This paper examines two competing explanations for workers' absenteeism, the shirking hypothesis and the adjustment-to-equilibrium hypothesis. Data on German workers for 1985-88 from the German SocioEconomic Panel are used in order to estimate the determinants of workers' absenteeism. The results indicate that firm size matters after wage effects are controlled for. This evidence supports the shirking hypothesis.
This paper is concerned with the problems of posterior simulation and model choice for Poisson panel data models with multiple random effects. Efficient algorithms based on Markov chain Monte Carlo methods for sampling the posterior distribution are developed. A new parameterization of the random effects and fixed effects is proposed and compared with a parameterization in common use, and computation of marginal likelihoods and Bayes factors via Chib’s (1995) method is also considered. The methods are illustrated with two real data applications involving large samples and multiple random effects.
Michael Porter and others have recently argued that suitable environmental regulations are likely to induce cost-reducing innovations. We analyze under which conditions such arguments might be consistent with microeconomic analysis, and under which additional conditions the firms' benefits might exceed the costs. It turns out that this requires fairly specific conditions.
Recently, the 'new economic geography' literature has developed as a theory of the emergence of large agglomerations which relies on increasing returns to scale and transportation costs. This literature builds on diverse intellectual traditions. It combines the insights of traditional regional science with those of modern trade theory and thus attempts to provide an integrative approach to interregional and international trade. The paper surveys this literature and discusses its relation to earlier approaches to similar topics.
This paper studies how minimum wage policies affect firm employment in China using a unique county level minimum wage data set matched to disaggregated firm survey data. We investigate both the effect of imposing a minimum wage, and the effect of the policies that tightened enforcement in 2004. We find that the average effect of minimum wage changes is modest and positive, and that there is a detectable effect after enforcement reform. Firms have heterogeneous responses to minimum wage changes which can be accounted for by differences in their wage levels and profit margins: firms with high wages or large profit margin increase employment, while those with low wages or small profit margin downsize. The increase in enforcement of China’s minimum wage in 2004 has since amplified this heterogeneity, which implies that labor regulation may reduce the monopsony rent of firms. Our results provide evidence for the theoretical predictions of the positive minimum wageemployment relationship in a monopolistic labor market.
We draw on a new data set on the use of Swiss francs and other currencies by European banks to assess the patterns of foreign currency bank lending. We show that the patterns differ sharply across foreign currencies. The Swiss franc is used predominantly for lending to residents, especially households. It is sensitive to the interest rate differential, exchange rate developments, funding availability, and to some extent international trade. Domestic lending in other currencies is used, to a greater extent, in cross-border lending, and for lending to resident nonfinancial firms, and is much less sensitive to the drivers identified for Swiss franc lending. Policy measures aimed at foreign currency lending have a clear impact on lending to residents. The results underline that not all foreign currencies are alike when it comes to foreign currency bank lending and the associated financial stability risks.
We document that observed international input-output linkages contribute substantially to synchronizing producer price inflation (PPI) across countries. Using a multi-country, industry-level dataset that combines information on PPI and exchange rates with international and domestic input-output linkages, we recover the underlying cost shocks that are propagated internationally via the global input-output network, thus generating the observed dynamics of PPI. We then compare the extent to which common global factors account for the variation in actual PPI and in the underlying cost shocks. Our main finding is that across a range of econometric tests, input-output linkages account for half of the global component of PPI inflation. We report three additional findings: (i) the results are similar when allowing for imperfect cost pass-through and demand complementarities; (ii) PPI synchronization across countries is driven primarily by common sectoral shocks and input-output linkages amplify co-movement primarily by propagating sectoral shocks; and (iii) the observed pattern of international input use preserves fat-tailed idiosyncratic shocks and thus leads to a fat-tailed distribution of inflation rates, i.e., periods of disinflation and high inflation.
In this paper, we empirically analyze the transmission of realized interest rate risk - the gain or loss in a bank's economic capital caused by movements in interest rates - to bank lending. We exploit a unique panel data set that contains supervisory information on the repricing maturity profiles of Swiss banks and provides us with an individual measure of interest rate risk exposure net of hedging. Our analysis yields two main results. First, the impact of an interest rate shock on bank lending significantly depends on the individual exposure to interest rate risk. The higher a bank's exposure to interest rate risk, the higher the impact of an interest rate shock on its lending. Our estimates indicate that a year after a permanent 1 percentage point upward shock in nominal interest rates, the average bank in 2013Q3 would, ceteris paribus, reduce its cumulative loan growth by approximately 300 basis points. An estimated 12.5% of the impact would result from realized interest rate risk weakening the bank's economic capital. Second, bank lending appears to be mainly driven by capital rather than liquidity, suggesting that a higher capitalized banking system can better shield its creditors from shocks in interest rates.
