Empirical Implications of Alternative Models of Firm Dynamics

This paper considers two models for analyzing the dynamics of firm behavior that allow for heterogeneity among firms, idiosyncratic (or firm specific) sources of uncertainty, and discrete outcomes (exit and/or entry). Models with these characteristics are needed for the structural econometric analysis of several economic phenomena, including the behavior of capital markets when there are significant failure probabilities, and the analysis of productivity movements in industries with large amounts of entry and exit. In addition, these models provide a means of correcting for the self-section induced by liquidation decisions in empirical studies of firms responses to alternative policy and environmental changes. It is shown that the two models have different nonparametric implications - implications that depend only on basic behavioral assumptions and mild regularity conditions on the functional forms of interest (one distinction between them corresponds to the distinction between heterogeneity and an ergodic form of state-dependence; a form in which the effect of being in a state in a particular period erodes away as time from that period lapses). The nonparametric implications enable the construction of testing and selection correction procedures that are easy to implement (they do not require the computationally difficult, and functional-form specific, estimation algorithms that have been used to empirically analyze stochastic control models with discrete outcomes in the past). The paper concludes by checking for the implications of the two models on an eight-year panel of Wisconsin firms. We find one model to be consistent with the data for retail trade.

A Model of Russia's "Virtual Economy"

The Russian Economy has evolved into a hybrid form, a partially monetized quasi-market system that has been called the virtual economy. In the virtual economy, barter and non-monetary transactions play a key role in transferring value from the productive activities to the loss-making sectors of the economy. We show how this transfer takes place, and how it can be consistent with the incentives of economic agents. We analyze a simple partial-equilibrium model of the virtual economy, and show how it might prove an obstacle to industrial restructuring and hence marketizing transition.http://deepblue.lib.umich.edu/bitstream/2027.42/39701/3/wp317.pd

The Stuctural Barrier to Transition: A Note on Input-Output Tables of Centrally Planned Economies

This note begins an exploration of one of the key legacies of the Soviet economic system, the physical structure of production and economic interaction, and its impact on the transition to a market-based system. It addresses some reasons for the size of the "shock" to the economy subsequent to the liberalization of prices, including the apparent disappearance of vast amounts of industrial output and an inflation driven by more than just monetary factors

Restructuring an Industry During Transition: A Two-Period Model

This paper develops the two-period model of enterprise shutdown during transition that was introduced in Ericson (1994). Its purpose is to provide a formal basis for the study of what Kornai (1994) has called the "transformation of the real structure of the economy" during the transition process. It focuses at the industry level of restructuring, taking a normative, industrial policy, perspective

Extraction and Partial Characterization of a Lipophilic, Fungicidal Molecule Associated with Serum Albumins

Vulvovaginal candidiasis (VVC) is a mucosal infection caused by Candida species and represents one of the most common clinical problems in women of reproductive age (68,71). Annually in the United States there are approximately 13 million cases of VVC, resulting in 10 million gynecologic office visits per year (38). It is estimated that 75% of women will experience at least one episode in their lifetime, with a projected 50% of all women experiencing multiple episodes (23). Candida albicans is a dimorphic commensal organism of the urogenital and gastrointestinal tracts and has been identified as the main pathogenic agent in VVC, accounting for approximately 85-90% of patients with positive cultures (52). Despite extensive research, the invasive mechanism of vaginal yeast infections is not well understood. Traditionally it has been assumed that changes in the host vaginal environment promote the dimorphic transition from blastospore to hyphae, resulting in a shift from asymptomatic colonization to symptomatic vaginitis (28). In contrast to the normal, systemic immune response, which confers an aseptic environment for tissue and organs, immune responses at the mucosal level are designed to prevent tissue invasion and local disease while maintaining an indigenous flora that could be both beneficial and pathogenic (28). Since fungi are eukaryotic, the vital cellular mechanisms that are usually targeted by modern pharmacologic agents, such as DNA replication and protein translation, are either conserved or have a strong homology to their human orthologs. Obtaining a better understanding of natural fungal suppression mechanisms and molecules at the mucosal level may pave the way for the development of more efficacious drugs or preventative regiments. The mechanism by which the human immune system is able to resist fungal invasion at the vaginal mucosa is unknown. Our research was aimed at finding any host factors that might play a role in the suppression of or prevention of a fungal infection at the vaginal mucosa. In order to screen candidate molecules that might be important in this type of vaginal defense, we chose a pathogenic C. albicans strain, SC5314, to test fungal cell viability upon introduction of the candidate molecules. We have identified a host factor that exhibits strong fungicidal activity when organically extracted from both human and bovine serum albumins. Characterization of this factor through organic extractions and acetone separations reveal that this molecule is a non-polar lipid. Serum samples that have been thoroughly stripped of fatty acids and other lipophilic molecules show no apparent fungicidal activity in cell viability assays. Since the factor is extractable from both human and bovine serum albumins, it may be conserved among mammals. Identification and characterization of this molecule may play a pivotal role in understanding host-Candida interactions at the mucosal membrane interface. Due to its human origin, the use of this factor as an antifungal would be extremely advantageous in regards to FDA (Food and Drug Administration) guidelines and ADMET (Adsorption, Distribution, Metabolism, Excretion, Toxicology) properties

An Alternative Theory of Firm and Industry Dynamics

This paper provides a model of firm and industry dynamics that allows for entry, exit and firm-specific uncertainty generating variability in the fortunes of firms. It focuses on the impact of uncertainty arising from investment in research and exploration-type processes. It analyzes the behavior of individual firms exploring profit opportunities in an evolving marketplace and derives optimal policies, including exit, in this environment. Then it adds an entry process and aggregates the optimal behavior of all firms, including potential entrants, into a rational expectations, Markov perfect industry equilibrium, and proves ergodicity of the equilibrium process. Numerical examples are used to illustrate the more detailed characteristics of the stochastic process generating industry structures that result from this equilibrium

An Alternative Theory of Firm and Industry Dynamics

This paper provides a model of firm and industry dynamics that allows for entry, exit and firm-specific uncertainty generating variability in the fortunes of firms. It focuses on the impact of uncertainty arising from investment in research and exploration-type processes. It analyzes the behavior of individual firms exploring profit opportunities in an evolving marketplace and derives optimal policies, including exit, in this environment. Then it adds an entry process and aggregates the optimal behavior of all firms, including potential entrants, into a rational expectations, Markov perfect industry equilibrium, and proves ergodicity of the equilibrium process. Numerical examples are used to illustrate the more detailed characteristics of the stochastic process generating industry structures that result from this equilibrium.Industry dynamics, exploratory investment, heterogeneous firms, Markov perfect equilibrium

Restructuring an Industry During Transition

http://deepblue.lib.umich.edu/bitstream/2027.42/39426/3/wp36.pd