The firm size wage premium : a quantile analysis

Empirical evidence shows that larger firms pay higher wages than smaller ones. This wage premium is called the firm size wage effect. The firm size effect on wages may be attributed to many factors, as differentials on productivity, efficiency wage, to prevent union formation, or rent sharing. The present study uses quantile regression to investigate the finn size wage effect. By offering insight into who benefits from the wage premi um, quantile regression helps eliminate and refine possible explanations. Estimated results are consistent with the hypothesis that the higher wages paid by large firms can be explained by the difference in monitoring costs that large firms face. Results also suggest that more highly skilled workers are more often found at larger firms .

An economic model of gun control

Guns stolen from law-abiding households provide the principal source of guns for criminals. The lethality of crime instruments increases with the availability of guns, so the gun market is subject to externalities that generate excessive ownership and inadequate spending on protective measures to deter gun theft. One motive for gun ownership is self defense, and the gun market is subject to coordination failure: the more guns purchased lawfully, the more will be stolen by criminals, so the greater the incentive for lawful . consumers to purchase guns for self defense. As a result, there may be multiple equilibria in the gun market and more than one equilibrium crime rate. We show that a simple refundable deposit for guns will internalize the externalities in the gun market and may cause large downward jumps in gun ownership, the lethality of crime instruments, and the social costs of crime.

Market timing as a motive for IPOs: evidence from IPOs of Japanese keiretsu firms

This paper examines the relevance of market timing as a motive for initial public offerings (IPOs) by comparing IPOs of firms that are members of Japanese keiretsu industrial groups with IPOs of independent Japanese firms. We argue that Japanese keiretsu-linked IPOs form a favorable sample to find evidence of the market timing motive. Instead, the data provide strong evidence for a restructuring motive and little evidence for market timing. We find that long run returns to keiretsu and independent IPOs are not negative, contrary to U.S. evidence, and are indistinguishable from each other; initial returns to keiretsu-linked IPOs are significantly higher than to independent firms; and a significant number of keiretsu IPO firms adjust their linkages with the group following the IPO, with both increases and decreases.

Multiple large shareholders in corporate governance

Large shareholders of firms with majority bIocks are often at the heIm of their companies and do not necessarily have the same interests as minority shareholders. We show that bargaining problems Ied by the presence of muItipIe controlling shareholders protect minority shareholders. The same bargaining problems, however, prevent efficient decisions. By solving this trade-off we find that i) muItipIe controlling shareholders should be present in firms with Iarge costs of diIuting minority shareholders and in firms with Iarge financing requirements, ii) an optimal ownership structure requires the presence of a dass of shareholders - the minority shareholders - with no control over corporate decisions. Evidence on the ownership structure of dose corporations in the V.S. is consistent with our model.

Managerial turnover and leverage under a takeover threat

How do shareholders perceive managers who lever up under a takeover threat? Increasing leverage conveys good news if it reflects management's ability to enhance value. It conveys bad news, though, if inefficient managers are more pressured to lever up. This paper demonstrates that negative (positive) updating prevails when takeover costs are small (large). Managers who leve r up to end a takeover threat thus may commit to an increase in the firm's value and yet increase their chances of being replaced by their shareholders. The model predicts that intraindustry leverage is less dispersed when takeover costs are low.

Financial distress as a collapse of incentive scheme

This paper explaina why workers lack motivation near bankruptcy, why they tend to leave companies in financiai distreas, and why thoae who remam require higher compensation. Theae indirect costa of financiai diatresa adie becauae the optimal combination of debt and incentive achem.ea, deaigned to minimize agency costa, ends up underpaying managers when there ia a bankruptcy threat. The paper a1so providea new empirica1 implications on the intera.ction between financiai reatructuring and changea in managerial compensation. Theae predictions are supported by the findings of Gilson and Vetsuypens (1992).

Sources of payments practices rigidity

This paper studies the joint determination of the wage payments period between firms and employees. The aggregate timeseries analysis reaches two conclusions: a) the average payments period keep an equilibrium relationship with the previous inflation peak, this indicates some degree of irreversibility of payments practices. b) the low previous inflation peak .;:;_asticity of ave r age payments periods reveal.s a high degree of rigidity of payments practices.The framework developed in the paper incorporates the fol.l.owing sources of payments practices rigidity: a)interactions between optimal. payments period decisions and optimal. number of trips to the bank. b)the occurrence of Pare to inneficiencies in the bargaining process between firms and empl.oyees due to wage regulation. c) integer restrictions on payments frequencies produced by upper bounds on the payments period. The empirical. part of the paper assesses the rel.evance of these different sources of payments practices rigidity using Brazil.ian micro data.

Regulation and wage adjustment patterns : non parametric evidence from longitudinal data

This paper gives a first step toward a methodology to quantify the influences of regulation on short-run earnings dynamics. It also provides evidence on the patterns of wage adjustment adopted during the recent high inflationary experience in Brazil.The large variety of official wage indexation rules adopted in Brazil during the recent years combined with the availability of monthly surveys on labor markets makes the Brazilian case a good laboratory to test how regulation affects earnings dynamics. In particular, the combination of large sample sizes with the possibility of following the same worker through short periods of time allows to estimate the cross-sectional distribution of longitudinal statistics based on observed earnings (e.g., monthly and annual rates of change).The empirical strategy adopted here is to compare the distributions of longitudinal statistics extracted from actual earnings data with simulations generated from minimum adjustment requirements imposed by the Brazilian Wage Law. The analysis provides statistics on how binding were wage regulation schemes. The visual analysis of the distribution of wage adjustments proves useful to highlight stylized facts that may guide future empirical work.

Dynamics of micro-entrepeneurial activities

This paper generates and organizes stylized facts related to the dynamics of selfemployment activities in Brazil. The final purpose is to help the design of policies to assist micro-entrepreneurial units. The 'first part of the paper uses as a main tool of analysis transitional data constructed from household surveys. The longitudinal information used covers three transition horizons: 1-month, 12-month and 5-year periods. Quantitative flows analysis assesses the main origins, destinies and various types of risks assumed by microentrepreneurial activities. Complementarily, logistic regressions provides evidence on the main characteristics and resources of micro-entrepreneurial units. In particular, we use the movements from self-employment to employer activities as measures of entrepreneurial success. We also use these transitions as measures of employment creation intensity within the self-employed segment.The second part of the paper explores various data sources. First, we attempt to analyze the life-cycle trajectories and determinants of self-employment. We use cohort data constructed from PME and qualitative data on financial and work history factors related to the opening of small bussiness from the informal firms survey implemented during 1994. Second, we apply a standart Mincerian wage equation approach to self-employment profits. This exerci se attempts to capture the correlation patterns between micro-entrepreneurial performance and a variety of firms leveI variables present in the 1994 Informal Survey. Finally, we use a a survey on the poor enterpreneurs of Rocinha favela as a laboratory to study poor entrepreneurs resources and behavior.In sum, the main questions pursued in the paper are: i) who are the Brazilian selfemployed?; ii) in particular: what is relative importance among the self-employed of subsistence activities versus those activities with growth and capital accumulation potential?; iii) what are the main static and dynamic determinants ofmicro-entrepreneurial success?; iv) what is the degree ofrisk associated with micro-entrepreneurial activities in Brazil?; v) What is the life-cycle profile of self-employment?; vi) what are the main constraints on poor entrepreneurs activities?.

Mobility, targeting and private school vouchers

This paper uses general equilibrium simulations to explore the role ofresidential mobility in shaping the impact of different types of private school voucher policies. In particular, general vouchers available to all residents in the state are compared to vouchers specifically targeted to either underprivileged school districts or underprivileged households. The simulations are derived from a three-community mo deI of low, middle and high income school districts (calibrated to New York data), where each school district is composed of multiple types of neighborhoods that may vary in house quality as well as the leveI of neighborhood extemalities. Households that differ in both their income and in the ability leveI of their children choose between school districts, between neighborhoods within their school district, and between the local public school or a menu of private school altematives.Local public school quality within a district is endogenously determined bya combination of the average peer quality of public school attending children as well as local property and state income tax supported spending. Financial support (above a required state minimum) is set by local majority rule. Finally, there exists the potential for a private school market composed of competitive schools that face production technologies similar to those ofpublic schools but who set tuition and admissions policies to maximize profits. In tbis model, it is demonstrated that school district targeted vouchers are similar in their impact to non-targeted vouchers but vastIy different from vouchers targeted to low income households. Furthermore, strong migration effects are shown to significantly improve the likely equity consequences of voucher programs.

Portifolio selection with random transaction costs

Transaction costs have a random component in the bid-ask spread. Facing a high bid-ask spread, the consumer has the option to wait for better terms oI' trade, but only by carrying an undesirable portfolio balance. We present the best policy in this case. We pose the control problem and show that the value function is the uni que viscosity solution of the relevant variational inequality. Next, a numerical procedure for the problem is presented.