Network Support and the Success of Newly Founded Business

The "network approach to entrepreneurship" is a prominent theoretical perspective within the literature on entrepreneurship. This literature assumes that network resources, networking activities and network support are heavily used to establish new firms (network founding hypothesis). Further, those entrepreneurs, who can refer to a broad and diverse social network and who receive much support from their network are more successful (network success hypothesis). Based on a study of 1,700 new business ventures in Upper Bavaria (Germany), the article gives an empirical test of the network success hypothesis. It is argued that one reason, why previous studies did not consistently find positive network effects, may be that social capital (network support) is used to compensate shortfalls of other types of capital (human capital and financial capital). This compensation hypothesis, however, does not find empirical confirmation. On the other hand, however, the network success hypothesis proves to be valid in our analyses, i.e. network support increases the probability of survival and growth of newly founded businesses.     

Partial retirement and the earnings test

This paper studies the effects of the earnings test on retirement behavior. The earnings tests of most social security systems tax post0retirement earnings at a relatively high level and do not lead to actuarially fair increases in futere benefits. This results in discouragement of partial retirement. The paper shows that a reduction in the earnings test's tax rate is likely to increase part-time work, and that, in special cases, the increase in work effort may even lead to a reduction in the net transfer from social security to the individual.I wish to thank the Institute of Industrial Relations at UC Berkeley for its hospitality and support. This research has been financed by the Austrian Fonds zur Förderung der wissenschaftlichen Forschung. I am indebted to J. K. Brunner, W. T. Dickens, J. Falkinger, E. Lazear, T. Sikor, B.-A. Wickström, R. Winter-Ebmer, and two referees for comments on an earlier draft.     

Separating small and big fish: The case of income tax evasion

This paper proposes to offer the taxpayer a choice of tax-enforcement schemes for self-selection. More specifically, the taxpayer should have the possibility of opting for the prevailing regime with a certain penalty on the evaded tax or for an alternative regime with a higher penalty on the evaded tax but a reduced tax rate. It is shown that this leads to a separation of taxpayers characterized by a relatively high degree of evasion (H-evaders) from taxpayers who evade only a relatively small amount of tax (L-evaders). Furthermore, the procedure is not self-defeating, it is effectively possible to direct the efforts of auditing towards the H-evaders. At the end of the game the L-evaders experience a welfare gain, the H-evaders are induced to reduce their evasion activities and the government can expect higher yields.We wish to thank Johann K. Brunner and two anonymous referees for many helpful comments.     

Investment under uncertainty and the state of confidence — A note

Zusammenfassung Bei echter Unsicherheit ist die Verteilung der erwarteten Nachfrage nicht bekannt, sondern muß erst aus vergangenen Erfahrungen, neuen Informationen und subjektiven Einschätzungen abgeleitet werden. Die vorliegende Arbeit konzentriert sich auf Unsicherheitssituationen, in denen das Vertrauen in die vergangenen Erfahrungen schwach ist und neue Informationen kaum verfügbar sind. Es wird gezeigt, daß in solchen Situationen (z. B. nach Trendbrüchen, in dünnen Märkten, bei innovativen Investitionen) der Einfluß der Profitabilität an Bedeutung gewinnt. Gleichzeitig stellt die Arbeit einen rigorosen Modellierungsversuch des state of confidence von Keynes dar.     

Taut plans, repressed inflation and the supply of effort in centrally planned economies

Conclusions In this paper we have developed a macroeconomic model of a centrally planned economy. In such an economy the use of taut plants to elicit greater supplies of effort from the work force is hampered by the inflationary pressures unleashed by the plan. Consequently the planners cannot, in general, optimize both the supply of effort and the supply of labour but rather must trade off one against the other.Planners may be able to alleviate inflationary pressures if they can impose wage discipline on enterprises or if they are willing to reduce investment. Both of these policies, however, have costs attached to them. Severe credit rationing designed to prevent upward wage drift may in fact reduce the output of enterprises by creating financial bottlenecks. Moreover, while upward wage drift does cause repressed inflation it may also be a way of moving workers from less efficient firms to more efficient ones and thus be useful in an allocational sense. Reductions in the volume of investment also represent a cost to planners since higher current output can be obtained only by sacrificing future output.We have also shown that the key mechanism driving our model, the link between disequilibrium in the market for consumer goods either at the micro-level or in the aggregate does exist. In our sample of East European countries there is a significant inverse relationship between deviations from the normal level of savings and deviations from the trend rate of growth of labour productivity, reflecting, we believe, fluctuations in the supply of effort by households.We are indebted to Zdenek Drabek, Michael Keren, Janos Kornai and J. Michael Montias for helpful comments. We also appreciate comments from the participants in the Ninth International Conference Models and Forecasts '85, Bratislava, Czechoslovakia, as well as from anonymous referees. Any errors and all opinions are, of course, entirely our responsibility.The research underlying this paper was supported by National Science Foundation Grant INT76-21084 and by funding from the National Council for Soviet and East European Research.     

The Impact of Income Inequality on Product Diversity and Economic Growth

The paper presents an empirical analysis of a model of endogenous growth and innovation with unequal incomes and hierarchical consumer demand. The theoretical model predicts a positive impact of income inequality on product diversity. The impact of inequality on per-capita growth may be positive or negative depending upon the assumptions about productivity growth, where the standard assumption that productivity is positively related to product diversity implies a positive impact. In the empirical part, indices for absolute and relative product diversity are calculated from ICP-expenditure data. The empirical evidence shows that a significant positive relationship exists between income inequality and relative product diversity and that the relationship between income inequality and economic growth is negative and significant. The results lead to the conclusion that the diversity-productivity relationship used in new growth theory has to be treated with scepticism.     

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