Reallocation Mechanisms

We consider reallocation problems in settings where the initial endowment of each agent consists of a subset of the resources. The private information of the players is their value for every possible subset of the resources. The goal is to redistribute resources among agents to maximize efficiency. Monetary transfers are allowed, but participation is voluntary. We develop incentive-compatible, individually-rational and budget balanced mechanisms for several classic settings, including bilateral trade, partnership dissolving, Arrow-Debreu markets, and combinatorial exchanges. All our mechanisms (except one) provide a constant approximation to the optimal efficiency in these settings, even in ones where the preferences of the agents are complex multi-parameter functions

Do Schumpeterian Waves of Creative Destruction Lead to Higher Productivity? Panel Data Evidence from Poland

We look at the determinants and consequences of job reallocation in the 22 2-digit sectors of the manufacturing industry in Poland over the period 1993-1997. Import competition and competitve market structure (weak concentration) are found to lead to more reallocation. Moreover, more reallocation seems to be associated with more poductive industries in some specifications. This confirms implications from neo-Schumpterian growth models: one channel through which competition might positively affect growth is through the reallocation of scarce resources from declining firms to rising ones.http://deepblue.lib.umich.edu/bitstream/2027.42/39870/3/wp485.pd

Employment Flows with Endogenous Financing Constraints

Empirical studies document that resource reallocation across production units plays an important role in accounting for aggregate productivity growth in the U.S. manufacturing. Distortions in financial market could hinder the reallocation process and hencemay adversely affect aggregate productivity growth. This paper studies the quantitative impact of costly external finance on aggregate productivity through resource reallocation across firms with idiosyncratic productivity shocks. A partial equilibrium model calibrated to the U.S. manufacturing data shows that costly external finance causes inefficient output reallocation from high productivity firms to low productivity firms and as a result leads to a 1 percent loss in aggregate TFP.Costly external Finance; Reallocation; Output weighted aggregate productivity

Understanding the Contributions of Reallocation to Productivity Growth: Lessons from a Comparative Firm-Level Analysis

We analyze comprehensive manufacturing firm data to measure the contribution of interfirm employment reallocation to aggregate productivity growth during the socialist and reform periods in six transition economies. Modifying a standard decomposition technique to better reflect the role of firm entry, we find that reallocation rates and productivity contributions are very low under socialism. After reforms, they rise dramatically, and productivity contributions greatly exceed those observed in market economies. Early in transition, faster reform is associated with larger contributions from reallocation, but later, and on average over the whole transition, this relationship is reversed. Though reallocation rates are larger in faster reforming economies, higher productivity dispersion in slower reformers creates much higher productivity gains for a given volume of reallocation. The results imply that reallocation should be viewed as necessary regular maintenance for a well-functioning economy, and particularly large productivity contributions tend to reflect previous neglect more than current virtue.productivity, reallocation, industry dynamics, creative destruction, reform, transition, Georgia, Hungary, Lithuania, Romania, Russia, Ukraine

Mitigating Environmental Externalities through Voluntary and Involuntary Water Reallocation: Nevada's Truckee-Carson River Basin

A transition from the era of building water projects and developing new supplies to an era of water reallocation is well underway in most of the West. Two decades ago, experts were debating the ability of western water institutions, originally conceived to serve the earliest non-native water diverters-irrigators and mines -- to adapt to the growing demands of cities. By acquiring water formerly used to grow crops, through voluntary market transactions, western cities have demonstrated that water law and policy prove flexible when the economic and political stakes are high enough.Initially fueled by urban growth, water reallocation is now being stimulated by a new array of forces. Throughout the West, water reallocation is beginning to reflect environmental benefits alongside the traditional uses for water in irrigation, cities, and industry. Some reallocations have involved market transfers of water arranged through voluntary negotiations; others have involved involuntary reallocations prompted by court rulings. This article argues that both types of reallocation will continue to be important in managing western water resources, but that each has quite different implications for the distribution of benefits and costs from reallocation

Reallocating Water: An Application of Sequent

We present an axiomatic approach to the reallocation of water rights among economic sectors. Reallocation may be appropriate when the current schedule of water allocation is considered unfair. Our proposed approach is based on the combination of initial water rights, sectors' claims to water, and an exogenous ordering of these sectors. We apply sharing rules, based on bankruptcy rules, to reallocate water, which complements other approaches to the reallocation of water rights, including those based on water markets. Our approach is illustrated using an application to water reallocation in Cyprus, where reallocation of water rights has been recognised as an essential step towards good water governance and one of the main challenges for current water policies.Water Reallocation, Sequential Sharing Rule, Water Scarcity, Axiomatic Approach, Cyprus

Do Schumpeterian Waves of Creative Destruction Lead to Higher Productivity? Panel Data Evidence from Poland

We look at the determinants and consequences of job reallocation in the 22 2-digit sectors of the manufacturing industry in Poland over the period 1993-1997. Import competition and competitve market structure (weak concentration) are found to lead to more reallocation. Moreover, more reallocation seems to be associated with more poductive industries in some specifications. This confirms implications from neo-Schumpterian growth models: one channel through which competition might positively affect growth is through the reallocation of scarce resources from declining firms to rising ones.Schumpeterian growth, job flows, competition, trade

Job and Worker Reallocation in German Establishments: The Role of Employers? Wage Policies and Labour Market Institutions

Using a large linked employer-employee data set, this paper studies the relationship between job reallocation, worker reallocation and the flexibility of wages in western German manufacturing. Using the plant-specific residual wage dispersion as a proxy for wage flexibility, we find that more flexible wages are associated with less job reallocation due to demand shocks being absorbed by wage rather than by quantity adjustments. As to excess worker reallocation, our results provide evidence of a significant positive relationship between excess worker flows and residual wage dispersion. Consistent with the hypothesis that more flexible wages should help employers in dissolving bad matches, this relationship is found to be most pronounced for low-quality workers. In interacting our measure of wage flexibility with the degree of plantspecific employment protection we find that less stringent firing practices may considerably reduce the need for more flexible wages in order to attain optimal worker-firm matches. --Job Reallocation,Worker Reallocation,Wage Dispersion

Job Reallocation and Productivity Growth in the Ukrainian Transition

We analyze the pace and patterns of job reallocation in Ukraine using 1992-2000 panel data on nearly the surviving universe of manufacturing firms inherited from the Soviet Union. Employment growth displays substantial increase in heterogeneity during this transition period, with a corresponding rise in excess job reallocation. Unlike data for Soviet Russia in the 1980s, Ukrainian job reallocation in the 1990s was clearly productivity-enhancing, both within and across industries. The paper also estimates the effects of firm and market characteristics on the magnitude of reallocation and on the extent to which it has contributed to aggregate productivity growth.reallocation, post-Soviet, Ukraine, Russia, Earle, Upjohn Institute, Brown