Trade Liberalization and Cartel Stability

Can reduced trade barriers promote a collusive understanding about not exporting into each others domestic markets? Reduced trade costs increase the short‐run gains from starting exporting, but can also make the long‐run punishment of such a strategy harsher. If collusion on prices is supported by a trigger strategy, a reduction in trade costs weakens competition in the sense that collusion is easier to sustain. In a corresponding model with collusion on quantities, this conclusion is reversed. The authors also discuss how results change if grim trigger strategies are replaced by stick‐and‐carrot punishments.     

Earnings Distribution and Labour Supply after a Retirement Earnings Test Reform*

Norwegian administrative data are used to evaluate the impact of a doubling of the threshold in the retirement earnings test. We find almost no impact on the extensive margin, but a positive effect on the intensive margin. This positive effect is uneven over the earnings distribution, and concentrated on workers around the threshold, increasing with exposure to the reform and leading to a decrease in earnings inequality. Individuals who remain active until retirement age respond more to the reform. Conditional on prereform earnings, we find little evidence that individual characteristics such as working histories influence the responsiveness to the reform.     

International convergence and divergence of material input structures: an industry-level perspective

This article analyses whether international material input structures have converged or diverged over time. Pooled variances for 25 industries were obtained from OECD input–output tables in constant prices for nine countries over the period 1971–1990. It is found that high-tech industries were mainly characterized by divergence of material input structures, whereas convergence was found for many low-tech, more mature industries. In line with studies on (labour) productivity growth rates, convergence of material input structures was prevalent in the 1970s, while divergence dominated in the 1980s.     

Research Quality Rankings of Heterodox Economic Journals in a Contested Discipline

This article argues that the discipline of economics consists of two subdisciplines: heterodox and mainstream economics. Being distinct bodies of knowledge, it is possible that the processes of building scientific knowledge are different enough so to generate distinctly different referencing and citation practices. Therefore, a specific impact contribution score is necessary for ranking heterodox journals in terms of their contribution to building heterodox economics. If properly developed such a metric could also be used to produce a single overall quality‐equality ranking of mainstream and heterodox journals. Utilizing citation data and peer evaluations of 62 heterodox economics journals, a research quality measure is developed and then used to rank the journals. The measure is then used in conjunction with the SSCI five‐year impact factor to produce a comparative research quality‐equality rankings of the 62 heterodox and the 192 mainstream journals in the SSCI.     

Do firms’ growth rates depend on firm size?

The empirical literature dealing with corporate growth does not in general give support to Gibrat??s Law stating that the expected increase in firm size is proportionate to its initial size, leaving their growth rates independent of size. Using a relatively large and representative sample of approximately 2,500 Danish firms representing all industries, we have evaluated the validity of Gibrat??s Law over the period 1990?C2004. The present analysis addresses this question by applying econometric methods to test Gibrat??s Law and correcting for problems related to autocorrelation. The empirical findings of our study do not generally support Gibrat??s Law, but in contrast to the results of earlier studies, the analysis reveals that firms?? growth rates are more likely to be positively related to firm size.     

Regional competitiveness, university spillovers, and entrepreneurial activity

This study examines the impact of regional competitiveness on the innovative activity of entrepreneurial firms. Based on a unique and hand-collected dataset of publicly listed high-technology start-ups and university regions, this paper tests how regional competitiveness and university spillovers affect the innovation behavior of entrepreneurial firms. The results provide strong evidence that regional competitiveness and university spillovers are strong complements in fostering innovation activity of entrepreneurial firms. However, the results also raise the question whether incentives for universities and their actors might lead to crowding out effects.     

Credible communication and cooperation: Experimental evidence from multi-stage Games

It is well known that communication often serves as a facilitator for cooperation in static games. Yet, communication can serve entirely different purposes in dynamic settings as communication during the game may work as a means for renegotiation, potentially undermining the credibility of cooperative strategies. To explore this issue, this paper experimentally investigates cooperation and non-binding communication in a two-stage game. More specifically, two treatments are considered: one with only pre-play communication and one where subjects can also communicate intra-play between the stages of the game. The results highlight a nontrivial difference concerning the effects of pre-play communication between the two treatments. Sending or receiving pre-play messages has a positive and significant effect on cooperation if there is no possibility of intra-play communication. However, this effect is significantly reduced when when intra-play communication is allowed. The results suggest that the credibility of pre-play messages may depend crucially on future communication opportunities.     

On the possibility of welfare-enhancing hard core cartels

The conventional wisdom is that cartels which merely lead to lower production levels and higher prices are detrimental to social welfare. This paper explores the extent to which this is generally valid. We derive necessary and sufficient conditions for the existence of a hard core cartel that is beneficial for firms and society at large. Considering both strong (with side payments) and weak (without side payments) hard core cartel contracts, we find that (i) both strong and weak welfare-enhancing cartels exist when at least one firm makes a loss on part of its sales in competition, (ii) a welfare-enhancing strong cartel exists whenever there is a difference in unit cost at competitive production levels, and (iii) a welfare-enhancing weak cartel exists when the profit margin on all sales is positive and the cost difference is sufficiently large.