“Following” or “attracting” the customer? Japanese Banking FDI in Europe

Using firm-level Japanese FDI data on investment into 18 European countries between 1970–2000 in all industries (banking, manufacturing, wholesale/retail distribution, and business services), this study examines if the “follow the customer” (FTC) hypothesis holds for firm-level data. The results suggest that banks do follow their customers into a foreign market, as part of a larger strategy that goes beyond the FTC theory. The firm level data show that the majority of FDI into a host country occurs after the foreign bank has established operations. Policy implications of this finding include the suggestion that host economies liberalize their financial sector early in an effort to attract banking FDI which then will attract non-banking FDI rather than the reverse.     

Measuring inflation expectations: a survey data approach

Measures of expected inflation from consumer surveys are derived using a modification of the Carlson-Parkin probability approach, which does not assume unbiasedness of expectations, makes use of survey data on expected future as well as perceived past price developments and allows for time varying response thresholds. We apply this method to the normal, central-t and noncentral-t distributions, thereby investigating the effects of nonnormal peakedness and asymmetry. We find that the effects on expected inflation of the former are small and of the latter are substantial, without increasing the accuracy of the expectations, however. Expected and actual inflation show substantial persistence, and, for most of our expectations measures, are cointegrated. Furthermore, the forecast error is stationary, implying weak-form rationality. The co-movement of currently observed expected inflation measures and the unobserved 12-months-ahead inflation rate is of interest for policy makers, for example in the direct inflation targeting strategy. Notwithstanding this, caution is warranted in using them as information variables because the inflation expected by consumers is no causal determinant of actual future inflation.     

Investment and technological choice in a right-to-manage model

We analyze the interactions between investment and local wage bargaining in a putty-clay model where the investment decision commits the firm to a particular capital intensity. This technological precommitment is used strategically in order to manipulate the bargaining outcome. We show that this strategic behavior induces a nonmonotonic relationship between the capital and labor demands of the firm and most of its environmental parameters (e.g., the bargaining power of the union, its minimum wage requirement, the capital cost). The results we obtain in our putty-clay framework thus contradict several conclusions of the standard literature on wage bargaining and investment.     

A two-sector model of production and trade with variable factor supplies

Zusammenfassung Produktion und internationaler Handel in einem Zwei-Sektoren-Modell mit variablem Faktorangebot. — In diesem Aufsatz wird untersucht, wie sich in einem Modell mit variablem Faktorangebot die Ergebnisse und Folgerungen aus dem traditionellen 2 x 2-Modell einer offenen Volkswirtschaft ver?ndern. Eine Produktionsfunktion des Haushaltssektors wird entwickelt, um ein variables Arbeitsangebot in das Modell einbeziehen zu k?nnen. Dann wird die neue Beziehung zwischen der Produktion des Marktsektors und den Ver?nderungen des Verh?ltnisses von Lohn und Kapitalrendite, die entsprechende Ver?nderungen des Arbeitsangebots auf dem Marktsektor bewirkt, n?her untersucht. Schlie\lich wird dargestellt, warum unter einigen sehr allgemeinen Annahmen die Kurve, die die Beziehung zwischen den beiden unter marktm?\igen Bedingungen produzierten Gütern darstellt, nicht mehr konkav zum Ursprung verl?uft. Dieses scheinbar perverse Ergebnis findet eine sehr rationale Erkl?rung und liefert die Grundlage für eine plausible alternative Erkl?rung des Leontief-Paradoxons.

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Résumé La production et le commerce international dans un modèle aux deux secteurs et à l’offre variable de facteurs. — Dans cet article les auteurs examinent comment le modèle à l’offre variable de facteurs change les résultats et les implications d’un 2 x 2 modèle traditionnel de l’économie ouverte. Une fonction de production pour le secteur de ménage est introduite afin de créer une offre variable de maind’∄uvre. Puis l’auteur examine la relation nouvelle entre la production du secteur de marché et les changements en rapport salaire/rendement de capital qui causent des changements correspondants en offre de main-d’∄uvre dans le secteur de marché. Finalement, les auteurs exposent pourquoi sous quelques conditions très générales la courbe qui illustre la relation entre les deux biens produits sur le marché n’est plus concave vers l’origine. Ce résultat apparemment pervers a une explication très rationnelle et donne la base pour une explication alternative et plausible du paradoxe de Léontief.

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Resumen Un modelo de dos sectores de producción y comercio con ofertas de factores variables. — En este artículo se examina cómo el modelo de oferta variable de factores altera los resultados e implicaciones del modelo tradicional 2 x 2 en una economía abierta. Se introduce una función de producción doméstica como un medio para generar nuestro modelo de oferta variable de trabajo. En seguida se examina la nueva relación entre el mercado de producción y cambios en la relación salario-renta, que da cuenta de cambios correspondientes en la oferta laboral con respecto al sector de mercado. Finalmente, se expone por qué bajo ciertas condiciones muy générales, la relación entre los dos bienes producidos en el mercado no es cóncava con respecto al origen. Este resultado aparentemente perverso tiene una explicación muy racional y proporciona la base para una explicación plausible y alternativa para la paradoja de Leontief.

     

Market Share and Price in Dutch Home Care: Market Power or Quality?

The paper uses unique data on contracts concluded by providers of home care to evaluate the effect of provider market power on prices of home care services in the Netherlands. Since, at least in some regions, one or two providers dominate the market, there are concerns about the effect of providers’ market power on the pricing of home care services. Using data on contracted prices and quantities for 2004–2006, we find that providers with a larger market share are able to contract at a higher price. The effect remains after controlling for quality.