Macroeconomic Implications of Agglomeration

Cities exist because of the productivity gains that arise from clustering production and workers, a process called agglomeration. How important is agglomeration for aggregate growth? This paper constructs a dynamic stochastic general equilibrium model of cities and uses it to estimate the effect of local agglomeration on aggregate growth. We combine aggregate time‐series and city‐level panel data to estimate the model's parameters via generalized method of moments. The estimates imply a statistically and economically significant impact of local agglomeration on the growth rate of per capita consumption, raising it by about 10%.     

DOWNSIZING AND JOB INSECURITY

This article offers an explanation of why firms' downsizing patterns may vary substantially in magnitude and timing, taking the form of one‐time massive cuts, waves of layoffs, or zero layoff policies. The key element of this theory is that workers' expectations about their job security affect their on‐the‐job performance. In a situation where firms face adverse shocks, the productivity effect of job insecurity forces firms to balance laying off redundant workers and maintaining survivors' commitment. The cost of ensuring commitment differs between firms with different characteristics and determines whether workers are laid off all at once or in stages. However, if firms have private information about their future profits, they may not lay off any workers in order to signal a bright future, boosting worker's confidence. (JEL: J21, J23, D21, D82)     

On the Dynamics of Unemployment and Wage Distributions

Postel‐Vinay and Robin's (2002) sequential auction model is extended to allow for aggregate productivity shocks. Workers exhibit permanent differences in ability while firms are identical. Negative aggregate productivity shocks induce job destruction by driving the surplus of matches with low ability workers to negative values. Endogenous job destruction coupled with worker heterogeneity thus provides a mechanism for amplifying productivity shocks that offers an original solution to the unemployment volatility puzzle (Shimer (2005)). Moreover, positive or negative shocks may lead employers and employees to renegotiate low wages up and high wages down when agents' individual surpluses become negative. The model delivers rich business cycle dynamics of wage distributions and explains why both low wages and high wages are more procyclical than wages in the middle of the distribution.     

DISENTANGLING THE MINIMUM WAGE PUZZLE: AN ANALYSIS OF WORKER ACCESSIONS AND SEPARATIONS

Changes in the legislation in the mid‐1980s in Portugal provide remarkably good conditions for analysis of the employment effects of mandatory minimum wages, as the minimum wage increased sharply for a very specific group of workers. Relying on a matched employer‐employee panel data set, we model gross worker flows—accessions and separations—in continuing firms, as well as in new firms and those going out of business, using a count regression model applied to proportions. Employment trends for teenagers, the affected group, are contrasted to those of older workers before and after the raise in the youth minimum wage. The major effect on teenagers of a rising minimum wage has been the reduction of separations from the employer, which, during the period under analysis, has compensated for the reduction of accessions to new and continuing firms. In this sense, our results can reconcile some of the previous evidence in the empirical literature when analyzing the aggregate impact of the minimum wage on youth employment without decomposing it by type of worker flow. (JEL: D21, J23, J38)     

The Path‐Dependent Nature of R&D Search: Implications for (and from) Competition

We formalize R&D as a search process for technology improvements across different technological domains. Technology improvements from a specific domain draw upon a common knowledge base, and as such they share technological content. Moreover, different domains may rely on similar scientific principles, and therefore, knowledge about the technology improvements by one domain might be transferable to another. We analyze how such a technological relatedness shapes the direction of R&D search when knowledge generated from past search efforts disseminates to rival firms. We show that firms optimally diversify their search efforts, even toward domains that are riskier and less promising on expectation. This is amplified for higher competition intensity, i.e., higher cross‐product substitutability. Our work also suggests that different sources of learning about the domains may have opposite effects on the direction of search. Higher ability to infer the potential of an explored domain prompts the clustering of searches, whereas the ability to learn across domains prompts diversification. Finally, we discuss the technological landscape properties that prompt firms to engage in a sequential R&D search, instead of a parallel competitive search.     

UNDERSTANDING THE EVOLUTION OF THE US WAGE DISTRIBUTION: A THEORETICAL ANALYSIS

In this paper, we propose an analytically tractable overlapping‐generations model of human capital accumulation and study its implications for the evolution of the US wage distribution from 1970 to 2000. The key feature of the model, and the only source of heterogeneity, is that individuals differ in their ability to accumulate human capital. Therefore, wage inequality results only from differences in human capital accumulation. We examine the response of this model to skill‐biased technical change (SBTC) theoretically. We show that in response to SBTC, the model generates behavior consistent with some prominent trends observed in the US data including (i) a rise in overall wage inequality both in the short run and long run, (ii) an initial fall in the education premium followed by a strong recovery, leading to a higher premium in the long run, (iii) the fact that most of this fall and rise takes place among younger workers, (iv) a rise in within‐group inequality, (v) stagnation in median wage growth (and a slowdown in aggregate labor productivity), and (vi) a rise in consumption inequality that is much smaller than the rise in wage inequality. These results suggest that the heterogeneity in the ability to accumulate human capital is an important feature for understanding the effects of SBTC and interpreting the transformation of the US labor markets since the 1970s.     

Temporary Work,Underemployment and Workplace Accommodations: Relationship to Well‐being for Workers with Disabilities

This study examines whether employment status and workplace accommodations are associated with perceived well‐being among workers with disabilities. Data from the 2006 Participation and Activity Limitation Survey conducted by Statistics Canada were used to test the relationship between employment status, receipt of workplace accommodations and well‐being. Findings indicated that fully utilized permanent employees showed greater life satisfaction and less perceived disability‐related discrimination than either temporary workers or permanent workers who were underemployed. These findings support the theory that inadequate employment is associated with deleterious effects on employee well‐being due to inferior need fulfilment and reduced social status. Workplace accommodations were associated with higher levels of well‐being for all workers with disabilities and helped to mitigate the negative effects of temporary status and underemployment. These findings supported the theoretical extension of main effect and buffering models of workplace stress to the prediction of perceived workplace discrimination.     

Educational Inequality

Abstract. This paper develops a theoretical model of the inequality in wages and salaries associated with differences in years of schooling (educational inequality, for short). Our model assumes that in the long run individual decisions to become more educated equalize the lifetime earnings of more educated workers and comparable less educated workers. Given this assumption, our model implies that innovations that increase the relative demand for more educated labor, and which cause short‐run increases in educational inequality, in the long run induce offsetting increases in the relative supply of more educated labor. But our model also has the novel implication that innovations that increase differences between the wages and salaries received by workers with the same years of education who are more or less able (ability premiums, for short) cause a smaller fraction of workers to choose to become more educated. Consequently, innovations that increase ability premiums in the long run also cause educational inequality to be larger than otherwise. In applying our theory to recent changes in educational inequality in the USA, we suggest that, to the extent that innovations that increase ability premiums are contributing to educational inequality, the increases in educational inequality during the 1980s and 1990s are unlikely to be reversed soon.     

Only Time Can Tell: Whether and When the Improvement in Career Development Opportunities Alleviates Knowledge Workers’ Emotional Exhaustion in the Chinese Context

Through extending the resource perspective, drawing on the temporal comparison theory, this study examines career development opportunities (CDOs), focusing on knowledge workers and considering the relative changes in CDOs before and after their job change in the Chinese context. Findings from a survey of 379 Chinese knowledge workers who have transferred their jobs at least once reveal that the improvement of CDOs can have a double‐edged‐sword effect on knowledge workers’ well‐being, shown as emotional exhaustion in this study. Although the improvement of CDOs negatively predicts knowledge workers’ emotional exhaustion in general, findings of a three‐way interaction reveal that offering more high‐quality CDOs can aggravate emotional exhaustion when knowledge workers have been working in their present position for a relatively long period, but have not received a pay rise. This study makes a theoretical contribution by introducing boundary conditions and testing their interactive influence. It helps broaden understanding of how CDOs can affect knowledge workers’ emotional exhaustion. It also has implications for enhancing the well‐being of knowledge workers, particularly in national and organizational contexts where there are significant skill shortages and retention problems.     

Education,Mobility and Employers’ Monopsony Power: A Search‐theoretic Analysis

Abstract. We analyse the efficiency of schooling choices in a wage‐posting search equilibrium model with on‐the‐job search. The workers have multidimensional skills and the search market is segmented by technology. Education determines the scope — or adaptability— of individual skills. Individuals obtain schooling to leave unemployment more quickly and to climb the wage ladder rapidly through job‐to‐job mobility — that is, to speed up job shopping. Education reduces firms’ monopsony power in the wage determination by improving workers’ mobility. As a result, the wage distribution shifts rightward with aggregate schooling. However, the ratio of vacant jobs to job seekers also falls in each sector. Either one or the other externality may dominate, implying, respectively, under‐ or over‐education. A combination of minimum wage and schooling fee can decentralize the efficient allocation.     

Knowledge Management Using Information Technology: Determinants of Short‐Term Impact on Firm Value*

The importance of knowledge management (KM) processes for organizational performance is now well recognized. Seeking to better understand the short‐term impact of KM on firm value, this article focuses on public announcements of information technology (IT)‐based KM efforts, and uses cumulative abnormal return (CAR) associated with an announcement as the dependent variable. This article employs a contingency approach, arguing that the KM announcement would have a positive short‐term impact on firm value in some conditions but not in others. Thus, it pursues the following research question: What are the effects of contextual factors on the CAR associated with the announcement of an IT‐based KM effort? Specific hypotheses are proposed based on information‐processing theory, organizational learning theory, the knowledge‐based theory of the firm, and the theory of knowledge creation. These hypotheses link CARs to alignment between industry innovativeness and the KM process, alignment between firm efficiency and the KM process, firm‐specific instability, and firm diversification. The empirical study utilizes secondary data on 89 KM announcements from 1995 to 2002. The results largely support the hypotheses. Overall, this article provides empirical support for the theory‐based arguments, and helps develop a contingency framework of the effectiveness of KM efforts.     

How Does Performance Management Affect Workers? Beyond Human Resource Management and Its Critique

While performance management (PM) is pervasive across contemporary workplaces, extant research into how performance management affects workers is often indirect or scattered across disciplinary silos. This paper reviews and synthesizes this research, identifies key gaps and explores ‘recognition theory’ as a nascent framework that can further develop this important body of knowledge. The paper develops in three main stages. The first stage reviews ‘mainstream’ human resource management (HRM) research. While this research analyses workers’ reactions to performance management in some depth, its focus on serving organizational goals marginalizes extra‐organizational impacts. The second stage reviews more critical HRM research, which interprets performance management as a disciplinary, coercive or inequitable management device. While this literature adds an important focus on organizational power, there is scope to analyse further how PM affects workers’ well‐being. To develop this strand of PM research, the third stage turns to the emerging field of recognition theory independently developed by Axel Honneth and Christophe Dejours. The authors focus especially on recognition theory's exploration of how (in)adequate acknowledgement of workers’ contributions can significantly affect their well‐being at the level of self‐conception. Although recognition theory is inherently critical, the paper argues that it can advance both mainstream and critical performance management research, and also inform broader inquiry into recognition and identity at work.     

The Granular Origins of Aggregate Fluctuations

This paper proposes that idiosyncratic firm‐level shocks can explain an important part of aggregate movements and provide a microfoundation for aggregate shocks. Existing research has focused on using aggregate shocks to explain business cycles, arguing that individual firm shocks average out in the aggregate. I show that this argument breaks down if the distribution of firm sizes is fat‐tailed, as documented empirically. The idiosyncratic movements of the largest 100 firms in the United States appear to explain about one‐third of variations in output growth. This “granular” hypothesis suggests new directions for macroeconomic research, in particular that macroeconomic questions can be clarified by looking at the behavior of large firms. This paper's ideas and analytical results may also be useful for thinking about the fluctuations of other economic aggregates, such as exports or the trade balance.     

Mobile Technology and Boundary Permeability

An extensive review of the literature reveals a lack of insight into why some employees and their families benefit from the adoption of mobile technology while others do not. The paper summarizes the authors' efforts to answer this question. The authors undertook a longitudinal case study of the adoption and use of a BlackBerry Smartphone by 25 professional knowledge workers. Four theoretical lenses were used to help with the data analysis process: boundary theory, the social constructivist view of technology, sensemaking and attribution theory. Analysis of the Time 2 data identified three groups. Segmentors (n = 4) did not use their smartphones outside work hours. Integrators (n = 8), used their smartphones to connect to both work and family anywhere, but not any time (temporally separated work and family roles). Struggling segmentors (n = 13) felt pressured by their organization to use their device 24/7 and did so. The analysis indicates that the relationship between the use of mobile technology and successful boundary management depends on the development of a strategy to manage the device prior to adoption, the ability to change one's strategy to respond to concerns at home, and self‐control.     

JOB MARKET SIGNALING OF RELATIVE POSITION,OR BECKER MARRIED TO SPENCE

This paper considers a matching model of the labor market where workers, who have private information on their quality, signal to firms that also differ in quality. Signals allow assortative matching in which the highest‐quality workers send the highest signals and are hired by the best firms. Matching is considered both when wages are rigid (nontransferable utility) and when they are fully flexible (transferable utility). In both cases, equilibrium strategies and payoffs depend on the distributions of worker and firm types. This is in contrast to separating equilibria of the standard model, which do not respond to changes in supply or demand. With sticky wages, despite incomplete information, equilibrium investment in education by low‐ability workers can be inefficiently low, and this distortion can become worse in a more competitive environment. In contrast, with flexible wages, greater competition improves efficiency.     

HERD BEHAVIOR IN FINANCIAL MARKETS: AN EXPERIMENT WITH FINANCIAL MARKET PROFESSIONALS

We study herd behavior in a laboratory financial market with financial market professionals. An important novelty of the experimental design is the use of a strategy‐like method. This allows us to detect herd behavior directly by observing subjects' decisions for all realizations of their private signal. In the paper, we compare two treatments: one in which the price adjusts to the order flow in such a way that herding should never occur, and one inwhich the presence of event uncertainty makes herding possible. In the first treatment, subjects seldom herd, in accordance with both the theory and previous experimental evidence on student subjects. A proportion of subjects, however, engage in contrarianism, something not accounted for by the theory. In the second treatment, the proportion of herding decisions increases, but not as much as the theory would suggest. Moreover, contrarianism disappears altogether. In both treatments, in contrast with what theory predicts, subjects sometimes prefer to abstain from trading, which affects the process of price discovery negatively. (JEL: C92, D82, G14)     

DO PARTIES MATTER FOR ECONOMIC OUTCOMES? A REGRESSION‐DISCONTINUITY APPROACH

A long‐standing issue in political economics is to what extent party control makes a difference in determining fiscal and economics policies. This question is very difficult to answer empirically because parties are not randomly selected to govern political entities. This article uses a regression‐discontinuity design, namely, party control changes discontinuously at 50% of the vote share, which can produce “near” experimental causal estimates of the effect of party control on economic outcomes. The method is applied to a large panel data set from Swedish local governments with a number of attractive features. The results show that there is an economically significant party effect: Left‐wing governments spend and tax 2–3% more than right‐wing governments. Left‐wing governments also have 7%lower unemployment rates, which is partly due to that left‐wing governments employ 4% more workers than right‐wing governments. (JEL: C21, D72, D78, H71, H72)     

Managing Knowledge Creation in High‐Tech R&D Projects: A Multimethod Study

R&D projects in high‐tech organizations bring together diverse knowledge domains to quickly develop new products and processes. The fast‐paced context of high‐tech organizations makes it challenging to create new knowledge and solve complex problems. Managing these R&D projects requires understanding both the mechanisms and the type of knowledge created to achieve project objectives. This research conducts a two‐phased multimethod study to understand knowledge creation in high‐tech R&D projects. The first phase uses qualitative data to develop a theory on knowledge creation in R&D projects. The second phase involves a survey that collects data from R&D projects to test the theory. Results from the case study find that R&D projects benefit from two types of knowledge – objective and intuitive. The case analyses show that intuitive and objective knowledge creation in high‐tech organizations occurs by creating not only diverse but also psychological safe project teams. The large‐scale survey finds that team diversity positively influences objective knowledge creation while psychological safety affects intuitive knowledge creation. Surprisingly, the results show that team diversity negatively affects intuitive knowledge creation. A post hoc analysis takes a more granular look at diversity and shows that different kinds of diversity have different effects on knowledge creation. This helps to better explain how to manage innovation across boundaries. Finally, the analysis shows that both objective and intuitive knowledge influence R&D project performance. Taken together, these results help explain how to manage innovation across functional boundaries to create knowledge and enhance R&D project performance.      

Voice,Affective Commitment and Citizenship Behavior in Teams: The Moderating Role of Neuroticism and Intrinsic Motivation

This paper provides an empirical examination of the effects of co‐workers’ procedural justice, defined as the individual's perception of how procedural justice is displayed towards him/her by the group. Drawing on the social exchange literature, it is confirmed that team affective commitment mediates the relationship between team voice – a form of co‐workers’ procedural justice – and team citizenship behaviors. The study also tests whether this positive indirect effect is moderated by neuroticism and intrinsic motivation. The results from a survey of 154 dyads consisting of employees and their current supervisor generally support the hypotheses. Team voice is a strong and consistent predictor of team citizenship behaviors, and the effect is mediated by team affective commitment only when intrinsic motivation is low and/or neuroticism is low. This study extends knowledge of the different sources of justice. Specifically, it shows that team voice and the boundary conditions of its effects are crucial to understanding attitudes and behaviors directed towards the team. This finding highlights the necessity of carefully taking into account the ability to express one's opinion inside teams.     

Complementary Drivers of New Product Development Performance: Cross‐Functional Coordination,Information System Capability,and Intelligence Quality

Coordination efforts that access and align relevant cross‐functional expertise are regarded as an essential element of innovation success. In recent years, these efforts have been further augmented through complementary investments in information systems, which provide the technological platforms for information sharing and coordination across functional and organizational boundaries. Somewhat overlooked has been the critical mediating role of the intelligence gained through these efforts and capabilities. This study draws on the theory of complementarity to elaborate on the nature of this mediating concept. Theoretical predictions of the model are tested using instrument variable regression analysis of data collected from a sample of publicly traded US manufacturing firms. The findings suggest that the effects of both internal and external coordination on market intelligence and supply‐chain intelligence are moderated by the firm's information system capability. The effect of both types of intelligence quality on new product development performance was contingent with the effects being enhanced (attenuated) when the market conditions were dynamic (stable). The results are robust to common‐method bias, endogeneity concerns, and alternative estimation methods.