Glenn Macdonald - Academia.edu (original) (raw)
Papers by Glenn Macdonald
The initial expansionary phase of the business cycle appears to be characterized by what commenta... more The initial expansionary phase of the business cycle appears to be characterized by what commentators have labelled a puzzling "jobless recovery" phase i.e., rapid growth in productivity (and output) with relatively sluggish expansion in employment. We demonstrate that a jobless recovery is a natural byproduct of an economy where: [1] technological advancements favor some sectors relatively more than other sectors; [2] technology diffuses slowly; and [3] the sectoral reallocation of labor takes time.
Journal of Political Economy, 1994
The usual explanation for why the producers of a given product use different technologies involve... more The usual explanation for why the producers of a given product use different technologies involves "vintage-capital": A firm understands the frontier technology, but can still prefer an older, less efficient technology in which it has made specific physical and human capital investments. This paper develops an alternative. "information-barrier" hypothesis: Firms differ in the technologies they use because it is costly
Journal of Political Economy, 1994
Firm numbers first rise, and then fall as the typical industry evolves. This nonmonotonicity in t... more Firm numbers first rise, and then fall as the typical industry evolves. This nonmonotonicity in the number of producers is explained in this paper using a competitive model in which innovation opportunities induce firms to enter, but in which a firm's failure to implement new technology causes it to exit. The model is estimated with data from the U.S. Automobile
Historically, when an economy emerges from recession, employment grows with, or soon after, the r... more Historically, when an economy emerges from recession, employment grows with, or soon after, the resumption of GDP growth. However, following the two most recent recessions in the United States, employment growth has lagged the recovery in GDP by several quarters, a phenomenon thathas been termed the 'jobless recovery.' To many, a jobless recovery defies explanation since it violates both historical
SSRN Electronic Journal, 2000
identi…ed coalitional games as a means of providing precise notions of value to evaluate strategi... more identi…ed coalitional games as a means of providing precise notions of value to evaluate strategic opportunities. In this paper, we show how coalitional game theory can be utilized to operationalize these approaches. In particular, we demonstrate the importance of considering full competitive interactions (rather than simply added value) when applying coalitional game theory and also how this can be employed to provide insights into the workings of an existing economic activity as well as to suggest ways that the activity might be altered to a …rm's advantage. We illustrate with an application in which an innovator considers whether to commercialize a new technology.
Review of Financial Studies, 2011
We study a competitive model in which firm managers differ in terms of ability, and the managers'... more We study a competitive model in which firm managers differ in terms of ability, and the managers' actions are private information. Each firm chooses how able a manager to hire, and optimizes the manager's incentive pay as well as the level of cooperating resources available to the manager. Thus, firm size, managerial talent, and incentives are simultaneously determined in equilibrium. The model can be considered as an amalgam of agency and Superstars, in which the possibility to adjust incentives enhances the firm's ability to provide a more talented manager with greater cooperating resources, and the ability to adjust cooperating resources enables better incentives. For example, the convexity of firm size as a function of the ability of the manager, the focus of the Superstars model, is increased when incentives are optimized. We study both a homogeneous firm model and a heterogenous firm extension, and find that our results are generally stronger when managers and firms match assortatively by managerial ability and firm productivity.
The Quarterly Journal of Economics, 2004
Recent empirical evidence has suggested a positive association between various measures of invest... more Recent empirical evidence has suggested a positive association between various measures of investor protection and financial markets' development, and between financial markets' development and economic growth. We introduce investor protection in a simple extension of the two-period overlapping generations model of capital accumulation and study how it affects economic growth. Investor protection is positively related to risk-sharing. As is standard in models of investment with risk-averse agents, better protection (better risk sharing) results in a larger demand for capital. This is the demand effect. A second effect, which we call the supply effect, follows from general equilibrium restrictions. For a given aggregate capital stock, better protection (i.e. a higher demand schedule) implies a higher interest rate. The aggregate resource constraint then implies lower income for the entrepreneurs (the younger cohort). As a result, current savings and the supply of capital in the following period decrease. It turns out that the strength of the supply effect is greater, the tighter the restrictions on capital flows. Therefore our model predicts that the positive effect of investor protection on growth is stronger for countries with lower restrictions. We find that the data provides some support for this prediction.
Review of Economic Dynamics, 2009
This paper analyzes the evolution of the distributions of output and employment across firms in U... more This paper analyzes the evolution of the distributions of output and employment across firms in U.S. manufacturing industries from 1963 until 1997. The evolutions of the employment and output distributions differ, but display strong inter-industry regularities, including that the nature of the evolution depends whether the industry is experiencing growth, shakeout, maturity, or decline. The observed patterns have implications for theories of industry dynamics and evolution.
Management Science, 2004
H ow does competition among economic actors determine the value that each is able to appropriate?... more H ow does competition among economic actors determine the value that each is able to appropriate? We provide a formal, general framework within which this question can be posed and answered, and then provide several results. Chief among them is a condition that is both required for, and guarantees, value appropriation. We apply our methodology to (i) assess the familiar notion that uniqueness, inimitability, and competition imply value appropriation, and (ii) determine the value appropriation possibilities for an innovator whose unique discovery is of use to several others who can compete for the right to use it.
Journal of Political Economy, 2001
We analyze a multiple‐activity, principal‐agent model in which the activities are naturally subst... more We analyze a multiple‐activity, principal‐agent model in which the activities are naturally substitutable for the agent and complementary for the principal. A basic result is that the optimal compensation must cause the agent to view the activities as complements. This ...
Journal of Political Economy, 1994
Journal of Political Economy, 1985
Page 1. A Rehabilitation of Absolute Advantage Glenn M. MacDonald Ecotnomics Resear/h Center, Nat... more Page 1. A Rehabilitation of Absolute Advantage Glenn M. MacDonald Ecotnomics Resear/h Center, National Opinion Research Center, and Univer sltT of "Western Ontario James R. Markusen l illiversity Of 1'esternt Ontaoio ...
Journal of Political Economy, 1985
... However, this possibility is excluded for the time being, and it is shown in Sec. ... of the ... more ... However, this possibility is excluded for the time being, and it is shown in Sec. ... of the simple model is that the type of product I obtains on winning the patent race cannot be ... that the innovator does have some leeway in determining the charac-teristics of the innovation he obtains. ...
Journal of Political Economy, 2004
Journal of Labor Economics, 1985
Deletion of Observations 125 truncate data points and to assess whether or not any proposed trunc... more Deletion of Observations 125 truncate data points and to assess whether or not any proposed truncation accurately reflects those beliefs. The practice of eliminating some observations from a data set on a variety of arbitrary grounds is extremely widespread in empirical eco- ...
Journal of Economics <html_ent glyph="@amp;" ascii="&"/> Management Strategy, 1994
A model of advertising is presented in which consumption experience is an imperfect indicator of ... more A model of advertising is presented in which consumption experience is an imperfect indicator of product quality. In equilibrium, neither price nor advertising signal the quality of newly introduced goods. Advertising of established products can be a signal of quality, but if it is, it must be an imperfect signal leaving residual uncertainty that influences consumers' repurchase decision. A set of observable implications follow.
Main programs used in generating tha tables and figures for the artcile. Note that data is not in... more Main programs used in generating tha tables and figures for the artcile. Note that data is not included, as it is under the disclosure restrictions of the US Census Bureau.
The initial expansionary phase of the business cycle appears to be characterized by what commenta... more The initial expansionary phase of the business cycle appears to be characterized by what commentators have labelled a puzzling "jobless recovery" phase i.e., rapid growth in productivity (and output) with relatively sluggish expansion in employment. We demonstrate that a jobless recovery is a natural byproduct of an economy where: [1] technological advancements favor some sectors relatively more than other sectors; [2] technology diffuses slowly; and [3] the sectoral reallocation of labor takes time.
Journal of Political Economy, 1994
The usual explanation for why the producers of a given product use different technologies involve... more The usual explanation for why the producers of a given product use different technologies involves "vintage-capital": A firm understands the frontier technology, but can still prefer an older, less efficient technology in which it has made specific physical and human capital investments. This paper develops an alternative. "information-barrier" hypothesis: Firms differ in the technologies they use because it is costly
Journal of Political Economy, 1994
Firm numbers first rise, and then fall as the typical industry evolves. This nonmonotonicity in t... more Firm numbers first rise, and then fall as the typical industry evolves. This nonmonotonicity in the number of producers is explained in this paper using a competitive model in which innovation opportunities induce firms to enter, but in which a firm's failure to implement new technology causes it to exit. The model is estimated with data from the U.S. Automobile
Historically, when an economy emerges from recession, employment grows with, or soon after, the r... more Historically, when an economy emerges from recession, employment grows with, or soon after, the resumption of GDP growth. However, following the two most recent recessions in the United States, employment growth has lagged the recovery in GDP by several quarters, a phenomenon thathas been termed the 'jobless recovery.' To many, a jobless recovery defies explanation since it violates both historical
SSRN Electronic Journal, 2000
identi…ed coalitional games as a means of providing precise notions of value to evaluate strategi... more identi…ed coalitional games as a means of providing precise notions of value to evaluate strategic opportunities. In this paper, we show how coalitional game theory can be utilized to operationalize these approaches. In particular, we demonstrate the importance of considering full competitive interactions (rather than simply added value) when applying coalitional game theory and also how this can be employed to provide insights into the workings of an existing economic activity as well as to suggest ways that the activity might be altered to a …rm's advantage. We illustrate with an application in which an innovator considers whether to commercialize a new technology.
Review of Financial Studies, 2011
We study a competitive model in which firm managers differ in terms of ability, and the managers'... more We study a competitive model in which firm managers differ in terms of ability, and the managers' actions are private information. Each firm chooses how able a manager to hire, and optimizes the manager's incentive pay as well as the level of cooperating resources available to the manager. Thus, firm size, managerial talent, and incentives are simultaneously determined in equilibrium. The model can be considered as an amalgam of agency and Superstars, in which the possibility to adjust incentives enhances the firm's ability to provide a more talented manager with greater cooperating resources, and the ability to adjust cooperating resources enables better incentives. For example, the convexity of firm size as a function of the ability of the manager, the focus of the Superstars model, is increased when incentives are optimized. We study both a homogeneous firm model and a heterogenous firm extension, and find that our results are generally stronger when managers and firms match assortatively by managerial ability and firm productivity.
The Quarterly Journal of Economics, 2004
Recent empirical evidence has suggested a positive association between various measures of invest... more Recent empirical evidence has suggested a positive association between various measures of investor protection and financial markets' development, and between financial markets' development and economic growth. We introduce investor protection in a simple extension of the two-period overlapping generations model of capital accumulation and study how it affects economic growth. Investor protection is positively related to risk-sharing. As is standard in models of investment with risk-averse agents, better protection (better risk sharing) results in a larger demand for capital. This is the demand effect. A second effect, which we call the supply effect, follows from general equilibrium restrictions. For a given aggregate capital stock, better protection (i.e. a higher demand schedule) implies a higher interest rate. The aggregate resource constraint then implies lower income for the entrepreneurs (the younger cohort). As a result, current savings and the supply of capital in the following period decrease. It turns out that the strength of the supply effect is greater, the tighter the restrictions on capital flows. Therefore our model predicts that the positive effect of investor protection on growth is stronger for countries with lower restrictions. We find that the data provides some support for this prediction.
Review of Economic Dynamics, 2009
This paper analyzes the evolution of the distributions of output and employment across firms in U... more This paper analyzes the evolution of the distributions of output and employment across firms in U.S. manufacturing industries from 1963 until 1997. The evolutions of the employment and output distributions differ, but display strong inter-industry regularities, including that the nature of the evolution depends whether the industry is experiencing growth, shakeout, maturity, or decline. The observed patterns have implications for theories of industry dynamics and evolution.
Management Science, 2004
H ow does competition among economic actors determine the value that each is able to appropriate?... more H ow does competition among economic actors determine the value that each is able to appropriate? We provide a formal, general framework within which this question can be posed and answered, and then provide several results. Chief among them is a condition that is both required for, and guarantees, value appropriation. We apply our methodology to (i) assess the familiar notion that uniqueness, inimitability, and competition imply value appropriation, and (ii) determine the value appropriation possibilities for an innovator whose unique discovery is of use to several others who can compete for the right to use it.
Journal of Political Economy, 2001
We analyze a multiple‐activity, principal‐agent model in which the activities are naturally subst... more We analyze a multiple‐activity, principal‐agent model in which the activities are naturally substitutable for the agent and complementary for the principal. A basic result is that the optimal compensation must cause the agent to view the activities as complements. This ...
Journal of Political Economy, 1994
Journal of Political Economy, 1985
Page 1. A Rehabilitation of Absolute Advantage Glenn M. MacDonald Ecotnomics Resear/h Center, Nat... more Page 1. A Rehabilitation of Absolute Advantage Glenn M. MacDonald Ecotnomics Resear/h Center, National Opinion Research Center, and Univer sltT of &quot;Western Ontario James R. Markusen l illiversity Of 1&#x27;esternt Ontaoio ...
Journal of Political Economy, 1985
... However, this possibility is excluded for the time being, and it is shown in Sec. ... of the ... more ... However, this possibility is excluded for the time being, and it is shown in Sec. ... of the simple model is that the type of product I obtains on winning the patent race cannot be ... that the innovator does have some leeway in determining the charac-teristics of the innovation he obtains. ...
Journal of Political Economy, 2004
Journal of Labor Economics, 1985
Deletion of Observations 125 truncate data points and to assess whether or not any proposed trunc... more Deletion of Observations 125 truncate data points and to assess whether or not any proposed truncation accurately reflects those beliefs. The practice of eliminating some observations from a data set on a variety of arbitrary grounds is extremely widespread in empirical eco- ...
Journal of Economics <html_ent glyph="@amp;" ascii="&"/> Management Strategy, 1994
A model of advertising is presented in which consumption experience is an imperfect indicator of ... more A model of advertising is presented in which consumption experience is an imperfect indicator of product quality. In equilibrium, neither price nor advertising signal the quality of newly introduced goods. Advertising of established products can be a signal of quality, but if it is, it must be an imperfect signal leaving residual uncertainty that influences consumers' repurchase decision. A set of observable implications follow.
Main programs used in generating tha tables and figures for the artcile. Note that data is not in... more Main programs used in generating tha tables and figures for the artcile. Note that data is not included, as it is under the disclosure restrictions of the US Census Bureau.