Multinationals: Too Many or Too Few?— The Proximity–concentration Trade-off

The paper builds an analytically tractable model that illustrates the “proximity–concentration trade-off” involved in horizontal multinationals. For low trade costs, firms are single-plant firms, for intermediate costs, some are single-plant firms whereas others are multinationals, for large trade costs, firms are multinationals. Because of the modeling strategy, the model is suited for a welfare analysis of multinationals. It shows that too many firms choose to concentrate their production in only one location. Also, for some transport costs, a reduction in transport costs worsens welfare.

“Thirlwall’s Law” reconsidered

Thirlwall’s Law is found to be the necessary but not sufficient condition for balanced long-run growth. A simple equation is considered whose empirical analysis could confirm—or reject—the validity of the Law. The analysis, conducted by means of econometric co-integration using the Dynamic Ordinary Least Squares method applied to data for 59 countries covering the years 1960–2012, suggests that Thirlwall’s Law may not hold for the decisive majority of countries.     

Combining “real effort” with induced effort costs: the ball-catching task

We introduce the “ball-catching task”, a novel computerized task, which combines a tangible action (“catching balls”) with induced material cost of effort. The central feature of the ball-catching task is that it allows researchers to manipulate the cost of effort function as well as the production function, which permits quantitative predictions on effort provision. In an experiment with piece-rate incentives we find that the comparative static and the point predictions on effort provision are remarkably accurate. We also present experimental findings from three classic experiments, namely, team production, gift exchange and tournament, using the task. All of the results are closely in line with the stylized facts from experiments using purely induced values. We conclude that the ball-catching task combines the advantages of real effort tasks with the use of induced values, which is useful for theory-testing purposes as well as for applications.     

Competitive search markets for durable goods

Summary. This paper considers a dynamic version of Akerlof's (1970) lemons problem where buyers and sellers must engage in search to find a trading partner. We show that if goods are durable, the market itself may provide a natural sorting mechanism. In equilibrium, high-quality goods sell at a higher price than low-quality goods but also circulate longer. This accords with the common wisdom that sellers who want to sell fast may have to accept a lower price. We then compare the equilibrium outcomes under private information with those under complete information. Surprisingly, we find that for a large range of parameter values the quilibrium outcomes under the two information regimes coincide, despite the fact that circulation time is used to achieve separation. Received: August 24, 2000; revised version: October 24, 2000     

Illustrating the importance of Austrian business cycle theory: A reply to Murphy,Barnett, and Block; A call for quantitative study

Murphy et al. (2009) criticize Young’s (2005) test of Austrian business cycle theory (ABCT) using US industry-level quarterly job reallocation data and the federal funds rate as a monetary policy indicator. I argue that not only are Murphy et al.’s specific criticisms misguided; more importantly, they all but completely rule out the type of empirical study that Young (2005) advocates: specifically, one that (1) is quantitative and distinguishes between statistical and economic significance and (2) attempts to exploit a hypothesis that is both a prediction of ABCT and not a prediction of competing monetary theories of the cycle. I argue that empirical studies embodying (1) and (2) are critical to ABCT as a research program. Furthermore, I review the existing econometric studies of ABCT from the last 10 years and conclude that there is much room for improvement along these lines.     

Redistribution as a selection device

This paper studies the role of the wealth distribution for the market selection of entrepreneurs when agents differ in talent. It argues that the redistribution of initial endowments can increase an economy's surplus because more talented individuals get credit for their risky investment projects. Moreover, the redistribution of initial endowments may lead to a Pareto-improvement although all agents are non-satiable. An agent's entrepreneurial ability is his private information and there is moral hazard in production. I find conditions such that unproductive rich entrepreneurs crowd out productive poor ones on the capital market. Then redistribution of initial endowments may lead to a new equilibrium where market participants are better informed about the entrepreneurs’ ability. The new equilibrium is characterized by (i) the selection of better entrepreneurs, (ii) a higher riskless rate of return on capital, (iii) lower repayments of successful entrepreneurs to their creditors and (iv) the fact that all agents are better off.     

FAMILIES, TIME AND MONEY IN CANADA, GERMANY, SWEDEN, THE UNITED KINGDOM AND THE UNITED STATES

Using microdata from the Luxembourg Income Study, we assess "time crunch" for families with children in Canada, Germany, Sweden, the U.K. and the U.S. Both theory and empirical evidence suggest that both time and money are important inputs to the well-being of parents and children. We present cross-country comparisons of "total available adult hours" under different assumptions about the varying time needs of families of different size. We also present estimates of "time shortages." In all cases, we provide separate estimates for families located at different points in the country income distributions, since being short of both time and money is likely to be particularly problematic. Although paid work hours are highest for high-income families, we nonetheless find significant numbers of lower-income families in which parents work very long hours in the paid labor market; this is particularly the case in the U.S.