Block recursive equilibria for stochastic models of search on the job

We develop a general stochastic model of directed search on the job. Directed search allows us to focus on a Block Recursive Equilibrium (BRE) where agents' value functions, policy functions and market tightness do not depend on the distribution of workers over wages and unemployment. We formally prove existence of a BRE under various specifications of workers' preferences and contractual environments, including dynamic contracts and fixed-wage contracts. Solving a BRE is as easy as solving a representative agent model, in contrast to the analytical and computational difficulties in models of random search on the job.     

Stimulating Strategically Aligned Behaviour Among Employees

Strategically aligned behaviour (SAB), i.e. employee action that is consistent with the company's strategy, is of vital importance to companies. This study provides insights into the way managers could promote such behaviour among employees (who can be managers as well) by stimulating employee motivation, by informing employees, and by stimulating the development of their capabilities. The results of surveys conducted in three organizations suggest that, first, perceived efforts by management aimed at motivating and informing employees (both managers and non-managers), and at developing their capabilities, each are related to SAB. Second, among the perceived efforts to stimulate motivation among employees, providing a rationale for the strategy and an open communication climate have a stronger relationship with SAB than participation in decision making and supportiveness. Third, the perceptions of the different types of managerial effort are related to each other. For this reason, the efforts have direct as well as indirect relationships to SAB. Fourth, each of the perceived efforts seems to be complementary to the others, in the sense that the relationship of one type of effort to SAB is stronger when other types of effort are perceived to be higher.     

Evolution on the Shoulders of Giants: Entrepreneurship and Firm Survival in the German Laser Industry

This paper studies 40 years of evolution in the German laser industry, which developed in the context of strong foreign competition. Key characteristics found in the U.S. laser industry are also present in Germany. There is sustained entry into the industry, and neither a shakeout nor first-mover advantages of early entrants are observed. Similar to the U.S. industry, spin-offs from existing laser firms have been more long-lived than have been academic startups. An analysis of the spin-off process indicates the importance of specific capabilities acquired at the parent firm.      

Industrial policy evaluation in the presence of spillovers

The shortage of studies on spatial spillovers of capital subsidy policies is rather surprising, considering that such policies are usually designed to generate spatial externalities. We propose a new framework that allows positive agglomeration effects to be contrasted with the negative cross-sectional substitution and the crowding-out effect. The global evaluation of the ATT and the spillover parameters shifts the spotlight from the policy effect on subsidised firms to the global effect of capital subsidy policies on the targeted territory. The empirical evaluation of a policy in Italy mainly directed towards small- and medium-sized firms shows that the impact on investments, turnover and employment is positive and large, but is negative on TFP. However, the employment growth is partially determined to the detriment of the untreated firms.     

The Costs of Financial Crises: Resource Misallocation,Productivity, and Welfare in the 2001 Argentine Crisis

Financial crises in emerging market countries appear to be very costly: both output and a host of partial welfare indicators decline dramatically. The magnitude of these costs is puzzling both from an accounting perspective – factor usage does not decline as much as output, resulting in large falls in measured productivity – and from a theoretical perspective. With the aim of resolving this puzzle, we present a framework that allows us to do the following. First, we account for changes in a country's measured productivity during a financial crisis as the result of changes in the underlying technology of the economy, the efficiency with which resources are allocated across sectors, and the efficiency of the resource allocation within sectors, driven both by reallocation amongst existing plants and by entry and exit. Second, we measure the change in the country's welfare resulting from changes in productivity, government spending, the terms of trade, and a country's international investment position. We apply this framework to the Argentine crisis of 2001 using a unique establishment level dataset and we find that more than half of the, roughly, 10 percent decline in measured total factor productivity can be accounted for by deteriorations in the allocation of resources both across and within sectors. We measure the decline in welfare to be of the order of one‐quarter of one year's gross domestic product.     

Sequential R&D and blocking patents in the dynamics of growth

The incentives to conduct basic or applied research play a central role for economic growth. How does increasing early innovation appropriability affect basic research, applied research, innovation and growth? In a common law system an explicitly dynamic macroeconomic analysis is appropriate. This paper analyzes the macroeconomic effects of patent protection by incorporating a two-stage cumulative innovation structure into a quality-ladder growth model with endogenous skill acquisition. We focus on two issues: (a) the over-protection versus the under-protection of intellectual property rights in basic research; (b) the evolution of jurisprudence shaping the bargaining power of the upstream innovators. We show that the dynamic general equilibrium interactions may seriously mislead the empirical assessment of the growth effects of IPR policy: stronger protection of upstream innovation always looks bad in the short- and possibly medium-run. We also provide a simple “rule of thumb” indicator of the basic researcher bargaining power.     

The rich in historical perspective: evidence for preindustrial Europe (ca. 1300–1800)

This article provides an overview of long-term changes in the relative conditions of the rich in preindustrial Europe. It covers four pre-unification Italian states (Sabaudian State, Florentine State, Kingdom of Naples and Republic of Venice) as well as other areas of Europe (Low Countries, Catalonia) during the period 1300–1800. Three different kinds of indicators are measured systematically and combined in the analysis: headcount indexes, the share of the top rich, and richness indexes. Taken together, they suggest that overall, during the entirety of the early modern period the rich tended to become both more prevalent and more distanced from the other strata of society. The only period during which the opposite process took place was the late Middle Ages, following the Black Death epidemic of the mid-fourteenth century. In the period from ca. 1500 to 1800, the prevalence of the rich doubled. In the Sabaudian State, the Florentine State and the Kingdom of Naples, for which reconstructions of regional wealth distributions exist, in about the same period the share of the top 10 % grew from 45–55 to 70–80 %—reaching almost exactly the same level which has recently been suggested as the European average at 1810. Consequently, the time series presented here might be used to add about five centuries of wealth inequality trends to current debates on very long-term changes in the relative position of the rich.