Stephen Nickell

Competition and Corporate Performance

Are people right to think that competition improves corporate performance? My investigations indicate first that there are some theoretical reasons for believing this hypothesis to be correct, but they are not overwhelming. Furthermore, the existing empirical evidence on this question is weak. However, the results reported here, based on an analysis of around 670 U.K. companies, do provide some support for this view. Most important, I present evidence that competition, as measured by increased numbers of competitors or by lower levels of rents, is associated with a significantly higher rate of total factor productivity growth.

Labour market institutions and economic performance

Labour markets Richard Freeman Do particular types of labour market institution hold the key to economic success? Should other countries try to emulate the flexibility of the American labour market or the centralization of Swedish-style corporatism? Since 1970 within the OECD there has been a sharp divergence both of economic performance and of indicators of labour market structure. The paper uses union density and the degree of wage dispersion across industries to proxy a countrys underlying labour market institutions. In assessing economic performance, it is argued that cross-country differences in output growth were much smaller than differences in employment growth. For given output growth, there is a clear negative relationship between employment growth and real wage growth across countries. Why do different countries find themselves at different points on this trade-off? The final part of the paper examines the correlation between indicators of labour market structure and the position on the wage-employment trade-off. It concludes that the degree of wage dispersion across industries is the most important indicator of market structure and that countries with very high or very low dispersion, typically the countries with highly centralized or highly decentralized bargaining in the labour market, have better employment performance than countries with intermediate degrees of centralization and wage dispersion.

What makes firms perform well

In this paper, we investigate the role of three external factors in generating improved productivity performance in companies. These are product market competition, financial market pressure and shareholder control. We have found, using data from around 580 UK manufacturing companies, that all three of these are associated with some degree of increased productivity growth. More specifically, average rents normalised on value-added (an inverse measure of competition) are negatively related to (total factor) productivity growth, interest payments normalised on cash flow are positively related to future productivity growth and firms with a dominant external shareholder from the financial sector have higher productivity growth rates. Furthermore, there is some evidence to suggest that the last two factors can substitute for competition.

Unemployment: Questions and Some Answers

In more or less every country in the OECD, unemployment was lower in the decades following the second world war than in any other period of comparable length, either before or since. For example, in Britain unemployment has exceeded 5% in every peacetime decade from 1850 onwards except for the 1950s and 1960s. Alternatively, as we can see in Table 1 (p. 779), average unemployment in the 1980s and 90s is higher, generally much higher, than in the 1960s in every country considered. Why this is so is one of the questions which underlies this paper. A second question, which is also illustrated in the unemployment numbers presented in Table 1 (p. 779), concerns the causes of the enormous variation in unemployment rates across the OECD countries? As we shall see, these are difficult questions. The first, in particular, is one for which we do not have a complete answer. By this, I do not mean that we do not have theories which are broadly consistent with these numbers. In fact, we have theories consistent with more or less any numbers. What we lack is a satisfactory empirical explanation of the time series pattern of OECD unemployment. In what follows, we remain focused on these two questions, first considering the theoretical background and then looking at some possible answers. We finish with some speculative conjectures on the first question.

The Marginal Utility of Income

In normative public economics it is crucial to know how fast the marginal utility of income declines as income increases. One needs this parameter for cost-benefit analysis, for optimal taxation and for the (Atkinson) measurement of inequality. We estimate this parameter using four large cross-sectional surveys of subjective happiness and two panel surveys. Altogether, the data cover over 50 countries and time periods between 1972 and 2005. In each of the six very different surveys, using a number of assumptions, we are able to estimate the elasticity of marginal utility with respect to income. We obtain very similar results from each survey. The highest (absolute) value is 1.34 and the lowest is 1.19, with a combined estimate of 1.26. The results are also very similar for subgroups in the population. We also examine whether these estimates (which are based directly on the scale of reported happiness) could be biased upwards if true utility is convex with respect to reported happiness. We find some evidence of such bias, but it is small—yielding a new estimated elasticity of 1.24 for the combined sample.

Chapter 9 Dynamic models of labour demand

Publisher Summary The chapter presents a discussion on the dynamic models of labor demand. A firm does not hire its workforce afresh each day for the reason that it is cheaper not to do so. Hiring and firing generate costs for the firm over and above the weekly wage payment. As it is discussed, these costs ensure that the firms demand for labor depends not only on current exogenous factors but also on the initial size of the workforce and expectations about the future levels of such factors. The firms demand for labor cannot be described by a static model. The chapter examines the theoretical explanations of facts and investigates the extent to which these explanations are consistent with empirical data. The chapter discusses the size and structure of the “adjustment” costs imposed on the firm by turnover. This is an important issue because the structure of these costs is crucial in determining the temporal pattern of labor demand in response to exogenous shocks. This is followed by analyses of a number of dynamic models of the demand for labor. The chapter also discusses the formulation of empirical models and presents some of the limited amount of empirical work, which is explicitly based on a formulated dynamic theory. The chapter concludes with some general remarks on the directions in which research in this area might proceed.

INSIDER FORCES AND WAGE DETERMINATION

This paper attempts to assess the relative importance of firm-specific factors (i.e., insider forces) in wage determination. Using firm-level data on 219 UK companies over the period 1974-82, it finds that a 1% rise in a firms prices or productivity relative to the aggregate economy leads to a rise in relative wages of 0.1-0.2%. As a corollary to this, outside factors such as the aggregate wage and the unemployment rate also play an important role. There is evidence for hysteresis effects based on insider forces, but these are inversely related to the extent to which firms take national agreements into account.

The rise in unemployment: a multi-country study

One of the most remarkable features of recent economic history has been the remorseless rise in unemployment throughout the industrialized countries. However, while the trend to higher unemployment is universal, the experience of individual countries also differs widely. The increase is especially marked within the European Community, where unemployment rates rival those reached in the interwar years. By contrast, in the Scandinavian countries and japan unemployment is lower and has risen very much less. Experience in the United States lies somewhere between these extremes, and in the last few years unemployment there has fallen sharply.

Unemployment: A Survey

This paper presents a survey of the economics of unemployment. It covers competitive and imperfect competition models, the role of different methods of wage determination, and explanation of postwar unemployment patterns in the OECD countries. Copyright 1990 by Royal Economic Society.

An Investigation of the Determinants of Manufacturing Employment in the United Kingdom

In this paper we present and estimate an adjustment cost model of industry employment which takes explicit account of both expectations and aggregation over different labour types. The resulting model is subject to a large number of tests and is a highly robust representation of the data. Finally forecasts are produced for manufacturing employment up to 1990.