The aim of the thesis is to further explore the relationship between economic integration and firm mobility and investment, both from an empirical and a theoretical perspective, with the objective of drawing conclusions on how government policy can be used to strengthen the positive impact of integration on investment, which is crucial in moving and maintaining countries at the forefront of the technology frontier and accelerating economic growth in a world of rapid technical change and high mobility of ideas, goods, services, capital and labor. The first chapter aims to bring together the literature on economic integration, firm mobility and investment. It contains two sections: one dedicated to the literature on FDI and the second covering the literature on firm entry and exit, economic performance and economic and business regulation. In the second chapter I examine the relationship between the Single Market and FDI both in an intra-EU context and from outside the EU. The empirical results show that the impact of the Single Market on FDI differs substantially from one country to another. This finding may be due to the functioning of institutions. The third chapter studies the relationship between the level of external trade protection put into place by a Regional Integration Agreement(RIA)and the option of a firm from outside the RIA block to serve the RIA market through FDI rather than exports. I find that the level of external trade protection put in place by the RIA depends on the RIA country's capacity to benefit from FDI spillovers, the magnitude of set-up costs of building a plant in the RIA and on the amount of external trade protection erected by the country from outside the reigonal block with respect to the RIA. The fourth chapter studies how the firm entry and exit process is affected by product market reforms and regulations and impact macroeconomic performance. The results show that an increase in deregulation will lead to a rise in firm entry and exit. This in turn will especially affect macroeconomic performance as measured by output growth and labor productivity growth. The analysis done at the sector level shows that results can differ substantially across industries, which implies that deregulation policies should be conducted at the sector level, rather than at the global macroeconomic level.

The present paper provides further evidence on the importance of sunk costs as determinant of the turnover, entry, and exit of firms by studying the Austrian manufacturing industry using a 14-year panel. This study explicitly considers sunk costs related to investment in dedicated intangible assets such as investment relating to organizational and goodwill capital. The empirical results confirm the relevance of sunk costs as mobility barriers, their symmetry in respect to entry and exit and suggest that the influence of sunk costs is robust to aggregation. Sunk costs relating to capital expenditure and to organizational capital are found to be symmetric. Sunk costs relating to advertising expenditures seem to be only barriers to entry but not mobility barriers. Industry growth and profitability growth are found to be asymmetric, having a positive influence on entry and a negative on exit. Export growth is found to reduce the turnover of firms and to have a negative effect on exit suggesting that the decision to export may be associated with substantial sunk costs. (author's abstract) / Series: Working Papers Series "Growth and Employment in Europe: Sustainability and Competitiveness"

Two of the most robust results from dynamic competitive models of industrial organization suggest that higher sunk cost industries should exhibit (1) higher intertemporal variability in the market value of their firms, and (2) lower intertemporal variability in the size of their industries. These predictions have done well empirically. This paper argues on theoretical and empirical grounds that depreciation generates countervailing effects.

This paper evaluates the impact of a large macroeconomic shock on poverty. In particular, we use longitudinal data from the European Survey on Income and Living Conditions (EU-SILC) comprising almost two million individuals from 29 European countries in order to quantify changes in poverty transition patterns caused by the 2007 global financial crisis. Because the crisis was largely unforeseeable, it provides an appealing natural experiment allowing us to isolate the causal effect of a substantial macroeconomic shock on poverty. Employing semiparametric mixed discrete time survival analysis, we find that conditional poverty entry hazards increased temporarily by 13.4% during the crisis, while post-crisis they are estimated to be 15.7% lower than before. Not only entry hazards have decreased, also conditional exit hazards are estimated to be 31.4% lower post-crisis compared to before. Ceteris paribus, the crisis therefore has made it more difficult to slip into poverty, yet those who were already poor face substantially lower prospects to escape. Exploring determinants of poverty transitions, we find that being retired, having a permanent job, owning one's dwelling instead of renting it, age, marital status, and household size are the most important protective factors against poverty. Finally, we show that mostly a housing cost overburden seems to be responsible for the persistence of poverty. / Series: INEQ Working Paper Series

No description available.

In the first paper, using a dataset of the records of Texas Real Estate Agents, I reexamine the findings of Hsieh and Moretti (2003) regarding the inefficiency of free entry in real estate industry: first, I point out one important source of misidentification in that paper's analysis of the relationship between home prices and the number of real estate agents in a city. This misidentification stems from not including the ratio of houses sold in a city to its labor force size as an explanatory variable. Failure to account for this variable will result in inflated coefficient for the effect of home prices on the percentage of real estate agents in a city's labor force. Second, I analyze the effect of home prices on productivity of real estate agents. Empirical evidence supports theory prediction of inverse relationship between home prices and productivity of its real estate agents (measured as the number of houses sold per agent) and the empirical results in Hsieh and Moretti (2003). Third, I investigate the relationship between the extra wages of real estate agents (defined as average earning net of agents' outside option) and home prices in a city. In support for free entry, I find no evidence of any such relationship. In theory, free entry potentially leads to social inefficiency. This paper finds strong empirical evidence consistent with excess entry into Texas Residential Real Estate Brokerage Industry and studies the effects of heterogeneity and future uncertainty on such inefficiencies. I develop a dynamic model of entry and exit with heterogeneous agents and modify the predictions of the earlier literature. I show that the heterogeneity among (real estate) agents results in a weaker relationship between the real estate commission fees and the number of real estate agents. I also show that the models developed for static cases in the previous papers are special cases of the more general model in this paper. The model allows us to explain the lower business stealing effect compared to static and homogeneous models that is observed in the data. To address the issue of excess entry, I separate the business stealing effect from demand driven entry and find that on average 75 percent of entry is due to business stealing. To evaluate free entry, I control for agents' outside options and find that the extra wages of the real estate agents do not vary with housing prices. The objective of the third paper is to study the determinants of commission rates in the two-sided market of real estate brokerage industry and explain the emergence of the MLS and its impact on commission rates. In addition to their commission rates, real estate agencies decide on their MLS policies as well: they can either list the property with the MLS and share information about it, or not list the property with the MLS. If a property is listed with the MLS, all MLS subscribers can see the listing and send their potential buyers to see that property. Potential buyers can go to any agency to purchase such a property. If the property is \textit{not} listed with the MLS, to buy a house, a buyer must go to the same agency that the seller has signed up with. Since sellers pay the commission fees, and buyers no longer have to go to the same agency, with MLS listing, buyers choose the closest agency regardless of the commission rates charged by the agencies. Therefore, changes in the commission rates only change the affiliation of the sellers and not that of the buyers. This leads to a softer competition under MLS listing as agencies compete only in the seller side of the market. The softer competition and resulting higher commission rates are desirable to the agencies. They prefer the MLS listing outcome and given the optimal strategies after observing each other's listing decisions, agencies weakly prefer listing to no listing. I show that the one period game has two Nash Equilibria in which either both real estate agencies choose to list their houses with the MLS, or both decide not to list their houses with the MLS. The no listing equilibrium forces buyers to work through that agency's agents and effectively ties the both sides of the market. The higher commission rate equilibrium of the game allows buyers to choose either agency and reduces the competition to the sellers side. Softer competition in turn, results in higher equilibrium commission rates and higher profits along the equilibrium path. / text

The forced water entry and exit of two-dimensional bodies through a free surface is computed for various 2D bodies (symmetric wedges, asymmetric wedges, truncated wedges and boxes). These bodies enter or exit water with constant velocity or constant acceleration. The calculations are based on the fully non-linear timestepping complex-variable method of Vinje and Brevig. The model was formulated as an initial boundary-value problem with boundary conditions specified on the boundaries (dynamic and kinematic free-surface boundary conditions) and initial conditions at time zero (initial velocity and position of the body and free-surface particles). The formulated problem was solved by means of a boundary-element method using collocation points on the boundary of the domain and solutions at each time were calculated using time stepping (Runge-Kutta and Hamming predictor corrector) methods. Numerical results for the deformed free-surface profile, the speed of the point at the intersection of the body and free surface, the pressure along the wetted region of the bodies and force experienced by the bodies, are given for the entry and exit. To verify the results, various tests such as convergence checks, self-similarity for entry (gravity-free solutions) and Froude number effect for constant velocity entry and exit (half-wedge angles 5 up to 55 degrees) are investigated. The numerical results are compared with Mackie's analytical theory for water entry and exit with constant velocities, and the analytical added mass force computed for water entry and exit of symmetric wedges and boxes with constant acceleration and velocity using conformal mapping. Finally, numerical results showing the effect of finite depth are investigated for entry and exit.

This paper examines a dynamic stochastic model of a competitive industry with heterogeneous firms that allows for entry, exit and mergers of firms in equilibrium. The model we build is an extension of a modified version of Jovanovic and Rousseau's (2002) model that introduces financial frictions, describes the market for corporate control and endogenizes its equilibrium price, and develops a stationary equilibrium à la Hopenhayn (1992). It provides a theoretical framework within which to study factors affecting variables such as entry, exit and investment through direct unbundled capital good purchase and mergers. This work contributes to the literature by suggesting another explanation to many empirical regularities and describing one more mechanism through which aggregate liquidity shocks may affect merger activity. The results suggest that due to asymmetric information about entrepreneur's survival probabilities aggregate liquidity shocks may contribute to codetermine the turnover rate of firms and investment levels through mergers.

In this paper we explore the determinants of changes in the industrial populations rates in Austrian manufacturing. The research questions whether or not the nature and causes of the net entry of firms across three different stages of entry-exit decision and firm growth are different. Our econometric analysis suggests that there are differences in leading to the determination of the entry and exit at different stages of the entry-exit decision, and that aggregate growth and disaggregate growth (measured in employment terms) play a major role. (author's abstract) / Series: Working Papers Series "Growth and Employment in Europe: Sustainability and Competitiveness"

In this paper we analyse the influence of sector specific developments in productivity and demand on net entry and employment in 19 industrial sectors of the Austrian economy. Based on the model of structural dynamics of Pasinetti, we develop an identification scheme that allows us to extract technology and demand shocks, by means of a structural vector autoregressive (SVAR) model with long-run restrictions. We study the patterns of productivity and demand shocks across industries by means of a principal components analysis and find that sectoral and macro-economic developments in demand strongly correlate, while this is not the case for technology shocks. Impulse-response analysis shows that for almost all sectors productivity growth rates experience an immediate increase to positive technology shocks while the hours worked decline as conjectured by Pasinetti. Finally, we use the identified shocks as explanatory variables in time-series cross-section regressions on net-entry and employment data. Both types of shocks are able to explain dynamics on the industry level in terms of employment and sales but not firm dynamics. (author's abstract) / Series: Working Papers Series "Growth and Employment in Europe: Sustainability and Competitiveness"