The spatial structure of production with a Leontief technology

The structure of the optimal spatial pattern of production is studied when there are interdependencies among production units which can be described by a Leontief technology, and when there is a single marketplace of final demand, the CBD. Transportation cost is proportional to distance. It is shown that the various goods are produced in rings which can be ranked by distance from the CBD independently of the levels of final demand. Furthermore shipment of goods for meeting intermediate and final demand can only be in the direction of the CBD and no shipment of goods towards the periphery can occur. A finite algorithm is given for the construction of the optimal pattern and for determining a system of f.o.b. prices and land rents which sustain it as a competitive equilibrium.     

Wage Effects of Trade Reform with Endogenous Worker Mobility

In this paper, we use a linked employer–employee database from Brazil to evaluate the wage effects of trade reform. With an aggregate (firm-level) analysis of this question, we find that a decline in trade protection is associated with an increase in average wages in exporting firms relative to domestic firms, consistent with earlier studies. However, using disaggregated, employer–employee level data, and allowing for the endogenous assignment of workers to firms due to match-specific productivity, we find that the premium paid to workers at exporting firms is economically and statistically insignificant, as is the differential impact of trade openness on the wages of workers at exporting firms relative to otherwise identical workers at domestic firms. We also find that workforce composition improves systematically in exporting firms, in terms of the combination of worker ability and the quality of worker–firm matches, post-liberalization. These results stand in stark contrast to the findings reported in many earlier studies and underscore the importance of endogenous matching and, more generally, non-random labor market allocation mechanisms, in determining the effects of trade policy changes on wages.     

The relationship between growth,profitability, and firm value

This research examined predictions drawn from value-based planning models. Results indicate that profitability and growth do influence shareholder value in the manner predicted; however, the relationships are conditional. This study also shows that, the market-to-book value of equity ratio and Tobin's q-ratio are theoretically and empirically, equivalent measures of value creation.     

On competition and endogenous firm efficiency

Summary. Conventional wisdom holds that product market competition disciplines firms into efficiency of operation. However, in a well known paper, Martin (1993) has shown that in a linear Cournot setting (with costs determined first and product market competition taking place in a second stage) the exact opposite obtains – a larger number of firms competing in the market implies lower firm efficiency. The note clarifies further the links between market structure and efficiency. Specifically, it argues why (and how) the result derived by Martin (1993) depends upon the assumptions made regarding the structure of demand and nature of conjectures held by firms as to their rivals' behavior. An illustrative counter-example (with Bertrand behavior and non-linear demand) in which entry increases efficiency is provided as well. Received: March 2, 2000; revised version: September 19, 2000     

LOBBYING COMPETITION OVER TRADE POLICY*

Competition between opposing lobbies is an important factor in the endogenous determination of trade policy. This article investigates the consequences of lobbying competition between upstream and downstream producers. The theoretical structure underlying the empirical analysis is the well‐known Grossman–Helpman model of trade policy determination, modified to account for the cross‐sectoral use of inputs (itself a quantitatively significant phenomenon, with around 50% of manufacturing output being used by other sectors rather than in final consumption). Our empirical results validate the theoretical predictions. Importantly, accounting for lobbying competition also alters substantially estimates of the “welfare‐mindedness” of governments in setting trade policy.     

Bayesian analysis of the two‐part model with endogeneity: application to health care expenditure

This paper studies the effect of managed care on medical expenditure using a model in which the insurance status is assumed to be endogenous. Insurance plan choice is modeled through the multinomial probit model. The medical expenditure variable, the outcome of interest, has a significant proportion of zeros that are handled using the two‐part model, extended to handle endogenous insurance. The estimation approach is Bayesian, based on the Gibbs Sampler. The model is applied to a sample of 20 460 individuals obtained from the Medical Expenditure Panel Survey. The results provide substantial evidence of selectivity. Copyright © 2006 John Wiley & Sons, Ltd.