Higher Exit Rates Research Articles

From One-and-Done to Seasoned Veterans: A Demographic Analysis of Individual Career Length in Major League Soccer

Although there is a modest amount of literature analyzing the career prospects of athletes in United States (U.S.) based football, basketball, and baseball leagues, little is known about the career prospects of professional soccer players in the U.S. In our analysis of Major League Soccer players, using a sample of approximately 1,100 players and 3,435 player-year observations, we identify the time-varying and time-constant variables that affect player career duration. Initial career expectancy was 2.4 years, more than a quarter of all players exit the league after one year, and the risks of career exit never fall below 12%. In addition, relative to U.S.-born players, foreign-born players face a disproportionately high exit rate.

Market concentration and new venture survival in static v dynamic industries

We propose that the effect of market concentration on firm survival is different according to whether an industry is static (low entry and exit) or dynamic. In our empirical analysis, we find support for this hypothesis. Industry concentration rates reduce the survival of new plants, but only in markets marked by low entry and exit rates. Specifically, a 10% increase in the five-firm concentration ratio in a dynamic market raises the survival rate of new ventures by approximately 2%. Our results have implications for the antitrust/competition law indicating less need for regulation of dominant firms in dynamic industries characterised by high entry and exit rates. We use a unique dataset comprising the population of new ventures that enter the UK market in 1998.

Gender differences in entrepreneurial choice and risk aversion – a decomposition based on a microeconometric model

Why are female entrepreneurs so rare? In Germany, women exhibit both a lower entry rate into and higher exit rate from self-employment. To explain this gender gap, this study estimates a structural microeconometric model of transition rates that includes a standard risk aversion parameter. Inputs into the model are the expected value and variance of earnings from self-employment and dependent employment, estimated separately by gender and accounting for nonrandom selection into self-employment. The gender differential in the transition rates is decomposed using a novel extension of the Blinder–Oaxaca technique for nonlinear models. Women's higher estimated risk aversion explains the largest part of their higher exit rate but only a small portion of their lower entry rate.

Gender Differences in Entrepreneurial Choice and Risk Aversion: A Decomposition Based on a Microeconometric Model

Why are female entrepreneurs so rare? Women have both to a lower entry rate into self-employment and a higher exit rate in Germany. To explain the gender gap, a structural microeconometric model of the transition rates is estimated, which includes a standard risk aversion parameter. As inputs into the model, the expected value and variance of earnings from self-employment and dependent employment are estimated separately by gender, accounting for non-random selection into the employment states. The gender differential in the transition rates is decomposed using a novel extension of the Blinder-Oaxaca technique for nonlinear models. Women's higher estimated risk aversion is found to explain the largest part of their higher exit rate, but only a small part of their lower entry rate.

Impact of market deregulation on the competitiveness of commercial milk producers in East Griqualand: a unit cost ratio (UCR) analysis: 1983–2006

This study investigates the impact of dairy market deregulation on the competitiveness of milk producers who comprise the East Griqualand (EG) study group in KwaZulu-Natal and the Eastern Cape Province of South Africa. The study uses a microeconomic approach, the unit cost ratio (UCR) method of competitiveness analysis, to assess changes in the relative competitiveness of EG milk producers from 1983–2006. Findings of previous research indicate that dairy market deregulation in the 1980s and 1990s caused lower real milk producer prices, increased uncertainty and higher exit rates in the South African dairy industry. Results of the UCR analysis suggest that EG milk producers were not competitive based on the net local price received for milk but were competitive when dairy cattle trading income was included. This suggests that dairy cattle trading income played an important role in enhancing the profitability of EG dairy enterprises in the study period. Further UCR analysis revealed that the top one-third of EG milk producers were relatively competitive from 1983–2006 due to higher real milk prices and lower unit costs. A panel data study of individual EG milk producers could be used to identify other important factors affecting milk producer competitiveness over time.

Racial differences in self-employment exits

Using detailed work history data in the 1979 National Longitudinal Survey of Youth, I investigate the reasons behind the racial gap in self-employment. My analysis of an “age uniform” sample of men, all of whom are observed from age 22 to 40 years, reveals that racial differences in cross-sectional self-employment rates are largely due to the fact that minority workers’ self-employment spells are relatively short-lived. Moreover, I find that minority workers’ relatively high exit rates are driven primarily by transitions to nonemployment. Estimates from a multinomial logit model of self-employment exits suggest that minority workers’ weak attachment to the labor market prior to entering self-employment is an important determinant of their transition from self-employment to nonemployment, while lack of prior industry and self-employment experience contributes to minorities’ transitions to wage employment. When I assign blacks and Hispanics the same (mean) work histories as whites, the predicted black–white gap in the first-year self-employment survival rate decreases by 31% and the Hispanic–white gap decreases by 14%.

Contracting and Firm Survival in Nascent Markets Enabled by Information Technology

Application service providers (ASP), who host and maintain Information Technology (IT) applications across the Internet, emerged as an innovation in the way IT services are delivered to client firms. In spite of many potential benefits to user firms, ASPs experienced business failure and high rates of exit. Drawing upon agency theory, we argue that the failure rates of ASPs can be explained by the efficiency in contracting arrangements between ASPs and client organizations. To test these predictions, we construct a unique dataset combining multiple sources that allows us to track each ASP from the year of founding through the beginning of 2006. We show that contractual misalignment, or adopting inefficient contracts, significantly lowers the probability of survival of service providers in the ASP marketplace. The impact of misalignment is particularly severe when coupled with adjustment costs that impede the transition to aligned contracts. To account for the heterogeneity in ASPs' knowledge of contracting, we test for endogenous self-selection of ASPs in the relationship between contractual misalignment and survival. Our results are robust to a variety of model specifications as well as alternate explanations of survival from industrial organization, organizational ecology and the resource-based view of the firm.

EXITS FROM HOMEOWNERSHIP: THE EFFECTS OF RACE, ETHNICITY, AND INCOME*

ABSTRACT This paper examines the extent to which populations experiencing low homeownership rates in the U.S. also experience high homeownership exit rates. We determine whether low‐income Hispanic and black households that achieve homeownership are as likely as white and high‐income households to sustain it. Using the Panel Study of Income Dynamics spanning the years 1970–2005, we find that low‐income homeowners consistently have higher homeownership exit rates, Hispanic households have higher raw exit rates prior to but not subsequent to 1997, and a black/white sustainability gap appears to arise post‐1997.

Entry and Exit in the Nonprofit Sector

Abstract We study the entry and exit dynamics of nonprofit public charities using 1989-2003 tax return data. The observed patterns can be understood using a dynamic industry model based on Jovanovic (1982) that incorporates profit-deviation and a non-redistribution constraint. Both features generate a high exit threshold which implies high net entry rates and low exit rates. The data reveal that nonprofit gross entry rates are lower than those of for-profits in services, while extremely low exit rates (across both sectors and time) result in net entry rates nearly 3 times larger than that of for-profit firms. We find that the behavior of new public charities is remarkably similar to that found in studies of private firms (e.g. new firms begin smaller than the industry mean, but grow faster). However, exit patterns diverge sharply. Besides relatively low exit rates, the survival rate of new nonprofit firms greatly exceeds those found in studies on services and manufacturing. In addition we find that the hazard rate of exit declines with age and size, and with size conditional on age.

The Effects of Entry Strategy and Inter-Firm Trust on the Survival of Japanese Manufacturing Subsidiaries in Brazil

This paper examines the effects of entry strategy and inter-firm trust on the survival of overseas subsidiaries in an emerging market, recognizing different types of firm exit, levels of ownership equity and types of joint venture in the analysis. The findings demonstrate that international joint ventures are more likely to be exited than wholly owned subsidiaries, though the high exit rate is due to capital divestiture, not firm closure. Further, when controlling for different levels of equity ownership and considering other types of joint ventures, only subsidiaries with minority equity ownership show a higher likelihood of divestment than other entry modes. Concerning inter-firm trust, the results suggest that partners having prior partnership experience will experience less exiting than first-time alliance partners. A sample of 224 Japanese manufacturing subsidiaries established in Brazil over 1989–2003 provides empirical evidence for this study.

Foreign-Owned Plants and Job Security

We investigate the hypothesis that workers in foreign-owned establishments face greater job insecurity. Using linked employer employee data from Germany, we examine whether foreign-owned establishments are more likely to exit production, and whether workers in foreign-owned establishments face higher separation rates, net of establishment exit. We find that, after controlling for the different characteristics of foreign and domestic establishments, foreign establishments have higher exit rates and higher separation rates, but the effect is quantitatively small. In contrast, foreign-owned establishments which do not export appear to have considerably higher exit rates and separation rates.

What does certification tell us about teacher effectiveness? Evidence from New York City

We use six years of panel data on students and teachers to evaluate the effectiveness of recently hired teachers in the New York City public schools. On average, the initial certification status of a teacher has small impacts on student test performance. However, among those with the same experience and certification status, there are large and persistent differences in teacher effectiveness. Such evidence suggests that classroom performance during the first two years is a more reliable indicator of a teacher's future effectiveness. We also evaluate turnover among teachers by initial certification status, and the implied impact on student achievement of hiring teachers with predictably high turnover. Given modest estimates of the payoff to experience, even high turnover groups (such as Teach for America participants) would have to be only slightly more effective in each year to offset the negative effects of their high exit rates (I2, J24).

Footloose Multinationals in Belgium?

Using firm level panel data for the years 1996-2001, covering all sec- tors of the economy, the impact of multinational ownership on the exit decisions of firms located in Belgium is estimated. In this analysis, I clearly distinguish for nationality of ownership, allowing for differences between firms that are foreign- owned and multinationals rooted in the domestic economy. Controlling for vari- ous firm- and industry-specific factors, it is found that while foreign multination- als are more likely to shut down operations compared to national firms in both manufacturing and service sectors, domestic multinationals only exhibit signifi- cantly higher exit rates in the manufacturing industries. The analysis has import- ant policy implications, especially in terms of the desirability of the large impact of multinational firms on employment and output generation in Belgium. JEL no. D21, F23, L20, L25

Product Strategies and Survival in Schumpeterian Environments: Evidence from the US Security Software Industry

This paper seeks to explore the drivers of survival in environments characterized by high rates of entry and exit, fragmented market shares, rapid pace of product innovation and proliferation of young ventures. The paper aims to underscore the role played by post-entry product strategies, along with their interaction, after carefully controlling for `at entry' factors and demographic conditions. Based on a population of 270 firms that entered the US security software industry between 1989 and 1998, we find evidence that surviving entities are those that are more aggressive in the adoption of versioning and portfolio broadening strategies. In particular, focusing on any one of these two strategies leads to a higher probability of survival as opposed to adopting a mixed strategy.

Firm exits as a determinant of new entry: Is there evidence of local creative destruction?

This study posits that a local process of creative destruction provides an impetus to regional industrial renewal. We argue that exits of older firms release resources that stimulate local entry. New entrants add value to these resources by redeploying them in more productive uses. We test our hypotheses with a unique longitudinal database encompassing the entry and exit of Canadian manufacturing enterprises. We find that exits of old firms increase entry and that on average new entrants are more productive. Persistent high local rates of exit, however, deter entry.

Homeownership and Labour Market Behaviour: Interpreting the Evidence

This paper reviews the empirical research that has been generated by Oswald's thesis, which claims that there is a causal relationship from homeownership to unemployment. The literature confirms a decreasing effect of homeownership on geographical mobility of workers, but does not in general confirm that homeowners have longer unemployment spells or higher unemployment rates. Even though this finding is related to heterogeneity in the labour force and associated selectivity effects, there are clear indications that there is also an effect of homeownership on the search for jobs on the local labour market, especially for highly leveraged homeowners. To offer an integrated representation of the various forces at work, this paper proposes an umbrella model with endogenous search intensity that is consistent with much of the empirical evidence. In particular, it predicts lower geographical mobility of homeowners as well as higher exit rates from unemployment - by acceptance of jobs on the local labour market.

Plant Turnover and Structural Reforms in Colombia

In a healthy economy, plant turnover increases aggregate productivity because efficient producers are more likely to survive. Given high entry and exit rates and the potential importance of turnover in accounting for aggregate productivity, in this paper we examine the determinants of plant exits and then examine how exits and other forms of output reallocation contribute to aggregate productivity. Using a unique plant-level longitudinal data set for Colombia for the period 1982-98, we examine the role of productivity and demand as well as input costs in determining plant exits. Moreover, given the important structural reforms introduced in Colombia during the early 1990s, we explore whether and how plant survival changed after these reforms. Our data permit measurement of plant-level quantities and prices, which allows us to decompose productivity and demand shocks and, in turn, to estimate the effects of these fundamentals on plant exit. We find that higher productivity, higher demand, and lower input prices decrease the probability of plant exit. We also find that the importance of physical efficiency and costs in determining exits increases after the introduction of structural reforms. Finally, a decomposition of aggregate productivity suggests that reallocation through entry and exit is important in accounting for the increase in aggregate productivity after the introduction of structural reforms. Copyright 2006, International Monetary Fund

Gezondheid en vervroegde uittrede in België

The impact of health status on early retirement in Belgium The impact of health status on early retirement in Belgium The relation between health condition and early labor market exit plays an important role in the current welfare debate, both from an academic and a policy perspective. This article looks into the relationship between health status and other predictors of early exit on the bases of administrative panel data for Belgium. We model early exit using an event history analysis and a proportional hazard model. We study the impact of health controlling for company, family and individual characteristics. Our findings confirm that a chronic bad health condition is an important trigger for early exit for men and women. The higher exit rates among blue-collar workers in the private sector is to a large extent due to the health condition within these groups. Our results show that the company size, the sector of employment, the wage level and the absence of child load increase early exit. Furthermore partners do tune their early exit behavior.

Modelling Entrepreneurship: Unifying The Equilibrium and Entry/Exit Approach

Two approaches can be distinguished with respect to modelling entrepreneurship: (i) the approach focusing on the net development of the number of entrepreneurs in an equilibrium framework and (ii) the approach focusing on the entries and exits of entrepreneurs. In this paper we unify these approaches to arrive at a model explaining the equilibrium and actual number of entrepreneurs and the entry and exit rate of entrepreneurs simultaneously and consistently. We apply our unified approach to the Netherlands using self-employment data for the 1960–1999 period. We find error-correction of about 20% per year and a very different situation in terms of disequilibrium before and after the early 1980s. Periods of high unemployment appear to be characterized by both high entry and high exit rates.

Welfare Regimes and Poverty Dynamics: The Duration and Recurrence of Poverty Spells in Europe

This article seeks to evaluate how well the different welfare states of Europe perform in terms of preventing recurrent and persistent income poverty and what household and individual characteristics influence poverty duration. Because we use cross-national data on longitudinal poverty, we are able to increase our understanding of the effect of the institutional context within which poverty occurs. We show that country welfare regimes strongly influence long-run poverty, with social democratic countries reducing the level of persistent and recurrent poverty. Liberal and Southern European regime countries have both higher rates and longer durations of poverty. Despite their dissimilar patterns of poverty duration, European welfare states display rather similar patterns of exit from poverty, once we control for duration. There is some evidence that high initial exit rates from poverty in social democratic and corporatist countries decrease quickly whereas those in liberal and Southern European countries remain high, which could suggest lower levels of incentives in the former.