Sunk Costs and the Growth and Failure of Small Business

We model the growth and failure of small business in Irish Manufacturing during the period 1973-1994. We estimate the effect of start-up size on the employment growth while controlling for the business cycle, the life cycle and the probability of business survival, amongst other factors. Learning models of firm selection and evolution are accepted in Homogenous Goods but rejected in R&D sectors. Due to high (low) entry and failure costs in R&D (Homogenous Goods) sectors, learning is undertaken ex-ante (ex-post), inducing entry with certainty (uncertainty) concerning ex-post performance, causing Gibrat's law to hold (fail).

Firm Performance and the Political Economy of Corporate Governance: Survey Evidence for Bulgaria, Hungary, Slovakia and Slovenia

Using survey data for 220 traditional manufacturing firms over 7 years of transition and 4 CEE countries, we find firms that produced for the EU market under planning consistently outperform those that produced for the CMEA market. Within the previously CMEA market, the best firms were selected to outside privatisation and outperformed insider/state owned firms. Outside privatisation was resisted in EU oriented firms and ownership was found to have no effect on performance. We argue that insider/state ownership in previously CMEA and EU markets builds up political support for the market system during its initial stages, ensuring its long-term success.http://deepblue.lib.umich.edu/bitstream/2027.42/39722/3/wp338.pd

Individual Pay and Outside Options: Evidence from the Polish Labour Force Survey

Using Polish Labour Force Survey data, we examine whether competition for labour has induced individual pay to depend on outside options, availability and quality of jobs. Exploiting the lack of inter-regional job and worker flows we estimate the elasticity of individual pay, amongst a rich set of individual characteristics, to be approximately -0.1 for local unemployment (job shortages) and + 0.1 for local job reallocation (restructuring). Variations in local labour market conditions explain approximately 50 per cent of the differences in expected individual earnings across regions, while differences in inherited human capital and occupation structures explain the rest.http://deepblue.lib.umich.edu/bitstream/2027.42/39748/3/wp364.pd

Product Differentiation and Firm Size Distribution: An Application to Carbonated Soft Drinks

Using brand-level retail data, the firm size distribution in carbonated soft drinks is shown to be an outcome of the degree to which firms have placed brands effectively (store coverage) across vertical (flavour, packaging, diet attributes) segments of the market. Regularity of the firm size distribution is not disturbed by the nature of short-run brand competition (turbulence in brand market share) within segments. Remarkably, product differentiation resulting from firms acquiring various portfolios of product attributes and stores in market evolution determines the limiting firm size distribution.Firm size distribution, product differentiation, carbonated soft drinks.

Linking Productivity to Trade in the Structural Estimation of Production within UK Manufacturing Industries

We estimate productivity dynamics within 4-digit manufacturing industries, using FAME data on UK Companies, from 1994 to 2003. We extend the algorithm in Olley and Pakes (1996) to allow for a selection bias driven by the Melitz (2003) effect (high productivity types selecting to exporting) to get more consistent and unbiased estimates of the parameters of the production function. We demonstrate a link between trade orientation and productivity within industries that is driven by selection, not by learning. Hence aggregate productivity is driven by market share reallocations amongst companies rather than from improvements in company level productivity.Simultaneity, Selection (Exit and Trade) Biases, Productivity Dynamics, UK Manufacturing Companies, within 4-digit industries.

Did political constraints bind during transition? Evidence from Czech elections 1990 - 2002

Many theoretical models of transition are driven by the assumption that economic decision making is subject to political constraints. In this paper we empirically test whether the winners and losers of economic reform determined voting behaviour in the first five national elections in the Czech Republic. We propose that voters, taking stock of endowments from the planning era, could predict whether they would become “winners” or “losers” of transition. Using survey data we measure the percentage of individuals by region who were “afraid” and “not afraid” of economic reform in 1990. We define the former as potential “winners” who should vote for pro-reform parties, while latter are potential “losers” who should support left-wing parties. Using national election results and regional economic indicators, we demonstrate that there is persistence in support for pro-reform and communist parties driven by prospective voting based on initial conditions in 1990. As a result, we show that regional unemployment rates in 2002 are good predictors of regional voting patterns in 1990.

Reforms and Productivity Dynamics in Chinese State-Owned Enterprises

Institutional change has taken place incrementally since 1978 for State-Owned Enterprises (SOEs) in the Industrial Sector of China. We will provide evidence for the notion that this is largely due to increased domestic competitive pressures and the opportunities arising from the integration of international markets. In this paper we estimate the effect of deep reform (the right to hire and fire labour, buy and sell capital and operate on international markets) on the productivity dynamics of entreprises. Using a unique balanced panel of681 SOEs for the period 1980 to 1994, we find consistent production function estimatesusing an algorithm put forward in Olley and Pakes (1996), which estimates using an simultaneity bias. Futhermore, we allow selection bias by formulating an entry that exposure to deep reform hav lead to higher productivity realisations while remaining under state ownership.

Product Differentiation and Firm Size Distribution - An Application to Carbonated Soft Drinks

Using brand level retail data, the firm size distribution in Carbonated Soft Drinks is shown to be an outcome of the degree to which firms have placed brands effectively (store coverage) across vertical (flavour, packaging, diet attributes) segments of the market. Regularity in the firm size distribution is not disturbed by the nature of short-run brand competition (turbulence in brand market shares) within segments. Remarkably, product differentiation resulting from firms acquiring various portfolios of product attributes and stores in market evolution determines the limiting firm size distribution.Firm Size Distribution; Product Differentiation; Carbonated Soft Drinks

ESTIMATING PRODUCTIVITY DYNAMICS DURING INSTITUTIONAL CHANGE: AN APPLICATION TO CHINESE STATE OWNED ENTERPRISES 1980-1994

We estimate the productivity dynamics of 680 industrial Chinese State-Owned Enterprises (SOEs) between 1980 and 1994. During this time managerial autonomy over factor markets was introduced. The timing of autonomy varied across SOEs and take-up was an endogenous process: high-productivity SOEs where more likely to take managerial control. We allow for this by adapting an algorithm developed in Olley & Pakes (1996) in order to generate estimates of productivity dynamics that deal with both simultaneity and endogenous selection biases. Apart from offering a methodology to estimate productivity dynamics during endogenous institutional change, we demonstrate that SOEs in China obtained productivity gains from managerial autonomy over factor markets in the years before privatisation.

Mr Whitaker and Industry: Setting the Record Straight–A Reply to Barry and Daly

The turnaround in economic policy from the late 1950s was remarkable. Protectionism was abandoned and exporting incentivised. As Barry and Daly (2011) admit, Conventional wisdom accords the bulk of the credit for the turnaround in policy to Seán Lemass, Minister for Industry and Commerce in most Fianna Fáil governments since 1932 and Taoiseach from 1959 to 1966, and T. K. Whitaker, Secretary of the Department of Finance from 1956 to 1969. Their main agenda is to set the record straight about the role of Mr. Whitaker in this historical turnaround in economic policy in Ireland. Their bottom line: Conventional wisdom is wrong. They attempt to illustrate this through a critique of our Walsh and Whelan (2010) paper. In our response to their paper we wish to address three issues. First, outline the real essence of our paper; secondly defend our analytical frameworks; and finally, place their new thesis on the role of Whitaker in economic policy during the “long 1950s” in the context of our paper and mainstream beliefs.