Extending contingency: the impact of strategy, technology, size and business environment on the organisational form of small Chinese firms

This paper is inspired by articles in the last decade or so that have argued for more attention to theory, and to empirical analysis, within the well-known, and long-lasting, contingency framework for explaining the organisational form of the firm. Its contribution is to extend contingency analysis in three ways: (a) by empirically testing it, using explicit econometric modelling (rather than case study evidence) involving estimation by ordered probit analysis; (b) by extending its scope from large firms to SMEs; (c) by extending its applications from Western economic contexts, to an emerging economy context, using field work evidence from China. It calibrates organizational form in a new way, as an ordinal dependent variable, and also utilises new measures of familiar contingency factors from the literature (i.e. Environment, Strategy, Size and Technology) as the independent variables. An ordered probit model of contingency was constructed, and estimated by maximum likelihood, using a cross section of 83 private Chinese firms. The probit was found to be a good fit to the data, and displayed significant coefficients with plausible interpretations for key variables under all the four categories of contingency analysis, namely Environment, Strategy, Size and Technology. Thus we have generalised the contingency model, in terms of specification, interpretation and applications area.

Asset Prices, Business Cycles, and Markov-Perfect Fiscal Policy when Agents are Risk-Sensitive

We study a business cycle model in which a benevolent fiscal authority must determine the optimal provision of government services, while lacking credibility, lump-sum taxes, and the ability to bond finance deficits. Households and the fiscal authority have risk sensitive preferences. We find that outcomes are affected importantly by the household's risk sensitivity, but not by the fiscal authority's. Further, while household risk-sensitivity induces a strong precautionary saving motive, which raises capital and lowers the return on assets, its effects on fluctuations and the business cycle are generally small, although more pronounced for negative shocks. Holding the stochastic steady state constant, increases in household risk-sensitivity lower the risk-free rate and raise the return on equity, increasing the equity premium. Finally, although risk-sensitivity has little effect on the provision of government services, it does cause the fiscal authority to lower the income tax rate. An additional contribution of this paper is to present a method for computing Markov-perfect equilibria in models where private agents and the government are risk-sensitive decisionmakers.

The Optimal Distribution of the Tax Burden over the Business Cycle

This paper analyses optimal income taxes over the business cycle under a balanced-budget restriction, for low, middle and high income households. A model incorporating capital-skill complementarity in production and differential access to capital and labour markets is developed to capture the cyclical characteristics of the US economy, as well as the empirical observations on wage (skill premium) and wealth inequality. We .nd that the tax rate for high income agents is optimally the least volatile and the tax rate for low income agents the least countercyclical. In contrast, the path of optimal taxes for the middle income group is found to be very volatile and counter-cyclical. We further find that the optimal response to output-enhancing capital equipment technology and spending cuts is to increase the progressivity of income taxes. Finally, in response to positive TFP shocks, taxation becomes more progressive after about two years.

Cyclical and Welfare Effects of Public Sector Unions in a Real-Business-Cycle Model

Motivated by the highly-unionized public sectors, the high public shares in total employment, and the public sector wage premia observed in Europe, this paper examines the importance of public sector unions for macroeconomic theory. The model generates cyclical behavior in hours and wages that is consistent with data behavior in an economy with highly-unionized public sector, namely Germany during the period 1970-2007. The union model is a signifi cant improvement over a model with exogenous public employment. In addition, endogenously-determined public wage and hours add to the distortionary e ffect of contractionary tax reforms by generating greater tax rate changes, thus producing signi ficantly higher welfare losses.

On the cost of rent-seeking by government bureaucrats in a Real-Business-Cycle framework

This paper studies the wasteful e ffect of bureaucracy on the economy by addressing the link between rent-seeking behavior of government bureaucrats and the public sector wage bill, which is taken to represent the rent component. In particular, public o fficials are modeled as individuals competing for a larger share of those public funds. The rent-seeking extraction technology in the government administration is modeled as in Murphy et al. (1991) and incorporated in an otherwise standard Real-Business-Cycle (RBC) framework with public sector. The model is calibrated to German data for the period 1970-2007. The main fi ndings are: (i) Due to the existence of a signi ficant public sector wage premium and the high public sector employment, a substantial amount of working time is spent rent-seeking, which in turn leads to signifi cant losses in terms of output; (ii) The measures for the rent-seeking cost obtained from the model for the major EU countries are highly-correlated to indices of bureaucratic ineffi ciency; (iii) Under the optimal scal policy regime,steady-state rent-seeking is smaller relative to the exogenous policy case, as the government chooses a higher public wage premium, but sets a much lower public employment, thus achieving a decrease in rent-seeking.

News Shocks and Business Cycles: Bridging the Gap from Different Methodologies

An important disconnect in the news driven view of the business cycle formalized by Beaudry and Portier (2004), is the lack of agreement between different—VAR and DSGE—methodologies over the empirical plausibility of this view. We argue that this disconnect can be largely resolved once we augment a standard DSGE model with a financial channel that provides amplification to news shocks. Both methodologies suggest news shocks to the future growth prospects of the economy to be significant drivers of U.S. business cycles in the post-Greenspan era (1990-2011), explaining as much as 50% of the forecast error variance in hours worked in cyclical frequencies

Tax smoothing in a business cycle model with capital-skill complementarity

This paper undertakes a normative investigation of the quantitative properties of optimal tax smoothing in a business cycle model with state contingent debt, capital-skill complementarity, endogenous skill formation and stochastic shocks to public consumption as well as total factor and capital equipment productivity. Our main finding is that an empirically relevant restriction which does not allow the relative supply of skilled labour to adjust in response to aggregate shocks, signi cantly changes the cyclical properties of optimal labour taxes. Under a restricted relative skill supply, the government fi nds it optimal to adjust labour income tax rates so that the average net returns to skilled and unskilled labour hours exhibit the same dynamic behaviour as under fl exible skill supply.

Characterisation of heteromers and oligomers in the TNF family of ligands and receptors

TNF family ligands and receptors fulfill a number of functions, mainly in the immune system. For example, the ligands BAFF and APRIL control growth and survival of mature Β cells at various stages of differentiation. TNF family ligands usually form homotrimers, but heteromers have also been described for lymphotoxin α1β2 and for BAFF and APRIL. Interestingly, twenty BAFF homotrimers can assemble into virus-like particles coined BAFF 60-mer, which are superior to BAFF 3-mer regarding their ability to signal in primary Β cells. A screen was performed in 293T cells, by co-transfecting differently tagged ligands, to identify six novel heteromers. The specificity of these novel heteromers, however, did not correspond to that of orphan receptors in the TNFR family. Little is known about heteromers of BAFF and APRIL, in particular their receptor-binding specificity and their ability to signal. A method to produce and purify heteromers of defined stoechiometry was developed, and the resulting reagents were used to demonstrate that BAFF2APRIL, like BAFF, binds to all BAFF receptors - namely BAFFR, TACI and Β CM A -, while APRIL2BAFF and APRIL only binds to TACI and BCMA. Heteromers could signal via their cognate receptors, sometimes as potently and sometimes less potently than homomers, depending on the receptors. A promising system to measure the activity of single-chain homo- and heteromers in vivo was set up: it measures mature Β cell rescue upon administration of single-chain ligands into BAFF-ko mice. To tackle the question of the physiological importance of BAFF 60-mer, a point mutation that prevents assembly of mouse BAFF into 60-mer while retaining its ability to form trimers was identified. This mutation (E247K) was introduced by homologous recombination into mouse embryonic stem cells that are now being used to generate knock-in mice. Results obtained in this work will help to better understand the role of various BAFF and APRIL forms that are elevated in a several autoimmune diseases. - Les ligands et récepteurs de la famille du TNF joue un rôle prédominant dans le système immunitaire. Par exemple, les ligands BAFF et APRIL contrôlent la croissance et la survie des cellules Β matures à différents stades de différenciation. Ces ligands existent souvent sous forme d'homotrimères (3-mer), bien que des héteromères aient été décrits pour la lymphotoxine α1β2 et pour BAFF et APRIL. Dans le cas de BAFF, vingt trimères peuvent, telle une particule virale, s'assembler en 60-mer qui surpasse le 3-mer pour signaler dans des cellules Β primaires. Un crible effectué dans des cellules 293T, par co-transfection de ligands différemment marqués, a permis d'identifier six nouveaux heteromères dont la spécificité n'a, hélas, pas correspondu à celle d'un récepteur orphelin de la famille du TNFR. Les connaissances sur la spécificité de liaison aux récepteurs et la capacité à signaler des heteromères de BAFF et d'APRIL sont fragmentaires. Une méthode pour produire et purifier des heteromères "simple chaîne" de stoechiométrie déterminée a été mise au point, et les réactifs ainsi obtenus utilisés pour démontrer que BAFF2APRIL, comme BAFF, lie tous les récepteurs de BAFF - c'est-à-dire BAFFR, TACI et BCMA -, alors qu'APRIL2BAFF et APRIL ne lient que TACI et BCMA. Les héteromères peuvent transmettre des signaux, parfois aussi bien et parfois plus faiblement que les homomères, selon les récepteurs. Un système prometteur pour mesurer l'activité des ligands simple chaîne in vivo a été mis au point. Il mesure la réapparition de cellules Β matures dans des souris déficientes pour BAFF après administration des ligands. Pour s'attaquer à la question de l'importance physiologique du 60-mer de BAFF, ime mutation empêchant l'assemblage en 60-mer sans affecter la capacité à former des trimères a été identifiée. Cette mutation (E247K) a été introduite par recombinaison homologue dans des cellules souches embryonnaires de souris qui sont utilisées pour obtenir des souris déficientes en BAFF 60-mer. Les résultats de ces travaux contribueront à mieux cerner le rôle des différentes formes de BAFF et d'APRIL produites en excès dans plusieurs maladies auto-immunes.

Unemployment and Endogenous Reallocation over the Business Cycle

This paper studies unemployed workers’ decisions to change occupations, and their impact on fluctuations in aggregate unemployment and its underlying duration distribution. We develop an analytically and computationally tractable stochastic equilibrium model with heterogenous labor markets. In this model three different types of unemployment arise: search, rest and reallocation unemployment. We document new evidence on unemployed workers’ gross occupational mobility and use it to calibrate the model. We show that rest unemployment is the main driver of unemployment fluctuations over the business cycle and causes cyclical unemployment to be highly volatile. The resulting unemployment duration distribution generated by the model responds realistically to the business cycle, creating substantial longer-term unemployment in downturns. Finally, rest unemployment also makes our model simultaneously consistent with procyclical occupational mobility of the unemployed, countercyclical job separations into unemployment and a negatively-sloped Beveridge curve.

Computing Markov-Perfect Optimal Policies in Business-Cycle Models

Time-inconsistency is an essential feature of many policy problems (Kydland and Prescott, 1977). This paper presents and compares three methods for computing Markov-perfect optimal policies in stochastic nonlinear business cycle models. The methods considered include value function iteration, generalized Euler-equations, and parameterized shadow prices. In the context of a business cycle model in which a scal authority chooses government spending and income taxation optimally, while lacking the ability to commit, we show that the solutions obtained using value function iteration and generalized Euler equations are somewhat more accurate than that obtained using parameterized shadow prices. Among these three methods, we show that value function iteration can be applied easily, even to environments that include a risk-sensitive scal authority and/or inequality constraints on government spending. We show that the risk-sensitive scal authority lowers government spending and income-taxation, reducing the disincentive households face to accumulate wealth.