Do Market Pressures Induce Economic Efficiency?: The Case of Slovenian Manufacturing, 1994-2001

The Slovenian transition represents a slow but steady liberalization of constraints on competition. Using a unique longitudinal data set on all manufacturing firms in Slovenia over the period 1994-2001, this study analyzes how firm efficiency changed in response to changing competitive pressures, holding constant firm attributes. Results show that the period was one of atypically rapid growth of total factor productivity (TFP) relative to levels in OECD countries, and that the rise in firm efficiency occurs across almost all industries and firm types: large or small; state or private; domestic or foreign-owned. Changes in firm ownership type have no impact on firm efficiency. Rather, competitive pressures that sort out inefficient firms of all types and retain the most efficient, coupled with the entry of new private firms that are at least as efficient as surviving firms, prove to be the major source of TFP gains. Market competition from new entrants, foreign-owned firms, and international trade also raise TFP in the industry. Results strongly confirm that market competition fosters efficiency.http://deepblue.lib.umich.edu/bitstream/2027.42/40007/3/wp621.pd

Does the Fourth Entrant Make Any Difference? Entry and Competition in the Early U.S. Broadband Market

We study the importance of sunk costs in determining entry conditions and inferences about firm conduct in an adapted Bresnahan and Reiss (1991, 1994) framework. In our framework, entrants incur sunk costs to enter, while incumbents disregard these costs in deciding on continuation or exit. We apply this framework to study entry and competition in the local U.S. broadband markets from 1999 to 2003. Ignoring sunk costs generates unreasonable variation in firms’ competitive conduct over time. This variation disappears when entry costs are allowed. Once the market has one to three incumbent firms, the fourth entrant has little effect on competitive conduct.entry; market structure; Sunk Costs; Broadband Market

O-Ring Production on U.S. Hog Farms: Joint Choices of Farm Size, Technology, and Compensation

� We hypothesize that hog production can be characterized by complementarities between new technologies, worker skills and farms size.� Such production processes are consistent with Kremer’s (1993) O-ring production theory in which a single mistake in any one of several complementary tasks in a firm’s production process can lead to catastrophic failure of the product’s value.� In hog production, mistakes that introduce disease or pathogens into the production facility can cause a total loss of the herd.� Consistent with predictions derived from the O-ring theory, we provide evidence that the most skilled workers concentrate in the largest and most technologically advanced farms and are paid more than comparable workers on smaller farms.� These findings suggest that worker skills, new technologies and farm size are complements in production.� The complementarities create returns to scale to large hog confinements, consistent with the dramatic increase in market share of very large farms over the past 20 years.complementarity; human capital; sorting; technology; farm size; Wages; hogs; O-ring; unobserved skill

Lifetime Health Consequences of Child Labor in Brazil

The health consequences of child labor may take time to manifest themselves. This study examines whether children who began working at a young age experience increased incidence of illness or physical disability as adults.. When child labor and schooling are treated as chosen without consideration of unobserved abilities or health endowments, child labor appears to have small adverse effects on a wide variety of health measures. Some adverse health consequences such as heart disease or hypertension seem unlikely to be caused by child labor. However, when we allow unobserved health and ability endowments to alter the age of labor market entry and years of schooling completed, the joint effects of child labor and schooling on health become larger while the less plausible health consequences lose significance. Results imply that delaying entry into child labor while increasing time in school significantly lowers the probability of early onset of physical ailments such as back problems, arthritis, or reduced strength or stamina. However, our methods are not able to distinguish between the health impacts of child labor from the impacts of reduced time in school.child labor; health; Wages; schooling; school quality; occupational choice

Returns to Graduate and Professional Education: The Roles of Mathematical and Verbal Skills by Major

Students in majors with higher average quantitative GRE scores are less likely to attend graduate school while students in majors with higher average verbal GRE scores are more likely to attend graduate school.  This sorting effect means that students whose cognitive skills are associated with lower earnings at the bachelor’s level are the most likely to attend graduate school.  As a result, there is a substantial downward bias in estimated returns to graduate education.  Correcting for the sorting effect raises estimated annualized returns to a Master’s or doctoral degree from about 5% to 14.5% and 12.6% respectively.  Estimated returns to professional degrees rise from 14% to 20%.  These findings correspond to a large increase in relative earnings received by post graduate degree holders in the United States over the past 20 years.sorting; Phd degree; Master's degree; Professional degree; GRE; Returns; Graduate Education; verbal ability; mathematics ability

High School Employment, School Performance, and College Entry

The proportion of U.S. high school students working during the school year ranges from 23% in the freshman year to 75% in the senior year. This study estimates how cumulative work histories during the high school years affect probability of dropout, high school academic performance, and the probability of attending college. Variation in individual date of birth and in state truancy laws along with the strength of local demand for low-skill labor are used as instruments for endogenous work hours during the high school career. Working more hours during the academic year does not affect high school academic performance. However, increased high school work intensity raises the likelihood of completing high school but lowers the probability of going to college. These results are similar for boys and girls, and so working during high school does not explain the widening gap in college entry between men and women.child labor; GPA; college enrollment; dropout; truancy age

Child Labour, School Attendance and Performance: A Review

This paper reviews the issues surrounding the derivation of estimates of the impact of child labor on school outcomes. The paper aims to review the current state of methodological and empirical knowledge concerning the impact of child labor on learning, to review existing data sets that could be used to address the issues, and to highlight areas where current research is lacking. This paper is an ILO/IPEC working paper funded by a a grant from the Dept. of Labor.

If Johnny Can't Work, Can Johnny Read Better?: Child Labor Laws, Labor Supply and Schooling Outcomes

The two most common state child labor restrictions are work permit requirements for teenagers and school dropout ages that are more stringent than federal requirements. If these laws are effectively targeted and enforced, children living in states legislating more stringent child labor laws should be less likely to work, should work fewer hours if they do work, and they should have better average schooling outcomes. Data show that stricter state laws do not lower significantly the likelihood that 14-15 year old youths work or the likelihood their hours exceed federal guidelines. Child labor laws do have small positive effects on academic outcomes. State work permit requirements modestly increase the likelihood of college entry while more stringent truancy laws increase marginally high school academic performance.dropout; child labor; legislation; GPA; college enrollment; truancy; work permit

Do Market Pressures Induce Economic Efficiency?: The Case of Slovenian Manufacturing, 1994-2001

Using a unique longitudinal data set on all manufacturing firms in Slovenia from 1994-2001, this study analyzes how firm efficiency changed in response to changing competitive pressures associated with the transition to market. Results show that the period was one of atypically rapid growth of total factor productivity (TFP). The rise in firm efficiency occurs across almost all industries and firm types: large or small; state or private; domestic or foreign-owned. Changes in firm ownership type have no direct impact on firm efficiency. However, increased market competition related to rising market share of private firms, new market entrants, foreign-owned firms, and international trade raise TFP across all firms in an industry, whether private or state owned. In addition, competitive pressures that sort out inefficient firms of all types and retain the most efficient, coupled with the entry of new private firms that are at least as efficient as surviving firms, prove to be the major source of TFP gains. Results strongly confirm that market competition fosters efficiency.

Do Entry Conditions Vary over Time? Entry and Competition in the Broadband Market: 1999-2003

We extend Bresnahan and Reiss’s (1991) model of local oligopoly to allow firm entry and exit over time. In our framework, entrants have to incur sunk costs in order to enter a market. After becoming incumbents, they disregard these entry costs in deciding whether to continue operating or to exit. We apply this framework to study market structure and competitive conduct in local markets for high-speed Internet service from 1999 to 2003. Replication of Bresnahan and Reiss’s framework generates unreasonable variation in firms’ competitive conduct over time. This variation disappears when entry costs are allowed. We find that once the market has one to three firms, the next entrant has little effect on competitive conduct. We also find that entry costs vary with the order of entry, especially for early entrants. Our findings highlight the importance of sunk costs in determining entry conditions and inferences about firm conduct.entry; exit; oligopoly; broadband; high-speed internet; competition; pricing