Working Papers
|
Technological Change and the Make-or-Buy Decision, with Ann Bartel and Nachum Sicherman, The Journal of Law, Economics, & Organization, forthcoming.
A central decision faced by firms is whether to make intermediate components internally or to buy them from specialized producers. We argue that firms producing products for which rapid technological change is characteristic will benefit from outsourcing to avoid the risk of not recouping their sunk cost investments when new production technologies appear. This risk is exacerbated when firms produce for low volume internal use, and is mitigated for those firms which sell to larger markets. Hence, products characterized by higher rates of technological change will be more likely to be produced by mass specialized firms to which other firms outsource production. Using a 1990-2002 panel dataset on Spanish firms and an exogenous proxy for technological change, we provide causal evidence that technological change increases the likelihood of outsourcing.
Using Elicited Choice Probabilities to Estimate Random Utility Models: Preferences for Electricity Reliability
with Asher Blass and Charles Manski, International Economic Review, May 2010.
When data on actual choices are not available, researchers studying preferences sometimes pose choice scenarios and ask respondents to state the actions they would choose if they were to face these scenarios. The data on stated choices are then used to estimate random utility models, as if they are data on actual choices. Stated choices may differ from actual ones because researchers typically provide respondents with less information than they would have facing actual choice problems. Elicitation of choice probabilities overcomes this problem by permitting respondents to express uncertainty about their behavior. This paper shows how to use elicited choice probabilities to estimate random utility models with random coefficients and applies the methodology to estimate preferences for electricity reliability in Israel.
Incentives and Invention in Universities
with Mark Schankerman, RAND Journal of Economics, summer 2008, 403-433.
Using data on U.S. universities, we show that universities that give higher royalty shares to faculty scientists generate greater license income, controlling for university size, academic quality,research funding and other factors. We use pre-sample data on university patenting to control for the potential endogeneity of royalty shares. We find that scientists respond both to cash royalties and to royalties used to support their research labs, suggesting both pecuniary and intrinsic (research) motivations. The incentive effects appear to be larger in private universities than in public ones, and we provide survey evidence indicating this may be related to diferences in the use of performance pay, government constraints, and local development objectives of technology license of ces. Royalty incentives work both by raising faculty effort and sorting scientists across universities. The effect of incentives works primarily by increasing the quality (value) rather than the quantity of inventions.
Small Price Changes and Menu Costs
with Daniel Tsiddon, special issue on "Price Flexibility: Theory and Evidence", Managerial and Decision Economics, October 2007.
We find that while some individual price changes are indeed ‘small’, the average price change of different products within a store in any given month is not. Moreover, the smaller the price change of an individual product, the larger the average price change of the remaining products sold by the store. We argue that these findings are consistent with extensions of menu cost models of price-setting behavior to multiproduct firms when these firms have high average costs and low marginal costs of changing prices.
Immigration and Prices
Journal of Political Economy, August 2007.
This paper examines the behavior of prices following the unexpected arrival of a large number of Former Soviet Union (FSU) immigrants to Israel during 1990. I use store-level price data on 915 CPI products to show that the increase in aggregate demand prompted by the arrival of the FSU immigration significantly reduced prices during 1990. Controlling for native population size, city and month effects, a one percentage point increase in the ratio of immigrants to natives in a city decreases prices by 0.5 percentage point on average. It is argued that this negative immigration effect is consistent with the arrival of new consumers -- the FSU immigrants -- having higher price elasticities and lower search costs than the native population. Thus, immigration can have a moderating effect on inflation through its direct effect on product markets, and not only by increasing the supply of labor.
Royalty Sharing and Technology Licensing in Universities
with Mark Schankerman, Journal of the European Economic Association 2, April-May 2004, 252-264.
Existence and Persistence of Price Dispersion: an Empirical Analysis
Review of Economics and Statistics, 2002, 433-444.
Do R&D Subsidies Stimulate or Displace Private R&D? Evidence from Israel Journal of Industrial Economics, 2002, 369-390.
Labor Productivity in Israel Manufacturing Sector, 1990-1994
Bank of Israel Review, 72, 1999, 23-49.
Is Learning-by-Exporting Important? Micro-dynamic Evidence from Colombia, Mexico and Morocco
with Sofornis Clerides and Jim Tybout, Quarterly Journal of Economics 1998, 903-947.
Product Innovation and the Business Cycle
with Boyan Jovanovic, International Economic Review, 1997, 3-22.
Staggering and Synchronization in Price-Setting: Evidence from Multiproduct Firms
with Daniel Tsiddon, American Economic Review 1996, 1175-1196.
R&D, Investment and Industry Dynamics
with Rafi Rob, Journal of Economics and Management Strategy 1996, 217-249.
Better Late than Early: Vertical Differentiation in the Adoption of a New Technology
with Prajit Dutta and Aldo Rustichini, Journal of Economics and Management Strategy 1995, 563-589.
Patents and Productivity growth at the Industry Level: A First Look
Economics Letters 1995, 101-108.
The Effects of Expected and Unexpected Inflation on the Variability of Relative Prices
with Daniel Tsiddon, Economics Letters 1993, 53-56.
Decomposition of Variables and Correlated Measurement Errors
International Economic Review 1993, 715-725
The Behavior of Prices and Inflation: An Empirical Analysis of Disaggregated Price Data
with Daniel Tsiddon, Journal of Political Economy 1992, 349-389.
Search Unemployment in an Overlapping Generations Setting
with Oded Galor, International Economic Review 1990, 409-419.
Entry, Exit, and Diffusion with Learning by Doing
with Boyan Jovanovic, American Economic Review 1989, 690-699.
Dynamics of R&D and Investment in the Scientific Sector
with Mark Schankerman, Journal of Political Economy 1989, 880-904
A central decision faced by firms is whether to make intermediate components internally or to buy them from specialized producers. We argue that firms producing products for which rapid technological change is characteristic will benefit from outsourcing to avoid the risk of not recouping their sunk cost investments when new production technologies appear. This risk is exacerbated when firms produce for low volume internal use, and is mitigated for those firms which sell to larger markets. Hence, products characterized by higher rates of technological change will be more likely to be produced by mass specialized firms to which other firms outsource production. Using a 1990-2002 panel dataset on Spanish firms and an exogenous proxy for technological change, we provide causal evidence that technological change increases the likelihood of outsourcing.
Using Elicited Choice Probabilities to Estimate Random Utility Models: Preferences for Electricity Reliability
with Asher Blass and Charles Manski, International Economic Review, May 2010.
When data on actual choices are not available, researchers studying preferences sometimes pose choice scenarios and ask respondents to state the actions they would choose if they were to face these scenarios. The data on stated choices are then used to estimate random utility models, as if they are data on actual choices. Stated choices may differ from actual ones because researchers typically provide respondents with less information than they would have facing actual choice problems. Elicitation of choice probabilities overcomes this problem by permitting respondents to express uncertainty about their behavior. This paper shows how to use elicited choice probabilities to estimate random utility models with random coefficients and applies the methodology to estimate preferences for electricity reliability in Israel.
Incentives and Invention in Universities
with Mark Schankerman, RAND Journal of Economics, summer 2008, 403-433.
Using data on U.S. universities, we show that universities that give higher royalty shares to faculty scientists generate greater license income, controlling for university size, academic quality,research funding and other factors. We use pre-sample data on university patenting to control for the potential endogeneity of royalty shares. We find that scientists respond both to cash royalties and to royalties used to support their research labs, suggesting both pecuniary and intrinsic (research) motivations. The incentive effects appear to be larger in private universities than in public ones, and we provide survey evidence indicating this may be related to diferences in the use of performance pay, government constraints, and local development objectives of technology license of ces. Royalty incentives work both by raising faculty effort and sorting scientists across universities. The effect of incentives works primarily by increasing the quality (value) rather than the quantity of inventions.
Small Price Changes and Menu Costs
with Daniel Tsiddon, special issue on "Price Flexibility: Theory and Evidence", Managerial and Decision Economics, October 2007.
We find that while some individual price changes are indeed ‘small’, the average price change of different products within a store in any given month is not. Moreover, the smaller the price change of an individual product, the larger the average price change of the remaining products sold by the store. We argue that these findings are consistent with extensions of menu cost models of price-setting behavior to multiproduct firms when these firms have high average costs and low marginal costs of changing prices.
Immigration and Prices
Journal of Political Economy, August 2007.
This paper examines the behavior of prices following the unexpected arrival of a large number of Former Soviet Union (FSU) immigrants to Israel during 1990. I use store-level price data on 915 CPI products to show that the increase in aggregate demand prompted by the arrival of the FSU immigration significantly reduced prices during 1990. Controlling for native population size, city and month effects, a one percentage point increase in the ratio of immigrants to natives in a city decreases prices by 0.5 percentage point on average. It is argued that this negative immigration effect is consistent with the arrival of new consumers -- the FSU immigrants -- having higher price elasticities and lower search costs than the native population. Thus, immigration can have a moderating effect on inflation through its direct effect on product markets, and not only by increasing the supply of labor.
Royalty Sharing and Technology Licensing in Universities
with Mark Schankerman, Journal of the European Economic Association 2, April-May 2004, 252-264.
Existence and Persistence of Price Dispersion: an Empirical Analysis
Review of Economics and Statistics, 2002, 433-444.
Do R&D Subsidies Stimulate or Displace Private R&D? Evidence from Israel Journal of Industrial Economics, 2002, 369-390.
Labor Productivity in Israel Manufacturing Sector, 1990-1994
Bank of Israel Review, 72, 1999, 23-49.
Is Learning-by-Exporting Important? Micro-dynamic Evidence from Colombia, Mexico and Morocco
with Sofornis Clerides and Jim Tybout, Quarterly Journal of Economics 1998, 903-947.
Product Innovation and the Business Cycle
with Boyan Jovanovic, International Economic Review, 1997, 3-22.
Staggering and Synchronization in Price-Setting: Evidence from Multiproduct Firms
with Daniel Tsiddon, American Economic Review 1996, 1175-1196.
R&D, Investment and Industry Dynamics
with Rafi Rob, Journal of Economics and Management Strategy 1996, 217-249.
Better Late than Early: Vertical Differentiation in the Adoption of a New Technology
with Prajit Dutta and Aldo Rustichini, Journal of Economics and Management Strategy 1995, 563-589.
Patents and Productivity growth at the Industry Level: A First Look
Economics Letters 1995, 101-108.
The Effects of Expected and Unexpected Inflation on the Variability of Relative Prices
with Daniel Tsiddon, Economics Letters 1993, 53-56.
Decomposition of Variables and Correlated Measurement Errors
International Economic Review 1993, 715-725
The Behavior of Prices and Inflation: An Empirical Analysis of Disaggregated Price Data
with Daniel Tsiddon, Journal of Political Economy 1992, 349-389.
Search Unemployment in an Overlapping Generations Setting
with Oded Galor, International Economic Review 1990, 409-419.
Entry, Exit, and Diffusion with Learning by Doing
with Boyan Jovanovic, American Economic Review 1989, 690-699.
Dynamics of R&D and Investment in the Scientific Sector
with Mark Schankerman, Journal of Political Economy 1989, 880-904