Regulating away competition: the effect of regulation on entrepreneurship and employment

Many scholars have worried that regulation deters entrepreneurship because it increases the cost of entry, reduces innovation in the regulated industry, and benefits large firms because they can overcome the costs of complying with regulations more easily than smaller firms. Using novel data on the extent of US federal regulations by industry and data on firm births and employment from the Statistics of US Businesses, we run fixed effects regressions to show that more-regulated industries experienced fewer new firm births and slower employment growth in the period 1998–2011. Large firms may even successfully lobby government officials to increase regulations to raise their smaller rivals’ costs. We also find that regulations inhibit employment growth in all firms and that large firms are less likely to exit a heavily regulated industry than small firms.     

Regulation,Local Monopolies and Spatial Competition

Many regulated industries involve an oligopoly market structure. We examine optimal incentive regulation for a duopoly model of spatial competition when firms have private cost information. Market structure is endogenous as regulation determines market segments for firms and output distribution across consumers in each firm's market. By varying the assignment of consumers to firms, a relatively more efficient firm can be rewarded with a larger market, thus reducing quantity incentive distortions. We derive the optimal policy, assess the impact of asymmetric information relative to full information, and examine extensions to allow for ex ante asymmetries in firm structure.     

INCENTIVE COMPATIBLE MECHANISM DESIGN AND FIRM GROWTH: EXPERIENCES FROM TELECOMMUNICATIONS SECTOR REGULATION

ABSTRACT**: This article evaluates the impact of the introduction of incentive regulation on firm growth among the population of local exchange carriers in the US telecommunications industry between 1988 and 2001. The results show that the rate of return method and other intermediate incentive schemes have had a negative impact on firm growth. Conversely, the introduction of pure price caps schemes had a positive and significant impact on firms’ growth. These results highlight the importance of proper and appropriate incentive compatible mechanism design in motivating firms to strive for superior performance.     

Cost-Padding in Profit-Regulated Firms*

When entry into an industry is restricted, economic regulation of that industry is often directed at preventing existing firms from monopoly pricing behaviour. One form of such regulation is to set prices so as to control the level of profits earned by these firms. This paper briefly reviews the relevant economic literature and presents a model of the regulated firm in which such price-setting procedures provide an incentive to inflate costs above minimum levels. The welfare cost of this form of regulation can then exceed that occurring at the unconstrained monopoly outcome. The setting of air fares under the Two-Airline Policy and the regulation of natural gas in NSW are discussed in the context of this analysis.     

“服务中介-企业”互动与科技型小企业知识吸收能力演化动态关系研究

“服务中介-企业”互动与科技型小企业知识吸收能力演化的动态关系需要深入洞察，以便为企业提升知识吸收能力提供指导。因此，提出“服务中介-企业”互动对企业知识吸收能力演化影响的理论框架，建立反映二者关系的系统动力学模型，并运用Venism PLE工具进行模拟仿真。分析结果发现，小企业知识吸收能力演化呈指数型增长特征；“服务中介-企业”互动对科技型小企业知识吸收能力具有促进作用，且有递增的边际贡献。随着互动层次和水平的提高，“服务中介-企业”互动对企业知识吸收能力的提升作用显著增大。“服务中介-企业”互动对企业知识吸收能力演化的作用存在“临界规模”效应。     

Incentive regulation and investment: evidence from European energy utilities

This paper investigates the relationship between investment and regulatory regimes (incentive vs. rate-of-return regulation) for a sample of EU energy utilities from 1997 to 2007. We control for the effect of firm ownership and for cross-country differences in the underlying energy demand and energy supply. To deal with potential endogeneity of the regulatory regime, we apply instrumental variable methods (2SLS and GMM). Our results show that investment rate is higher under incentive regulation than under rate of return regulation. Using original data on the regulatory tools (X factor and WACC), we find that investment of incentive regulated firms appears highly sensitive to the X factor, consistent with efficiency- and profit-seeking motivations. Electric utilities investment is also sensitive to the level and change in the weighted average cost of capital (WACC). Finally, we find that the positive relationship between private control and investment is not robust to IV estimations, suggesting that in Europe regulation may have reduced the differences between private and public firms’ incentives to invest.     

What did China’s labor contract law do to its private manufacturing firms?

Well-intended employment protection legislation may have adverse consequences. This paper uses Chinese firm-level data to assess the impacts of China’s Labor Contract Law, effective on January 1, 2008. My results show that, relative to public firms, private firms as a whole were negatively affected in terms of firm-level year-to-year employment changes. The law had negligible effects on employment and wages in firms with high wages. At the same time, employment fell and wages rose in firms with low wages. Moreover, firms who did not train workers intensively to acquire firm-specific skills had more job turnover than firms who did. Finally, I study how labor demand responded to the law along the extensive margin. For regions that experienced abrupt declines in labor mobility, possibly due to stricter labor regulation enforcement following the enactment of the Labor Contract Law, firm exit rose significantly, suggesting large incidence of mass layoff.     

国有企业改制对就业的影响——来自11个城市的证据

在20世纪90年代中后期,中国工业企业的就业规模大幅度下降,许多人认为,企业改制是其主要原因。本文通过对11个城市386家企业从1995年到2001年的面板数据的研究,评估了企业改制对就业的影响。我们的面板数据回归结果显示,和一般印象相反,改制显著地减缓了就业的下降趋势。我们还发现,改制对企业的就业增长有持续的和递增的积极作用。即使在控制了企业的绩效、就业条件、资产结构以及改制前就业历史之后,我们仍然得到相同的结论。另外,我们还使用了倾向分值匹配基础上的差分内差分方法对我们的结果进行了验证,也得到了相似的结论。     

Price Effects of Target Ratcheting: A Progress Report on Medical Devices

Regulators, who have asymmetric information concerning the technology of regulated firms, often rely on incentive‐based regulation. While such a scheme is well known to be vulnerable to the adverse incentives of regulated firms, empirical research that quantifies the magnitude of distortion caused by incentive regulation is scarce. This paper is a progress report of our recent project on target ratcheting with an application to medical devices in Japan. A casual observation of detailed product‐level transaction data and reduced‐form analyses indicate the existence of pricing distortion in the wholesale market. The paper also proposes a two‐period bilateral bargaining model to match the data. A preliminary analysis finds evidence consistent with the hypothesis that target ratcheting distorts the pricing of regulated firms, but the magnitude of the distortion is estimated to be economically small.     

大数据能力对农业科技企业创新的影响：一个有调节的中介效应模型

目前学者们较为关注大数据能力对于企业创新的影响研究,但大多笼统探究大数据能力对企业创新的直接影响,深入探究其中介机制和调节机制的研究尚未完善,立足于农业科技企业的研究更是缺乏。本文基于动态能力理论,深入探究大数据能力对农业科技企业创新的影响机制,以双元组织学习为中介变量,以市场导向为调节变量,建立可调节的中介模型。基于181家农业科技企业样本,结果表明：大数据能力对企业创新具有显著正向影响;探索式学习和利用式学习在大数据能力和企业创新间均具有正向中介作用;市场导向增强了利用式学习在大数据能力与企业创新之间的中介作用;而对探索式学习在大数据能力与企业创新之间的中介作用未发挥显著的调节作用。     

Strategic pricing and entry deterrence under price-cap regulation

This paper shows that dynamic price-cap regulation allows the regulated firm to deter entry. Under dynamic price-cap regulation, the allowed prices in each period are an increasing function of the prices set in the previous period. By setting a low price before entry, the regulated firm can commit itself to charge a low price in the event of entry. If this price is sufficiently low with respect to the potential entrant's fixed cost, entry does not occur. Whether the regulated firm prefers to deter or accommodate entry depends on the level of the entry cost for the prospective entrant, on the tightness of the price-cap and on the degree of market power of the competing firms in case of entry.     

Employment in family managed firms: Less but safe? Analysing labour demand of German family managed firms with a treatment model for panel data

This paper analyses the differences in labour demand between family and non-family managed firms. These firms seem to have better employment performance than non-family controlled companies. Therefore, this study applies a treatment model for panel data controlling for endogeneities of being a family managed firm or not. The results of the estimations indicate that labour demand is possibly larger because of family members joining the firms as extra employees. Moreover, labour turnover is lower, supporting the assumption that family firms offer some kind of implicit labour contracts. However, in opposite to previous results, it seems that only small family managed firms show different employment behaviour.     

Does the Effectiveness of Employment Incentive Programs Vary by Firm Size?

This article examines the impact of national employment incentive programs on employment growth of individual firms in the original fifteen member states of the European Union (EU-15). We investigate whether this impact differs among firms of different size classes, and whether the effectiveness of employment incentive programs depends on the business cycle. We find that expenditures on employment incentives have a positive impact on employment growth for firms of all sizes. However, this impact is significantly reduced for smaller firms, suggesting that employment incentive programs are less effective for small firms. We also find that the employment impact of incentive programs is stronger during recessionary periods, but only for firms without any employees (i.e., own-account workers).     

Entry Deterrence and Entry Accommodation Strategies of a Multiproduct Firm Regulated with Dynamic Price Cap

In this paper we study the way a multiproduct firm, regulated through a dynamic price cap, can develop a price strategy that uses the regulatory policy to deter entry. We consider a firm that initially operates as a monopolist in two markets but faces potential entry in one of the markets. We conclude that the regulated firm can have the incentive to block the entry. This strategy leads to the reduction of the price in both markets. However, the final effect of the entry deterrence strategy on total consumer surplus is not always positive.     

PRICING REGULATIONS AND NETWORK TECHNOLOGY INVESTMENTS: A RETROSPECTIVE EVALUATION

This article evaluates the impact of the introduction of incentive regulation on technology deployment, as evaluated using two technology deployment metrics, among the population of local exchange carriers in the USA between 1988 and 2001. The regulatory schemes are disaggregated into five categories, permitting examination of heterogeneity among regulatory schemes. The results show that the rate of return method and the other intermediate incentive schemes implemented have had a negative impact on technology deployment. Conversely, the introduction of pure price caps schemes had a positive and significant impact on firms’ technology deployment. These results highlight the importance of appropriate incentive compatible mechanism design in motivating firms to adopt the new and important technologies that have been developed.     

Swedish Multinationals and Competition from High- and Low-Wage Locations

This study uses data on Swedish multinationals to estimate cross-elasticities of labor demand in different locations. With a vertical decomposition of the firm's activities, whether there is substitution or complementarity between employment in different parts of the firm will depend on whether wage changes lead to a relocation of activities or simply to changes in marginal costs and/or demand for inputs in other parts of the firms. It is found that there is some evidence of a substitutionary relationship between employment in the Swedish parts of the firms and employment in other high-income locations, but no evidence of substitution stemming from employment in low-income locations.     

Recursive contracts,firm longevity,and rat races: An experimental analysis

This paper reports the results from a laboratory experiment which investigates the structure of contracts that emerge in overlapping-generation firms where future ownership is a perquisite of employment. Workers in the young generation are offered employment contracts designed by the firms' owners who belong to the old generation. When old, employed workers are granted ownership rights as long as the firm continues to operate. In line with theoretical predictions, the results indicate that as firm longevity increases, the recursive nature of the contracts leads to a rat race characterized by low wages, high effort levels, and rent dissipation. These results have important implications for the optimal management of long-lived firms such as partnerships.     

REGULATIONS AND STRATEGY: EVIDENCE ON ADVERTISING

This article evaluates the impact of the introduction of incentive regulation on firms’ advertising spending among the population of local exchange carriers in the United States telecommunications industry between 1988 and 2001. The results show that the hybrid rate of return method and other intermediate incentive schemes have a negative relationship with advertising spending. Conversely, the introduction of pure price caps schemes has had a positive and significant impact on firms’ advertising spending. These results highlight the importance of incentive compatible mechanism design in motivating firms to be market oriented and strive for superior performance.     

FIRM FRAGMENTATION AND URBAN PATTERNS*

We document several empirical regularities regarding the evolution of urban structure in the largest U.S. metropolitan areas over the period 1980–90. These regularities relate to changes in resident population, employment, occupations, as well as the number and size of establishments in different sections of the metropolitan area. We then propose a theory of urban structure that emphasizes the location and internal structure decisions of firms. In particular, firms can decide to locate their headquarters and operation plants in different regions of the city. Given that cities experienced positive population growth throughout the 1980s, we show that firm fragmentation produces the diverse set of facts documented in the article.     

Cartels in the unidirectional Hotelling model

We study the impact of space on perfect collusion sustainability within the unidirectional Hotelling model where the firms are constrained to move to the left. We obtain that when the firm that located to the left of the Hotelling segment has the greater incentive to deviate, the distance between the firms has a negative impact on the capability of the firms to sustain the collusion in equilibrium. On the other hand, when the firm that located to the right has the greater incentive to deviate, greater spatial distance makes the collusion easier to sustain in equilibrium. These results substantially differ from the bidirectional Hotelling model.