Adjustment costs and time-to-build in factor demand in the U.S. manufacturing industry

In order to explain cyclical behavior of factor demand, the static neoclassical model of the firm has been extended to include either adjustment costs (e.g. Lucas (1967)) or time-to-build considerations as in Kydland and Prescott (1982). This paper presents an intertemporal factor demand model which accounts for adjustment costs and gestation lags. The closed form solution of the model is a highly restricted vector ARMA-process that is estimated using quarterly data for the manufacturing industry in the U.S., 1960–1988. The main conclusion is that both sources of dynamics of factor demand are identifiable and found to be empirically of importance.     

Stories from the Front‐line: How they Construct the Organization*

abstract Drawing on social constructionist theory this paper applies discourse analysis to ten narratives told by service delivery staff in one distribution network. The analysis looks at how the narratives construct the organization through their constructions of self (the narrator), customer and manufacturer and their constructions of the relationships linking these three sets of actors. The paper argues that the narrators construct the self either as an organizational customer or an organizational partner. The two constructions locate conflict either within the organization or at the customer–organizational boundary respectively. The implications of this are suggested. Contrasts between the manner in which organizational members construct the self as customer or partner and the construction of the organizational member in the internal customer literature are highlighted and briefly discussed.     

Are differences in firm size transitory or permanent?

An Erratum for this article has been published in Journal of Applied Econometrics 18(2) 2003, 249 Previous empirical work on corporate growth rates using cross‐section or short‐panel econometric techniques suggests that growth rates are random but that some degree of mean reversion exists. This means that size differences between firms are transitory. Another, more natural way to explore the long‐run distribution of firm sizes is to examine data on the growth of particular firms over long periods of time. Using a sample of 147 UK firms observed continually for more than 30 years, our conclusions are that growth rates are highly variable over time and that differences in growth rates between firms do not persist for very long. Further, firms show no tendency to converge to either a common size or to a pattern of stable size differences over time. These results are compared and contrasted with standard approaches that suggest that firms reach and maintain stable positions in a skewed size distribution. Copyright © 2002 John Wiley & Sons, Ltd.     

THE MORISHIMA ELASTICITY OF SUBSTITUTION FOR THE VARIABLE PROFIT FUNCTION AND THE DEMAND FOR IMPORTS IN THE UNITED STATES*

In this article, I derive expressions for the Morishima elasticities of substitution (MES) for the variable profit function and estimate these elasticities to shed some light on the substitutability between imports, capital services, and labor services. The results reveal that capital services and imports are Morishima substitutes, irrespective of whether the price of capital services or imports changes, and imports and labor services are also Morishima substitutes, irrespective of whether the price of imports or the wage rate changes. Thus, an increase in the price of U.S. imports (through tariffs or duties) will result in substitution (in the Morishima sense) into labor and capital services.     

Cap and trade policies in the presence of monopoly and distortionary taxation

We extend an analytical general equilibrium model of environmental policy with pre-existing labor tax distortions to include pre-existing monopoly power as well. We show that the existence of monopoly power has two offsetting effects on welfare. First, the environmental policy reduces monopoly profits, and the negative effect on income increases labor supply in a way that partially offsets the pre-existing labor supply distortion. Second, environmental policy raises prices, so interaction with the pre-existing monopoly distortion further exacerbates the labor supply distortion. This second effect is larger, for reasonable parameter values, so the existence of monopoly reduces the welfare gain (or increases the loss) from environmental restrictions.     

On the Statistical Significance of Event Effects on Unsystematic Volatility

We develop a method for determining the significance of the effect of a certain event (stock split, corporate restructuring, change in regulation, etc.) on unsystematic volatility of asset returns. Simulations show that the suggested tests reject the true null hypothesis of no effect on volatility at appropriate levels, whereas the rejection rates of a false null hypothesis increase with the magnitude of the effect. An application of the method to corporate spin‐offs reveals statistically significant and long‐lasting estimated increases in unsystematic volatility of parent companies' returns.     

Liquidity, Labels and Medium-Term Notes

We suggest that the medium-term note market provides an excellent laboratory for exploring the relationships between yield, liquidity, and the label affixed to a financial instrument. Crabbe and Turner (1995) examined the liquidity issue and uncovered the counter-intuitive result that issue size is unrelated to liquidity. Their study failed to examine a potential channel for a liquidity effect, however, in the form of multiple issues from a single, typically large, MTN registration filing. We find evidence that file size is significantly related to yield in a number of instances. Several other proxies for liquidity, such as frequency of issue, are also sometimes significantly related to yields. Contrary to Crabbe and Turner (1995) , we find that labeling a security an MTN can have an impact on its yield. The label "note" also appears to matter for yield in some instances.