We study how opening to trade affects economic growth in a model where heterogeneous firms can adopt new technologies already in use by other firms in their home country. We characterize the growth ...rate using a summary statistic of the profit distribution: the mean-min ratio. Opening to trade increases the profit spread through increased export opportunities and foreign competition, induces more rapid technology adoption, and generates faster growth. Quantitatively, these forces produce large welfare gains from trade by increasing an inefficiently low rate of technology adoption and economic growth.
Risk Reduction and Umbrella Branding Montgomery, Cynthia A.; Wernerfelt, Birger
The Journal of business (Chicago, Ill.),
01/1992, Letnik:
65, Številka:
1
Journal Article
Recenzirano
In the context of competitive markets with asymmetric information, we develop a model of firms' branding decisions. In equilibrium, both branded and unbranded products exist, and we characterize ...price-quality relationships between them. In contrast to other advertising models, we predict that branded products will have lower average (price-adjusted) quality than unbranded products. This lower average is counterbalanced by lower variance in product quality, giving branding a risk-reducing rather than a quality-guaranteeing function. We describe industries in which these relationships are likely to be stronger and test the predictions using Consumer Reports data on quality and price.
Because the observations on entry in an industry are count data, a model of entry is developed from the premise that entry requires a statistical framework based on a discrete probability ...distribution. To meet this requirement, an econometric model of entry based on the Poisson distribution is specified. The Poisson approach admits a richer analysis of entry data than the logarithmic regression approach in 2 ways. The logarithmic specification provides an incomplete description of the entry data, and it precludes the use of maximum likelihood estimation. The proposed Poisson probability model is estimated using data on 330 four-digit Standard Industrial Classification industries for the years 1972 and 1977. Profitability, growth, market size, and intrafirm efficiency differentials are found to be positively related to entry. Four indexes of entry barriers are found to have a significant, negative impact: 1. capital requirements, 2. advertising, 3. concentration, and 4. multiplant production.
A hybrid approach is used to examine the capacity expansion process in capital-intensive industries. A theoretical model is developed that leads to the conclusion that, where costs vary widely across ...firms, the lowest cost producer will tend to preempt the others in adding new capacity. Capacity expansion in the US titanium dioxide industry is then examined in the context of the model's theoretical predictions. Du Pont's strategy in titanium dioxide over the period 1972-1977 agrees with the predictions but also emphasizes some of the risks of preemption. The results are of general interest because the identical process seems to drive capacity expansion in many other industries. Preemption is a dangerous process in which miscalculations can depress profitability for the entire industry for years to come.
ABSTRACT
Output changes in the U.S. economy from 1972 to 1977 are analyzed using a 477‐sector input‐output framework. The empirical model is based on benchmark data from the U.S. Bureau of Economic ...Analysis. Commodity output changes are attributed to technical change, import substitution, changes in domestic final demand, and changes in export demand. Special attention is given to the importance of international trade and the patterns of change observed in rapidly growing and declining sectors.
The results indicate that 71 percent of the sectors lost domestic market share to imports, but on balance international trade contributed to positive output change through increased exports. Technology changes became increasingly important in sectors of the economy experiencing either rapid growth or decline. Conversely, final demand, exports, and import substitution generally appeared to be most important in the slowly changing sectors. These findings confirm and expand on earlier work that indicated a dominant role for technology changes in explaining output changes in emerging and declining industries.
Industry-level census data is used to examine the role of industry characteristics as entry barriers. A study features estimation results from very large samples that cover a wide range of industries.
A study shows that unionization has a statistically significant deterring effect on the entry of firms in the US. Traditional models of entry-deterrence emphasize sunk costs or predatory pricing ...rather than unionization.
This paper examines the effects of military experience and civilian experience on the earnings of veterans with the objective of determining the substitutability of these two forms of experience for ...personnel receiving different types of military training. To perform the analysis, the Social Security earnings records of 24,000 individuals who separated from military service in fiscal year 1971 were obtained for the period 1972-77. Analysis of these data reveals that more military experience does increase subsequent civilian earnings, but that the relative impact of military and civilian experience varies considerably by military occupation category.
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