inter city competition for foreign investment static and dynamic effects of china s incentive areas abstract china s open door policy has created a natural experiment for studying agglomeration externalities and the role of incentives designed to attract foreign direct investment we build a model which predicts that foreign firms will prefer cities where other foreign firms are located we estimate the model using data on 931 foreign ventures we then use simulations to explore the effect policies favoring particular cities had on the distribution of investment we find that attractive cities those with good infrastructure and an established industrial base gained most and that agglomeration effects greatly magnified the direct impact of policy

marshallian factor market externalities and the dynamics of industrial localization abstract when an industry has thus chosen a locality for itself it is likely to stay there long so great are the advantages which people following the same skilled trade get from near neighborhood to one another a localized industry gains a great advantage from the fact that it offers a constant market for skill employers are apt to resort to any place where they are likely to find a good choice of workers while men seeking employment naturally go to places where there are many employers who need such skill as theirs the advantages of variety of employment are combined with those of localized industries in some of our manufacturing towns and this is a chief cause of their continued growth alfred marshall principles of economics 8th ed pp 271 272 1920

wealth distribution in life cycle economies abstract this paper compares the age wealth distribution produced in life cycle economies to the corresponding distribution in the us economy the idea is to calibrate the model economies to match features of the us earnings distribution and then examine the wealth distribution implications of the model economies the findings are that the calibrated model economies with earnings and lifetime uncertainty can replicate measures of both aggregate wealth and transfer wealth in the us furthermore the model economies produce the us wealth gini and a significant fraction of the wealth inequality within age groups however the model economies produce less than half the fraction of wealth held by the top 1 percent of us households

incentives for foreign direct investment under imitation we study the symmetric mixed strategy equilibrium of a dynamic model where at each instant two exporting firms choose their probability of foreign direct investment f1di the first firm s fdi generates cost lowering spillovers for the second and leads to local imitation thereby intensifying competition while an increase in imitation risk usually makes fdi less likely there exist parameter values for which the converse holds the key point is that by delaying the second firm s switch to fdi an increase in imitation risk can increase the value of being first to invest thereby increasing the equilibrium probability of fidi jel classification f23 f12 l13 incitation a l investissement direct a etranger quand il y a imitation les auteurs etudient 1 equilibre de strategies mixtes symetriques dans un modele dynamique ou a chaque instant deux firmes exportatrices choisissent leur probabilite d investissement direct a 6tranger l investissement direct a 1 etranger de la premiere firme engendre des effets de retomb6e qui reduisent le couits pour la seconde et engendre un effet d imitation au niveau local ce qui a pour effet d augmenter le degre de concurrence alors que l accroissement du risque d imitation reduit la probabilite d investissement direct a l etranger il existe des valeurs des parametres pour lesquels c est l inverse qui se produit le point central est que en faisant en sorte de reporter le recours a l investissement direct a l etranger par la seconde firme un accroissement du risque d imitation peut accroitre l avantage d avoir et6 le premier a investir a l etranger et donc accroitre la probabilite d equilibre d un investissement direct a 1 tranger

the impact of the 1962 repatriates from algeria on the french labor market this paper uses census data to examine the impact on the french labor market of the 900 000 people repatriated from algeria in 1962 repatriates settled in regions culturally and climatically simil

immigration search and loss of skill this article develops and estimates an on the job search model of the entry of highly skilled immigrants from the former soviet union into the israeli labor market the estimated parameters of the model together with information on the wages of immigrants from earlier waves imply that on average immigrants can expect lifetime earnings to fall short of the lifetime earnings of comparable natives by 57 of this figure 14 percentage points reflect frictions associated with nonemployment and job distribution mismatch and 43 percentage points reflect the gradual adaptation of imported schooling and experience to the local labor market

the burden of the nondiversifiable risk of entrepreneurship entrepreneurship is risky we study the risk facing a well documented and important class of entrepreneurs those backed by venture capital using a dynamic program we calculate the certainty equivalent of the difference between the cash rewards that entrepreneurs actually received over the past 20 years and the cash that entrepreneurs would have received from a risk free salaried job the payoff to a venture backed entrepreneur comprises a below market salary and a share of the equity value of the company when it goes public or is acquired we find that the typical venture backed entrepre neur received an average of 5 8 million in exit cash almost three quarters of entrepreneurs receive nothing at exit and a few receive over a billion dollars because of the extreme dispersion of payoffs an entrepreneur with a coefficient of relative risk aversion of two places a certainty equivalent value only slightly greater than zero on the distribution of outcomes she faces at the time of her company s launch jel g24 g32 l26 m13

are micro and macro labor supply elasticities consistent a review of evidence on the intensive and extensive margins we evaluate whether state of the art macro models featuring indivisible labor are consistent with modern quasi experimental micro evidence by synthesizing evidence on both the intensive and extensive margins we find that micro estimates are consistent with macro estimates of the steady state hicksian elasticities relevant for cross country comparisons on both the extensive and intensive margins however micro estimates of intertemporal substitution frisch elasticities are an order of magnitude smaller than the values needed to explain business cycle fluctuations in aggregate hours by preferences the key puzzle to be resolved is why micro and macro estimates of the frisch extensive margin elasticity are so different

sect subsidy and sacrifice an economist s view of ultra orthodox jews israeli ultra orthodox men study full time in yeshiva until age 40 on average why do fathers with families in poverty choose yeshiva over work draft deferments subsidize yeshiva attendance yet attendance typically continues long after exemption fertility rates are high tfr 7 6 and rising a social interaction approach explains these anomalies yeshiva attendance signals commitment to the community which provides mutual insurance to members prohibitions strengthen communities by effectively taxing real wages inducing high fertility historically the incursion of markets into traditional communities produces ultra orthodoxy subsidies induce dramatic reductions in labor supply and unparalleled increases in fertility illustrating extreme responses social groups may have to interventions

industrial groupings and foreign direct investment we explore worldwide foreign direct investment location decisions by japanese manufacturing firms from 1985 through 1991 our conditional logit estimates provide evidence that firms location decisions are affected by membership in either vertical or horizontal keiretsu consistent with previous studies that stress agglomeration effects on firms location decisions we find that the stock of investment in a region by a firm s vertical keiretsu partners increases the probability of location further we find that the recent flow of investment into a region by a firm s horizontal keiretsu partners increases the probability of investment to the region providing evidence of networking effects

gender gaps in unemployment rates in oecd countries in some oecd countries the male and female unemployment rates are very similar but in others notably the mediterranean countries the female unemployment rate is much higher than the male explaining these cross country differences is the subject of this article we show that in countries where there is a large gender gap in unemployment rates there is a gender gap in both flows from employment into unemployment and from unemployment into employment we conclude that differences in human capital accumulation between men and women interacted with labor market institutions is an important part of the explanation

accounting for the u s earnings and wealth inequality we show that a theory of earnings and wealth inequality based on the optimal choices of ex ante identical households that face uninsured idiosyncratic shocks to their endowments of efficiency labor units accounts for the u s earnings and wealth inequality almost exactly

technology capital and the us current account the u s bureau of economic analysis bea estimates the return on investments of foreign subsidiaries of u s multinational companies over the period 1982 2006 averaged 9 4 percent annually after taxes u s subsidiaries of foreign multinationals averaged only 3 2 percent two factors distort bea returns technology capital and plant specific intangible capital technology capital is accumulated know how from intangible investments in r d brands and organizations that can be used in foreign and domestic locations used abroad it generates profits for foreign subsidiaries with no foreign direct investment fdi plantspecific intangible capital in foreign subsidiaries is expensed abroad lowering current profits on fdi and increasing future profits we develop a multicountry general equilibrium model with an essential role for fdi and apply the bea s methodology to construct economic statistics for the model economy we estimate that mismeasurement of intangible investments accounts for over 60 percent of the difference in bea returns

macroeconomic effects from government purchases and taxes for u s annual data that include world war ii the estimated multiplier for temporary defense spending is 0 4 0 5 contemporaneously and 0 6 0 7 over 2 years if the change in defense spending is permanent gauged by ramey s defense news variable the multipliers are higher by 0 1 0 2 since all estimated multipliers are significantly less than 1 greater spending crowds out other components of gdp particularly investment the lack of good instruments prevents estimation of reliable multipliers for nondefense purchases multipliers in the literature of two or more likely reflect reverse causation from gdp to nondefense purchases increases in average marginal income tax rates measured by a newly constructed time series have significantly negative effects on gdp when interpreted as a tax multiplier the magnitude is around 1 1 the combination of the estimated spending and tax multipliers implies that the balanced budget multiplier for defense spending is negative we have some evidence that tax changes affect gdp mainly through substitution effects rather than wealth effects

multinationals multi plant economies and the gains from trade a general equilibrium model of a multinational enterprise based on economies of multi plant operation is developed these economies are modelled as arising from the existence of a joint input whose productivity in each production facility is independent of the number of facilities maintained by a firm the multinational thus offers the world increased technical efficiency by eliminating the duplication of the joint input that would occur with independent national firms since this technical efficiency may come at the expense of increased market power the full determinants of home country host country and world welfare are considered

financial intermediation and delegated monitoring this paper develops a theory of financial intermediation based on minimizing the cost of monitoring information which is useful for resolving incentive problems between borrowers and lenders it presents a characterization of the costs of providing incentives for delegated monitoring by a financial intermediary diversification within an intermediary serves to reduce these costs even in a risk neutral economy the paper presents some more general analysis of the effect of diversification on resolving incentive problems in the environment assumed in the model debt contracts with costly bankruptcy are shown to be optimal the analysis has implications for the portfolio structure and capital structure of intermediaries

firing costs employment fluctuations and average employment an examination of germany west germany s employment promotion act of 1985 facilitated the use of fixed term contracts and increased the number of dismissals above which the employer is required to establish a social plan involving severance payments i assess the effect of this reduction in firing costs on movements in employment using monthly data on a panel of detailed manufacturing industries for 1977 92 i also examine the effect of introducing flexible hours of work in certain industries beginning in 1985 i find that employment adjustment was unaffected by the lower firing costs but slowed by the greater working hours flexibility

the impact of mass migration on the israeli labor market mass migration from the former soviet union increased the israeli population by 12 in the first half of the 1990s this exodus was precipitated by the lifting of emigration restrictions in an unstable ussr and by the open immigration policy of israel toward soviet jews who faced more restrictive entry policies elsewhere i use this natural experiment to study the impact of immigration on the labor market outcomes of native israelis ols yields significant reductions in wages and small reductions in employment however ols is biased if the distribution of immigrants across occupations in israel was not exogenous to relative wage and employment conditions i instrument for the entry of russians into an occupation in israel using information on their former occupations in the ussr there is a significant positive correlation between the former presence of the immigrants in an occupation in the ussr and their presence in that occupation in israel but the previous occupational choices of russians abroad were independent of israeli wage and employment growth subsequent to their migration iv estimates indicate that immigration did not have an adverse impact on native israeli labor market outcomes

shareholding in the keiretsu japan s financial groups largest debtholders in keiretsu member companies hold more stock if the companies have high debt to equity ratios or have weaker collateral greater prospects of growth or unique aspects all are factors associated with the agency problems of debt that stockholding by a debtholder can help to resolve the stockholding also induces greater borrowing by these same companies ceteris paribus copyright 1993 by mit press

mass migration to israel and natives employment transitions this study examines how mass migration from the former soviet union to israel affected natives probability of moving from employment to non employment and vice versa using 1989 99 data from the israeli labor force survey the authors find that the share of immigrants in labor market cells defined by occupation industry district of residence schooling and experience was generally positively associated with natives probability of moving from employment to non employment however when the analysis controls for the endogenous sorting of immigrants across cells this effect is substantially reduced for men and disappears or is even reversed for women the authors conclude that immigrants tended to cluster in labor market cells with high turnover rates and that immigration did not increase natives likelihood of exiting employment they also find no discernible effects of immigration on natives transitions between labor market cells or on the probability of their moving from non employment to employment

japanese firms and the decision to invest abroad business groups and regional core networks the determinants of the decision by japanese firms to set up manufacturing plants in southeast asia europe and north america are analyzed using micro data on the behavior of firms in the electronics industry while firm specific intangible assets based on r d and marketing efforts are positively related to the decision to invest in europe and north america investment in southeast asia is mainly related to human resources and driven by interfirm ties within horizontal and vertical business groups the empirical results suggest that membership of horizontal keiretsu relaxes liquidity constraints while the manufacturing networks of horizontal and vertical keiretsu in southeast asia facilitate the establishment of manufacturing plants by member firms copyright 1996 by mit press

wage risk and employment risk over the life cycle we specify a structural life cycle model of consumption labour supply and job mobility in an economy with search frictions that allows us to distinguish between different sources of risk and to estimate their effects the sources of risk are shocks to productivity job destruction the process of job arrival when employed and unemployed and match level heterogeneity our model allows for four main social insurance programmes in contrast to simpler models that attribute all income fluctuations to shocks our framework allows us to disentangle the effects of the shocks from the responses to these shocks estimates of productivity risk once we control for employment risk and for individual labour supply choices are substantially lower than estimates that attribute all wage variation to productivity risk increases in productivity risk impose a considerable welfare loss on individuals and induce substantial precautionary saving increases in employment risk have large effects on output and primarily through this channel affect welfare the welfare value of government programs such as food stamps which partially insure productivity risk is greater than the value of unemployment insurance which provides partial insurance against employment risk and no insurance against persistent shocks

immigrating to opportunity estimating the effect of school quality using a natural experiment on ethiopians in israel in may 1991 fifteen thousand ethiopian jews were brought to israel in an overnight airlift and sorted in a haphazard and essentially random fashion to absorption centers across the country this quasi random assignment produced a natural experiment whereby the initial schooling environment of ethiopian children can be considered exogenous to their family background and parental decisions we examine the extent to which the initial elementary school environment affected the high school outcomes of ethiopian children using administrative panel data on the educational career of each child in israel through much of the 1990s the results show that the early schooling environment has an important effect on high school dropout rates repetition rates and the passing rate on matriculation exams necessary to enter college the results are robust to using alternative measures of the schooling environment and to the inclusion of community fixed effects which suggests that aspects of the elementary school itself are important for high school success

sweat equity in u s private business in this paper we first provide evidence that existing measures of business incomes and valuations based on widely used surveys such as the survey of consumer finances are mismeasured we then develop a theory disciplined by u s national accounts and business census data to measure net incomes and private business sweat equity which is the value of time to build customer bases client lists and other intangible assets we estimate an aggregate sweat equity value of 0 65 times gdp with little cross sectional dispersion in valuations when compared to business net incomes and large cross sectional dispersion in rates of return our estimate of sweat equity is close to the estimate of marketable fixed assets used in production by private businesses implying a high ratio of intangible to total assets we use the model to evaluate the impact of greater tax compliance of private businesses and lower tax rates on the net income of both privately held and publicly traded businesses we find larger sectoral and aggregate effects from the tax policy experiments relative to studies that abstract from private business and in particular the accumulation of sweat capital finally we show that our results are robust to including non pecuniary benefits of business ownership

strategic fdi and industrial ownership structure we argue that different industrial ownership structures generate different incentives for firms to engage in fdi a comparison is made between partially cooperative structures such as the japanese kieretsu and korean chaebol systems and competitive structures such as u s firms it is found that ownership structure has significant implications for the probability of initial fdi whether or not a cooperative structure is also coordinated turns out to be crucial in predicting fdi behaviour this has further implications for the optimal fdi incentives of potential host countries and for how empirical studies might be designed jel classification f10 f21 f23 strategie d investissements directs a l etranger et structure de propriete de l industrie les auteurs suggerent que des structures differentes de propriete dans l industrie engendrent des incitations diverses pour les entreprises a investir directement a l etranger on fait des comparaisons entre des structures partiellement cooperatives comme celles des kieretsus au japon et des chaebol en coree et des structures concurrentielles comme celles qui existent aux etats unis il appert que la structure de propriete a un impact significatif sur la probabilite de faire initialement un investissement direct a l etranger le fait que la structure de cooperation engendre aussi une coordination s avere d une importance centrale pour predire le comportement d investissement direct a l etranger voila qui a des implications pour le design des incitations a investir par les pays hotes potentiels et pour le design des etudes empiriques de ces phenomenes

the impact of 1970s repatriates from africa on the portuguese labor market this paper examines the labor market effect of the retornados who immigrated to portugal from angola and mozambique in the mid 1970s following portugal s loss of its african colonies the retornados increased the portuguese labor force by roughly 10 in just three years two analyses suggest contrasting conclusions first comparisons of portugal with spain and france indicate that any adverse effect of the retornados was quantitatively swamped by the europe wide downturn in labor market conditions in the 1970s second comparisons between districts within portugal indicate that the retornados may have had a strong adverse effect on portuguese wages suggesting that immigration may be considerably more harmful than previous case studies have concluded the authors however regard the results of the within portugal analysis as less reliable than those of the comparison across countries

corporate structure liquidity and investment evidence from japanese industrial groups this paper presents evidence suggesting that information and incentive problems in the capital market affect investment we come to this conclusion by examining two sets of japanese firms the first set has close financial ties to large japanese banks that serve as their primary source of external finance and are likely to be well informed about the firm the second set of firms has weaker links to a main bank and presumably faces greater problems raising capital investment is more sensitive to liquidity for the second set of firms than for the first set the analysis also highlights the role of financial intermediaries in the investment process

labor mobility of immigrants training experience language and opportunities summary statistics observations percent mean sdschooling 419 14 58 2 74age on arrival 419 38 05 9 15white collar in fsu 284 67 78 blue collar in fsu 127 30 31 did not work in fsu 8 1 91 married 363 86 63 english 419 1 76 0 94hebrew before migration 50 11 93 ulpan attendance 386 92 12 ulpan completion 332 79 24 ulpan length months 387 5 61 1 34hebrew1 rst survey 419 2 71 0 82hebrew2 second survey 316 2 98 0 83t able a2 transitions between the labor market states quarters 8 9quarters 3 4 wc bc wt bt ue obs wc 79 57 10 75 3 23 2 15 4 30 93bc 2 58 80 80 1 72 2 87 12 03 349wt 51 28 28 21 0 00 0 00 20 51 39bt 23 81 52 38 0 00 0 00 23 81 21ue 18 93 47 93 6 51 1 78 24 85 169quarters 14 15quarters 8 9 wc bc wt bt ue obs wc 90 52 6 90 0 00 0 86 1 72 116bc 4 56 90 88 0 35 0 70 3 51 285wt 41 18 41 18 0 00 0 00 17 65 17bt 25 00 66 67 0 00 0 00 8 33 12ue 23 86 44 32 0 00 0 00 31 82 88quarters 18 19quarters 14 15 wc bc wt bt ue obs wc 96 72 3 28 0 00 0 00 61bc 2 47 90 12 2 47 4 94 81wt bt 0 00 100 00 0 00 0 00 1ue 30 00 20 00 0 00 50 00 10

preemption and rent equalization in the adoption of new technology we study the adoption of a new technology to illustrate the effects of preemption in games of timing we show that the threat of preemption equalizes rents in a duopoly but that this result does not extend to the general oligopoly game if the gain to preemption is sufficiently small then the optimal symmetric outcome which involves late adoption is an equilibrium this contrasts with reinganum s result that in precommitment equilibria there must be diffusion we develop a new and richer formalism for modeling games of timing which permits a continuoustime representation of the limit of discrete time mixed strategy equilibria

idiosyncratic production risk growth and the business cycle we introduce a neoclassical growth economy with idiosyncratic production risk and incomplete markets each agent is an entrepreneur operating her own technology with her own capital stock the general equilibrium is characterized by a closed form recursion in the cara normal case incomplete markets introduce a risk premium on private equity which reduces the demand for investment as compared to complete markets the steady state can thus have both a lower capital stock due to investment risk and a lower interest rate due to precautionary savings furthermore the anticipation of high real interest rates in the future feeds back into high risk premia and low investment in the present thus slowing down convergence to the steady state our results highlight the importance of private risk premia for capital accumulation and business cycles

self selection and internal migration in the united states abstract within the conceptual framework of the roy model this paper provides an empirical analysis of internal migration flows using data from the national longitudinal survey of youth the theoretical approach highlights regional differences in the returns to skills regions that pay higher returns to skills attract more skilled workers than regions that pay lower returns our empirical results suggest that interstate differences in the returns to skills are a major determinant of both the size and skill composition of internal migration flows persons whose skills are most mismatched with the reward structure offered by their current state of residence are the persons most likely to leave that state and these persons tend to relocate in states which offer higher rewards for their particular skills

strategic investments and the development of multinationals a model of multinational behavior is presented in which either the existence or absence of multinationals can be a nash equilibrium outcome the key determinant is the relationship between plant scale economies a force for geographic centralization and multiplant economies plus transport costs leading to multinationality the model predicts that multinational enterprise production arises when firm specific and transportation costs are large relative to plant scale economies the latter are both a technological and a strategic variable in the entry decision copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

the visible and the hidden behind migrants human capital abstractthe paper explores differences in human capital between the israel born and immigrants within the jorgenson and fraumeni model using a unique imputed education method the study answers

on the wage growth of immigrants israel 1990 2000 this paper develops a descriptive methodology for the analysis of wage growth of immigrants that is based on human capital theory the sources of the wage growth are 1 the rise of the return to imported human capital 2 the impact of accumulated experience in the host country and 3 the mobility up the occupational ladder in the host country the model implies a nonlinear wage function that includes interactions between imported skills and local wage growth using data on native israelis and immigrants from the former soviet union of israel we estimate wage equations jointly for the two groups we find that upon arrival immigrants receive non return for imported skills in the ten years following arrival wages of highly skilled immigrants grow at 8 percent a year rising prices of skills occupational transitions accumulated experience in israel and an economy wide rise in wages account for 3 4 1 1 1 5 and 1 5 percent each in the long run the return for schooling converges to 0 027 substantially below the 0 069 return for natives we do not reject the hypothesis that the return for experience converges to that of natives and that immigrants receive a higher return for their unmeasured skills we find that there is some downgrading in the occupational distribution of immigrants relative to that of natives moreover the average wages of immigrants approach but do not converge to the wages of comparable natives the main reason for this is the low return to their imported skills jel j24 j31 j60