Geroski's Stylized Facts and Mobility of Large German Manufacturing Firms

Paul Geroski has established two stylized facts with respect to theprevalence of differential changes (mobility) of indicators ofeconomic and technological performance: technologicalindicators show a larger amount of mobility than do economic indicators.We assess the two stylized facts for a sample of 392 large Germanfirms observed over the period 1981–1993 and assigned to elevenmanufacturing industries. We analyze these data with two novelmethods, Salter curves and mobility indices based on fractileMarkov chains. Our analysis supports Geroski's two stylized factsin the case of large German manufacturing firms taking account ofsectoral differences.     

What do we know about entry?

This paper is a brief survey of recent empirical work on entry. It is organized as a series of stylized facts and a series of stylized results which together summarize much of what is generally understood - or believed - about what drives entry, and about the effects that entry has on markets.     

SCREENING AND MERGER ACTIVITY*

In our paper, the target of a proposed merger, by setting a reserve price, is able to screen prospective acquirers according to their (expected) ability to generate merger‐specific synergies. Both empirical evidence and many merger models suggest that the difference between high and low‐synergy mergers becomes smaller during booms. Thus, a target's opportunity cost for sorting out relatively less fitting acquirers increases and, hence, targets screen less tightly during booms, which leads to a hike in merger activity. Our screening mechanism not only predicts that merger activity is intense during booms and subdued during recessions but is also consistent with other stylized facts about takeovers and generates novel testable predictions.     

House Prices and Rents: Microevidence from a Matched Data Set in Central London

I analyze a real estate agency's proprietary dataset containing tens of thousands of housing sale and rental transactions in Central London during the 2006–2012 period. I isolate 1,922 properties that were both sold and rented out within six months and measure their rent‐price ratios. I find that rent‐price ratios are lower for bigger and more central units. These stylized facts are consistent with the user cost formula and reflect differences in maintenance costs, vacancy rates, growth expectations and risk premia.     

An Applied Econometrician's View of Large Company Performance

This paper contains a brief survey of recent empirical work on the performance of large companies. It tries to pull together the literature in the form of six stylized facts, illustrating them with data drawn from a single sample. The paper concludes by highlighting the issues which are thrown up for future work. These are: accounting for persistent heterogeneities between firms, accounting for the apparently erratic performance of many firms and, finally, moving away from hypothesis testing driven empirical agendas.     

The Firm Size Distribution and Inter-Industry Diversification

We show that the stylized facts of the Firm Size Distribution (FSD) by age cohorts, as shown in Cabral and Mata (2003), bind within 4-digit manufacturing industries in the UK and Belgium. This paper investigates whether the time to build a portfolio of products from inter-industry diversification is a mechanism that helps explain the stylized facts of the FSD by age cohorts. We find that the degree of inter-industry diversification has a separate impact on firm size when controlling for age, amongst other factors. Using the techniques of Cabral and Mata, we find that inter-industry diversification does shift the FSD to the right, and more so in older age groups.     

Agriculture in Africa – Telling myths from facts: A synthesis

Stylized facts drive research agendas and policy debates. Yet robust stylized facts are hard to come by, and when available, often outdated. The 12 papers in this Special Issue revisit conventional wisdom on African agriculture and its farmers’ livelihoods using nationally representative surveys from the Living Standards Measurement Study-Integrated Surveys on Agriculture Initiative in six African countries. At times they simply confirm our common understanding of the topic. But they also throw up a number of surprises, redirecting policy debates while fine-tuning others. Overall, the project calls for more attention to checking and updating our common wisdom. This requires nationally representative data, and sufficient incentives among researchers and policymakers alike. Without well-grounded stylized facts, they can easily be profoundly misguided.     

Mortgage Choice†

Mortgage choice refers to a set of problems faced by a homeowner that includes the choice of a loan-to-value ratio, the refinancing and default decisions, and the choice of mortgage instrument. This paper reviews much of the literature that has been written on the topic. It begins with a listing of the major stylized facts the literature seeks to explain. Models used to explain mortgage choice are categorized and discussed. It is argued that the relatively simple certainty model that incorporates liquidity constraints seems capable of explaining some of the stylized facts, but is unable to explain some others. The paper concludes with a discussion of three policy questions that require a better understanding of mortgage choice before they can be answered. The paper is based upon the author's Presidential Address to the American Real Estate and Urban Economics Association, which was delivered in Atlanta, Georgia on December 29, 1989.     

石化行业中的经验曲线效应

经验曲线是美国著名波士顿咨询公司开拓的管理预测概念和工具之一，回顾经验曲线的起源及发展，总结了有关石化行业中的经验曲线效应现象，即：典型的大宗化工产品的固定成本的长期趋势存在明显的双倍斜率约为25％的经验曲线效应；同时单位固定资产投资也存在着双倍斜率为25％～63％的经验曲线效应。指出经验曲线是预测大宗化学品固定成本和投资长期趋势的一个有效实用的工具，并就国内应用经验曲线时应注意的问题及想法进行了探讨。     

Bias and Error in Mine Project Capital Cost Estimation

Previous analyses of small samples of mining projects have found that feasibility studies tend to underestimate the as-built capital costs of the project. Our review of 63 international mining and smelting projects confirms that as-built capital costs are, on average, 14% higher than as estimated in the bankable feasibility study. There is little attenuation over time of this bias in capital cost estimation, appearing to reflect an absence of learning on the part of the project sponsor or the consulting engineering firm. We argue that this persistence of bias is instead intentional and rational, driven by a scarcity of project financing and the need by project sponsors to inflate the project economics in a bid to secure financing. We find some empirical support for our contention. A second phase of the analysis examines estimation error. Roughly half of all projects' as-built capital costs fall outside of the expected ± 15% of the feasibility study capital cost estimate, even after allowing for intentional estimation bias. Cost overruns of 100% or more happen in roughly 1 out of 13 projects. Smaller projects have less estimation accuracy than large projects. Finally, our analysis of the cost overrun data reveals that a shifted lognormal probability distribution should be used when modeling mining project capital costs in a Monte Carlo analysis.     

Markup pricing in petroleum refining:: A multiproduct framework

This paper describes a structural model of markup pricing under joint production with quasi-fixed inputs of capital, labor, and inventories. The price–cost markups are functions of the inverse price elasticity of demand, an industry average conjectural variation elasticity, and the inventory to sales ratio. Our empirical findings suggest significant markups over marginal cost that differ considerably by product. This study also estimates the elasticities of markups with respect to supply and demand shocks.     

The Performance of US Corporations: 1981–1994

This study decomposes the performance of US public firms between 1981 and 1994 into year, industry, corporate-focus and firm effects. Performance is measured by Tobin’s q, accounting profitability, and a hybrid measure. The results show that firm effects were more important to performance than industry effects, although industry effects had a large permanent component. Corporate focus was not important. The stylized facts suggest that competitive advantages – that is, differences between direct competitors in the same industry – were at least as important as industry influences on performance. Industry influences were more predictable and sustainable than competitive advantages, however.     

Small forces and large firms: Foundations of the RBV

The article presents a synthesis of several papers I have written, mostly in the economics literature, since the publication of ‘A resource‐based view of the firm’ (Wernerfelt, 1984). The starting point is a very small force: the reduction in bargaining costs when several bargains are pooled into one. I show how one can construct a theory of the firm based on this force and defend the theory by arguing that it makes predictions consistent with several stylized facts. In addition, the theory suggests that firms should decide on their strategy and scope based on excess capacity of productive resources—exactly like the RBV.     

Credit rating industry: A helicopter tour of stylized facts and recent theories

The recent subprime crisis and the ongoing Euro zone crisis have generated an enormous interest in the credit rating industry not only among economists but also among average citizens. As a consequence, we have seen an explosion of the economic literature on the industry. The objective of this survey is to introduce readers to the key stylized facts of the credit rating industry and to the recent theoretical economic literature on this industry.     

The Nature and the Determinants of Labor Market Transitions in Former Socialist Economies: Evidence from Bulgaria

To generate stylized facts on transitions between different labor market states during early transition, panel data for a sample of the registered unemployed in Bulgaria were collected. We find that about 60 percent of the unemployed are long-term unemployed. From logit regressions we find that women who had higher education and had not received unemployment benefits are more likely to be reemployed. For men, these factors are not significant, although participation in a training program is significant.     

„Bewertung von physischen Übertragungsrechten — Eine Analyse der Grenzkuppelstellen zwischen Deutschland und den Niederlanden“

The purpose of this paper is to discuss market-coherent valuation of physical transmission rights for cross-border capacities between Germany and the Netherlands. Aiming at a fair valuation of these contracts, the most important stylized facts of electricity prices such as mean reversion, spikes and correlations of regional prices have to be considered. We present two different approaches to the valuation of physical transmission rights and perform a quantitative analysis of the results. On the one hand various challenges of modeling regional price differences are discussed. On the other hand a structural undervaluation of required flexibility is indicated, which implicates missing incentives for the extension of cross border capacities.     

“Which side are you on?” A historical study of union membership composition in seven Western countries

This study uses surveys from the past 60 years to study union membership in Denmark, France, West Germany, Italy, Sweden, the United Kingdom, and the United States. We first revisit aggregate union densities finding that, for France and Italy, they were at times under- and overestimated, respectively. Second, we document the evolution of the composition of union membership in terms of gender, occupation, education, and sector. Different stylized facts emerge for different groups of countries. These facts do not lend support to the composition-based theory that attributes deunionization to deindustrialization, nor to the technological theory that predicts the exit of the high-skilled from unions.     

Search Frictions in Many-to-one Markets*

This article studies how search frictions affect competition and matching efficiency in many-to-one loan markets where a borrower requires support from multiple investors and coordination is desired but absent. We develop a dynamic search model and show that borrowers employ mixed strategies in quoting interest rates. More importantly, we find that in many-to-one markets, the rate dispersion caused by search frictions facilitates coordination and hence improves allocation efficiency relative to a no friction environment. Further, we empirically present stylized facts consistent with the theoretical predictions and structurally estimate the impact of search frictions on matching efficiency.     

Comparative statics for real options on oil: What stylized facts?

An important application in the real options literature has been in investments in the oil sector. Two commonly applied “stylized facts” in such applications are tested here. One is that the correlation of the returns on oil and the stock market is positive; the other that it is invariant to changes in oil price volatility. Both are rejected in data for 1993–2008 for crude oil and Standard & Poor's 500 stock market index. Based on real options theory, consequences are pointed out. The widespread idea that higher volatility leads to increased value and postponed investment is not necessarily valid.     

Divisional Cost of Capital: A Study of Its Use by Major U.S. Firms

The study examines the use of divisional cost of capital by Fortune 1000 companies. Two hundred and ninety eight firms (29.8 percent) responded to the survey. While the concept of weighted average cost of capital is utilized by 85.2 percent of the respondents, less than 50 percent use divisional cost of capital. By using a single firm cut-off criterion for all projects, there is the potential for intrafirm misallocation of capital since projects initiated by high risk divisions are more likely to be accepted because of high returns. Lower return divisions with less risk may be starved for capital when only a single weighted average cost of capital is used. The author also suggests some normative approaches to solve the problem.