FIRM DYNAMICS IN AN URBAN ECONOMY *

We develop a new dynamic general equilibrium model to explain firm entry, exit, and relocation decisions in an urban economy with multiple locations and agglomeration externalities. We characterize the stationary distribution of firms that arises in equilibrium. We estimate the parameters of the model using a method of moments estimator. Using unique panel data collected by Dun and Bradstreet, we find that agglomeration externalities increase the productivity of firms by up to 8%. Economic policies that subsidize firm relocations to the central business district increase agglomeration externalities in that area. They also increase economic welfare in the economy.     

DIRECTED SEARCH AND FIRM SIZE*

Standard directed search models predict that larger firms pay lower wages than smaller firms, contrary to the data. This article proposes one way to obtain this positive size–wage differential in a directed search setting. I posit that there is an optimal size associated with a firm: A firm suffers a penalty by not operating at its optimal size. I show that if this penalty is sufficiently large the size–wage differential will be obtained. My model also gives a new way to look at the data because it highlights the importance of the distinction between intended and realized firm sizes.     

城市土地优化配置的模式,目标及实现途径探讨

本文在对不同时期我国城市土地配置模式与特点进行分析的基础上．指出了城市土地优化配置的关键在于推行土地配置市场化．提出了城市土地优化配置的目标及其实现途径。     

FIRM HETEROGENEITY AND THE LABOR MARKET EFFECTS OF TRADE LIBERALIZATION*

This article develops a model that incorporates workers' fair wage preferences into a general equilibrium framework with heterogeneous firms. In a setting where the wage considered to be fair by workers depends on the productivity of the firm they are working in, we study the determinants of profits, involuntary unemployment and within‐group wage inequality. We use this model to investigate the effects of globalization, thereby pointing to distributional conflicts that have so far not been accounted for: a simultaneous increase of average profits and involuntary unemployment as well as a surge in within‐group wage inequality.     

BACKGROUND RISK AND THE THEORY OF THE COMPETITIVE FIRM UNDER UNCERTAINTY*

This paper examines the optimal production decision of a firm under output price risk á la Sandmo when the firm also faces a dependent background risk. It is shown that standard risk aversion plus a non-negative association between the output price risk and the background risk are sufficient to ensure a reduction in the firms optimal output upon introduction of the background risk. The paper investigates the impact of a deterministic transformation of the background risk on the firms optimal production decision. It is shown that decreasing absolute risk aversion in Ross' sense is among the sufficient conditions that generate an unambiguous negative comparative static result.     

FIRM SIZE AND EFFICIENCY IN THE SOUTH AFRICAN MOTOR VEHICLE INDUSTRY*

The South African motor vehicle industry has historically been considered a critical industry in the South African economy and the target of numerous government policies designed to protect it and/or increase its international competitiveness. This study examines the cost performance of firms in this industry according to their size, using data categorised by output level. The results are consistent with statistically significant economies of scale at the lowest output levels and a cost inefficiency averaging from about seven to nine per cent for all firms. The findings also suggest that all else equal, the smallest firms and the largest firms have lower unit costs than mid‐sized firms. While this work suggests that policies that would give incentives for the smallest firms to increase their scale of operations might help to reduce their unit costs, further investigation needs to be done with respect to why firms in the mid‐level size categories appear to be less efficient.     

FIRM HETEROGENEITY,RULES OF ORIGIN,AND RULES OF CUMULATION*

This article sheds light on the restrictive nature of rules of origin (ROO) and on the role of diagonal cumulation in mitigating the protectionist content of ROO. Empirical evidence suggests that diagonal cumulation has beneficial effects on trade—particularly among spoke countries. We show that these patterns can be reconciled with a theoretical setting where heterogeneous firms buy intermediate inputs from domestic and foreign sources. The model finds that switching from bilateral to diagonal cumulation relaxes the restrictiveness of the ROO and leads the least productive exporters to stop exporting.     

INCOME,CONSUMPTION AND SAVING IN URBAN AND RURAL INDIA*

The main purpose of the study is to determine the savings potential of urban and rural households in India and in the process determine the possible savings and consumption functions separately for urban and rural areas. Four different possible functions have been used for determining the savings behaviour of the households both at the aggregate level and at the per capita level. The rural households, according to the results, have an extremely low rate of saving with income elasticity of saving of less than unity. For the urban households on the other hand, the income elasticity of saving is high enough to suggest the possibilities of considerably high savings potential. To understand the consumption behaviour of these households, the long-run and the short-run marginal propensities to consume and the marginal propensities to consume out of‘permanent’ or ‘normal’ income and ‘transitory’ income have been worked out. For the urban sector none of these give encouraging enough results and the analysis has been extended to examine whether other factors like prices and household assets are of any significance. Whereas for the rural sector, Milton Friedman's theory of ‘permanent’ or ‘normal’ income is somewhat substantiated, other factors like ‘transitory’ income, prices and assets appear to inthence urban consumption behaviour though no single one of them substantially enough. A negligible effect of ‘permanent’ income on urban consumption behaviour is, on the other hand, very clearly suggested by the results. Household consumption and savings have next been projected using the above results to determine the possible levels for the next three years. The results suggest that the rate of domestic savings likely to be achieved by the end of the Third Five Year Plan (1965–66) falls short of the targets laid down.     

A HIERARCHICAL THEORY OF THE FIRM*

This paper provides a mathematically coherent and concise formulation of the Williamson market-failure approach and, hence, develops models for single-level and multilevel firms and organizations. These models optimally determine the extent of integration for each viable link on every hierarchical level, When the models are reformulated in terms of four operational parameters that determine integration, applied benefit-cost methods can be utilized, in practice, to model a firm. Both static and dynamiclmodels-are presented.     

PRICE CONSTRAINTS,FORWARD MARKETS AND THE COMPETITIVE FIRM UNDER PRICE UNCERTAINTY*

This article proposes a model of the competitive firm simultaneously facing price constraints and forward markets under price uncertainty. The incorporation of a forward market is shown to be very important because a risk-averse firm will set its production decision to the forward price regardless of its attitude toward risk. In addition, we show that risk aversion is a sufficient condition for a decrease in risk to reduce the amount hedged when risk is reduced through a mean-preserving price squeeze.