Asymmetric expectations: Cross-national coalitions in a Japanese transplant in Italy

This article is a study of the experience of a Japanese production unit transplanted to Italy. It employs the concepts of “Fordism” and “lean production” which are well known in industrial sociology and management studies. The article shows how the interplay of the owner's nationality with the local managerial and organizational characteristics of the firm resulted in a production and market crisis, and how following a series of cross-cultural misunderstandings, a new system of trust relations evolved permitting the firm's transition to lean production. © 1995 John Wiley & Sons, Inc.     

How does firm diversification impact innovation?

This study sheds light on the relationship between business diversification and innovation. A diversification strategy is both a driver of sunk costs and strategic slack. Strategic slack is a valuable reserve of knowledge, usable to foster innovation. Using linear models, we explore the interplay between research and development (R&D) and organisational slack in large and diversified companies listed on the Euronext 100 Index. We consider the diversification pattern over time, and its interactions with the following three categories: sunk costs, slack resources, and R&D. The results show an antithetic effect of diversification and slack on R&D expenditures. In contrast to unabsorbed and potential slack, diversification and sunk costs hinder innovation. However, diversification is a huge source of strategic slack and, thus, has a positive effect on innovation, indirectly.     

Central Bank Independence and the Cost of Disinflation: Why the Wage Contracts Length Matters?

Recent empirical contributions demonstrate that countries with less independent central banks enjoy lower output losses during disinflationary cycles. To explain these somewhat surprising empirical findings, some authors suggest that independent central banks probably face a flatter short-run Phillips curve. In this paper, we provide both theoretical and empirical arguments to rationalize this intuition. We demonstrate that, since central bank independence reduces the mean inflation rate and its variance, wage setters opt for a lower degree of nominal wage indexation leading to more wage and price inertia and, thus, to a flatter short-run Phillips curve. Consequently, this paper put forward a channel of positive influence of central bank independence on the sacrifice ratio through its impact on nominal wage indexation. Empirical tests, performed using a sample of 19 OECD countries during the 1960–1990 period, show that these theoretical results hold also empirically.     

EFFICIENT MECHANISMS FOR MERGERS AND ACQUISITIONS*

We characterize incentive‐efficient merger outcomes when payments can be made both in cash and stock. Each firm has private information about both its stand‐alone value and a component of the (possibly negative) potential synergies. We study two cases: when transfers can, and cannot, be made contingent on the value of any new firm. When they can, we show that redistributing shares of any nonmerging firm generates information rents and provides necessary and sufficient conditions for the implementability of efficient merger rules. When they cannot, private information undermines efficiency more when it concerns stand‐alone values than synergies. Here, acquisitions emerge as optimal mechanisms.     

On the existence of shadow prices

For utility maximization problems under proportional transaction costs, it has been observed that the original market with transaction costs can sometimes be replaced by a frictionless shadow market that yields the same optimal strategy and utility. However, the question of whether or not this indeed holds in generality has remained elusive so far. In this paper, we present a counterexample which shows that shadow prices may fail to exist. On the other hand, we prove that short selling constraints are a sufficient condition to warrant their existence, even in very general multi-currency market models with possibly discontinuous bid–ask spreads.     

A Pure Theory of Job Security and Labour Income Risk

Models of labour market equilibrium where forward-looking decisions maximize both profits and labour income on a risk-neutral basis offer valuable insights into the effects of employment protection legislation. Since risk-neutral behaviour in the labour market presumes perfect insurance, however, job security provisions plays no useful role in such models. This paper studies a stylized model of dynamic labour market interactions where labour reallocation costs are partly financed by uninsured workers' consumption flows. In the resulting second-best equilibrium, provisions that shift labour reallocation costs to risk-neutral employers can increase productive efficiency if their administrative dead-weight costs are not too large, and increase workers' welfare as long as employers' firing costs at least partly finance workers' mobility.     

The Marginal Cost of Public Funds in Closed and Small Open Economies

The efficiency cost of taxation has become an increasingly important consideration in the evaluation of alternative tax policy options. This paper provides a review of estimates of the efficiency costs of taxation and presents some new estimates for small open economies. The available studies suggest that, in closed economies, the distortions from taxation are highest for corporate taxes and lowest for wage taxes. This efficiency ranking of different taxes does not hold in small open economies. It is shown that, in a small open economy, this ranking is reversed. Personal income taxes are less distortionary than wage taxes primarily because the link between domestic saving and investment is severed. Corporate taxes are also less distortionary for a variety of factors, such as changes in depreciation levels, payments to foreigners and terms of trade.     

The Role of Migration in the Variety and Quality of Trade: Evidence from Germany

We explore the migration‐trade nexus in the case of Germany over the period 2000–09, disentangling the two dimensions of intra‐industry trade (vertical and horizontal). We find that immigration is positively and significantly related to intra‐industry trade. However, the magnitude and statistical significance of migration's impact on trade are considerably higher for horizontal intra‐industry trade and increase with the difference in the level of development between Germany and the partner countries. This pattern is consistent with the view that information flows between migrant communities and their country of origin may be more important for consumer goods (where trade in varieties prevails) and that this information effect is more important if trading countries are very different.     

Government size,decentralization and growth: empirical evidence from Italian regions

The aim of this study is to empirically assess the relationship among government size, decentralization and economic growth in Italian ordinary regions. The empirical analysis, based on a panel dataset on Italian regions, provides evidence in support of the existence of an inverted U-shaped relationship between public expenditure and economic growth, that depends on the degree of fiscal decentralization. In particular, according to our estimates on the specific Italian case, the optimal degree of decentralization is around 32%, while the optimal government size value is approximately 52%.