Frederic Warzynski

The Effects of Privatization and Competitive Pressure on Firms' Price-Cost Margins: Micro Evidence from Emerging Economies

This paper uses representative panel data on 1,701 Bulgarian and 2,047 Romanian manufacturing firms to analyze how price-cost margins are affected by privatization and competitive pressure. Privatization is associated with higher price-cost margins. This effect is stronger in highly competitive sectors, which suggests that the creation of competitive markets and privatization go together. It also suggests that privatized firms reduce costs rather than increase prices, as in highly competitive markets firms are more likely pricetakers. Import penetration is associated with lower price-cost margins in sectors where product market concentration is high, but in more competitive sectors this effect is reversed.

Managerial change, competition, and privatization in Ukraine

This paper analyzes the determinants of managerial change and the impact of privatization, competition, and managerial change on firm performance, using survey data from 300 Ukrainian firms. Ownership and competition are shown to be linked to managerial change; privatized firms experience less turnover than state firms, which suggests an entrenchment effect. However, managerial change in privatized and de novo firms is positively related to performance, which suggests a disciplining impact of private ownership. Moreover, dominant firms have more managerial turnover. Although managerial change and privatization do not individually affect performance, together they have a positive effect on profitability. In addition, competition improves profitability and productivity in privatized firms only. These findings suggest that privatization, competition, and managerial change are complementary measures in improving firm performance.

Increased sorting and wage inequality in the Czech Republic

In this paper, we look at the evolution of firms’ wage structures using a linked employeremployee dataset, which has longitudinal information for firms and covers a large fraction of the Czech labor market during the period 1998-2006. We first look at the evolution of individual wage determination and find evidence of slightly increasing returns to human capital and diminishing gender inequality. We then document sharp increases in both within-firm and between-firm inequality. We investigate various hypotheses to explain these patterns: increased domestic and international competition, an increasingly decentralized wage bargaining, skill biased technological change and a changing educational composition of the workforce. We find some support for that all these factors have contributed to the changes in the Czech wage structure, and that increased sorting is strongly associated with the observed changes in wage inequality.

Globalization, Superstars, and Reputation: Theory & Evidence from the Wine Industry

We develop a simple model of the effects of reputation on prices. An increasing fraction of consumers who are “naive” (less informed about quality) results in a stronger sensitivity of prices to ratings of quality. We then argue that this may be a factor in price dynamics for goods that become more widely traded as a result of globalization. We then provide some empirical analysis of these ideas using data on prices and Robert Parkers ratings of wines. Wine prices are strongly related to ratings, and even more so for higher quality wine categories. In addition, changes in Parker ratings for the same wine result in large price changes. Price elasticities with respect to ratings have risen dramatically since 1993. One plausible explanation for this is the growing globalization of the fine wine market, which increases the prevalence of naive wine consumers. (JEL Classification: D8, F1, L1, Q1)

Collective Reputation Effects: An Empirical Appraisal

This paper tests Tirole (1996)’s theory about the link between indiviual and collective reputation. We estimate an interaction model in which a single collective reputation both determines and is determined by a series of individual reputations. Using detailed survey data about the image of Bordeaux wines in seven European countries, we find positive and significant spillover eects from the umbrella reputation (Bordeaux) that moreover increase with the individual reputation level of the wine. Controlling for the natural endogeneity of collective reputation in this setup, allows to capture the important fact that this relationship is faced with marginal diminishing returns. In other words that the marginal impact of Bordeaux as an umbrella brand actually tends to decrease to zero (and not to increase in a linear way) as the reputation level of its entities goes up. These spillover eects, when significantly positive, vary from a minimum of 5% to a maximum of 15% of additional favorable quality opinions.

Incentives in Economic Departments: Testing Tournaments?

Existing tests of tournament theory have recently been criticized for their failure to distinguish tournaments from other theories that have similar effects like standards and marginal productivity theory (Gibbs, 1994, 1996; Prendergast, 1999). In this paper, we propose a series of empirical tests that allow to make this distinction. We use a dataset of average wages by rank in US economic departments over the period 1977-1997 and link this information to individual production data to test whether wage gaps affect the productivity and cooperative behavior of economists and to control for marginal productivity theory. We find that the wage gap is increasing along the hierarchy, even when controlling for production by rank. Moreover, wages are more sensitive to productivity for higher ranks. We find some evidence that higher wage gaps lead to higher productivity but not that wage gaps depend on the number of contestants nor that they lead to less cooperation.

Do Schumpeterian Waves of Creative Destruction Lead to Higher Productivity? Panel Data Evidence from Poland

We look at the determinants and consequences of job reallocation in the 22 2-digit sectors of the manufacturing industry in Poland over the period 1993 - 1997. Import competition and competitive market structure (weak concentration) are found to lead to more reallocation. Moreover, more reallocation seems to be associated with more productive industries in some specifications. This confirms implications from neo-Schumpetarian growth models: one channel through which competition might positively affect growth is through the reallocation of scarce resources from declining firms to rising ones.

Stars War in French Gastronomy: Prestige of Restaurants and Chefs' Careers

In this paper, we analyze the careers from a sample of more than 1,000 top French chefs over more than twenty years and link it to the success or reputation of the restaurants where they have worked. This allows us to test what are the determinants of success but also to investigate the dynamics of performance and reputation, stressing the importance of the quality of apprenticeships, mentoring and entrepreneurship spirit. We find that the prestige of the restaurant where individuals work is on average declining along the career, and that the quality of apprenticeship is strongly related to the future success as chef. We also find that prices of restaurants with higher reputation are more sensitive to bad signals.

Globalization, Superstars, and the Importance of Reputation: Theory & Evidence from the Wine Industry

We develop a simple model of the effects of reputation on wine prices. An increasing fraction of consumers who are “naive” (less well informed about wine quality) results in a stronger sensitivity of wine prices to ratings of quality. We then use data on prices and Robert Parker’s ratings of wines, to show that prices have become more related to Parker ratings over time. In addition, we find that a change in Parker rating has a stronger effect on price, the stronger is the wine’s reputation.

The implementation of national competition policy law and the dynamics of price-cost margins: evidence from Belgium and the Netherlands 1993-1999

This book addresses the foundations of economic growth at the firm level, combining both theoretical and econometric contributions by established scholars. Challenging contributions revisit Marshall’s view on the management of innovation, investigate the decision of firms to venture into entrepreneurship and clarify some misunderstanding about Schumpeter’s ideas. The book goes on to shed light on the classical specialisation-flexibility trade-off and provides a vision on the role of the knowledge-based economy and firm networks in technology development. Firm survival and performance, price-cost margins and the determinants of research intensity are also investigated econometrically.