Low-wage import competition,inflationary pressure,and industry dynamics in Europe

Have exogenous changes in import competition from low-wage countries (LWCs) brought about changes in inflationary pressure in Europe? This paper examines whether labor-intensive exports from Asia and other global regions have a uniform impact on producer prices in Germany, France, Italy, Sweden, and the United Kingdom. In a panel covering 110 (4-digit) NACE industries from 1995 to 2008, instrumental variable estimations document that LWC import competition is associated with strong price effects. More specifically, when Chinese and other Asian LWC exporters capture 1% of a European market, producer prices decrease by about 3%. Next, decomposing the mechanisms that underlie the LWC price effect on European industry, we show that import competition has a pronounced effect on average productivity and only a muted effect on wages. Owing to the exit of firms and the increase in productivity, LWC import competition is shown to have substantially reduced employment in the European manufacturing sector.     

Social Preferences,Sorting, and Competition*

In this paper, I investigate how an increase in competition for workers influences the impact of social preferences on labor‐market outcomes. By sorting themselves into firms with homogeneous work forces, workers can ensure that they suffer less from social comparisons. Competition promotes choice and thus facilitates sorting. However, competition also boosts rent differences in the labor market, because firms cannot curb internal inequity among its employees without losing workers to competitors. To reduce their exposure to social comparisons, workers might engage in inefficient sorting into unemployment. Consequently, social preferences can have strong effects (i.e., unemployment) in a competitive labor market, whereas they only have a slight impact on labor‐market outcomes in a monopsony.     

Product market competition, R&D, and welfare

We compare the subgame perfect equilibrium emerging in four regimes of research and development (R&D) competition between duopolists: (i) full competition, (ii) coordination of research strategies, (iii) joint venture with cross licensing of patents, and (iv) full collusion in R&D and the product market. The outcome of the firms' interaction depends on the interplay of the degree of product market competition, the similarity of the research strategies, and the cost of R&D, relatively to market size. Our main result is that each of the four regimes can, for plausible parameter combinations, yield the highest level of welfare. Therefore it is problematic to draw general rules applicable to all proposed research joint ventures.     

异质性媒体与资本市场信息效率

新闻传媒通过其信息处理和传播功能 ,对资本市场的信息整合产生了重要影响.不同于以往的研究 ,文章深入新闻传媒行业内部 ,探讨了不同类别的媒体(中央媒体与各地方媒体)对中国资本市场信息效率的差异化影响.研究发现:中央媒体既可以直接提升资本市场信息效率 ,又可以通过削弱政治关联对资本市场信息整合的不利影响,间接改善资本市场信息效率;地方媒体虽然能够直接提升资本市场信息效率 ,但是无力削弱政治关联对资本市场信息整合的不利影响 ,其间接渠道并不起作用.这一结果考虑了媒体跟踪上市公司时可能产生的内生性问题 ,在一系列稳健性测试中始终存在.文章认为 ,相对于地方媒体 ,中央媒体在信息透明度较低情况下的信息获取和处理的能力优势 ,以及面对政治关联时保持客观报道的独立性优势,可以解释这一发现.     

Competition, Imitation and Growth with Step-by-Step Innovation

Is more intense product market competition and imitation good or bad for growth? This question is addressed in the context of an endogenous growth model with "step-by-step" innovations, in which technological laggards must first catch up with the leading-edge technology before battling for technological leadership in the future. In contrast to earlier Schumpeterian models in which innovations are always made by outsider firms who earn no rents if they fail to innovate and become monopolies if they do innovate, here we find: first, that the usual Schumpeterian effect of more intense product market competition (PMC) is almost always outweighed by the increased incentive for firms to innovate in order to escape competition, so that PMC has a positive effect on growth; second, that a little imitation is almost always growth-enhancing, as it promotes more frequent neck-and-neck competition, but too much imitation is unambiguously growth-reducing. The model thus points to complementary roles for competition (anti-trust) policy and patent policy.     

Corruption,competition and democracy

This paper presents a model of the interaction between corrupt government officials and industrial firms to show that corruption is antithetical to competition. It is hypothesized that a government agent that controls access to a formal market has a self-interest in demanding a bribe payment that serves to limit the number of firms. This corrupt official will also be subject to a detection technology that is a function of the amount of the bribe payment and the number of firms that pay it. Under quite normal assumptions about the shape of the graph of the detection function, multiple equilibria can arise where one equilibrium is characterized by high corruption and low competition, and another is characterized by low corruption and high competition. Some suggestive empirical evidence is presented that supports the main hypothesis that competition and corruption are negatively related.     

Information sharing and lending market competition with switching costs and poaching

We analyze information sharing with repeated banking competition. In the presence of switching costs we find that information sharing renders poaching more profitable in future rounds of competition, since the poaching activities can be targeted towards (more) creditworthy borrowers. We find that information sharing reduces relationship benefits, and, therefore relaxes competition for initial market shares. Information sharing introduces a welfare tradeoff by promoting equilibrium profits at the expense of talented entrepreneurs whenever market power persists in credit market, whereas it is a matter of indifference without market power. Thus information sharing may induce exclusion of creditworthy borrowers from credit markets.     

Product Differentiation,Competitive Toughness,and Intertemporal Substitution

Standard measures of competitive toughness fail to capture the fact that, as consumers optimize intertemporally, firms operating today compete with (as yet non‐existent) businesses, which will be started tomorrow. We develop a two‐tier constant elasticity of substitution (CES) model of dynamic monopolistic competition in which the impact of product differentiation on the market outcome depends crucially on the elasticity of intertemporal substitution (EIS). The degree of product differentiation per se fails to serve as a meaningful indicator of competitive toughness: what matters is its cross‐effect with EIS. We also extend the model to the case of non‐CES preferences in order to capture variable mark‐ups.     

What are the determinants of hiring? The importance of product market demand and search frictions

In this article, we study the importance of product market demand and search frictions for hiring. We use a search-matching model with imperfect competition in the product market to derive an equation for total hiring in a local labour market, and estimate it on Swedish panel data. If product markets are imperfectly competitive, product demand shocks should have a direct effect on employment for given levels of prices and wages. Our main finding is that product demand has such a direct effect on hiring. This highlights the importance of taking imperfect competition in the product market into account in studies of employment dynamics and hiring. We also find that, for given levels of prices, wages, and product demand, the number of unemployed workers in a local labour market has a positive effect on hiring, suggesting that search frictions matter. Quantitatively, product demand shocks seem to be more important for understanding the variation in hiring than shocks to the number of unemployed workers.     

Rent‐Seeking,Market Structure,and Growth

We study the role of productive and unproductive entrepreneurship in economic growth, in a setting where firms compete in both economic and political markets. Specifically, firms compete for market share through cost‐reducing technological innovation, and they vie for influence over government transfer policy through rent‐seeking activities. We find that rent‐seeking affects growth in two ways: it allows firms to ignore economic competition, leading to less innovation, and it alters the number of firms that are supported in equilibrium. The former effect is negative, while the latter is ambiguous. We show how these effects depend on various characteristics of economic and political markets.     

The empirical content of Cournot competition

We consider the testable implications of the Cournot model of market competition. Our approach is nonparametric in the sense that we abstain from imposing any functional specification on market demand and firm cost functions. We derive necessary and sufficient conditions for (reduced form) equilibrium market price and quantity functions to be consistent with the Cournot model. In addition, we present identification results for the corresponding inverse market demand function and the firm cost functions. Finally, we use our approach to derive testable restrictions for the models of perfect competition, collusion and conjectural variations. This identifies the conditions under which these different models are empirically distinguishable from the Cournot model. We also investigate empirical issues (measurement error and omitted variables) related to bringing our testable restrictions to data.     

Tariffs, licensing and market structure

This paper challenges the conventional wisdom that exclusive owners of an advanced technology are always better off when producing as a monopolist than when competing against another firm. Competition against a less-efficient firm weakens the power that a host country can exert on the incumbent in the form of its tariff policy. We show that this gives a motive for a monopolist to license its technology to another foreign firm. A host country gains more from increased competition if it can induce the foreign incumbent to transfer technology to the host country firm. We show that the host country can do so by tariff commitment. We also discuss the implications of bargaining under licensing and Bertrand competition in the product market. Hence, this paper qualifies and extends the recent work of Kabiraj and Marjit [Protecting consumers through protection: The role of tariff-induced technology transfer. European Economic Review 47, 113-124].     

Monopolistic competition and income dispersion

We develop a model of monopolistic competition that accounts for consumers’ heterogeneity in both incomes and preferences. This model makes it possible to study the implications of income redistribution on the toughness of competition. We show how the market outcome depends on the joint distribution of consumers’ tastes and incomes and obtain a closed-form solution for a symmetric equilibrium. Competition toughness is measured by the weighted average elasticity of substitution. Income redistribution generically affects the market outcome, even when incomes are redistributed across consumers with different tastes in a way such that the overall income distribution remains the same.     

Tackling Keynes’ question: a look back on 15 years of Learning To Consume

Two centuries of continuous economic growth since the industrial revolution have fundamentally transformed consumer lifestyles. Here Keynes raised an important question: will consumption always continue to expand in the same manner as it has in the previous two centuries? If so, how? This paper critically reviews a body of work that has adopted the Learning To Consume (LTC) approach to study the long run growth of consumption (Witt 2001). By borrowing certain established insights from psychology and biology about how consumers learn and what motivates them to consume, it highlights how rising income, new technologies and market competition have combined to trigger important changes in both the underlying set of needs possessed by consumers and how they learn to satisfy these needs. Methodological issues and open questions are discussed.     

Media as watchdogs: The role of news media in electoral competition

We develop an equilibrium model to analyze the role of the media in electoral competition. When policy payoffs are state-dependent, party policies do not converge to the median voter's ideal policy if the media report only party policies. News analysis about the state, though possibly biased, can discipline off-equilibrium deviations and make the parties adopt more centrist policies. Since voters are rational, the party favored by the media need not win with a higher probability. Instead, media bias may reduce the effectiveness of electoral competition and lead to more polarized policies.     

PROFITABLE STRATEGIC DELEGATION WITH CONJECTURAL VARIATIONS

Firms delegate strategic decisions to managers because they find it profitable to do so. In the product market, when agents make conjectures about the reaction of their rivals to marginal changes in their own strategies, the set of equilibriums can be enlarged with respect to the case of no conjectures. This paper takes a duopolistic linear market parameterization where firms selling differentiated products can delegate either price or output decisions to managers. We show that it is a dominant strategy for firms to delegate no matter whether firms are Cournot or Bertrand competitors, although the equilibrium is not necessarily efficient. Futhermore, in equilibrium Cournot competition is more profitable for firms than Bertrand competition. Finally, requiring consistency in conjectures yields the same outcome no matter what type of strategic interaction and managerial choice there is on the part of firms.     

The effects of market structure on industry growth: Rivalrous non-excludable capital

We analyze imperfect competition in dynamic environments where firms use rivalrous but non-excludable industry-specific capital that is provided exogenously. Capital depreciation depends on utilization, so firms influence the evolution of the capital equipment through more or less intensive supply in the final-goods market. Strategic incentives stem from, (i) a dynamic externality, arising due to the non-excludability of the capital stock, leading firms to compete for its use (rivalry), and, (ii) a market externality, leading to the classic Cournot-type supply competition. Comparing alternative market structures, we isolate the effect of these externalities on strategies and industry growth.     

REGULATION,IMPERFECT COMPETITION,AND THE U.S. ABORTION MARKET

The U.S. abortion market has grown increasingly concentrated recently, while many states tightened abortion laws. Using data on abortion providers, I estimate an equilibrium model of demand, price competition, entry and exit, to capture the effect of regulation on industry dynamics. Estimates show regulations played an important role in determining the abortion market structure and evolution. Counterfactual simulations reveal increases in demand‐aimed regulation were the most important observed factor in explaining recent abortion declines. Simulating Utah's regulatory regime nationally shows tightening abortion restrictions can increase abortions in equilibrium, mainly through tilting the competitive landscape toward low‐price providers.     

Market competition and firms' social performance

This paper investigates whether market competition encourages firms to be more socially responsible. We find that firms in more competitive markets exhibit better overall social performance, as measured by doing well (“strength”) and doing badly (“concern”) in areas such as community, environment, human rights, and treatment of employees. To deal with endogeneity, we instrument market competition on entry barrier and observe that market competition only significantly reduces social concerns but not increases social strengths. Thus, firms are more reactive in reducing social concerns than proactive in augmenting their social strengths. Amongst these concerns, firms appear to be more active in reducing environmental concerns. The paper underscores the limitations in relying on the “invisible hand” of the market to deal with the multi-dimensional challenges of firms’ social performance.     

Money,net wealth,and the real-balance effect

This paper deals with two important questions in monetary economics: Is competely produced resource-using bank money part of society's net wealth? Is such money part of the base relevant for the operation of the real-balance effect? We argue that the answer to the first question depends critically on the nature of the asset and not on the market structure of the industry. In particular, we argue that perfect competition in the banking industry is a necessary but not sufficient condition for excluding bank money from society's net wealth. Furthermore, we argue that resource-using bank money is part of the base relevant for the operation of the real-balance effect, regardless of whether or not it is part of society's net wealth.