restructuring of the hungarian space economy drawing on ideas about the governance of socio economic systems the paper argues that foreign investments can be conceptualized as a site where the interaction between competing institutions operating at different spatial scales is translated and instantiated in the material and discursive practices which constitute work in this way factory regimes are nested in a web of interactions which govern industrial and regional change this approach is used to analyse the diff

tax versus emissions trading scheme in the long run in this paper we compare the performance of emission taxes and tradable permits under free market entry when firms face idiosyncratic ex ante cost uncertainty we show that under auctioned permits insufficient entry occurs while under a linear emission tax scheme depending on parameters market entry can be either excessive or insufficient our long run analysis thus contrasts with spulber s 1985 equivalence result and also modifies weitzman s result in favor of an ets in that the superiority of a tax over an ets is not guaranteed even when the weitzman condition favors a tax we also show that an ets is superior to a tax scheme when the entry cost is low and the magnitude of uncertainty asymmetric information and the size of the output market are large

localized spillovers in the polish food industry the role of fdi in the development process jensen c 2004 localized spillovers in the polish food industry the role of fdi in the development process reg studies 38 535 550 the paper aims to investigate whether there are spillovers and agglomeration effects in the polish food industry this part of the research focuses on horizontal or inter industry types of spillovers assuming that they may be multidirectional and could be based on any kind of community related to geography industry affiliation and ownership in the transition countries that have opened up to foreign direct investment very recently ownership can be an important determinant of the firm s embeddedness in both local and global networks the study confirms the relevance of all three types of community factors bur raises concerns that foreign investors appear to share their own glocal networks while spillovers among domestic firms are confined to their own and also to highly localized producer communities an f test on the appropriateness of pooling confirms the idea t

are preliminary announcements of the money stock rational forecasts abstract we develop a theoretical framework of analyzing preliminary announcements of economic data and then apply this framework to the money stock we find that preliminary announcements of the money stock are best characterized as measured with classical errors in variables that is the revision is not correlated with the true value of the series the revision is however forecastable using information available at the time of the preliminary announcement our ability to forecast the revision implies that preliminary announcements are not rational estimates of the true money stock

an experiment on spatial competition with endogenous pricing hotelling s 1929 principle of minimum differentiation and the alternative prediction that firms will maximally differentiate from their rivals in order to relax price competition have not been explicitly tested so far we report results from experimental spatial duopolies designed to address this issue the levels of product differentiation observed are systematically lower than predicted in equilibrium under risk neutrality and compatible with risk aversion the observed prices are consistent with collusion attempts our main findings are robust to variations in three experimental conditions automated vs human market sharing rule for ties individual vs collective decision making and even vs odd number of locations

industry equilibrium uncertainty and futures markets abstract this paper studies competitive long run industry equilibrium with uncertainty and futures trading we also provide a long run analysis of futures trading instead of the conventional short run analysis it is shown without using a general equilibrium model that given uncertain demand and risk aversion a bias backwardation or contango arises in long run industry equilibrium given risk neutrality such a bias however disappears we find that the occurrence of the bias depends not only on the existence of a risk premium but also on the length of the period considered each risk averse firm operates at a less efficient scale and moreover an expected spot price never accords with marginal cost when the expected spot price is less than marginal cost the risk averse firm can secure profit by selling futures contracts more than the amount of its output in the presence of production supply uncertainty a risk neutral firm operates with excess capacity under additive risk while the firm operates with proper capacity under multiplicative risk the key lies in whether its average cost curve is shifted by production risk

agglomeration and trade some additional perspectives the form of agglomeration economies those internal to the firm as well as those external to it is reviewed consideration is next given to recent changes in the regional state economies of the us midwest as part of an effort to explore the evolving nature of agglomeration economies particular attention is paid to the changing relationship between the establishment and the firm and to radical developments that have affected the transportation sector the impact of these changes on the nature of interstate trade and on the structure of the metropolitan economy are then examined there follows a discussion of how agglomeration economies are being supplemented and perhaps replaced by less spatially constrained advantages finally certain of the more important implications of these various trends are discussed

economic behavior under temporal uncertainty a considerable amount of research has focused on the effects of uncertainty on economic behavior in the absence of complete risk markets private risk bearing is widely believed to influence economic decisions arrow 1 sandmo 23 chavas 4 dalal 6 and others have investigated the role of uncertainty in resource allocation for example sandmo 23 has proposed a theory of the firm under risk he showed how risk and risk aversion can have a negative effect on production decisions

the differential impact of uncertainty on investment in small and large businesses we study the impact of profit uncertainty on investment and whether or not this response is different in industries that are dominated by small firms versus those that are dominated by relatively larger firms our key findings are that the sign of the investment uncertainty relationship is negative and that the quantitative negative impact is substantially greater in industries dominated by small firms these results are robust to accounting for potential endogeneity of the uncertainty measure alternate procedures for measuring uncertainty and alternate ways of segmenting industries into small and large firm groups

joint production quasi fixed factors of production and investment in finished goods inventories inventory investment has long been an important area of inquiry for empirical work in macroeconomics this is due in large measure to the fact that inventory investment is a major source of fluctuations in aggregate output empirical work on inventories however has been dominated by the use of simple univariate flexible accelerators 1 the major objective of this paper is to propose and test a multivariate flexible accelerator model for inventory investment the model is tested with data on finished goods inventories from the manufacturing sector of the u s economy there are two reasons for undertaking such a task first at a theoretical level a univariate flexible accelerator model asserts that investment in say finished goods inventories is proportional to the gap between the desired and actual stocks of finished goods such a model presumes that decisions by firms on finished goods inventories are made independently of decisions on other stocks but theory suggests that when firms make simultaneous decisions on a variety of stocks which includes not only finished goods but also goods in process inventories the size of the work force etc decisions on finished goods will interact with decisions on

asymmetnc taxation and the theory of the competitive firm under uncertainty this paper examines the implications of the asymmetries in the tax treatment of corporate profits and losses for the theory of the competitive firm under uncertainty it is shown that the tax asymmetry introduces a curvature into the firm s target function which affects its behaviour in the short run in long run industry equilibrium however most of the effects disappear at the firm level but still remain at the industry level

noise a firm made trade barrier abstract a dominant domestic firm confronted by a fringe of risk averse importers achieves higher profits by adopting a volatile price policy than by setting quantity according to the standard marginal condition the fluctuating domestic price is equivalent to a tariff on imports for all intents and purposes the local firm raises its rivals costs

the comparative statics of a competitive industry facing demand uncertainty abstract the comparative statics of a competitive industry under uncertainty with free entry is clarified and extended using the general structure of random demand due to leland 1972 while strong results are obtained for the industry few unambiguous results can be derived for the firm

the resurgence of inventory research what have we learned abstract recent empirical and theoretical research on business inventories is surveyed and critically evaluated while most inventory research has had macroeconomic motivations we focus on its microtheoretic basis and on potential conflicts between theory and evidence the paper asks two principal questions first how can inventories which are allegedly used by firms to stabilize production nonetheless be a destabilizing factor at the macroeconomic level second why if firms are following the production smoothing model is production more variable than sales in many industries we suggest that the so called s s model may help answer both questions

the effects of product price uncertainty on the owner managed firm theory and evidence in this paper we extend the theory of the owner managed firm to incorporate product price uncertainty and we present an empirical test of the model s predictions under product price uncertainty the trade off between leisure and profit faced by an owner manager is combined with the trade off between surety and risk bearing faced by an entrepreneur the firm s owner bears the uninsurable and undiversifiable risk about profit caused by product price uncertainty and as manager supplies the firm a unique labor factor the model predicts that the substitution effect of an increase in risk on the quantity supplied by the firm is negative the income effect of risk reinforces the substitution effect if the entrepreneur s labor supply has a positive wage elasticity but runs counter to and could dominate the substitution effect if the wage elasticity of labor supply for the entrepreneur is sufficiently negative unlike previous research on price uncertainty and the firm this paper presents an empirical test of the model s predictions using data on physicians in solo practice our empirical analysis indicates that although wage elasticities of labor supply for the physician entrepreneurs are negative greater risk leads to a reduction in output these results suggest that the substitution effect is dominant in determining the response to product price uncertainty for the owner managed firms in our sample frank knight 12 gave prominence to the risk bearing role of the entrepreneur who as residual claimant bears the risk associated with a firm s revenue tibor scitovsky 21 later emphasized a different aspect of entrepreneurial activity the trade off confronted by an ownermanager between consumption of leisure and pursuit of profit both models of the entrepreneur are relevant to predicting the behavior of an owner managed firm operating in a risky environment the entrepreneur in such a firm must choose between consuming leisure and supplying labor which provides an uncertain return the random residual of revenue net of payments to other factors

knowledge stocks knowledge flows and innovation evidence from matched patents and innovation panel data successful innovation depends on knowledge technological strategic and market related in this paper we explore the role and interaction of firms existing knowledge stocks and current knowledge flows in shaping innovation success the paper contributes to our understanding of the determinants of firms innovation outputs and provides new information on the relationship between knowledge stocks as measured by patents and innovation output indicators our analysis uses innovation panel data relating to plants internal knowledge creation external knowledge search and innovation outputs firm level patent data is matched with this plant level innovation panel data to provide a measure of firms knowledge stock two substantive conclusions follow first existing knowledge stocks have weak negative rather than positive impacts on firms innovation outputs reflecting potential core rigidities or negative path dependencies rather than the accumulation of competitive advantages second knowledge flows derived from internal investment and external search dominate the effect of existing knowledge stocks on innovation performance both results emphasize the importance of firms knowledge search strategies our results also re emphasize the potential issues which arise when using patents as a measure of innovation

revenue neutral tax policies under price uncertainty reply in their comment on my 1990 article yeh suwanakul and mai extend my analysis which focused attention exclusively on firm output to allow for simultaneous endogeneity of price aggregate output and numbers of firms they show that with downward sloping demand industry output adjusts positively to revenue neutral changes in the marginal rate of taxation this result is significant for two reasons first we are more often interested in predictions about aggregate phenomena than we are in predictions about individual firms indeed firm level predictions are frequently irrefutable since firm data are often unavailable second the authors derive their result under a set of conditions that appear to be more general than those invoked in my 1990 article in particular they circumvent the need to invoke specific assumptions about the nature of firms aversions toward risk i consider this a useful extension and i appreciate the careful scrutiny of my paper

the small world of germany and the durability of national networks the globalization offinancial markets and the concomitant restructuring decisions of firms challenge the historical legacy of national systems of governance german corporate ownership patterns and restructuring events in the 1990 s are examined here in this light the results show that ownership links among german firms constitute a small world that has consequences for understanding mergers and acquisitions ownership links form closely knit clusters offirms that are nonetheless highly connected across the network as a whole restructuring events fall squarely in the center of this structure despite increasing global competition the german small world tends to replicate itself to illustrate this robustness potential disruptions to the observed german network are simulated this simulation shows that the properties of the small world remain intact even when ownership ties are changed these findings suggest that a more global economy in germany need not lead to the dissolution of the ownership structure but rather may be associated with a deepening of network ties

the aggregate effects of risk in the agricultural sector the theory of the firm facing a random output price is extended to include industry equilibrium conditions in a way particularly important for agriculture land prices adjust to maintain industry equilibrium the comparative statics and the effects of policy for the firm are significantly altered the main finding is that risk and other parameter changes are capitalized into the price of land and yield wealth or income effects rather than substitution effects this often simplifies the analysis

rational expectations and the smoothing properties of inventories of finished goods abstract this paper formulates and estimates a dynamic rational expectations equilibrium model of inventories of finished goods and employment of labor the view that the primary role of inventories of finished goods is to act as a buffer stock in the face of fluctuating demand is examined both the model and estimation results indicate that this is the case because of differences in the costs involved for firms in changing their inventory stocks and labor force in addition to providing some new evidence on the behavior of inventories of finished goods and employment the paper illustrates a technology for maximum likelihood estimation of structural parameters under the hypothesis of rational expectations

social times of network spaces network sequences and foreign investment in hungary to model from its inception interenterprise network formation and its interaction with foreign investment across an entire epoch of rapid and profound economic transformation the authors gathered data on the complete ownership histories of 1 696 of the largest hungarian enterprises from 1987 to 2001 they develop a social sequence analysis to identify distinctive pathways whereby firms use network resources to buffer uncertainty hide or restructure assets or gain knowledge and legitimacy during this period networked property grew stabilized and involved a growing proportion of foreign capital cohesive networks of recombinant property were robust and in fact integrated foreign investment although multinationals through their subsidiaries dissolved ties in joint venture arrangements the authors find evidence that they also built durable networks these findings suggest that developing economies do not necessarily face a forced choice between networks of global reach and those of local embedde

risk aversion and technology mix in an electricity market this article analyzes the eff ect of risk and risk aversion on the long term equilibrium technology mix in an electricity market it develops a model where fi rms can invest in baseload plants with a fi xed variable cost and peak plants with a random variable cost and demand for electricity varies over time but is perfectly predictable at equilibrium the electricity price is partly determined by the random variable cost and the returns from the two kinds of plants are negatively correlated when the variable cost of the peak technology is high the return of peak plants is low but the return to baseload plants is high risk averse fi rms reduce the capacity of the riskiest technology and develop the capacity of the other compared to risk neutral fi rms in the particular case where a risk neutral fi rm invests heavily in baseload technology and only sparely in peak capacity a risk averse fi rm would invest less in baseload increase peak capacity and increase total installed capacity

cathedrals in the desert transnationals corporate strategy and locality in wroc aw hardy j 1998 cathedrals in the desert transnationals corporate strategy and locality in wroc aw reg studies 32 639 652 this paper examines the relationship between the strategy and restructuring of transnational corporations patterns of foreign direct investment and the transformation of the regions of east and central europe different views of the impact of foreign direct investment are interrogated by taking a case study approach which focuses on 12 significant brownfield and greenfield investments in the wroc aw region of poland the paper examines the relationship between their mode of entry and institutional engagement economic impacts are explored through looking at both the internal restructuring of firms and the wider linkages created in the local region the paper concludes that whilst the internal impact on individual firms has been marked local linkages are not significant questions are raised about the effects of competition on indigenous firms it is suggested that fdi has

input choices and uncertain demand the theory of the firm under demand uncertainty has to date assumed that the firm s input decisions are unaffected by the stochastic nature of demand this assumption is not usually made explicitly but it is implied by the assumption that the firm s cost function presumably derived by finding the minimum cost combination of inputs for any given level of output is unaffected by the uncertainty however if firms must choose some of their inputs before the uncertainty regarding demand is resolved then different input decisions may involve different levels of risk since firms decisions regarding price and output are affected by demand uncertainty and non linear risk preferences as previous authors have shown it seems reasonable to suspect that their input decisions will also be affected but if input decisions are affected then firms cost functions are not invariant to uncertainty and the results of previous studies must be reexamined three different types of firms are considered in this paper the competitive firm the quantity setting imperfect competitor and the price setting imperfect competitor input decisions of the competitive firm and the quantity setting imperfect competitor are shown to be unaffected by demand uncertainty and hence the assumption of an unchanging cost function is appropriate in these cases for the price setting imperfect competitor however input decisions are influenced by demand uncertainty and an unchanging cost function is therefore not appropriate this case is considered in some detail and conditions under which results can differ from those previously reported in the literature are examined

inventories and the volatility of production a stylized fact associated with inventory behavior is that the variance of production exceeds the variance of sales this paper presents a model of production decisions with demand uncertainty that incorporates no nnegativity constraints on inventories even with no productivity shocks optimal behavior by the firm is consistent with this stylized fact either if demand exhibits positive serial correlation or if the firm can backlog excess demand the reason is that a demand shock affects both the actual inventory level given unchanged production and the desired level production must replenish the stock and adjust to the new desired level copyright 1987 by american economic association

theoretical deliberations on time and space in post socialist transformation altvater e 1998 theoretical deliberations in time and space in post socialist transformation reg studies 32 591 605 this paper considers the spatio temporal dimensions of post socialist transformation it discusses approaches based on modernization and dependency theory and shows that neither modernization an oecd profile nor dependency on the global division of labour are likely outcomes of transformation instead hybrid forms of capitalism are evolving they display different combinations of an extraction and production economy or of arbitrage capitalism based on exploitation of differentials in time and space without taking care of material production processes the trajectory of development depends highly on the management of competitiveness of the place on regulation of competition in the global space and on the organization of the economy of time altvater e 1998 des reflexions theoriques sur le temps et l espace de la transformation post socialiste reg studies 32 591 605 cet art

production smoothing evidence from physical product data we reconsider the paradox that the variance of production often exceeds the variance of shipments a result that casts doubt on the production smoothing model of inventory behavior most studies of production smoothing have analyzed two digit sic dollar value data from commerce department surveys in contrast this paper examines disaggregated physical product data and finds that production is smoother than shipments in about two thirds of the 38 industry or product groupings considered however doubts about the model persist most notably euler equation estimates of the model s cost parameters are usually imprecise and often do not have the signs postulated by production smoothing models

revenue neutral tax policies under price uncertainty comment in an interesting paper in this journal holloway investigated the firm s response to revenue neutral taxation under price uncertainty in his analysis revenue neutral policies adjust simultaneously the marginal tax rate and the level of exemptions while keeping expected tax receipts constant using an assumption of nonincreasing absolute risk aversion he concluded that a reduction in the marginal rate would cause the firm to contract output holloway used the 1986 tax reform act as an example of a revenue neutral policy as a matter of fact the act was intended to be revenue neutral while low

a note on free entry under uncertainty the role of asymmetric information in a model of competing managerial firms i show that the equilibrium number of firms decreases with uncertainty if entry is relatively more costly than monitoring the result adds to the earlier contributions and is consistent with the available evidence

broken symmetry symmetry and price uncertainty or short and long run comparative statics of the competitive firm abstract the notion of broken or hidden symmetry is applied to a long run characterization of a competitive firm operating under price uncertainty the main result of the paper is the restoration of a slutsky type symmetry of the input demand functions within an expected utility framework which does not involve any assumption about risk aversion a second conclusion is that economic relations expressed in terms of relative quantities are essential in the long run comparative statics under price uncertainty

exporting firm and forward markets the multiperiod case abstract we consider a model with a competitive risk averse exporting firm who faces uncertain exchanges rates in a multiperiod analysis the capital stock or fixed input has to be determined at the outset while the variable input labor is chosen optimally at the beginning of each period but before the realization of the exchange rate we show that introducing unbiased currency forward markets decreases the capital labor ratio in all periods we also show that such a firm tends to overhedge compared to the one period cases in some cases the introduction of unbiased forward markets results in higher investments and production in all dates

the impact of a large multinational organization on a small local economy barrow m and hall m 1995 the impact of a large multinational organization on a small local economy reg studies 29 635 653 this paper is based on a research project undertaken for american express a m e x in brighton which aimed to identify the economic impact of american express on the local economy a research methodology is employed which inter alia utilizes concepts drawn from development economics notably economic linkages and enclave development adapted to the requirements of the project we use both quantitative data from the firm s payroll and suppliers databases and interview data from a variety of sources to make a judgement about the impact of the firm upon the locality we find there are both quantitative and qualitative links with the rest of the economy we try to measure both absolute and relative impacts of the firm by making use of different counter factual scenarios we find a generally beneficial effect of the firm upon the locality in contrast to a number of other st

the economic role of commodity storage one of the earliest and most successful exainples of economic policy is the oftquoted biblical account of joseph s interpretation of the pharoah s dream joseph foretold that seven years of abundant harvests would precede seven years of drought and recommended that the pharoah accumulate grain during the good years since that time the central role of storage in stabilising the economy in the face of exogenous disturbances has been obvious but our understanding of the nature of that role has not greatly advanced without divine assistance in forecasting stochastic production the storage decision is considerably more complex than the one joseph faced and the role of storage quite different in fact several commonly held impressions about the role of storage of commodities such as grains are incorrect rather than stabilising production storage actually accentuates its variability rather than causing a mean price preserving decrease or a mean output preserving decrease in the dispersion of price storage generally causes a more complex modification of the distribution of price rather than being most effective at eliminating short falls in consumption storage actually is more effective at eliminating the incidence of exceedingly high consumption in this paper we explore the role of storage in a model where production is stochastic and both production and storage are performed by competitive profitmaximisers who form rational expectations about the returns to their activities we derive the subtle but very important interactions among production price expectations and storage which simpler models cannot capture finally we make a comparative statics assessment of the distributional implications of storage these results while confirming the importance of the specification of the demand function and the supply elasticity identified in recent analytical studies e g wright i979 and newbery and stiglitz i979 are surprisingly favourable to consumers considering the asymmetric nature of the effects of storage on consumption and price storage is simply a productive activity one that transfers a commodity from one period to the next like other forms of production it is costly the total cost of storing an amount st from period t to period t i is as of period t i

quality premiums and the firm s production decision in real world production processes the price taking firm often produces a stream of products having varying quality the firm may have limited control over the quality distribution and may only observe quality after production decisions have been made often the marketplace can and does price output according to quality examples of the situations in question are beef vegetable fruit and flower production diamond mining craft industries and any production process where factory seconds exist another though less apparent example is where there is a minimum quality standard a common practice in the production of branded goods in this case the price for production with quality below the standard is zero while production under uncertainty 3 5 6 10 11 and hedonic pricing 1 8 have received considerable attention the issue of production when faced with a price quality schedule has not in this paper we adapt the stochastic dominance approach 6 430 9 227 to determine the effect of price quality schedule changes on the optimal input choice of the firm these stochastic dominance results are then extended by relaxing some dominance constraints that have little meaning in the context of price schedule dominance then the theory of monotonic functions 2 13 7 197 is applied to study the effect of a global change from a constant price contract to a price quality schedule contract we also consider in detail the impacts of the commonly used minimum quality standard price quality schedule on production the paper is then summarized and conclusions are drawn

the forward looking competitive firm under uncertainty under realistic circumstances forward looking risk averse firms will produce more than risk neutral firms and a mean preserving spread of the price distribution will increase risk averse firms production these results depend on firms realizing that prices of inputs required for production in subsequent periods are contemporaneously correlated with output prices this study rationalizes previously unexplained real world behavior such as the spreading of sales over time and short run production or storage at an expected loss the present findings imply that empirical work should not assume nor should it find a monotonic relationship between output and the level of risk or of risk aversion

an examination on the cost efficiency of the banking industry under multiple output prices uncertainty this article formulates a behavioural model of profit maximization which explicitly incorporates both multiple output prices risk and safety first practice this theoretical model is specifically suitable for investigating financial institutions whose output prices frequently encounter a variety of risks such as loan defaults arrears the sample banks are empirically found to be highly risk averse furthermore risk preferences exert little effect on the technical efficiency estimates whereas the same estimates obtained by the standard fixed effect model under certainty tend to be overestimated evidence is found that a specialized bank offering a single product with a larger scale of production will be preferable in an uncertain atmosphere

central and eastern europe a decade after the fall of state socialism regional dimensions of transition processes following the collapse of state socialism a decade ago central and eastern european countries ceecs opted for democracy and market economy there was a widespread belief that transition to a market economy via neo liberal shock therapy would lead to a quick closure of the wealth gap with the west a decade later however neo liberal expectations of convergence under market conditions never materialized instead new europe has been experiencing fragmentation and growing disparity between west and east and also within the east itself in examining regional patterns and building on the strengths of institutional and radical approaches this article challenges neo liberal accounts of uneven development in eastern europe it argues that diverging economic trajectories should be understood in the light of the structural legacies of both the state socialist and pre socialist past and the way these are exposed to and interact with international political economy

supply response under proportional profits taxation a striking result in the theory of the competitive firm under certainty is the proposition that a proportional profits tax with full offsets for losses will have no impact on optimal output this result does not apply under uncertainty it is shown that under constant or increasing returns to scale a proportional profits tax will yield an unambiguous expansion in output the same result is shown to hold for the more general rank dependent expected utility rdeu model

exchange structures in transition lending and trade relations in chinese business groups the networks of interfirm relations that developed in business groups during economic transition are central to china s reform and are becoming an important part of the country s emergent economic structure using a recent and original data set that includes direct observations of economic choices made by firms the process by which these interfirm lending and trade ties emerged and evolved in the early stages of reform is explored initially information from sources external to the network dominated the formation and direction of exchange relations firms turned to their prior connections took advantage of market position and drew on bureaucratic power to develop alliances over time internal influences gained importance and managers increasingly drew on internal nontrade relations and other indicators inside the business group to identify lending and trade partners the results demonstrate the central but changing role that social relations and environmental cues played in the creation of economic structure during china s transition this study also contributes to an understanding of the processes of organizational adaptation to a major economic transition and interfirm alliance formation more generally the findings reveal that firms select exchange partners of known reputation and solicit relations that reduce uncertainty even when there is a cost involved

on output price uncertainty and the comparative statics of industry equilibrium the analysis of firm response to output price variability has until recently been incomplete due to a failure to consider explicitly the effect of firm response on the attainment of competitive equilibrium at the industry level a recent paper by appelbaum and katz 1 has addressed the issue of industry equilibrium under output price uncertainty they show how the optimal number of firms might change through the process of exit and entry and they characterize the collective influence of firms decisions on expected market price however their analysis focuses on firms with a single stage production process which allows no production flexibility in the form of adjustment of output levels after output price is revealed an earlier paper by hartman 3 has shown that at the firm level the optimal response to output price uncertainty will depend on whether production flexibility exists specifically if firms employ a two stage production process which is characterized by the presence of a quasi fixed factor then firm level output may increase or decrease in response to changes in output price variability even if firms are risk neutral the assumption that production flexibility exists changes those results initially developed by sandmo 7 and applied more recently by appelbaum and katz 1 which are based on a single stage production process this paper provides an extension of the appelbaum and katz analysis to admit production flexibility equivalently it extends the analysis of hartman to consider explicitly the effect of firm response on the attainment of competitive equilibrium at the industry level appelbaum and katz show that for an industry of identical risk averse firms with a singlestage production technology the effect of a mean preserving increase in price uncertainty is to decrease industry output and to raise market price a more recent comment by ishii 5 shows that output per firm will also fall yet none of these authors shows unambiguously whether the number of firms increases or decreases although not explicitly stated the analysis in appelbaum and katz suggests there would be no firm or industry response to a mean preserving change in price spread if firms were risk neutral expected profit maximizers the model employed in this paper is analogous to that of appelbaum and katz with two principal exceptions i here an industry is composed of firms all of which are either risk neutral

imperfect hedging and export production firms engaged in international operations are highly interested in developing ways to protect themselves from exchange rate risk the incentive for risk management comes from the enormous volatility of the floating foreign exchange rates our study shows that an exporting firm can benefit from hedging exchange rate risks even when no perfect hedge is possible since in reality not every currency is traded in a futures market 7 chap 15 the exporting firm uses futures contracts with other underlying assets whose spot prices are highly correlated with the foreign exchange spot rate in the real world hedging must often be accomplished by using futures contracts on different deliverable instruments such hedging may result in imperfect hedging as shown by anderson and danthine 1 eaker and grant 11 dellas and zilberfarb 9 broll wahl and zilcha 6 it has been shown in recent publications 12 8 15 13 23 16 2 14 5 18 22 that an international firm facing exchange rate risk can eliminate this risk altogether if it can use a currency forward market another financial asset or a portfolio of assets which is perfectly correlated to the exchange rate in the absence of such markets the firm can reduce its income risk by engaging in a hedging activity of assets correlated to the foreign exchange recent studies of firm behavior under exchange rate uncertainty examine the influence of futures markets on the export and hedging decision these papers derive two major theorems one is the separation theorem which states that when futures markets exist the firm s export production decision is determined solely by technology and input output prices including the futures prices this result holds if the gain from the futures contract is perfectly correlated with export revenue the other theorem is the full hedging theorem which asserts that with unbiased futures markets the firm completely avoids exchange rate risk by entering into optimum futures contracts

technology transfer and spillovers does local participation with multinationals matter this paper examines the effects on technology transfer and spillovers deriving from ownership sharing of foreign multinational affiliates more specifically we try to answer two questions using unpublished indonesian micro data firstly do establishments with minority and majority ownership differ in terms of productivity levels secondly does the degree of spillover differ with the degree of ownership in the fdi our results show that foreign establishments have comparable high levels of labor productivity and that domestic establishments benefit from spillovers however the degree of foreign ownership does neither affect the level of labor productivity in foreign establishments nor the degree of spillovers

models of the multinational enterprise flexibility is identified as the hallmark of recent modelling of the multinational enterprise the focus on flexibility is a response to the rationalization and restructuring of international business which has occurred since the end of the golden age of western economic growth flexibility has been south in factor markets intermediate product markets and markets for final products it has been sought by both governments and firms flexible firms are attracted to locations with flexible host governments this article contrasts the modern research agenda based on flexibility with the more traditional research agenda which predominates in the literature reviewed by caves 1996

price uncertainty and the price discriminating firm in international trade the firm operating in an uncertain environment was initially analyzed in detail by sandmo 1971 and by leland 1972 since these early papers many extensions to the analysis have been explored by such writers as batra and ullah 1974 mayer 1975 hartman 1976 holthausen 1976 stewart 1978 paroush and kahana 1979 anid katz and paroush 1979 this paper investigates the optimal policy of a pr ice discriminating firm which operates under pr ice uncertainty in one of two markets the main motivation for the analysis comes from the problems of a firm which sells its output both domestically and abroad such a firm often has nearly full information about the domestic market b ut faces uncertainty in foreign markets in particular the firm which has its utility defined over profits denominated in terms of domestic currency will regard the profits on its foreign sales as uncertain given excha nge rate variability even if it has full information about all other conditions in the foreign market hence the paper may be regarded both as an extension to the above mentioned analyses of the firm under uncertainty and as an attempt to throw light on the activities of firms involved in international trade the treatment being essentially of a mricroeconomic nature is clearly different from that of such writers as batra 1 975 and helpman and razin 1979 which are essentially macroeconomic treatments

engineering growth business group structure and firm performance in china s transition economy business groups have received increasing attention from academics interested in interorganizational relations and their impact on firms as part of industrial reform the chinese government began in the mid 1980s to encourage firms to form business groups with structural characteristics that promised to enhance financial performance and productivity using 1988 90 panel data on china s 40 largest business groups and their 535 member firms the study finds that the presence and predominance of interlocking directorates and finance companies in business groups improved the financial performance and productivity of the groups member firms in addition firms in groups with nonhierarchical organizational structures performed better than firms in hierarchical groups suggesting that complete integration into a hierarchical organization is not an optimal strategy

the stylized facts about the behavior of manufacturers inventories and backorders over the business cycle 1959 1980 recent theoretical work has highlighted the role of inventories in propagating business cycles this paper attempts to provide an empirical foundation for current and future research on the role inventories play in business cycles the evidence presented here indicates that inventories and backorders are major variables in predicting output fluctuations further the evidence is that disaggregating inventories by stage of fabrication is important in predicting output in concert with previous findings our results suggest that disaggregated inventories ought to be a component of models of the business cycle

the effects of price uncertainty on the factor choices of the competitive firm it is well known that if the price of a variable factor or of output is uncertain when the level of a quasi fixed factor must be chosen by a competitive firm the profit maximizing allocative choices differ from those made when all prices are fixed at their expected values the expected responses of input levels to price uncertainty depend on the characteristics of the production function but even their signs are difficult to determine empirically as they depend on among other parameters the third derivatives of the production function which are difficult to identify this paper shows that the response of the quasi fixed factor and the expected short run response of the variable factor are directly related to observable characteristics of the input demand and output supply functions but concentration on the responses of individual inputs provides only a partial view of the allocative effects of price uncertainty when the full effects on both factors are considered together both types of price uncertainty induce different biases in expected factor proportions relative to choices under certainty the directions of these biases cannot be inferred from results regarding the sign of the response of either factor viewed in isolation previous studies in this field include sandmo 11 batra and ullah 1 and holthausen 4 who showed that non neutral attitudes toward risk can affect the level of output and the amount of a quasi fixed input chosen by a firm faced with product price uncertainty stewart 12 showed a similar result for factor price uncertainty the above studies all assume explicitly or implicitly 6 4 that there is no reduction in price uncertainty between the time if any separating decisions on different inputs thus the usual distinction between short run and long run allocative decisions is ruled out turnovsky 13 showed that this assumption is crucial using a model which maintained an alternative assumption that firms could modify their planned output at additional cost after the selling price is known the effect of output price uncertainty on planned

international evidence on the persistence of economic fluctuations abstract this paper presents new evidence on the persistence of fluctuations in real gnp we estimate two measures of persistence nonparametrically using post war quarterly data from canada france germany italy japan the united kingdom and the united states we compare these estimates with monte carlo results from various ar 2 processes for six out of seven countries the point estimates indicate that a 1 shock to output should change the long run unvariate forecast of output by well over 1 low order arma models yield similar conclusions finally we examine the persistence in relative outputs of different countries

can the production smoothing model of inventory behavior be saved the production smoothing model of inventory behavior has a long and venerable history and theoretical foundations that seem very strong yet certain overwhelming facts seem not only to defy explanation within the production smoothing framework but actually to argue that the basic idea of production smoothing is all wrong most prominent among these is the fact that the variance of detrended production exceeds the variance of detrended sales this paper first documents the stylized facts then it derives the production smoothing model rigorously and explains how the model can be amended to make it consistent with the facts finally it reviews the theoretical and empirical evidence and tries to draw some tentative conclusions

collusion under risk aversion and fixed costs we analyze collusion under demand uncertainty by risk averse cartels that care about the utility derived from profits with sufficient risk aversion and non trivial fixed operating costs it becomes difficult for cartels to collusively restrict output both when demand is low and marginal dollars are highly valued and when demand is high and potential defection profits are high output relative to monopoly levels becomes a u shaped function of demand greater risk aversion or higher fixed operating costs make collusion more difficult to support in recessions but easier to support in booms

firm size and regional linkages a typology of manufacturing establishments in southern spain romero i and santos f j 2007 firm size and regional linkages a typology of manufacturing establishments in southern spain regional studies 41 571 584 regions with different levels of development are characterized by different enterprise compositions according to firm size and regional productive linkages using these two variables and two additional ones the technological level and the position in the value chain the composition of the industrial sector in any region can be studied in this respect a new theoretical enterprise typology is proposed in this paper as a powerful analytical tool furthermore empirical work is carried out using a data set from the survey done to estimate the regional input output table of andalusia a backward region in southern spain thus the theoretical enterprise typology is applied to the industry in andalusia so that some strengths and weaknesses of the regional economy are identified romero i et santos f j 2007 la taille de l entreprise et les mail

real interest rates and macroeconomic activity while standard discussions of the transmission mechanism of monetary policy tend to assume a strong and negative link between real interest rates and real macroeconomic activity and this appears to some extent to be borne out by simulation of large scale macroeconometric models the empirical evidence suggests that the link between real interest rates and macroeconomic aggregates such as consumption and investment is in fact somewhat tenuous the weak link between interest rates and aggregate consumption may be explained at a theoretical level while the apparently weak link between interest rates and investment is more puzzling although it may be related to neglect of issues such as uncertainty and the irreversibility of investment in empirical studies similarly evidence on the link between real interest rates and economic growth is mixed and this may be related to non linearities in the relationship the survey highlights the need for further research in this area

regulation theory strategies of enterprise integration and the political economy of regional economic restructuring in central and eastern europe the case of slovakia 1 1 this is a revised version of a paper presented at the annual conference of the institute of british geographers university of northumbria at newcastle january 1995 the research is based upon interviews with enterprise managers ministerial representatives and other economic organizations in slovakia during 1993 94