the effects of human resource management practices on productivity a study of steel finishing lines the authors investigate the productivity effects of innovative employment practices using data from a sample of thirty six homogeneous steel production lines owned by seventeen companies the productivity regressions demonstrate that lines using a set of innovative work practices which include incentive pay teams flexible job assignments employment security and training achieve substantially higher levels of productivity than do lines with the more traditional approach which includes narrow job definitions strict work rules and hourly pay with close supervision their results are consistent with recent theoretical models which stress the importance of complementarities among work practices

discount rates and credit markets theory and evidence from rural india three models of credit markets 1 the permanent income model 2 upward sloping credit supply to individual borrowers and 3 constrained credit due to imperfect enforcement are tested using credit market data and an experimental study of individuals discount rates in south india the permanent income model is rejected by both the discount rate and the credit market data the discount rate data are consistent with either of the other two models while the credit market data are consistent with a combination of these two models other explanations are found to be insufficient to explain the results of this study

working over time dynamic inconsistency in real effort tasks experimental tests of dynamically inconsistent time preferences have largely relied on choices over time dated monetary rewards several recent studies have failed to nd the standard patterns of present bias however such monetary studies contain oftendiscussed confounds in this paper we sidestep these confounds and investigate choices over consumption real eort in a longitudinal experiment we pair this eort study with a companion monetary discounting study we conrm very limited time inconsistency in monetary choices however subjects show considerably more present bias in eort furthermore present bias in the allocation of work has predictive power for demand of a meaningfully binding commitment device therefore our ndings validate a key implication of models of dynamic inconsistency with corresponding policy implications

the real effects of relational contracts abstract does the soft side of management matter many managers assert that firm culture is strongly correlated with productivity but there are few robust tests of this assertion in a set of

the stability of measured time preferences abstract we use a panel dataset to test the stability of measured discount rates over time in response to changes in both macroeconomic events and household level labor market outcomes while discount rate measures are constructed to capture a rate of time preference our evidence is inconsistent with such an interpretation our results more closely align with the interpretation that standard methods to elicit discount rates reveal the market interest rate faced by an individual rather than their pure rate of time preference it follows directly from such an interpretation that factors which influence the interest rate at which a household can borrow and lend such as the inflation rate and household income ought to be correlated with the elicited discount rate a prediction supported by our data

why don t the poor save more evidence from health savings experiments using data from a field experiment in kenya we document that providing individuals with simple informal savings technologies can substantially increase investment in preventative health and reduce vulnerability to health shocks simply providing a safe place to keep money was sufficient to increase health savings by 66 percent adding an earmarking feature was only helpful when funds were put toward emergencies or for individuals that are frequently taxed by friends and relatives group based savings and credit schemes had very large effects

complementarities of innovation activities an empirical analysis of the german manufacturing sector abstract innovation strategies in manufacturing often involve internal rd it is based on data from the german part of the community innovation survey cis 3 the results provide evidence for significant complementarities between internal r d and r d cooperation but cast doubt on the complementarity of internal and contracted r d since a productivity effect on firms patenting probability or sales with new products cannot be found

dynamic financial constraints distinguishing mechanism design from exogenously incomplete regimes we formulate and solve a range of dynamic models of constrained credit insurance that allow for moral hazard and limited commitment we compare them to full insurance and exogenously incomplete financial regimes autarky saving only borrowing and lending in a single asset we develop computational methods based on mechanism design linear programming and maximum likelihood to estimate compare and statistically test these alternative dynamic models with financial information constraints our methods can use both cross sectional and panel data and allow for measurement error and unobserved heterogeneity we estimate the models using data on thai households running small businesses from two separate samples we find that in the rural sample the exogenously incomplete saving only and borrowing regimes provide the best fit using data on consumption business assets investment and income family and other networks help consumption smoothing there as in a moral hazard constrained regime in contrast in urban areas we find mechanism design financial information regimes that are decidedly less constrained with the moral hazard model fitting best combined business and consumption data we perform numerous robustness checks in both the thai data and in monte carlo simulations and compare our maximum likelihood criterion with results from other metrics and data not used in the estimation a prototypical counterfactual policy evaluation exercise using the estimation results is also featured

dynamic models of r d innovation and productivity panel data evidence for dutch and french manufacturing abstract this paper introduces dynamics in the r d to innovation and innovation to productivity relationships which have mostly been estimated on cross sectional data it considers four nonlinear dynamic simultaneous equations models that include individual effects and idiosyncratic errors correlated across equations and that differ in the way innovation enters the conditional mean of labor productivity through an observed binary indicator an observed intensity variable or through the continuous latent variables that correspond to the observed occurrence or intensity it estimates these models by full information maximum likelihood using two unbalanced panels of dutch and french manufacturing firms from three waves of the community innovation survey the results provide evidence of robust unidirectional causality from innovation to productivity and of stronger persistence in productivity than in innovation

economies of diversification a generalization and decomposition of economies of scope abstract the paper investigates the benefits of diversification for a multi product firm it examines economies of diversification reflecting the cost reduction associated with producing outputs in an integrated firm compared to specialized firms the analysis applies under complete specialization as well as partial specialization when firms are not fully specialized and or when the specialization scheme does not cover all outputs it decomposes economies of diversification into four additive parts a part measuring complementarity among outputs a part reflecting economies of scale a part reflecting convexity and a part reflecting the role of fixed cost this new decomposition appears useful in investigating how scale effects complementarity effects and convexity effects can contribute to economies of scope in a multiproduct firm and helps generate valuable insights into the economics of specialization for multiproduct firms

time intensive r d and unbalanced trade abstract this paper highlights a novel mechanism that generates global imbalances it develops a general equilibrium trade model with one of two countries having a comparative advantage in a sector whose production is characterized by i rapid anticipated demand growth and ii large up front r d costs international funding of the accruing r d costs generates capital inflows in the r d stage which are balanced by subsequent outflows importantly sector level growth does not generate growth differentials between countries typically regarded as rationales of global imbalances additionally it is shown that a trade surplus can coincide with appreciations of the real exchange rate i argue that switzerland s trade surplus which was driven to record heights during 2010 2014 by pharmaceutical exports exemplifies this mechanism calibrating the model to swiss trade flows underpins this argument

r d scope economies and plant performance in this article i present an alternative specification of knowledge production and derive a structural econometric model with some desirable properties i provide a simple and less data intensive framework for empirical studies of the relationship between firm performance and r d the main empirical findings are as follows i r d has a positive effect on performance ii the appropriable part of knowledge capital depreciates at a rate of 2 iii there are significant spillover effects of r d across lines of business within a firm and iv there are significant spillovers in r d across firms that belong to the same interlocking group of firms

present bias quasi hyperbolic discounting and fixed costs in this paper we elicit preferences for money time pairs via experimental techniques we estimate a general specification of discounting that nests exponential and hyperbolic discounting as well as various forms of present bias including quasi hyperbolic discounting our experimental data do not appear peculiar in any dimension in particular we find clear evidence for present bias as most of the previous literature however no evidence for quasi hyperbolic discounting is found and the data strongly favor instead a specification with a small present bias in the form of a fixed cost of the order of 4 on average across subjects with such a fixed cost the curvature of discounting is imprecisely estimated and exponential discounting is hardly rejected in this specification the present bias tends to vanish for economically relevant monetary rewards

temporal stability of time preferences abstract the preferences assumed to govern intertemporal trade offs are generally considered to be stable economic primitives though evidence on this stability is notably lacking we present evidence from a large field study conducted over two years with around 1 400 individuals using incentivized intertemporal choice experiments aggregate choice profiles and corresponding estimates of discount parameters are unchanged over the two years and individual correlations through time are high by existing standards however some individuals show signs of instability by linking experimental measures to administrative tax records we showthat identified instability is uncorrelated with both levels and changes in sociodemographic variables

the returns to foreign r d extant research on research and development r d internationalization has not examined how effective foreign r d investments are in generating positive returns for the investing firms in particular in comparison and conjunction with the effects of domestic r d investments we examine the effectiveness of international knowledge sourcing through foreign r d in an empirical analysis of the productivity effects of foreign and domestic r d investments in a large panel of firms based in the netherlands we argue that foreign and domestic r d will exhibit complementarity in their effects on productivity but that the roles of domestic and foreign r d depend on the relative position of the home country with respect to the global technology frontier and the related relative opportunities for knowledge sourcing abroad we estimate a dynamic panel data model derived from a knowledge stock augmented production function framework allowing for productivity convergence and declining returns to r d we confirm that for firms active in industries in which the home country is behind the global technology frontier foreign r d provides positive returns and has a complementary relationship with domestic r d for industries at the global technology frontier in contrast domestic r d is the primary source of productivity growth

optimal indirect and capital taxation we consider an environment in which agents skills are private information and follow arbitrary stochastic processes we prove that it is typically pareto optimal for an individual s marginal benefit of investing in capital to exceed his marginal cost of doing so this wedge is consistent with a positive tax on capital income we also prove that it is pareto optimal for the marginal rate of substitution between any two consumption goods to equal the marginal rate of transformation this lack of a wedge is consistent with uniform taxation of consumption goods within a period

credit constraints and the measurement of time preferences incentivized experiments are often used to identify the time preferences of households in developing countries we argue theoretically and empirically that experimental measures may not identify pr

full insurance in the presence of aggregate uncertainty this paper tests implications of full consumption insurance the object is to determine how much mileage can be obtained from a model with complete markets with such features as private information or liquidity constraints omitted the implication exploited is that individual consumption responds to aggregate risk but not to idiosyncratic risk the test involves regressing the change in household consumption onto the change in aggregate consumption and other right hand side variables such as the change in household income and change in employment status all variables other than the change in aggregate consumption are predicted to be insignificant in explaining the change in household consumption with observations on consumption and income for 10 695 households from the consumer expenditure survey the results are mixed the results for one specification exponential utility are mostly consistent with full consumption insurance the results for the other specification power utility are not

contracts constraints and consumption the paper compares implications of three kinds of models of households consumption behaviour the basic permanent income model several models of liquidity constrained households and a model of an informationally constrained efficient contract these models are distinguished in terms of implications regarding the present discounted values of net trades to households at various levels of temporary income and the households marginal rates of substitution martingale consumption is studied as an approximation to the predicted consumption process of the efficient contract model

risk sharing in private information models with asset accumulation explaining the excess smoothness of consumption we study testable implications for the dynamics of consumption and income of models in which first best allocations are not achieved because of a moral hazard problem with hidden saving we show that in this environment agents typically achieve more insurance than that obtained under self insurance with a single asset consumption allocations exhibit excess smoothness as found and defined by campbell and deaton 1989 we argue that excess smoothness in this context is equivalent to a violation of the intertemporal budget constraint considered in a bewley economy with a single asset we also show parameterizations of our model in which we can obtain a closed form solution for the efficient insurance contract and where the excess smoothness parameter has a structural interpretation in terms of the severity of the moral hazard problem we present tests of excess smoothness applied to u k microdata and constructed using techniques proposed by hansen roberds and sargent 1991 to test the intertemporal budget constraint our theoretical model leads us to interpret them as tests of the market structure faced by economic agents we also construct a test based on the dynamics of the cross sectional variances of consumption and income that is in a precise sense complementary to that based on hansen roberds and sargent 1991 and that allows us to estimate the same structural parameter the results we report are consistent with the implications of the model and are internally coherent

models of technology diffusion abstract the literature on new technology diffusion is vast and it spills over many conventional disciplinary boundaries this paper surveys the literature by focusing on alternative explanations of the dominant stylized fact that the usage of new technologies over time typically follows an s curve the most commonly found model which is used to account for this model is the so called epidemic model which builds on the premise that what limits the speed of usage is the lack of information available about the new technology how to use it and what it does the leading alternate model is often called the probit model which follows from the premise that different firms with different goals and abilities are likely to want to adopt the new technology at different times in this model diffusion occurs as firms of different types gradually adopt it there are actually many ways to generate an s curve and the third class of models which we examine are models of density dependence popularized by population ecologists in these models the twin forces of legitimation and competition help to establish new technologies and then ultimately limit their take up finally we look at models in which the initial choice between different variants of the new technology affect the subsequent diffusion speed of the chosen technology such models often rely on information cascades which drive herd like adoption behaviour when a particular variant is finally selected

internal versus external capital markets this paper presents a framework for analyzing the costs and benefits of internal versus external capital allocation we focus pritnarily on comparing an internal capital market with bank lending while both represent centralized forms of financing in the former case the financing is owner provided while in the latter ceise it is not we argue that the ownership aspect of internal capital allocation has three important consequences 1 it leads to more monitoring than bank lending 2 it reduces managers entrepreneurial incentives and 3 it makes it easier to efficiently redeploy the assets of projects that are performing poorly under existing management

revising commitments field evidence on the adjustment of prior choices the very poor in developing countries often make intertemporal choices that seem at odds with their individual self interest there are many possible reasons why this paper investigates several of these reasons with a lab in the field experiment in rural malawi involving large stakes it makes two contributions first it constructs a new dependent variable revisions of prior choices regarding the allocation of future income this allows us to directly examine intertemporal choice revision and its determinants in particular this dependent variable permits a novel test for the existence of self control problems it turns out revisions of money allocations toward the present are positively associated with measures of present bias from an earlier baseline survey as well as the randomly assigned closeness in time to the first possible date of money disbursement second the paper investigates other potential determinants of revision aside from self control problems it finds little evidence that revisions of money allocations toward the present are associated with spousal preferences for such revision household shocks or the financial sophistication of respondents

estimating time preferences from convex budgets experimentally elicited discount rates are frequently higher than what seems reasonable for economic decision making such high rates are often attributed to present biased discounting a well known bias of standard measurements is the assumption of linear consumption utility attempting to correct this bias using measures of risk aversion to identify concavity researchers find reasonable discounting but at the cost of exceptionally high utility function curvature we present a new methodology for identifying time preferences both discounting and curvature from simple allocation decisions we find reasonable levels of both discounting and curvature and surprisingly dynamically consistent time preferences jel c91 d12 d81 understanding and estimating time preferences is obviously of great importance to economists marketers and policy makers consumers decide how much to invest in savings education real estate and life insurance how much to diet exercise and smoke whether to marry when to have children and what to leave in their wills while there has been substantial research estimating time preferences using aggregate consumption data 1 the bulk of the effort has occurred in laboratory environments 2 among the many laboratory techniques employed recent studies have favored multiple price lists mpl with monetary payments 3 with mpls individuals are asked multiple times to choose between smaller payment amounts closer to the present and larger amounts further into the future the interest rate increases monotonically in a price list such that the point where an individual switches from preferring sooner payments to later payments carries interval

the rapid adoption of data driven decision making abstract we provide a systematic empirical study of the diffusion and adoption patterns of data driven decision making ddd in the u s using data collected by the census bureau for a large representative sample of manufacturing plants we find that ddd rates nearly tripled 11 30 between 2005 and 2010 this rapid diffusion along with results from a companion paper are consistent with case based evidence that ddd tends to be productivity enhancing yet certain plants are significantly more likely to adopt than others key correlates of adoption are size presence of potential complements such as information technology and educated workers and firm learning

firms age process innovation and productivity growth abstract this paper looks directly at the impact of firms age and process innovations on productivity growth a model that specifies productivity growth as an unknown function of these variables is devised and estimated using semiparametric methods results show that firms enter the market experiencing high productivity growth and that above average growth rates tend to last for many years but also that productivity growth of surviving firms converges process innovations at some point then lead to extra productivity growth which also tends to persist somewhat attenuated for a number of years

risk sharing and information in village economies arrangements for achieving efficient risk sharing vary depending on the information available to agents in the economy the usual euler equation restricts efficient allocations in an economy which obeys the permanent income hypothesis while efficient allocations in an economy with private information and long term contracts satisfy a symmetric restriction but not the euler equation full insurance arrangements are unique in that they satisfy both restrictions we look at an environment in which it seems likely that long term contracts play a role in mitigating the effects of private information three village economies in south india the evidence that consumption allocations satisfy the private information restriction is quite strong for households in two of the three villages the evidence for the third village suggests that while consumption for some households satisfies the private information restrictions other households consumption obey the permanent income hypothesis

aid for trade and greenfield investment summary the aid for trade aft initiative was launched in 2005 at the hong kong ministerial conference where high income countries pledged to increase their aft contributions to developing countries aft comprised almost entirely of aid for trade related infrastructure and building productive capacity would promote growth by easing supply side constraints and improving transportation energy and communication infrastructure by lowering costs of operating in recipient countries aft may increase both trade and investment most research on the effects of aft on international transactions focuses on trade the sparse research on investment investigates aid and net foreign direct investment flows based on the international balance of payments we contribute to the literature by assessing aft effects on new greenfield investment using bilateral data for 25 donor and 120 recipient countries for the period 2003 13 we find that bilateral aft promotes greenfield investment our preferred specification includes bilateral and country time fixed effects and employs the poisson pseudo maximum likelihood ppml estimator robust effects emerge between the top five donors and more developed recipient countries cases where aid flows are large thus we see evidence that a critical level of aid is required to encourage greenfield investment both aid for infrastructure particularly transportation and energy and building productive capacity are found to exert strong effects to the extent that greenfield investment creates jobs and generates technology transfer it appears that aft is accomplishing its development objectives at least with regard to the more advanced recipient countries

why are some regions more innovative than others the role of small firms in the presence of large labs we study the impact of small firms on innovation in regions where large labs are present small firms generate demand for specialized services that lower entry costs for others this effect is particularly relevant in the presence of large firms that spawn spin outs caused by innovations deemed unrelated to the firm s overall business we examine msa level patent data during the period 1975 2000 and find that innovation output is higher in regions where both a sizable population of small firms and large labs are present the finding is robust to across region as well as within region analysis and the effect is stronger in certain subsamples in a manner that is consistent with our explanation