THE IMPACT OF UNIONIZATION ON MOTOR CARRIER COSTS

Union trucking firms have significantly different cost structures than non-union firms. Further, average costs for union firms are higher than for non-union firms even after controlling for higher unionized labor costs. The translog cost function approach used here incorporates a unique dummy variable technique to test not only for overall differences in union/non-union costs, but also to identify which individual cost function parameters differ between the two types of firms. Results suggest that unionized trucking firms are at a competitive disadvantage in the less regulated, post-1980 trucking industry.     

CORPORATE CHARTERING: AN EXPLORATION IN THE ECONOMICS OF LEGAL CHANGE

During the nineteenth and early twentieth centuries, the market for corporate charters was deregulated as states replaced special chartering with incorporation under general laws. This paper explores the pattern of deregulation across states within the context of the interest-group theory of government. The empirical results show that legal change tended to occur first in states where the stake in deregulation was greatest, and where the costs of lobbying for "liberal" corporation codes were low. Innovations in law can thus be explained by the same benefit-cost calculus that describes economic innovation.     

Product selection and costs in a partially unionized industry

This paper examines differences in costs among union and nonunion firms operating in the multiple and competitive lumber markets; develops a model of output and product selection decisions; and then estimates the cost function implied by the model for a sample of sawmills that produce green and dry lumber. Overall, the average variable costs for the green technology are about 67 percent higher for union mills and, for the dry technology, costs are about 30 percent higher. However, differences inminimum average variable costs are negligible in the dry market but are significant in the green market. The results suggest that some union mills may be able to coexist with nonunion mills in a competitive industry by specializing in market niches determined by comparative cost advantages. The authors gratefully acknowledge comments from James Bennett, Jo Anna Gray, Chris Ellis, Stephen Haynes, Joe Kerkvliet, and an anonymous referee.     

ESTIMATING THE LIQUIDITY OF M2 COMPONENTS IN THE POST-DIDMCA ERA

This paper estimates the liquidity of M2 components within an intertemporal model of a representative household. A modification of Pfann and Verspagen's asymmetric adjustment cost function measures liquidity cost. Generalized Method of Moments estimation of structural parameters using monthly data for December 1983–March 1993 reveals significant evidence of asymmetry toward decreasing asset holdings for all components except demand deposits. Estimated withdrawal costs for savings deposits, money market mutual funds, and small time deposits are small. Split sample estimations suggest greater liquidity in the more recent period. The results point to the effects of financial innovation in lowering withdrawal costs. (JEL E51, D91)     

HETEROGENEOUS FIRMS AND THE ORGANIZATION OF PRODUCTION

Firms in the same industry exhibit systematic differences in the organization of production and the structure of employment. Entrepreneurial ability is the specific scarce input that limits the size of a firm. This input must be allocated to two activities, coordinating production and monitoring workers. Able entrepreneurs can convert calendar time into larger supplies of coordinating effort that enable them to assemble large firms. Greater ability implies a higher shadow price of time which increases the implicit costs of monitoring. A dispersion of entrepreneurial abilities generates an equilibrium size distribution of firms. Differences in monitoring costs affect the choice of worker productivities, the design of products, and the organization of production. The monitoring cost hypothesis advanced in this paper goes a long way in explaining the equilibrium of an industry containing heterogeneous firms that differ in size and behavior.     

PAY, TECHNOLOGY, AND THE COST OF WORKER ABSENCE

Conventional studies of absenteeism concentrate on labor supply. An equilibrium approach, however, establishes that the shadow cost of absenteeism varies across firms that operate different technologies. Using an unusual employee/employer matched data set from France, which records both individual worker absenteeism and information about technology, we show that firms operating just-in-time technology have higher shadow costs of absence than firms that do not. The estimates are used to calculate the economy-wide cost of absence, which turns out to be very low. ( JEL J22, J31, J41)     

ON THE INFREQUENT ADJUSTMENT OF PRICE BY FIRMS

Many firms change price no more than twice a year. This phenomenon is readily explained by very small price adjustment costs, and the fact that the firm's rate of profit is often insensitive to deviations in the interval between price changes from its optimal level. As a result, firms which change price only once or twice a year may earn almost as much profit as firms that adjust price optimally. This refutes the standard objection that price adjustment costs are too small to matter. The argument does not require extreme assumptions about the flatness of the firm's profit function.     

THE IMPACT OF TRADE COSTS ON FIRM ENTRY,EXPORTING, AND SURVIVAL IN KOREA

This study examines how changes in trade costs have affected entry, exit, productivity, and exporting in the Korean manufacturing sector. We verify several predictions of heterogeneous‐firm models of international trade. For example, falling import‐trade costs are associated with less entry and lower market shares among existing domestic firms, and higher total factor productivity for Korean manufacturing as a whole. The size of firms plays an important role in many of our results. New domestic firms are more likely to be small, but large firms are less likely to exit and more likely to have an increase in total factor productivity. (JEL F10, D24)     

THE EFFECT OF PROVIDER CONTROL OF BLUE SHIELD PLANS ON HEALTH CARE MARKETS

Blue Shield plans often are granted regulatory advantages by the states in which they operate. Run efficiently, such not-for-profit firms should use these lower costs to eliminate their less advantaged rivals, the commercial insurers. However, these higher-cost commercial providers have been able to offer insurance coverage at prices competitive with the Blues, as evidenced by the fact that Blue plans have, on average, less than 50 percent market share. Similar prices with lower overall costs implies that economic rents are being earned, rents which a not-for-profit firm cannot distribute to owners. In this paper we argue that when there are competing goals among the groups controlling the Blue Shield plans, the different possible "uses" of the regulatory advantage become endogenously determined, necessitating the use of simultaneous equation estimation. Testing this model we find the major effect of doctor-control of Blue Shield plans is to raise doctors' fees while lowering the amount of rents captured by both consumers and administrators.     

WHY DO FIRMS CONTRIVE SHORTAGES? THE ECONOMICS OF INTENTIONAL MISPRICING

Given buyers' product-specific information capital, firms may increase long-run profits by "under-pricing" (rationing) rather than clearing markets when demands or costs rise transitorily. To minimize resulting shortages' costs, sellers predictably would distinguish among customer groups, managing any queues of disappointed loyal buyers that materialized (but largely ignoring transitory buyer queues), and would discourage resale. Unlike other shortage models, short-run excess demand necessarily implies neither buyers who prefer consuming in groups, nor waiting costs that are negligible. Any sense of "unfair" price increases would arise endogenously from sellers'failures to value appropriately customers' otherwise prudent informational investments.     

THE NEAR OPTIMALITY OF MARK-UP PRICING

Mark-up pricing policies result in a loss of profits compared to marginal pricing behavior. These losses, however, are often very small, even for large changes in the money supply. But by adopting a simple pricing rule the firm does not have to forecast the future, and avoids the informational and computational costs required to determine the profit maximizing price each period. Thus, even if these costs are small, mark-up pricing policies may be optimal, or approximately so, at least for some firms. In a macro model this is likely to imply large monetary non-neutralities.     

Firm outsourcing decisions: evidence from U.S. foreign trade zones

This article examines the operations of firms located in U.S. foreign trade subzones to study the responsiveness of outsourcing to international cost changes. I find that firms reduce their reliance on foreign inputs when dollar depreciation increases the relative price of imported inputs. The effect is pervasive across industries and is economically significant. In addition, firms that rely more heavily on imported intermediate inputs reduce their overall shipments when dollar depreciation elevates their imported, input costs. However, the magnitude of the shipments effect is economically small, suggesting that firms respond to exchange rate movements by adjusting their operations on other dimensions.     

CHANGE-POINT ANALYSIS OF THE GROWTH EFFECTS OF STATE BANKING DEREGULATION

This article uses recent developments in change-point analysis to demonstrate that stronger income growth rates previously associated with state bank branch deregulation were in all cases temporary rather than permanent. In addition, patterns of temporal ordering across regions suggest that in many states deregulation was a response to economic conditions rather than the reverse. (JEL E44 , G28 )     

RATE BASE METHODS AND REALIZED RATES OF RETURN

Considerable regulatory energy and academic research has been devoted to examining the question of what constitutes the "correct" basis of valuation of the rate base for utility firms. This study compares utility earnings using data which adjust for differences among state jurisdictions concerning what is allowed in the rate base. The results show that there is no statistical difference in earnings of firms regulated by original cost, fair value, and reproduction cost jurisdictions. The results also show that regulation cannot generally explain the variance in earnings between states and rapid inflation does not seem to affect the results.     

INNOVATION: ITS PUBLIC AND PRIVATE ASPECTS AND SOME OF THEIR EMPIRICAL IMPLICATIONS FOR MERGERS

Innovators may have incentives to incur the expense of the search for new knowledge even if others can use the results without contributing to the costs of the search for them. Why? Assume firms choose their actions independently. Assume new knowledge is a free public good: a firm can make the product at lower cost even if it spends nothing on research, if another does the research. The most plausible noncooperative equilibrium in this situation is stochastic: firms will decide what to do on the basis of a random device. The theory determines the probability that the firm spends nothing, or something, on research. In consequence, no firm can be certain that a rival will do the research; no firm can be certain of becoming a free rider. In consequence, there will be no relation on average between returns on research-outlays and size of outlays; but the yield on research always will be positive. Innovation can lead to differences among firms, but these differences should not persist, as firms can gain by eliminating them. In a non-cooperative equilibrium, where firms have different cost conditions, the allocation of output among them is inefficient. Such inefficiency can be eliminated if information about methods of production is sold, say by way of licensing. But royalty receipts are a very small fraction of total revenues, even in research and development intensive industries such as chemicals and scientific instruments. Merger is another avenue of cooperation. The theory which assumes research results are private predicts a positive relation between merger activity and technical change. Empirical evidence for the 1879–1930 inverval supports this prediction.     

ECONOMIES OF SCALE IN A MULTIPLANT TECHNOLOGY: EVIDENCE FROM THE OILPATCH

A unique micro data set detailing operating costs and technical characteristics of 133 Texas oil leases was used to estimate an econometric cost function, yielding a number of interesting findings. First, evidence of economies of scale in crude extraction implies additional gains from oil field unitization and helps explain the paradox that voluntary unitization often occurs in the later stages of a field's life. Second, marginal operating costs per well were found to be about 30 percent below average costs, explaining why many wells remain operational despite falling crude oil prices. Finally, the results confirmed a number of plausible technical relationships. For example, operating costs rise sharply with depth, explaining the existence of shallow, low-production stripper wells.     

INFLATION DYNAMICS AND SUBJECTIVE EXPECTATIONS IN THE UNITED STATES

We estimate a forward‐looking New Keynesian Phillips Curve (NKPC) for the United States using data from the Survey of Professional Forecasters as proxy for expected inflation. We obtain significant and plausible estimates for the structural parameters independently of whether we use the output gap or unit labor costs as a measure of marginal costs. Moreover, when estimating a Phillips curve where lagged inflation enters due to price indexation by nonreoptimizing firms, we obtain significant parameter estimates of the sign predicted by theory independently of the marginal cost measure used. (JEL E31)     

THE LIMITS TO GROWTH

This article examines aggregate real estate firm mortality rates in a group of metropolitan areas during the 1960s and 1970s. Real estate firms play a critical role in the local growth machine, yet no research has examined the environmental limits which these firms experience. A set of ecological hypotheses are constructed which detail the influence of task and institutional environments on aggregate firm mortality rates. The findings show the sensitivity of firms to their local context, although standard market forces are not operating. In addition, period differences suggest that larger societal forces interact with the local land market, increasing aggregate mortality rates over time. Results support recent observations of the local land market made by the "new urban sociology."     

SOME EFFECTS OF OWNERSHIP ON THE WHOLESALE PRICES OF ELECTRIC POWER

Differences in the property rights which distinguish government-owned and privately-owned, government-regulated business firms imply that government-owned electric utilities sell wholesale electric power at lower prices and buy it at higher prices than similarly-situated private firms. The hypotheses were tested using cross-section data. The results are generally favorable and suggest that the approach is fruitful.     

THE NATURE OF OUTSOURCING RELATIONSHIPS: EVIDENCE FROM OAP PRICES

This paper studies the extent and variation in production cost pass‐through for U.S. outsourcing imports. Data from 4,676 products imported through the U.S. overseas assembly program show that outsourcing imports were characterized by incomplete pass‐through of production and trade costs to import prices. Notably, pass‐through was higher for products assembled in high education countries while the response of outsourcing import prices to competing suppliers' prices was largest for products sold by firms in capital‐intense industries. The reasons for these cross‐country and cross‐industry differences, as they relate to theories of outsourcing and trade, are explored. (JEL F1, F2)