scholarly journals Entry and Exit, Multiproduct Firms, and Allocative Distortions

2018 ◽  
Vol 10 (2) ◽  
pp. 86-112 ◽  
Author(s):  
Roberto N. Fattal Jaef
Keyword(s):  
Firm Dynamics ◽  
Multiproduct Firms ◽  
Product Portfolio ◽  
Factor Productivity ◽  
Entry And Exit ◽  
Welfare Gains ◽  
Transition Dynamics ◽  
Dynamic Factors ◽  
Long Run ◽  
Productivity Gains

Most studies quantifying the gains from reversing allocative distortions are static in nature. We propose a model of firm dynamics featuring entry, exit, and multiproduct firms to understand the contribution of these dynamic factors in shaping the welfare and long-run productivity gains from removing distortions. We find that while the entry and exit of firms and their product-portfolio choices exert countervailing forces over long-run total factor productivity (TFP), they reinforce each other in shaping the welfare gains from reversing misallocation. Welfare gains, which account for transition dynamics, become more than twice as high as the long-run changes in TFP. (JEL D21, D24, D61, L11, O41)

scholarly journals Reorganization or Liquidation: Bankruptcy Choice and Firm Dynamics

2021 ◽  
Author(s):  
Dean Corbae ◽  
Pablo D’Erasmo
Keyword(s):  
Capital Structure ◽  
Firm Dynamics ◽  
Law Firms ◽  
Bankruptcy Law ◽  
Entry And Exit ◽  
Dynamics Model ◽  
Financial Decisions ◽  
Long Run ◽  
Bankruptcy Policy

Abstract In this paper, we ask how bankruptcy law affects the financial decisions of corporations and its implications for firm dynamics. According to current U.S. law, firms have two bankruptcy options: Chapter 7 liquidation and Chapter 11 reorganization. Using Compustat data, we first document capital structure and investment decisions of non-bankrupt, Chapter 11, and Chapter 7 firms. Using those data moments, we then estimate parameters of a general equilibrium firm dynamics model with endogenous entry and exit to include both bankruptcy options. Finally, we evaluate a bankruptcy policy change similar to one recommended by the American Bankruptcy Institute that amounts to a “fresh start” for bankrupt firms. We find that changes to the law can have sizable consequences for borrowing costs and capital structure which via selection affects productivity, as well as long run welfare.

Determinants of Total Factor Productivity in Mexico, Indonesia, Nigeria, and Turkey (1980–2014)

2018 ◽  
Vol 4 (2) ◽  
pp. 192-217 ◽  
Author(s):  
Phillip Akanni Olomola ◽  
Tolulope Temilola Osinubi
Keyword(s):  
Human Capital ◽  
Total Factor Productivity ◽  
Negative Relationship ◽  
Annual Data ◽  
Factor Productivity ◽  
Distributed Lag ◽  
Long Run ◽  
The World ◽  
Government Stability ◽  
Short Run

This study analyzed the macroeconomic and institutional determinants of total factor productivity (TFP) in the MINT (Mexico, Indonesia, Nigeria, and Turkey) countries during the period 1980–2014. Annual data covering the period between 1980 and 2014 were used. Data on real gross domestic product (real GDP), labor force, gross fixed capital formation, foreign direct investment (FDI), human capital, and inflation were sourced from the World Development Indicators published by the World Bank. Also, data on corruption, government stability, and law and order were obtained from the database of International Country Risk Guide. Panel autoregressive distributed lag (PARDL) regression technique was used to estimate the model. Results showed that TFP growth rate declined on average by 1.4 per cent and 1.8 per cent in Mexico and Turkey, respectively, while Indonesia and Nigeria did not experience productivity growth on the average. Results also showed that in the long run, human capital and government stability had positive and significant effects on TFP, while FDI and corruption had negative but significant effects on TFP. In the short run, there existed a significant negative relationship between TFP and inflation. However, the effects of human capital and corruption on TFP were positive and significant. The study concluded that human capital and corruption were key drivers of TFP in the MINT countries both in the long run and short run.

TAX POLICY AND FOOD SECURITY: A DYNAMIC ANALYSIS

2019 ◽  
pp. 1-29
Author(s):  
Pawan Gopalakrishnan ◽  
Anuradha Saha
Keyword(s):  
Food Security ◽  
Food Consumption ◽  
Limited Range ◽  
Welfare Gains ◽  
Agent Model ◽  
Real Gdp ◽  
Long Run ◽  
Food Subsidy ◽  
Short Run ◽  
Subsidy Program

We investigate the sectoral and the distributional effects of a food subsidy program, where food consumption in the economy is subsidized by taxing the manufacturing good producers. In a two-agent model comprising of farmer and industrialist households, agents consume food to accumulate health. Simulations indicate that while the subsidy program increases food output and agents’ health both in the short run and the long run, manufacturing output and aggregate real GDP appear to fall in the short run and increase only in the long run. The program does not make both agents better off and exhibits social welfare gains for a limited range of subsidies.

scholarly journals Optimal Regulation in the Presence of Reputation Concerns *

2014 ◽  
Vol 130 (1) ◽  
pp. 415-464 ◽  
Author(s):  
Andrew Atkeson ◽  
Christian Hellwig ◽  
Guillermo Ordoñez
Keyword(s):  
Firm Dynamics ◽  
Total Production ◽  
Entry And Exit ◽  
Free Entry ◽  
Spot Prices ◽  
The Public ◽  
Equilibrium Prices ◽  
Random Growth ◽  
The Impact

Abstract In all markets, firms go through a process of creative destruction: entry, random growth, and exit. In many of these markets there are also regulations that restrict entry, possibly distorting this process. We study the public interest rationale for entry taxes in a general equilibrium model with free entry and exit of firms in which firm dynamics are driven by reputation concerns. In our model firms can produce high-quality output by making a costly but efficient initial unobservable investment. If buyers never learn about this investment, an extreme “lemons problem” develops, no firm invests, and the market shuts down. Learning introduces reputation incentives such that a fraction of entrants do invest. We show that if the market operates with spot prices, entry taxes always enhance the role of reputation to induce investment, improving welfare despite the impact of these taxes on equilibrium prices and total production.

Trade and Investment Liberalization in India: Implications for Productivity Gains

2014 ◽  
Vol 05 (03) ◽  
pp. 1440008
Author(s):  
Ram Upendra Das
Keyword(s):  
Direct Investment ◽  
Raw Materials ◽  
Economic Reforms ◽  
Factor Productivity ◽  
Firm Level ◽  
Wage Rates ◽  
Dramatic Rise ◽  
Productivity Gains ◽  
Trade And Investment

Since 1991, India has witnessed wide-ranging economic reforms in its policies governing international trade and foreign direct investment (FDI) flows which has consequently led to a dramatic rise in both trade and FDI flows since then. Using firm-level panel data, this paper investigates whether these trends have contributed to significant productivity improvements since 2000, as measured by total factor productivity (TFP). In addition, the paper also examines the determinants of TFP across a range of different industry categories. The results suggest the existence of significant productivity improvements since 2000 and also identify variables such as imports of raw materials and capital goods, size of operation, quality of employment captured by wage rates, and technology imports as crucial determinants of productivity.

scholarly journals Short-run pain, long-run gain: the conditional welfare gains from international financial integration

2016 ◽  
Vol 65 (2) ◽  
pp. 329-360 ◽  
Author(s):  
Raouf Boucekkine ◽  
Giorgio Fabbri ◽  
Patrick A. Pintus
Keyword(s):  
Financial Integration ◽  
Welfare Gains ◽  
Long Run ◽  
International Financial Integration ◽  
Short Run

scholarly journals Firm Dynamics: Firm Entry and Exit in Canada, 2000 to 2008

2012 ◽  
Author(s):  
Oana Ciobanu ◽  
Weimin Wang
Keyword(s):  
Firm Dynamics ◽  
Firm Entry ◽  
Entry And Exit ◽  
Firm Entry And Exit

scholarly journals Roles Of Human Capital And Total Factor Productivity Growth As Sources Of Growth: Empirical Investigation In Thailand

2011 ◽  
Vol 8 (12) ◽  
Author(s):  
Paitoon Kraipornsak
Keyword(s):  
Time Series ◽  
Human Capital ◽  
Production Function ◽  
Technological Progress ◽  
Factor Productivity ◽  
Capital Input ◽  
Tfp Growth ◽  
Long Run ◽  
Residual Growth ◽  
Factor Input

Total Factor Productivity (TFP) growth has long been identified as an exogenous source of economic growth (the residual growth). Recently, there have been a number of economists who introduced and developed the view of endogenous growth model. An argument is that all important factors of source of growth are incorporated into the growth model, there should not present a significant exogenous residual growth. This paper presents an analysis on estimated TFP growth of which it could be considered as a factor of technological progress that is viable in the economy as it is believed. This study included human capital input into the estimated sectoral production function as an essential factor input that can explain capacity of knowledge advancement and an effective innovation in the economy. Human capital is therefore considered to play an essential role in modern growth theory. However, empirically, the effect of human capital on growth and productivity has been inconclusive probably due to the estimation problem. Frequently macroeconomic time series are often non stationary, this study cautiously dealt with the estimation in line with stationary time series econometrics. In this paper, human capital index was constructed based on the Mincerain wage equation and was augmented into the production function for the analysis of growth. The results of the estimation indicated the existence of long run positive contribution of the TFP growth in agriculture but insignificant long run contribution to growth in services. Human capital also positively contributed to growth in agriculture but it was insignificantly contributed to growth in industry and services. Remarkably, physical capital input was found the significant contribution to growth in all sectors. The study also estimated for the economy wide allowing all three sectors to interact among them and found that in the long run growth of industry can be traded off with those of agriculture and services. The TFP growth was also found significantly contributable to the long run growth of the economy. The finding is consistent with the new concept of endogenous growth hypothesis. The conventional concept of the TFP growth estimated from the two input production function was found inadequate to explain the contribution to growth. Human capital was found to be the third factor input that must be included in the estimation of production function. The residual growth or the shift of production function or the TFP growth in this study can mainly be explained by technological progress that is not represented by any other factor of advancement. Nevertheless, this technological progress or the TFP growth must be incorporated and be estimated at the same time in the model but not as being the residual of the regression equation. Therefore, the residual growth in line with the conventional concept must be insignificant. Additionally, because the findings excluded the essential factors, which is human capital input from the estimated standard two factor input models, it caused the residual growth to be significant, as found in the past.

Diagnosing the Product Portfolio

1977 ◽  
Vol 41 (2) ◽  
pp. 29-38 ◽  
Author(s):  
George S. Day
Keyword(s):  
Product Portfolio ◽  
Long Run ◽  
Managerial Resources

How to use scarce cash and managerial resources for maximum long-run gains

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