Industrial organisation

Samuel Bowles, 21 April 2018

Few economists doubt that Marx flunked economics, a judgement mostly based on his labour theory of value. But this column argues that Marx’s representation of the power relationship between capital and labour in the firm is an essential insight for understanding and improving modern capitalism. Indeed, this insight is incorporated into standard principal–agent models of labour and credit markets.

Koen De Backer, Sébastien Miroudot, Davide Rigo, 19 April 2018

Multinational enterprises that produce goods rely on services to organise their value chain, so barriers to investment in services are likely to affect their production. The column uses a new and comprehensive OECD database to measure the share of services in the exports of multinational enterprises, and also in the output of their foreign affiliates. The results suggest that policymakers may need to focus more on the services that support manufacturing industries.

Kun Jiang, Wolfgang Keller, Larry D. Qiu, William Ridley, 15 April 2018

China’s government mandates that foreign investors in certain industries form joint ventures with a domestic Chinese partner. The column uses a dataset accounting for all joint ventures in China from 1998 to 2007 to show that this policy is successful in its aim of encouraging technology transfer from foreign investors to domestic operations. It finds empirical evidence for the existence of at least three channels through which this transfer takes place.

Giorgio Barba Navaretti, Giacomo Calzolari, Alberto Pozzolo, 01 March 2018

Financial technology companies have spurred innovation in financial services while fostering competition amongst incumbent players. This column argues that although incumbents face rising competitive pressure, they are unlikely to be fully replaced by FinTechs in many of their key functions. Traditional banks will adapt to technological innovations, and the scope for regulatory arbitrage will decline.

Pieter Gautier, Arjen Siegmann, Aico van Vuuren, 27 February 2018

In 2005, flat-fee real estate brokers entered the Dutch housing market, charging a substantially lower up-front fee than the average traditional brokers’ fee based on sale price. This column uses house sale data to demonstrate that flat-fee agents sell properties faster, and at an average price that is 2.7% higher than traditional agents. This suggests that the profits of traditional brokers are at least partly driven by rents, rather than performance.

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