Luca Marcolin

The competitiveness of regions. A comparison between Belgian and German regions

We analyze the regional competitiveness of NUTS1 German and Belgian regions using firm level data. By doing so, we want to stress the importance of heterogeneity between regions within countries, as well as of firm heterogeneity, in the context of competitiveness analysis. We thus take a step away from the standard approach to the topic which makes use of composite indicators, and define competitiveness as labor cost per unit of value added at the firm level. But in doing so, we control for firm size and the sector the firm operates in. We further break down the analysis into productivity and labor cost dynamics. Using Flanders’ performance as benchmark, we find that the region ranks high in terms of labor productivity, but loses its competitive edge to East German regions especially because of its relatively high labor costs. Belgian regions are in general outperformed by German ones, at least as far as manufacturing production is concerned.

Do wages reflect labor productivity? The case of Belgian regions

We simultaneously estimate a wage and a labor productivity equation where we include regional dummies as explanatory variables. We find that the wage-productivity gap reached 11% for Brussels and 4.2% for Wallonia in the years 2005-2012. This was driven by the negative performance in labor productivity of firms in these regions relative to Flanders, which more than compensated for the advantage in average salary cost they enjoyed. These results are coherent with the existence at the regional level of institutional barriers to the firm-level adjustment of wages to labor productivity.JEL codesJ24; J31; J5; R23

International rent sharing and takeovers

Purpose - – The purpose of this paper is to provide empirical evidence of international rent sharing in multinational enterprises. It looks at changes in rent sharing before and after the acquisition of a company by a foreign entity, and assesses the role of target and acquirer profitability in the wage setting process for the target firm. It therefore contributes to the evaluation of the impact of a form of globalization (inward foreign direct investment (FDI)) onto wages. Design/methodology/approach - – The authors use a unique firm level longitudinal dataset of M & - As in Belgium between 1998 and 2010. The authors construct a micro-level dataset containing takeover and accounting information for target and acquiring firms. The empirical set up permits to net the estimates from selection effects in the choice of target firm, using propensity score matching and a difference-in-difference approach. Findings - – The authors find evidence that the deal does not significantly affect the degree of domestic rent sharing, but it enables international rent sharing. The authors qualify the results in terms of the acquirer’s location, industry link with the target and controlling stake. Further robustness specifications include different profits and controls, and a comparison with a sample of domestic acquisitions. Research limitations/implications - – The sample of matches for acquired firms is constructed using propensity scores, which may not perfectly capture the differences between targeted and non-targeted companies. Although estimates should be net of selection effects, other sources of endogeneity may still make the estimates inconsistent. Practical implications - – Updating the discussion on the labor market consequences of globalization, and on foreign takeovers in particular. Social implications - – The discussion on international takeover should take into account not only the extensive margin (i.e. labor adjustments) but also salaries. The authors argue that through a precise channel (rent sharing) international takeovers of domestic companies may benefit the domestic labor force. Originality/value - – The dataset was constructed for the purposes of this analysis; rent sharing is tested in a takeover scenario for the first time, thus avoiding selection biases.