Firms' relative sensitivity to aggregate shocks and the dynamics of gross job flows

We propose the coefficient of variation as a measure of the cyclical volatility of gross job flows that is immune to trends in net job creation. In addition, we show that this measure is intrinsically related to the importance of aggregate shocks for fluctuations in job flows at the firm level. Using data for the Portuguese economy, we conclude that the coefficient of variation is a more robust measure for the underlying volatility of gross job flows. We also find that large and old firms exhibit higher relative sensitivity to aggregate shocks than small and young firms, and have a disproportional influence over the dynamics of aggregate job reallocation. In particular, since large and old firms tend to reallocate jobs less procyclically than small and young firms, job reallocation is less procyclical than if all firm classes were equally sensitive to aggregate shocks.     

Job creation,job destruction and employment growth in transition countries in the 90s

We analyze job flows in five transition countries: Poland, Estonia, Slovenia, Bulgaria, and Romania. Using comparable firm level data over the years 1993–1997, we find that in early transition job destruction dominates job creation, while the latter is picking over time; most job reallocation occurs within, rather than across sectors; ownership and firm size are the most relevant characteristics for understanding the dynamics of job flows. We investigate job creation and destruction at the firm level by estimating a firm growth equation. Our results indicate patterns of gross job flows and firm growth remarkably similar to those in market-based economies.     

Skill shortages and labor market outcomes in Central Europe

The new Central European members of the EU have been characterized by low employment rates, especially among unskilled workers, despite the GDP recoveries and large private sector shares in output and employment. Evidence points at skill shortages in Central Europe as a key impediment to faster labor reallocation and convergence to the EU-15 employment structures. In this paper, we develop a simple model of labor reallocation with transaction costs and show how skill shortages can inhibit firm creation and increase income inequality. We use the model to examine the impact of training subsidies and their financing on skill acquisition and start-ups of new private firms, and show that the positive effect of subsidies would be mostly offset by high wage taxes. Shifting financing from wage to consumption taxes would improve incentives for workers’ training and firm start-ups, while relying more on income taxes could reduce the income gap between workers and entrepreneurs.     

Sectoral bubbles,misallocation, and endogenous growth

Stock price bubbles are often on productive assets and occur in a sector of the economy. In addition, their occurrence is often accompanied by credit booms. Incorporating these features, we provide a two-sector endogenous growth model with credit-driven stock price bubbles. Bubbles have a credit easing effect in that they relax collateral constraints and improve investment efficiency. Sectoral bubbles also have a capital reallocation effect in the sense that bubbles in a sector attract more capital to be reallocated to that sector. Their impact on economic growth depends on the interplay between these two effects. Bubbles may misallocate resources across sectors and reduce welfare.     

The Reallocation of Labour and the Lifecycle of Firms

This paper uses a unique US panel dataset of firms and workers toinvestigate the relationship between the firm's lifecycle and the reallocation of labour. We distinguish labour reallocation associated with job reallocation, and reallocation of workers over a fixed configuration of jobs. We find that firms at the beginning and end of their lifecycles contribute disproportionately to labour market lows, with sorting between firms particularly important among young firms, whereas sorting within firms is moreimportant among mature firms. We also find that high churning lows are associated with a lower probability of a young firm surviving.     

Firm turnover and productivity differentials in Ethiopian manufacturing

Are the forces of market selection at work in Africa? How successful are markets in these economies in sorting out firms on an efficiency basis following the sequence of reforms to liberalize and particularly to transform some of the previous command economies to market oriented ones? What is the pattern of entry and exit in the manufacturing sector and how does it affect industry productivity growth? This study examines these issues using firm-level industrial census data from the Ethiopian manufacturing sector. It is the first attempt to analyze firm turnover and productivity differentials using industrial census data in sub-Saharan Africa. The Ethiopian manufacturing sector exhibits a high firm turnover rate that declines with size. Exit is particularly high among new entrants; 60% exit within the first 3 years in business. Our study consistently shows a significant difference in productivity across different groups of firms, which is reflected in a turnover pattern where the less productive exit while firms with better productivity survive. We also found higher aggregate productivity growth over the sample period, mainly driven by firm turnover.     

Impact of Changes in Consumer Preferences on Sectoral Labour Reallocation: Evidence from the Italian Economy

This study empirically investigates the impact of changes in consumer preferences on labour reallocation across the Italian economic sectors. For this purpose, coherent sectoral time series of consumer preferences and labour units are constructed from Italian national accounts and consumption expenditure data. In line with recent firm‐level evidence, empirical findings indicate a positive and significant effect of preference changes on labour reallocation. Results are robust to several econometric specifications, different procedures to elicit preference changes, as well as the introduction of time‐varying price coefficient and sector‐specific effects of total consumption expenditure.     

Monopsonistic competition for the “best” workers

In this paper we analyse an economy where firms use labour as the only production factor, with constant return to scale. We suppose that jobs differ in their non-wage characteristics so each firm has monopsonistic power. In particular, we suppose that workers are heterogeneous with respect to their productivity. Then, each firm has incentives to offer higher wages in order to recruit the most productive workers. Competition among firms leads to a symmetric equilibrium wage, which is higher than the reservation wage, and to involuntary unemployment for the less productive workers, who are willing to work at the current wage but are not hired because their productivity is lower than the wage level. If firms have no institutional constraint on paying lower wages for the same job, an endogenous labour market segmentation emerges.     

Firm Productivity Moderated Link Between Human Capital and Compensation: The Significance of Task‐Specific Human Capital

The human capital of a firm as manifested by employee knowledge and experience represents a key resource of a firm's capabilities. Prior empirical studies have found that firms composed of high levels of human capital experience superior firm performance. Human capital theory proposes that an individual's general or firm‐specific human capital is positively related to compensation. However, empirical studies examining firm‐specific human capital's association with higher employee compensation have been inconclusive. The current study proposes that firm‐specific human capital be categorized as task‐specific and non‐task‐specific. Employees accumulate task‐specific human capital through duties conducted in their current position. Non‐task‐specific human capital represents experiences gained in prior positions to an employee's current job within the firm. Utilizing human capital data from 38,390 employees representing 76 firms in the IT sector, this study examines the association between forms of human capital and employee compensation at different levels of firm productivity. Results show that task‐specific human capital is associated with higher employee compensation. In addition, firm productivity moderates this association.     

Job flows,jobless recoveries,and the Great Moderation

This paper explores a link between the decline in employment volatility and the onset of jobless recoveries observed since the mid-1980s using a time series of job flow estimates for manufacturing that covers the entire postwar period. I show that job creation and job destruction rates have fallen and become less cyclical. This has increased the importance of reallocative shocks relative to aggregate shocks in explaining their time-series fluctuations. Despite the increased importance of reallocation, it is a change in the responses of job flows to aggregate shocks, which are now larger and more persistent, that lead to the onset of jobless recoveries. The decline in the cyclicality of temporary layoffs and the rise in the use of employment services cannot account for these altered responses.     

The importance of education for the reallocation of labor: Evidence from Swedish linked employer–employee data 1986–2002

Using Swedish employer–employee data we study job and worker flows for different educational groups, as well as the cyclicality of such flows. Due to the long period studied, from 1986 to 2002, and the widely fluctuating business cycle during this period, we have a unique opportunity to analyze the cyclical pattern of job and worker flows. We especially look at the big downturn in the Swedish economy in the beginning of the 1990s. When workers are treated as homogenous, we find job reallocation to be countercyclical. However, when we estimate correlations for different educational groups, we find job reallocation to be countercyclical for the lowest educated, and acyclical for higher educated workers. Contrary to job flows, we find worker flows to be acyclical, with a strong procyclical pattern in hiring rates, and an acyclical pattern in separation rates. When decomposing worker flows into educational groups, the acyclical pattern is prevalent for all groups, except for the highest educated. For the highest educated, worker reallocation is strongly pro-cyclical due to both more hirings and separations during up-turns.     

The cyclical pattern of regional unemployment flows in Poland

Using male unemployment benefit data across Polish regions during 1994–1996, we find that unemployment flows are pro-cyclical and increase with job reallocation, controlling for other factors. At the national level we observe that job reallocation and output are associated with stagnant unemployment flows, low inflows and long duration. This has heretofore been attributed to workers by-passing the unemployment benefit system as they move job to job. We show this to be a fallacy of aggregation. The cyclical behaviour of regional unemployment flows and their response to job reallocation suggests that workers use unemployment benefit system to facilitate transition.     

Insider trading: Regulation, securities markets, and welfare under risk aversion

I analyze in this article the impact of insider trading regulation (ITR) on a securities market and on social welfare, and argue that the imposition of ITR forces a reallocation of wealth and risk that decreases social welfare. Three reasons explain this result: First, ITR increases the volatility of securities prices; second, it worsens the risk sharing among investors; and, third, it diverts resources from the productive sector of the economy. Further, although I formally establish conditions under which ITR makes society better off, I argue that those conditions are not useful to justify the imposition of this regulation.     

Unionisation structures, productivity and firm performance: New insights from a heterogeneous firm model

This paper introduces collective bargaining at the firm and at the sector level into the heterogeneous firm model of Melitz and Ottaviano (Melitz, M. J., Ottaviano, G. I. P., 2008. Market size, trade, and productivity. Review of Economic Studies 75 (1), 295-316). It then analyses how the two bargaining regimes change aggregate industry productivity and firm performance relative to a competitive labour market. While sector-level bargaining forces the least productive firms to exit and thus increases average productivity relative to the competitive benchmark, firm-level bargaining allows less productive firms to stay in the market and thus reduces average productivity. Sector-level bargaining also results in higher average output and profit levels than either firm-level bargaining or a competitive labour market. The paper also shows that the choice between sector- and firm-level bargaining can involve a trade-off between product variety and product prices: Not only the average price level but also product variety tends to be lower under sector-level bargaining than under firm-level bargaining.     

Worker poaching in a supply chain: Enemy from within?

Worker poaching represents the primary mode by which workers change employers. We examine worker poaching between firms linked in a value chain. We find that, in a value chain, the less productive firm may offer its workers higher wages and poach workers from the more productive firm. We also find that worker flows accomplished via poaching impact supply chain management: (a) the identity of the bottleneck firm may depend on whether poaching is available; (b) poaching between linked firms may benefit both, and (c) the value chain cannot be fully coordinated without controlling wages in the labor market.     

Gross job flows and institutions in Europe

We examine job flows in the 1990s for a sample of 13 European countries. By using a dataset of continuing firms that covers all sectors, we find firm characteristics to be important determinants of job flows, with smaller and younger firms within services typically having a larger degree of job turnover. Once controlled for firm and sectoral effects, the role of institutions in the dynamics of job creation and destruction is examined. As expected, employment protection is found to reduce job flows. Similarly, countries with higher unemployment benefits and more co-ordinated wage bargaining systems are characterised by lower job flows.     

Comparing Public and Private Sector Employees’ Innovative Behaviour: Understanding the role of job and organizational characteristics,job types,and subsectors

Abstract

Innovation is argued to be of key importance in the public sector. Little is known about possible sector differences in innovative behaviour. The stereotype in literature is that public employees are less innovative. We analyse whether sector is associated with innovative behaviour and the influence of job/organizational characteristics. We test this by using a three-country representative survey in Scandinavia with 8,310 respondents. We control for subsectors/industries and job functions. We do not find that public employees are less innovative. Furthermore, the study emphasizes the importance of understanding the major differences in innovative behaviour between different subsectors/industries and job types.     

Organizational dynamics and aggregate fluctuations: The role of financial relationships

This paper constructs an estimated dynamic stochastic general equilibrium model to study the role of labor reallocation between production and organizational tasks within a firm in movements in measured TFP in Japan. Allocating more labor to organizational tasks strengthens the financial relationship with financial intermediaries and helps firms to mitigate a widening in credit spread during financial difficulties. However, doing so reduces the labor allocated to production tasks and hence the measured TFP. Our quantitative analysis indicates that labor reallocation contributes to the observed procyclicality in measured TFP. We also find that this mechanism amplifies and propagates the effects of exogenous shocks on aggregate activity.     

Patterns of business creation,survival and growth: Evidence from Africa

We study firm dynamics using a novel database of all formally registered firms in Cote d'Ivoire from 1977 to 1997, which account for about 60% of GDP. First, we examine entry and exit patterns and the role of new and exiting firms versus incumbents in job creation and destruction. We find that while the rate of job creation at new firms is quiet high – at 8% on average – the numbers of jobs added by new firms is small in absolute terms. Next, we examine survival rates and find that the probability of survival increases monotonically with firm size, but that manufacturing and foreign-owned firms face higher likelihoods of exit compared to service oriented and domestically-owned firms. We find that higher GDP growth increases the probability of firm survival, but this is a broad impact with no firm size disproportionately affected. In robustness checks we find that post-1987, size is no longer a significant determinant of firm survival for new entrants, suggesting that the operating environment for firms changed. Finally, we find that trade and fiscal reform episodes raised the probability of firm exit and attenuated the survival disadvantages faced by smaller firms, but exchange rate revaluation and pro-private sector reforms did not significantly lower the likelihood of exit.     

Cournot duopoly and insider trading with two insiders

We study the effect of competition among insiders in an extension of the static Kyle [Kyle, A. (1985). Continuous auctions and insider trading. Econometrica, 53, 1315–1335] model of insider trading introduced by Jain and Mirman (JMC) [Jain, N., & Mirman, L.J. (2002). Effects of insider trading under different market structures. The Quarterly Review of Economics and Finance, 42, 19–39]. In the JMC model competition in the real sector is introduced. In this paper we introduce competition in the stock sector in the JMC model by assuming that there is a manager who is responsible for making the real decisions of the firm as well as an ‘owner’ who has the same information as the manager but has no managerial responsibilities. In this way we can study the interaction between competition in the real sector and competition in the financial sector. We show that the stock price set by the market makers reveals more information than in the JMC model and that the expected equilibrium values of the manager’s profits sometimes decline and sometimes increase depending on the exogenous parameters of the model. Moreover, we prove that due to the competition in the financial sector, the level of output produced by the firm is less than in JMC. Finally, we also study the effect of financial competition in the case in which the market makers receive only one signal and analyze the comparative statics in this case.