How different are the production functions of the European manufacturing sectors? New empirical evidence

The neo-classical model of international trade assumes that the Total Factor Productivity (TFP) of a sector is common across countries, that returns to scale are constant and that the sectoral production of the countries differs by virtue of the factor endowments. In this article, we consider whether the differences in production can also be explained by the economies of scale in the national industries and by the technological differences across countries. To test this hypothesis, we estimate three models proposed in Harrigan (1999 Harrigan, J. 1999. Estimation of cross-country differences in industry production functions. Journal of International Economics, 47: 267–93.  [Google Scholar]) with data for eight European Union (EU) Member States covering the period 1978 to 1992 and analyse how the TFP changes from country to country.     

How Green are Exporters?

There is a well‐established theoretical and empirical literature that shows that exporters are more innovative than otherwise equivalent non‐exporters. In this article, we ask whether this is also true when it comes to the effects of adopting greener production techniques. Using an instrumental variables strategy based on UK firm level data, we find robust evidence that exporters are more likely to report their innovation as having a ‘high/very high’ environmental effect.     

How are preferences revealed?

Revealed preferences are tastes that rationalize an economic agent's observed actions. Normative preferences represent the agent's actual interests. It sometimes makes sense to assume that revealed preferences are identical to normative preferences. But there are many cases where this assumption is violated. We identify five factors that increase the likelihood of a disparity between revealed preferences and normative preferences: passive choice, complexity, limited personal experience, third-party marketing, and intertemporal choice. We then discuss six approaches that jointly contribute to the identification of normative preferences: structural estimation, active decisions, asymptotic choice, aggregated revealed preferences, reported preferences, and informed preferences. Each of these approaches uses consumer behavior to infer some property of normative preferences without equating revealed and normative preferences. We illustrate these issues with evidence from savings and investment outcomes.     

Lower bounds of concentration in Taiwan's manufacturing industries: do exports matter?

This article aims to test Sutton's ‘lower bounds’ approach on the analysis of market concentration in a small open economy like Taiwan. Exporting, which is important to a small open economy, is also considered in order to investigate the role of foreign competition on the market structure. Using a stochastic frontier approach, the estimate findings are in accordance with Sutton's predictions, whereby the lower bounds for high advertising and/or R&D-intensive industries are higher than those for low advertising and/or R&D-intensive industries in Taiwan. At the same time, the lower bounds of concentrations for export-intensive industries do not differ significantly from that of nonexport-intensive industries. The deviations from the lower bound are explained by industry characteristics such as the cost disadvantage ratio, the share of small and median-size enterprises, turnover rate and growth rate.     

How Wealthy are the Rich?

Underreporting and undersampling biases in top tail wealth, although widely acknowledged, have not been statistically quantified so far, essentially because they are not readily observable. Here we exploit the functional form of power law-like regimes in top tail wealth to derive analytical expressions for these biases, and use German microdata from a popular survey and rich list to illustrate that tiny differences in non-response rates lead to tail wealth estimates that differ by an order of magnitude, in our case ranging from 1 to 9 trillion euros. Underreporting seriously compounds the problem, and we find that the estimation of totals in scale-free systems oftentimes tends to be spurious. Our findings also suggest that recent debates on the existence of scale- or type-dependence in returns to wealth are ill-posed because the available data cannot discriminate between scale- or type-dependence, on one hand, and statistical biases, on the other hand. Yet both economic theory and mathematical formalism indicate that sampling and reporting biases are more plausible explanations for the observed data than scale- or type-dependence.     

How strategy sensitive are contributions?

Summary. We test six hypotheses for contributions in dilemma games, a category that includes the prisoner's dilemma and public goods games. Our experiment focuses specifically on the strategic interdependence of contributing behavior, and manipulates the strategy space of a two-person dilemma game especially designed for the task. The hypothesis that contributors have non-linear preferences over own and the other player's payoffs accurately matches the strategic pattern of contributing that we observe across treatments. None of the reasons for contributing advanced by the other hypotheses, whether alone or in additive combination, does so.     

How common are common priors?

To answer the question in the title we vary agents? beliefs against the background of a fixed knowledge space, that is, a state space with a partition for each agent. Beliefs are the posterior probabilities of agents, which we call type profiles. We then ask what is the topological size of the set of consistent type profiles, those that are derived from a common prior (or a common improper prior in the case of an infinite state space). The answer depends on what we term the tightness of the partition profile. A partition profile is tight if in some state it is common knowledge that any increase of any single agent?s knowledge results in an increase in common knowledge. We show that for partition profiles that are tight the set of consistent type profiles is topologically large, while for partition profiles that are not tight this set is topologically small.     

What factors determine the outsourcing intensity? A dynamic panel data approach for manufacturing industries

The present article investigates the determinants of outsourcing production using a panel of 93 Spanish manufacturing industries for the period 1993 to 2002. Outsourcing is measured as production tasks which are contracting out to external suppliers, a more direct and suitable indicator. After controlling for unobserved heterogeneity and simultaneity, our results show a high persistence of the outsourcing intensity. Moreover, outsourcing of production is positively related to unit labour costs, skills requirements, national ownership and orientation to international markets. We also find evidence for a negative link between the outsourcing intensity and the share of small firms.     

How predictable are environmental compliance inspections?

The goal of this paper is to examine the timing of environmental compliance inspections and determine the extent to which such inspections can be predicted. The paper focuses on modeling the inspections at hazardous waste facilities in the U.S. using detailed data on individual inspections and facilities. The paper uses a number of parametric and semi-parametric duration models to predict the timing of inspections and finds that the exponential model provides the best balance in terms of the explanatory power and simplicity of the model. However, even with this model it is difficult to accurately predict the timing of most compliance inspections. The paper also examines the extent to which using data on individual inspections can improve empirical predictions about aggregate inspections. If the goal is to estimate the annual number of inspections at hazardous waste facilities, neither the exponential model or a Poisson model is clearly superior. Which model is more appropriate depends on the question the researcher wants to answer. Similarly, if the focus is on whether any inspection occurred in a given time period, the benefits of using the exponential model depend on the nature of the questions to be answered. While the exponential model performs better than a probit model in predicting which entities will be inspected, it also results in a higher number of “false positives,” that is predicting an inspection when no inspection actually occurs.     

How Fast are Semiconductor Prices Falling?

The Producer Price Index (PPI) for the U.S. suggests that semiconductor prices have barely been falling in recent years, a dramatic contrast to the rapid declines reported from the mid‐1980s to the early 2000s. This slowdown in the rate of decline is puzzling in light of evidence that the performance of microprocessor units (MPUs) has continued to improve at a rapid pace. Over the course of the 2000s, the MPU prices posted by Intel, the dominant producer of MPUs, became much stickier over the chips' life cycle. As a result of this change, we argue that the matched‐model methodology used in the PPI for MPUs likely started to be biased after the early 2000s and that hedonic indexes can provide a more accurate measure of price change since then. MPU prices fell rapidly through 2004 on every price measure we present, with the PPI declining at an even quicker pace than the hedonic indexes. However, from 2004 to 2009, our preferred hedonic index fell faster than the PPI, and from 2009 to 2013 the gap widened further, with our preferred index falling at an average annual rate of 42 percent, while the PPI declined at only a 6 percent rate. Given that MPUs currently represent about half of U.S. shipments of semiconductors, this difference has important implications for gauging the rate of innovation in the semiconductor sector.     

Does government R&D stimulate or crowd out firm R&D spending? Evidence from Chinese manufacturing industries

We examine whether receiving a government R&D grant stimulates or crowds out a firm’s own R&D spending in Chinese manufacturing industries. Using a database that spans the population of large and medium size privately owned Chinese manufacturing firms for the period from 2007 to 2011, a matching estimator and a matching and difference in‐differences estimator, we find a large firm R&D promoting effect of government R&D: receiving a government R&D grant led to a 4 to 9‐million‐yuan increase in a firm’s own R&D expenditures. This is a significant effect since the average R&D expenditures ranged from 5 to 9 million yuan in the year before receiving the grant. To understand the mechanisms behind this effect, we compare the before‐ and after‐treatment performance and behaviour of the treated and the control firms. We find that the government R&D receiving firms became more profitable following their receipt of the grant. We also find that receiving a government R&D grant increases the likelihood of a firm continuing its R&D performance after receiving the initial grant.     

Do exchange rates affect the capital–labour ratio? Panel evidence from Canadian manufacturing industries

Using industry-level data for Canadian manufacturing industries from 1981 to 1997, we find empirical evidence of a negative relationship between the capital–labour ratio and the user cost of capital relative to the price of labour. A 10% increase in the user cost of the Machinery and Equipment (M&E) relative to the price of labour results in a 3.3% decrease in the M&E–labour ratio in the long run. Assuming complete exchange rate pass-through into imported M&E prices, the maximum effect of a permanent 10% depreciation in the exchange rate is a 1.7% decline in the M&E–labour ratio. This result implies that the cumulative growth of the M&E–labour ratio during the 1991 to 1997 period would have been 2.3 percentage points higher had the dollar not depreciated. This may appear to be significant, but considering both M&E as a share of total capital and the capital share of nominal output are both approximately one-third, in terms of a simple growth accounting framework, the effect on labour productivity is small.     

How similar are alcohol drinkers? International evidence

Using a Vector Autoregression (VAR) approach, several hypotheses are re-examined suggested by the literature concerning the relationship between financial development and economic growth, investment and productivity. The models use quarterly time-series data from ten OECD countries and China. Innovation accounting or variance decomposition and impulse response function analysis is applied to examine interrelationships between variables in the VAR system and, therefore, differs from the more usual Granger causality approach. In particular, it examines the relationship between financial development proxied by total credit. At best, weak support is found for the hypothesis that financial development ‘leads' economic growth.     

How large are wage differentials in Austria?

The OECD has repeatedly recommended that wage bargaining in Austria be decentralised to allow wage diferentials to widen. But the status quo itself is in question. While studies of aggregate industry data indicate a high degree of wage dispersion, research based on data from household surveys seems suggest that income inequality in Austria is as small as in the Scandinavian countries. This paper seeks to reconcile these opposing views. It shows that data from the household surveys underestimate the size of inter-industry wage differentials. An analysis of the structure of contractual wage rates supports the view that wage inequality is very pronounced in Austria and that a narrowing of the wage gap would lead both to an increase in productive efficiency and an increase in income equality.