Understanding evolutionary processes in non-manufacturing industries: Empirical insights from the shakeout in pharmaceutical wholesaling

Although the empirical pattern of industry shakeout has been documented for many manufacturing industries, we know little about the processes by which market structure evolves in non-manufacturing service industries. This paper establishes detailed empirical observations about the consolidation of a single non-manufacturing industry, the wholesale distribution of pharmaceuticals. These observations are used to explore differences between manufacturing and wholesaling in both the patterns and explanations for consolidation and analyze the explanatory power of theories that link consolidation to technological change. The analysis demonstrates that theories developed to explain consolidation in new manufacturing industries have varying degrees of applicability to the consolidation of drug wholesaling. The observed patterns of exit, innovation, and growth suggest important modifications to evolutionary theories of market structure.     

Usage‐based insurance and its acceptance: An empirical approach

This study aims to explore the motor insurance market's attitude towards usage‐based insurance (UBI), and thus its readiness for a launch in the near future. Data on client perception was collected using a structured questionnaire. On the basis of this, an initial selection of factors, other than income, that could influence the declared attitude of drivers was demonstrated showing that it is primarily dependent on certain demographic characteristics like their age, sex, or place of residence. A strong relationship was also demonstrated with respect to the intensity of the vehicle's use, to the amount of the insurance premium they have paid, and to the self‐assessment of the respondents' driving skills. Clients are likely to accept the concept of UBI once implemented, but that they are not ready yet to give up the traditionally used methods of premium calculation. Their attachment to discounts granted can be very strong in particular to the no‐claims bonus.     

The new local economics: A reply to John Benington

Attempts are being made to construct a “new local economics” and important claims are being made on its behalf. In present circumstances, its contribution, though with some valuable achievements as John Benington has shown, must nevertheless be marginal. The task is to gain the maximum leverage from minimal resources, and this article suggests that the key priorities should be to use local authorities' influence as purchasers, employers and investors.     

Global Warming Policy and the Pennsylvania Economy: A Computable General Equilibrium Analysis

Most studies of the impacts of global warming policy have been performed at the national level. However, national averages obscure the fact that some regions may be affected much more than others. We formulated a regional computable general equilibrium model to analyze the impact of a carbon tax on the Pennsylvania economy. The model incorporates special features relating to labor mobility, trade and energy substitution for this purpose. Our results indicate significant negative overall impacts on the Pennsylvania economy, primarily because it is a major producer and user of fossil fuels, especially coal, and because it is highly industrialized. Sensitivity analyses on key parameters and model assumptions indicate that our results are robust.     

Input–Output Structural Decomposition Analysis: A Critical Appraisal

Over the past decade, input–output structural decomposition analysis (SDA) has developed into a major analytical tool. We review the development of SDA and its relationship to other methodologies. We present the fundamental principles of alternative approaches to deriving SDA estimating equations and explore the various decompositions of changes in IO tables. We also identify several complications and unresolved issues. Most importantly, we find that a rigorous grounding in economic theory is lacking for SDA, but we are able to offer some suggestions as to how it might be established.     

Practitioners' Corner

The first 150 words of the full text of this article appear below. Spring at last. Here in Montreal, the transition from winteris particularly delicious. There is more light, the world looksless grey, and the trepidation that another storm may be aroundthe corner is put away with the winter tires. In this issueof JFEC, the editors appear to be underscoring seasonal changein an issue whose unifying theme involves parameter and modelstability. Parameter stability is an important issue in econometrics. Achanging economic environment may be captured by allowing theparameters of a reduced form model to vary to reflect changingconditions. The challenge for the econometrician is to constructmodels that do more than reflect changes in an ad hoc manner.For want of more insightful approaches, the challenge is oftensidestepped in practice by focusing on shorter samples whereno structural change can be assumed to have occurred. However,in so constricting the sample size, . . . [Full Text of this Article]     

Legal Minimum Wages and Employment Duration

We estimate the effect of minimum wages on employment duration using event history data from the 1988-1994 rounds of the National Longitudinal Survey of Youth. Existing literature takes two alternative tracks: Some studies predict reduced turnover due to rents created by minimum wages, others focus on the expected increase in turnover due to reduced job amenities and imperfect information. We find that for men, the net effect of a minimum wage depends on its magnitude relative to the typical wage in the local labor market. We find some evidence that where the minimum wage is low, separation rates for men hired at the minimum wage are reduced. We also find that as the relative value of the minimum wage rises, separation hazards increase. We interpret these findings as evidence that rents may accrue to minimum wage workers, but that the job matching process is undermined when the minimum wage binds.     

Industrial Policy and Technology Diffusion: Evidence from Paper Making Machinery in Indonesia

In this paper, we analyze the diffusion and adoption of paper making machinery in the Indonesian pulp and paper industry, from 1923 till 2000. We develop a machine level index of technological sophistication (mach), which measures the technological distance of each paper machine to the world technological frontier. The data reveal a pattern of rapid technological catch up. But catch up was not an industrywide phenomenon. Some modern firms installed state-of-the-art machinery, while others installed older vintages. The paper argues that industrial policy has played an important role in the speed and nature of diffusion of paper making machinery.     

Do alliances promote knowledge flows?

We explore the role of interfirm alliances as a mechanism for sharing technological knowledge. We argue that knowledge flows between alliance partners will be greater than flows between pairs of nonallied firms, and less than flows between units within single firms. Using patent citations as a proxy for knowledge flows, we find results that are consistent with these expectations. We then explore how firm characteristics affect knowledge flows within alliances and find positive effects due to technological, geographic, and business similarities between partners. We use alliance data from MERIT, patent data from the USPTO, and firm data from Compustat.