Essays On Productivity Labor Allocations And Intangible Capital

ABSTRACT: The first essay conducts robustness analysis on Gali's (1999) results. Following Gali's identification strategy, the model is extended to the sectoral level within the private sector. The paper also looks at the two important breaks, 1973 recession and 1984-beginning of the "great moderation". The private sector results suggest that non-technology shocks are the major cause of business cycle fluctuation rather than technology shocks. Sectoral data also produced this conclusion with the exception of one sector. Most of the results do not change for the pre- and post-recession and great moderation dates. This essay reinforces the notion that technology shocks play a limited role in the aggregate short-run fluctuations of business cycles. These results pose a challenge to modern real business cycle theory. The question does hours decline in response to a technology shock attracted a lot of research in the last decade. The second essay attempted to investigate the response to hours in a three-variable--productivity, hours and corporate profits-- model using vector- autoregressive with long-run and short-run restrictions. The model imposes three restric- tions- technology shocks affect productivity permanently, hour's shock and profit shocks do not affect productivity in the long-run and profit shocks do not affect hours contempora- neously. The results seemed to be more encouraging for real business cycle theory and are inconsistent with the conclusion that technology shocks play limited role in business cycle fluctuations. An important finding is that profits matter empirically since it changed the response to hours from a technology shock. By adding profits to the model, hours do not decline from a productivity shock. Though the initial impact is negative they recover in first quarter and they co-move with productivity.The response to hours shock is however consistent with Gali (1999). Hours worked increase in response to a shock to employment. Recent empirical research argued that intangible capital has been playing an important role in explaining productivity gains in the last two decades. In the third essay, intangible capital is introduced in an otherwise standard real business cycle model. Firms expend resources to create intangible capital which is an additional input in the production func- tion. Since firm's investment in intangible capital is pro-cyclical it produces positive profits despite being a competitive firm. The firm increases investment in intangible capital from both temporary and permanent productivity shock. It also plays a significant role in pro- ducing endogenous movement in productivity. Firms use more labor and physical capital to produce intangible capital since it raises productivity and future profits. However, there is a trade-off between current period profits and investment in intangible capital. Perma- nent technology shock results in higher factor share of labor and capital allocated to create intangible capital which decreases profits in the current period; however, higher investment in intangible capital would raise future profits.

This dissertation consists of three chapters. Chapter one estimates the capital adjustment costs at the plant level in a model entry and exit. We find that the estimated variance of plant-specific productivity shock is larger than obtained from balanced panel estimation. Estimation using the unbalanced panel generates a larger irreversibility cost, a smaller disruption cost, and a smaller convex cost, all compared with the estimates by Cooper and Haltiwanger (2006). In chapter two, we study how much of the aggregate productivity changes can be accounted for by the capital reallocation. We also study the impact of capital reallocation on the productivity dispersion across firms. We find that the capital reallocations accounts for roughly 12 percent of the labor productivity and capital productivity are reduced as the reallocation activity increases. When the economy-wide technology has a positive change, the reallocation increases temporarily then drops to its original level. After a short transition, the economy settles down with an increased labor productivity. Chapter three further studies the quantitative role of allocation, entry and exit in the growth of aggregate productivity. We find that, without including in the model the forces that drive the entry and exit changes, the model economy has a modest increase in the aggregate productivity as a result of decrease in the fixed reallocation cost.

My dissertation uses theoretical tools and empirical methods to address substantive questions in the intersection of Macroeconomics and Industrial Organization. In particular, my research focuses on understanding the underlying forces that determine efficiency and distortions. In the first chapter, Privatization, Distortions, and Productivity, I ask that to what extent and through what channels privatization has contributed to the rapid growth of GDP and TFP in China's manufacturing sector. Privatization, like many other industrial policies, affects firms' output and productivity through a direct effect on productivity and an indirect effect on resource allocation. Understanding the consequences of privatization on both productivity and allocative efficiency is crucial for policy evaluation and subsequent reforms. To do so, I first develop a method to separately identify productivity and factor misallocations. This links to two distinct literatures. One is the macro literature on misallocation that use wedges or distortions to measure the deviation from firm's optimal scale. The other is the empirical IO literature to estimate production function using input and output, together with firm's optimal choices. I augment the empirical production function estimation framework by introducing wedges between marginal revenues and marginal costs as an additional unobserved variable that distorts the firms output away from their optimal input choices. And I show that how to identify and estimate productivity, distortions and parameters in production function. I then estimate the productivity and distortion effects of privatization. Finally I propose a decomposition method for aggregate productivity growth to explicitly account for the direct effect of privatization. Second, I discussed market frictions, specifically search and informational frictions that prevents efficient allocations in the labor markets. In Understanding Transitions using Directed Search with Mike Peters (UBC) and Steven Xu (HKU), we develop a directed search model to study worker transitions between jobs in the French labor market. In particular, the model we consider allows workers to have incomplete information about each other's' marketable characteristics (types) at the point where they make their search decisions. The theory provides a series of testable predictions about the relationship between the wage a worker receives at the job that he or she leaves, and the wage they get at their next job. The paper then uses data from the French DADS data set to study transitions in a variety of different labor markets in France in 2007, and compares these transitions to what is predicted by the theory. We find that the labor markets for skilled workers and industrial type of workers support more of our model. Third, I explore the return of productivity and distortions in scientific world. In Is Citation Behavior Biased? The Influence of Journal Editors with Bruno Biais (TSE) and Augustin Landier (TSE), we test the null hypothesis that the number of citations provides an unbiased measure of an article's scientific value. To do so, we exploit a shock that is exogenous to the scientific value of a paper, namely the ending time of editorial appointments of colleagues of a paper's author(s). We show that during the course of an editor's appointment, the citation rates of her papers in the journal she edits go up by 23 percentage points. During the same period, these articles don't have any significant citation premium at other journals. The citation premium fades away when the editor steps down. The same phenomenon applies to colleagues of the editor. This provides a counterexample to the null hypothesis that is both large in size and in the population of papers that is affected.

Early in the twenty-first century, a quiet revolution occurred. For the first time, the major developed economies began to invest more in intangible assets, like design, branding, and software, than in tangible assets, like machinery, buildings, and computers. For all sorts of businesses, the ability to deploy assets that one can neither see nor touch is increasingly the main source of long-term success. But this is not just a familiar story of the so-called new economy. Capitalism without Capital shows that the growing importance of intangible assets has also played a role in some of the larger economic changes of the past decade, including the growth in economic inequality and the stagnation of productivity. Jonathan Haskel and Stian Westlake explore the unusual economic characteristics of intangible investment and discuss how an economy rich in intangibles is fundamentally different from one based on tangibles. Capitalism without Capital concludes by outlining how managers, investors, and policymakers can exploit the characteristics of an intangible age to grow their businesses, portfolios, and economies.

These volumes should be required reading for anyone with an interest in international business and globalisation. They add immeasurably to our understanding. Mira Wilkins, Business History Dunning is one of the most prominent researchers and thinkers in the IB field. In these books, he has set out his most celebrated writings and has provided us relatively easy access to widely scattered references in the literature. Rajat Kathuria, Global Business Review The modern academic study of the multinational enterprise started with John Dunning s pioneering study of American Investment in British Manufacturing Industry in 1958. In the early 1970s he began to publish an influential and authoritative stream of papers integrating theoretical and empirical analysis of the multinational enterprise. This fascinating volume charts the evolution of John Dunning s thinking, highlighting his attempts to develop a richer, more dynamic and historical framework for the analysis of the multinational enterprise. It makes compelling reading, and offers unique insights into the intellectual development of his well-known eclectic paradigm of international production. Mark Casson, University of Reading, UK This volume contains a selection of John Dunning s best known and highly acclaimed writings on the theory of international business activity. Spanning more than three decades, the 16 contributions trace the evolution of his thoughts and ideas as an economist, from his first article on the determinants of international production, published in 1973, to his most recent essay on relational assets, networks and global business activity, completed in 2002. Theories and Paradigms of International Business Activity gives particular prominence to the author s much renowned eclectic paradigm, which he first promulgated at a Nobel Symposium on the international allocation of economic activity in 1976. Since then, the author has written over 60 articles, pamphlets and chapters in books which have extended, refined and updated his theorizing on the interface between trade, FDI and MNE activity, in the light of the changing characteristics of the world economy and advances in international business scholarship. This, the first of two volumes of John Dunning s work, is essential reading for all students, scholars and researchers with a special interest in the reasons behind the explosive growth in post-war FDI and the globalization of business activity.

This first book on the political economy of Taiwan, and in honour of John Fei, provides an overview of the process of economic development in the light of endogenous growth theory. It also explores the sources of economic development in East Asian countries.