Felix R. FitzRoy

Self-Employment Wealth and Job Creation: The Roles of Gender, Non-Pecuniary Motivation and Entrepreneurial Ability

This paper uses National Child Development Study data for a large cohort of British individuals, to explore the influence of education, inheritance and other background characteristics on the propensity to become self-employed; and also on subsequent success, as measured by job and wealth creation. For the first time, we study the effects of our regressor variables on our success measures via disaggregation of our sample by gender – and, in this way, reveal striking differences between the determinants of male and female entrepreneurial performance.

When Less is More: Distinguishing Between Entrepreneurial Choice and Performance

This paper uses NCDS data on individual characteristics to distinguish determinants of entrepreneurial choice, income and job generation. A new model of utility from self‐employment shows that relaxing liquidity constraints could inhibit performance. Empirically, we find that a range of inheritance enhances the performance of the self‐employed and increases self‐employment; while higher education also increases self‐employment income and job creation, but reduces the probability of self‐employment. Combining these choice and performance effects, we find that education has a positive net effect on job creation, as does inheritance up to a certain threshold.

Efficiency and Internal Organization: Works Councils in West German Firms

Efficiency-voice theory has not explained why highly competent managers cannot maintain effective communication without formal or mandatory institutions of l abors voice. Powerful West German works councils are negatively rela ted to productivity in the sample, suggesting that the best managers can do better without councils. However, excessive pressure on worker s should encourage both unionization and councils to gain compensatin g differentials, and the simultaneous WLS-Tobit estimates also suppor t this effect. General productivity benefits from formal voice organi zation are strongly rejected, but evaluating welfare, efficiency, and causality directly requires data on job satisfaction and managerial ability. Copyright 1987 by The Review of Economic Studies Limited.

On the choice of incentives in firms

Abstract Simple models of individual and group incentives under uncertainty are compared, and comparative performance is shown to depend upon various exogenous parameters. The incentive effects of profit sharing will thus vary with organizational and other characteristics that may be difficult to observe, and attempts to quantify productivity effects that neglect selection bias are likely to be misspecified. Significant selection effects are found in previously used firm-level data, and productivity effects of existing profit sharing are found to be much larger than potential effects in firms without sharing arrangements. This throws doubt on policies to encourage sharing in isolation.

Innovation, rent-sharing and the organization of labour in the federal republic of Germany

Rent seeking by unions may inhibit various kinds of investment, particularly R&D, and unionization is often negatively related to innovation across industries. Formal organization and collective bargaining may also reduce the flexibility of work organization, and hence inhibit innovation. In a sample of small- and medium-sized firms in the FRG metal-working industry, a measure of organized labour was negatively related to product innovation, but there was little evidence for rent-seeking in simultaneous estimates.

Skills, Wages, and Employment in East and West Germany

Disaggregated data from 30 two-digit manufacturing industries in the east and west parts of unified Germany are used to estimate employment for three skill categories of blue collar workers. Employment elasticities are uniformly higher in the east, and for unskilled labor. The former result contradicts union claims that wages had little relevance for east German job losses, while the latter confirms the capital-skill complementarity hypothesis.

Capital-skill complementarity in West German manufacturing

Capital-skill complementarity is tested for two different definitions of skill, using data from 32 West German manufacturing industries from 1975–1990. Using the Kmenta approximation for the CES function provides strong support for complementarity between white collar workers and capital. On the other hand, when “skill” is defined as skilled white collar and blue collar workers, we find essentially no evidence for complementarity. This surprising result suggests that the official classification of skilled production workers does not capture the planning activity most complementary to increasing capital intensity and technological progress.

Earning Curves and Wage Curves

Using British county data for full-time male manual workers we extend earlier work to investigate wage and earning curves. We distinguish between total earnings and hourly wages for standard hours, uncontaminated by overtime premium. Using data from 1980-95 we find that earnings behaviour is dominated by volatile hours in the short run, while wage growth is highly sensitive to the level of unemployment as in the classical Phillips curve with macro data. Macro evidence for sticky wages is thus confirmed at the local level, and the wage curve of rapid adjustment is rejected for normal hourly wages. Copyright 2000 by Scottish Economic Society.

Testing the Tunnel Effect: Comparison, Age and Happiness in UK and German Panels

In contrast to previous results combining all ages, we find positive effects of comparison income on happiness for the under 45s and negative effects for those over 45. In the UK, these coefficients are several times the magnitude of own income effects. In West Germany, they cancel out to give no effect of comparison income on life satisfaction in the whole sample when controlling for fixed effects, time-in-panel, and age-groupings. Pooled OLS estimation gives the usual negative comparison effect in the whole sample for both West Germany and the UK. The residual age-happiness relationship is hump-shaped in all three countries. Results are consistent with a simple life cycle model of relative income under uncertainty.Jel codesD10, I31, J10

Firm size, efficiency and employment: A review article

SummaryS-Js book contains much careful and interesting discussion of small-firm employment data and related issues, and will be read by all workers in the field. However it also contains too much detailed quantification and international comparison of doubtful relevance, at least for most economists, and misses much background material of direct importance for evaluating the role of small firms. As a result, the authors seriously under-estimate the contribution of small business to both employment and efficiency of modern economies, as well as the importance of policy to correct the traditional and still pervasive bias towards large organizations.