Using parametric and nonparametric procedures, we identify the apparent source of cost inefficiency in banking. Unexplained inefficiencies of 20 to 25% from earlier studies are reduced to 1 to 5% when, in addition to commonly specified cost function influences, variables reflecting the external business environment and common industry indicators of "productivity" are added. While these same pro...

We predict and find that accounting restatements induce economically meaningful share price declines among non-restatement firms in the same industry. These price declines are most pronounced among non-restatement firms with low accounting quality, as measured by industry adjusted accruals. Our results are consistent with the notion that accounting restatements cause investors to reassess the c...

This paper studies the effect of regional spillovers on the rate of finn formation in two major West Gennan industries for the time period from 1989 to 1993. I exploit regional variations in finn fonnation at the county level to identify the effects of historically given industry structure and employment structure on the emergence of new firms. The results are consistent with the existence of l...

We describe the evolution of productivity growth in a competitive industry with free entry and exit. The exogenous wage rate determines the firms’ engagement in labor productivity enhancing process innovation. There is a unique steady state of the industry dynamics, which is globally asymptotically stable. In the steady state, the number of active firms, their unit labor cost and supply depend ...

Formality, Informality, and Social Welfare An industry is modeled in which entrepreneurs, who are heterogeneous in ability, may produce formally or informally. It is shown how the formal-informal mix depends on the distribution of ability, product demand and various parameter values. The industry equilibrium is compared to one in which informality is prohibited. With relatively high product dem...

We use new data on the location and background of entrants into the US tyre industry to analyse why the industry became so regionally concentrated around Akron, Ohio, a small city with no compelling advantages for tyre production. We analyse where the Ohio entrants originated and conduct various analyses of how proximity to other tyre firms affected the longevity of tyre producers. We also exam...

The aggregation level of industries in the Danish macroeconomic model ADAM is examined using a new indicator of aggregation bias. The indicator is decomposed into contributions from the original industries, thereby clearly identifying the aggregation problems which caused the 6 industry groups of the older versions of ADAM to be disaggregated into the current 19 groups. An aggregation key minim...

This paper presents a model for the credit card industry, where oligopolistic card networks price their products in a complex marketplace with competing payment instruments, rational consumers/merchants, and competitive card issuers/acquirers. The analysis suggests that card networks demand higher interchange fees to maximize card issuers’ profits as card payments become more efficient. At equi...

This paper discusses different mechanisms of subsidy allocation invoked by operation of law. We compare the allocation of subsidies via committees to the allocation of subsidies through the reference principle, which binds public support to performance at the box office. The analysis is embedded in a broadly disposed regression analysis of the determinants of the performance of German movies in...

This paper examines transition in the level of competition in the Japanese life insurance industry over the last ten years. We estimate the first order condition for profit maximizing insurance oligopolies to obtain the degree of non-competition and collusion. Estimation results suggest: 1) mutual companies, like stock companies, seek to maximize their own profits rather than pay out dividends ...