L22 - Firm Organization and Market StructureReturn

Using a macro-level dataset covering 173 countries from 2000 to 2020, this study is the first attempt to examine how income diversification and market concentration are related to bank stability. Firstly, we document that bank stability is positively related to revenue diversification, suggesting that banks are more stable when they are more engaged in non-traditional activities. Secondly, market concentration is positively associated with bank stability, in line with the concentration-stability hypothesis that banks in a highly concentrated banking system are more likely to be more stable. Thirdly, we show that market concentration modifies the link between revenue diversification and bank stability. Specifically, it is shown that diversified banks are more stable in a more concentrated environment compared to those on a less concentrated market. These results are robust to multiple regression specifications with different proxies for bank stability and income diversification.

The present paper investigates the use of national wage settings as a mechanism to deter entry via foreign direct investment (FDI) in a unionized monopoly industry. A union which sets centralized wages in a multi-unit firm can both decentralize and change the agenda to prevent the market entry of a non-unionized firm. The adoption of the efficient bargaining agenda is especially effective to deter entry because it lowers the fixed-cost threshold the entrant can bear. Moreover, through side-payments, the incumbent and the union can have common interests in modifying the wage setting to reach outcomes that is Pareto-superior to duopoly. However, if the union cedes "too much power" and becomes "too weak", internal conflicts with the incumbent firm may arise.

This paper incorporates hierarchical structure into the neoclassical theory of the firm. Firms are hierarchical in two respects: the organization of workers in production and the wage structure. The firm's hierarchy is represented as a sector of a circle, where the radius represents the hierarchy's height, the width of the sector represents the breadth of the hierarchy at a given height, and the angle of the sector represents the span of control. A perfectly competitive firm chooses height and width, as well as capital, in order to maximize profit. We analyse the short-run and long-run impact of changes in scale economies, input substitutability, and input and output prices on the firm's hierarchical structure. We find that the firm grows as the specialization of its workers increases or as its output price increases relative to input prices. The effect of changes in scale economies is contingent on the price of output. The model also brings forth an analysis of wage inequality within the firm, which is found to be independent of the firm's hierarchical organization of workers, and only depends on the firm's wage schedule.

This paper analyzes development of the ownership structures in Czech voucher-privatized firms during 1996 - 1999. The period can be characterized by increasing ownership concentration uniformly across all categories of owners with exception of banks. Within frequent changes uncovered by cluster analysis, higher ownership concentration was found to preserve itself. In general, investment funds and portfolio companies recorded the highest average concentration increase. Industrial companies and individual owners were found to be the most stable type of owner. Sector perspective shows that while in 1996 the firms do not exhibit excessive differences among sector specific attributes with respect to the proportion of stake held, in 1999 they do.