Who Benefits from Trade Wars?

Even though economists keep on emphasising the benefits of international trade, protectionism is on the rise in many industrialised countries. The authors argue that a potential explanation for this phenomenon can be found in the short-run distributional effects of import tariffs: while protectionism hurts the economy from an aggregate perspective (i.e. GDP goes down), unskilled workers in import-competing sectors benefit in the short run and do not lose in the long run. They might therefore lend political support to protectionism.     

Factor Substitution in U.S. Manufacturing: Does Plant Size Matter?

We use micro data for 10,412 U.S. manufacturing plants to estimate the degrees of factor substitution by industry and by plant size. We find that (1) capital, labor, energy and materials are substitutes in production, and (2) the degrees of substitution among inputs are quite similar across plant sizes in a majority of industries. Two important implications of these findings are that (1) small plants are typically as flexible as large plants in factor substitution; consequently, economic policies such energy conservation policies that result in rising energy prices would not cause negative effects on either large or small U.S. manufacturing plants; and (2) since energy and capital are found to be substitutes, the 1973 energy crisis is unlikely to be a significant factor contributing to the post 1973 productivity slowdown.     

Can Industry Consolidation Lead to Greater Efficiencies? Evidence from the U.S. Defense Industry

The question of whether mergers in various industries lead to greater market power or improved efficiencies has been the subject of numerous public policy debates. This analysis focuses on the impact of consolidation in the U.S. defense industry over the past 20 years and examines the reasons behind the wave of defense consolidation, the results in terms of the reduction in contractors, the antitrust response to mergers, and evidence on the impact of the mergers on weapons systems’ total and per-unit costs. The analysis finds that merger activity was driven less by declines in spending following the Cold War than by a stronger economy and a vibrant financial market. The cost data show that 39 to 44 percent of systems experienced statistically significant change in either total costs or per-unit costs following a merger. Somewhat more systems were likely to exhibit lower postmerger per-unit costs than higher per-unit costs, suggesting improved efficiency. The analysis also examines the impact on weapon systems cost by type of weapons system, manufacturer, and service (Army, Navy, Air Force). The evidence suggested greater efficiencies following consolidation for many sectors. Army and Navy systems overall showed lower per-unit costs, but the Air Force weapons systems showed mixed results.     

Who Survives in Japan? An Empirical Analysis of European and U.S. Multinational Firms in Japanese Manufacturing Industries

This paper provides new evidence on exit patterns of European and U.S. firms in Japanese manufacturing industries. Specifically, the paper tests two sets of hypotheses: (1) Japans distinctive business institutions and practices work against foreign firms and constitute a barrier to operate in Japan; and (2) the international configuration of business activities of foreign firms determines their post-entry performance in Japan. Using a new sample of 366 subsidiaries established during the 1973–1994 period in Japan, the paper finds, most importantly, that the exit pattern of foreign firms in Japan is influenced significantly by the industry-specific factors that determine infant mortalities and the subsidiary-specific factors that determine the subsidiarys international activities. On the contrary, this paper finds that Japans distinctive business practices are less likely to affect the exit pattern.     

Who Benefits from Multiple Brand Celebrity Endorsements? An Experimental Investigation

Advertisers commonly use celebrity endorsers to increase the effectiveness of advertising in persuading consumers. In many cases, these celebrities endorse more than one brand. Little is known, however, about the benefit to brands from these multiple endorsements by the same celebrity. This research applies classical conditioning theory to an exploration of multiple brand endorsements by a single celebrity, and examines how brand concept consistency between endorsed brands affects consumers’ evaluations of the endorsed brand. The findings, over two separate studies, indicate that exact and high concept consistency between endorsed brands positively influences consumers’ attitude toward these brands.     

Who Benefits from Longer Lending Relationships? An Analysis on European SMEs

This paper empirically investigates the impact of lending relationships duration on SMEs financial stability. Our research hypothesis is that the balance between benefits and costs of longer bank‐firm ties may be different depending on the degree of firms' financial health. Using a large sample of European manufacturing SMEs that excludes firms that have defaulted and those with less than ten employees, we find that the overall positive effect of enduring lending relationships tends to progressively increase for more stable firms, being greater when the main bank operates nearby the firm. Our findings, yet, are conditional on firm survival and may not be generalized to the smallest of firms.     

Do Leveraged Firms Underinvest in Corporate Social Responsibility? Evidence from Health and Safety Programs in U.S. Firms

The explosion of health-related costs in U.S. firms over more than a decade is a huge concern for managers. The initiation of Health and Safety (H&;S) programs at the firm level is an adequate Corporate Social Responsibility (CSR) initiative to contain this evolution. However, in spite of their documented efficiency, firms underinvest in those programs. This appears as a puzzle for health economists. In this paper, we uncover a strong negative relation of financial leverage to the implementation of H&;S programs. The negative impact of debt on investment and CSR activities is generally interpreted as an efficient disciplinary effect of debt on managers. H&;S are particularly well suited to revisit this evidence, given their strong profitability and homogeneity across firms. Very interestingly, the negative effect is stronger for firms with high free cash flows, for which debt is used to prevent overinvestment. This strongly suggests that debt, while disciplining managers, also discourages investments which are valuable both for firms and society.     

Who Supports the ECB? Evidence from Eurobarometer Survey Data

This paper studies the determinants of the support for the European Central Bank (ECB) in the member countries of the European Monetary Union (EMU) and their evolution from 1999 to 2015. Our contribution is to examine micro‐level sociodemographic characteristics from the Eurobarometer surveys jointly with macroeconomic indicators of trust in a central bank in order to evaluate econometrically their relative importance over time. Pseudo‐panel logit estimates reveal that the former have a dynamically stable, and generally stronger influence taken altogether, when compared with the latter. Interestingly, we find that while expected inflation becomes a positive determinant of trust in the ECB after the global financial crisis (GFC), actual inflation gets no statistical significance. Having taken centre stage in the monetary policy debate in the Euro‐area post‐GFC and especially since 2013, excessive disinflation and risk of deflation attracted strong attention by the public and have consequently affected its perceptions about the ECB. Accordingly, our results emphasise forward lookingness of the EMU population with regard to ‘deflation scares’ in determining trust in the ECB, in addition to disentangling the contributions of the key individual‐level sociodemographic factors, and can duly inform ECB's communication strategy.     

How Do Organisational Members Perceive CRM? Evidence from a U.K. Service Firm

Loyalty is a multi-faceted construct. Much of the research on loyalty considers aggregate aspects and dimensions. Here, the individual record of one loyalty cardholder is subjected to examination, analysis and interpretation. The aim is not to generalize but rather to explore meanings of loyalty at a micro level. By building up a picture of an individual we illustrate the richness of such data for businessesand researchers, but in so doing question how ethical such an approach is (including for researchers).     

Who benefits from mandatory CSR? Evidence from the Indian Companies Act 2013

We examine the value impact of mandatory Corporate Social Responsibility (CSR) spending required by the Indian Companies Act of 2013 for large and profitable Indian firms. We find that the external mandate is value decreasing, even after controlling for prior voluntary CSR activity by firms affected by the mandate. We also find that there is systematic crosssectional variation across firms. Firms that are profitable and firms in the Fast Moving Consumer Goods sector that voluntarily engaged in CSR, benefit from CSR. Industrial firms and firms with high capital expenditures are negatively impacted by the mandate. We conclude that a one-size-fits-all approach to CSR is sub-optimal and value decreasing.     

Who Benefits from Workers with General Skills? Countervailing Incentives in Labour Contracts

In a principal–agent model with adverse selection and moral hazard the impact of the agent's transferable human capital on incentives is analysed. It is shown that under asymmetric information the employer (principal) prefers a worker (agent) with general skills to a similarly productive worker with firm‐specific skills although the reservation utility of a worker with general (i.e. marketable) skills is higher. The principal's information costs are lower when workers have general skills than in the case where workers possess only firm‐specific human capital because of countervailing incentives. The optimal contract for workers with general skills differs from the standard screening contract in that it involves pooling.     

Does Exporter Turnover Contribute to Aggregate Productivity Growth? Evidence from Malaysian Manufacturing

Malaysia’s economic success is to a significant extent underpinned by its export‐oriented manufacturing sector. The sector has a large foreign presence, with MNCs attracted by the open trade and investment regime, and FDI‐friendly policies. Using unpublished manufacturing census data for 2000 and 2005, we apply the methodology by Foster et al. (1998) to decompose productivity growth. The analysis shows that exporters were more productive than domestic‐oriented establishments, and were distinctly more competitive. The empirical evidence also shows that establishment turnover is important in boosting productivity growth. In particular, we find that turnover of exporters made a larger contribution to aggregate productivity growth compared with domestic‐oriented establishments during the period from 2000 to 2005. Surviving establishments (those that operated in both years), on the other hand, made a negative contribution. It is noteworthy that entrants to export markets were more productive than surviving non‐exporters and even surviving exporters. Exiters from export markets or ‘export failures’, on the other hand, were less productive than continuing exporters. Given the importance of turnover to productivity growth, the government should ensure unrestricted entry to the export sectors for both foreign and domestic investors. Continuing with pro‐FDI policies is also important, given the keener global competition.     

Does Trade Credit Affect Technical Efficiency? Empirical Evidence from Italian Manufacturing SMEs

Using firm‐level data from the Italian manufacturing sector, we investigate the relationship between small and medium‐sized firms technical efficiency and trade credit. Our contribution is twofold: we provide evidence on an open empirical question, and disentangle the channels through which trade credit may influence firms' efficiency. According to our findings, based on the Simar and Wilson (2007) procedure, trade credit seems to positively affect firm efficiency by mitigating financial constraints. Indeed, trade credit enhances efficiency especially for firms that are more likely to be financially constrained (i.e., smaller and/or younger firms) and during the most recent financial crisis.     

Evasion behaviors of exporters and importers: Evidence from the U.S.–China trade data discrepancy

Since the late 1990s, reported U.S. imports from China and Hong Kong have regularly and increasingly exceeded reported exports of China and Hong Kong to the United States. This discrepancy, which is not caused by re-exporting through Hong Kong, varies by product categories, and in some cases takes the opposite sign. In this paper, we focus on China's direct exports to the United States. Using a model that allows for simultaneous misreporting to two authorities, we find strong statistical evidence of under-reporting exports at the Chinese border to avoid paying value-added tax (VAT). The value of VAT avoided is estimated at $6.5 billion during 2002–2008, and the associated understatements account for approximately two-thirds of the discrepancy. We also provide evidence of tariff evasion at the U.S. border, in particular for related-party transactions, and indirect evidence of transfer pricing and evasion of Chinese capital controls. An estimated $2 billion of U.S. tariff revenue is lost due to such evasion during 2002–2008, which reduces the apparent size of the statistical discrepancy.     

A U.S. Manufacturing Strategy for the 21st Century: What Policies Yield National Sector Competitiveness?

The national debate over the fate of U.S. manufacturing is back, with some asking the question: Is manufacturing dead? However, the U.S. manufacturing sector has been making a surprising comeback and added jobs in 2010 and 2011 following 12 straight years of declines. Utilizing economic data, coupled with qualitative manufacturing industry information, offers a unique opportunity for the authors to present a pragmatic and strategic national manufacturing strategy based on the realities of a continually evolving R&D/high-technology-based U.S. manufacturing sector.     

Does Gibrat’s Law Hold? Evidence from Canadian Retail and Manufacturing Firms

This paper investigates the validity of Gibrat’s Law holding for firms in manufacturing and retail trade sectors. The object is to expand our knowledge of Gibrat’s Law to include non-manufacturing firms. A unique longitudinal firm-level database, which contains information on Canadian incorporated establishments, enables the inter-industry comparison. The findings of the analysis are that Gibrat’s Law is violated in both manufacturing and retail sectors. Violations of Gibrat’s Law for both sectors include (i) growth rates that depend on firm size (ii) growth variability that depends on firm size and (iii) a negative persistence of firm growth. Finally, age effects or selection effects are not the causes of these violations.      

What''s New in U.S. Trade Regulation?

With the benefits afforded by engaging in international trade comes the hurdle of navigating the complex regime of U.S. trade controls. In 2009, traders will contend with yet another new trade control in the United States: the May 2008 amendments to the Lacey Act of 1900. These amendments, aimed at preventing illegal logging, affect every product containing any amount of plant or plant product that is imported into or traded within the United States.Compliance with these measures may be onerous at first, but should become routine quickly with proper preparation.     

Why U.S. Credit Downgrade Impacts So Much?

Last week,the global stock markets were in turmoil,the stock markets in Europe,the United States and Asia-Pacific as well as the A share market were all reduced to be under pressure because of the market's increasing panic about the US debt crisis. The two parties in the US Congress eventually passed the bill for raising debt ceiling and slashing deficit before the deadline,but Standard & Poor's(S&P) abruptly announced on     

How Will U.S. Credit Downgrade Affect China?

August 5 is an unusual day,when Standard & Poor's cut the U.S. credit rating by a notch to AA-plus in an unprecedented blow citing concerns over the nation's budget deficits and climbing debt burden,adding the freshly passed debt reduction plan by U.S.Congress wasn't enough to stabilize the country's debt situation. The agency remains negative on the outlook of the new credit rat-