Lower Exit Rates Research Articles

Access to language training and the local integration of refugees

This paper examines whether language classes raise refugees’ language proficiency and improve their socio-economic integration. Our identification strategy leverages the opening, closing, and gradual expansion of local language training centers in Denmark, as well as the quasi-random assignment of the refugees to locations with varying proximity to a language training center. First, we show that refugees’ distance from the assigned language training center is as good as random conditional on initial placement. Second, we show that a one-hour decrease in commuting time increases the total hours of class attended by 46 to 71 hours. Third, we use this novel identification strategy to show that 100 additional hours of language class increases fluency in the Danish language by 8–9 percent, post-language training human capital acquisition by 11–13 percent and improve the integration of the refugees in the communities where they were initially placed, as measured by the lower exit rates from those same communities and an almost 70 percent reduction in mobility to the largest, most immigrant-dense cities in Denmark.

Duration models: determinants of research-based spin-offs survival

Existing literature has shown that research-based spin-off firms usually exhibit lower death risks than other start-ups. However, few studies have focused on the survival determinants of these particular firms. From a matched employer-employee data set this paper fills in this gap by providing evidence using a sample of RBSOs created in Portugal from 1979 until 2007 and observed until 2012. Specifically, we use duration analysis – both accelerated failure time models and proportional hazard models - to investigate if firm characteristics and location characteristics play a role on these firms’ survival. Results from the Weibull model show a positive impact of variables such as firm size and age on these firms’ survival probability as well as the location of spin-offs in municipalities with high entry rates and low exit rates.

Unpacking New Firm Exit

AbstractThis paper unpacks new firm exit in a novel way. It theorizes that, even after controlling for a wide range of human capital and other factors, access to, and the management of, an overdraft facility powerfully influences the exit chances of a new firm. It then unpacks exits, distinguishing between new firms that exit leaving no debts (pure exiters) and those that exit leaving a debt (defaulters). A second distinction is between those exiting in the short‐ and the longer‐run. Using a bank‐based dataset, comprising nearly 6,000 new businesses in England and Wales tracked over a decade, it shows that, although there are similarities, financial management plays an important, but very different, role in explaining exit across the four groups. Overall, new firms with an overdraft have lower exit rates than those without, but the reverse is the case for defaulters. A second finding is that, although exceeding the terms of an overdraft enhances short‐run survival, it lowers survival in the longer‐run. These results highlight the powerful insights provided by private information held by the bank that is not normally available to academic researchers.

A Reply to Campbell and Mau

In Bloom et al. (2016, Bloom, Draca and Van Reenen (BDVR)), we have a set of nine results on the impact of Chinese trade. The first three showed that Chinese trade increased technical change in European firms measured by patents, productivity, and the adoption of Information Technology (IT). The last six showed that Chinese trade led to reallocation towards more technologically advanced firms: those with more patents, higher productivity and IT adoption had faster growth and lower exit rates. Campbell and Mau (2020, “CM”) argue that one of these results, the effect of Chinese imports on patenting, is sensitive to specification changes. This article focuses on CM’s critique of our count data models—we discuss other aspects of CM in a longer response.1

Employee compensation and new venture performance: does benefit type matter?

Using insights from strategic human resource management, we examine how employee benefits affect new venture performance. We hypothesize that two categories of benefits affect new venture performance and might do so differently: benefits that promote stability and flexibility. Using employee benefits data from the Kauffman Firm Survey, we find that new ventures that provide stability benefits—healthcare plans, tuition reimbursement, and retirement plans—have lower rates of exit and higher odds of earning a profit. Conversely, we find that firms that provide flexibility benefits—financial packages, stock ownership, bonus pay, and paid sick and vacation leave—do not affect firm exit rates but, with the exception of stock options, also have higher profits. We use IV methods to control for the possibility of reverse causality—firms that can afford to provide better employee benefits probably have better performance. Our IV results support our findings and suggest that firms that provide better employee benefits have lower exit rates and higher odds of earning a profit.

Capital Requirements in a Quantitative Model of Banking Industry Dynamics

We develop a model of banking industry dynamics to study the quantitative impact of capital requirements on bank risk taking, commercial bank failure, and market structure. We propose a market structure where big, dominant banks interact with small, competitive fringe banks. The paper extends our previous work by letting banks accumulate securities like treasury bills and to undertake short-term borrowing when there are cash flow shortfalls. A nontrivial size distribution of banks arises out of endogenous entry and exit, as well as banks' buffer stocks of securities. We find that a 50% rise in capital requirements leads to a 45% reduction in exit rates of small banks and a more concentrated industry. Aggregate loan supply falls by 8.71% and interest rates rise by 50 basis points. The lower exit rate causes the tax/output rate necessary to fund deposit insurance to drop in half. Higher interest rates, on the other hand, result in a higher default frequency as well as a lower level of intermediated output. We also use the model to study the effect of lowering the rate different sized banks are charged when borrowing on their lending behavior studied by Kashyap and Stein (2001).

Do First- and Second-Generation Migrants Stay Longer in Social Assistance Than Natives in Belgium?

In many European countries, migrants are overrepresented in social assistance. In Belgium, at least 70% of social assistance beneficiaries are first- or second-generation migrants, as natives are often eligible for a social insurance benefit. Lower exit rates among migrants relative to natives could raise concern about the labour market inclusion of beneficiaries, as well as the financial sustainability and solidarity basis of the welfare state. This paper analyses whether migrants remain longer in social assistance than natives and whether migrants vary in their timing of exit by migration-history characteristics. We use longitudinal data from the social assistance administration linked to other administrative sources, including detailed information about migration histories of migrants. Using event history analysis, we track the exits from social assistance for 22,620 beneficiaries in the period June 2005–December 2009. We find that migrants have substantially longer median durations than natives. Controlling for socio-demographic characteristics, benefit and work histories, we find that most migrant groups have (slightly) lower exit rates than natives. Asylum seekers stay substantially longer in social assistance whereas migrants with longer durations of residence have shorter benefit periods than recent migrants. Second-generation migrants do not stay longer in social assistance than natives.

The pleasure of pursuit: recreational hunters in rural Southwest China exhibit low exit rates in response to declining catch.

Hunting is one of the greatest threats to tropical vertebrates. Examining why people hunt is crucial to identifying policy levers to prevent excessive hunting. Overhunting is particularly relevant in Southeast Asia, where a high proportion of mammals and birds are globally threatened. We interviewed hunters in Southwest China to examine their social behavior, motivations, and responses to changes in wildlife abundance. Respondents viewed hunting as a form of recreation, not as an economic livelihood, and reported that they would not stop hunting in response to marked declines in expected catch. Even in scenarios where the expected catch was limited to minimal quantities of small, low-price songbirds, up to 36.7% of respondents said they would still continue to hunt. Recreational hunting may be a prominent driver for continued hunting in increasingly defaunated landscapes; this motivation for hunting and its implications for the ecological consequences of hunting have been understudied relative to subsistence and profit hunting. The combination of a preference for larger over smaller game, reluctance to quit hunting, and weak enforcement of laws may lead to hunting-down-the-web outcomes in Southwest China.

Comparative Analysis of the HRM Practices between Hospitality and Healthcare Sectors in South Kerala

Hospitality and health care sectors have similarities due to service oriented and customer centric approach. The study is aimed to identify and understand the link between hospitality and health care sectors in terms of human resource management practices and how it enriches the business activities. The study is qualitative in nature and a case study was used. Purposive sampling method was used and primary data was collected through direct observation and semi-structured interviews with experts of the five star hotels and super specialty hospitals in South Kerala and secondary data was collected from journals, newspapers, books and internet, etc. Study analyzed that hospitality sector is having well functioned and polished HRM practices compared to health care sector. Each HRM practice is inter-connected and resulted into lower exit rate and better satisfaction of the staff. Proper execution of human resource management practices such as recruitment, selection, induction, training & development, performance appraisal, compensation, employee welfare, grievance mechanism and exit management has a significant role in satisfaction of the employees and performance of the organization. Well functioned HR department and HRM practices will enhance the effectiveness of the staff and that ultimately lead to the best quality service delivery.

Comparative Analysis of the HRM Practices between Hospitality and Healthcare Sectors in South Kerala

Hospitality and health care sectors have similarities due to service oriented and customer centric approach. The study is aimed to identify and understand the link between hospitality and health care sectors in terms of human resource management practices and how it enriches the business activities. The study is qualitative in nature and a case study was used. Purposive sampling method was used and primary data was collected through direct observation and semi-structured interviews with experts of the five star hotels and super specialty hospitals in South Kerala and secondary data was collected from journals, newspapers, books and internet, etc. Study analyzed that hospitality sector is having well functioned and polished HRM practices compared to health care sector. Each HRM practice is inter-connected and resulted into lower exit rate and better satisfaction of the staff. Proper execution of human resource management practices such as recruitment, selection, induction, training & development, performance appraisal, compensation, employee welfare, grievance mechanism and exit management has a significant role in satisfaction of the employees and performance of the organization. Well functioned HR department and HRM practices will enhance the effectiveness of the staff and that ultimately lead to the best quality service delivery.

Female Labour Segregation in the Domestic Services in Italy

Third-country immigrants are over-represented among lower status workers in all EU countries and rarely achieve upward mobility. The present paper aims to analyse the migration trajectories of foreign-born women who entered the Italian labour market as domestic workers, in order to assess the role of personal and group characteristics in determining the chances of leaving this sector. The data were collected as part of a project studying the working trajectories of migrants in Italy. The survey was conducted during 2009 on 13,000 migrants aged 18 and over, living in Italy at the time of the interview and born in high emigration countries. We used a piecewise exponential model with random intercept for citizenship with time measured from the beginning of the person’s first domestic work in Italy. Our results show low exit rates from the domestic sector but we identify personal and group characteristics which facilitate exit from this segment of the labour market. Employment experience, including unskilled, has a positive effect on the transition in the host country, as do education achieved in the country of origin and higher levels of tasks and duties in the last job held in the country of origin, whereas ethnic networks limit access to other occupations. The aims of the women’s migration project include a strong emphasis on occupational mobility, whether they migrate for work or for family reasons. Finally, we find evidence of the existence of a “U-shaped” pattern in occupational mobility for this particular subpopulation of workers.

Capital Requirements in a Quantitative Model of Banking Industry Dynamics

We develop a model of banking industry dynamics to study the quantitative impact of capital requirements on bank risk taking, commercial bank failure, and market structure. We propose a market structure where big, dominant banks interact with small, competitive fringe banks. Banks accumulate securities like Treasury bills and undertake short-term borrowing when there are cash flow shortfalls. A nontrivial size distribution of banks arises out of endogenous entry and exit, as well as banks’ buffer stocks of securities. We test the model using business cycle properties and the bank lending channel across banks of different sizes studied by Kashyap and Stein (2000). We find that a rise in capital requirements from 4% to 6% leads to a substantial reduction in exit rates of small banks and a more concentrated industry. Aggregate loan supply falls and interest rates rise by 50 basis points. The lower exit rate causes the tax/output rate necessary to fund deposit insurance to drop in half. Higher interest rates, however, induce higher loan delinquencies as well as a lower level of intermediated output.

Dynamics of collaboration in university–industry partnerships: do initial conditions explain development patterns?

The aim of this paper is to investigate how research partnerships between firms and universities emerge and evolve over time, focusing on the relationship between initial conditions and development trajectories. Based on literature on alliances and a comparative case study, the paper presents propositions to explore the links between initial conditions, modes of collaboration and development pathways. The empirical study indicates that there is no straightforward link between initial conditions and development of partnerships over time. Being embedded in a network makes it easier to form relationships and has a positive influence of the early, set-up phase of collaboration, but has limited impact on long term development of partnerships. The data also illustrates the weak side of networks; they are efficient mechanism for forming relationships but in some cases represent weak commitment to partnerships over time, leading to low or symbolic firm involvement and high firm exit rates.

Homeownership, Unemployment and Commuting Distances

More than a decade ago Oswald has formulated the thesis that homeownership increases unemployment. Empirical research on micro data has confirmed that unemployed homeowners are less inclined to move house in combination with accepting a new job elsewhere. However, in general for European countries, residential mobility associated with unemployment spells appears to be too small to be able to have a substantial impact on labour market outcomes. The present paper aims to make a new contribution to the scientific debate on Oswald’s thesis by addressing two complementary issues: risk attitudes of job seekers and commuting costs. We show that decreasing absolute risk aversion implies that the exit rate from unemployment is increasing in housing cost in the context of a standard job search model. In a spatial setting this is shown to imply that higher housing costs increase average commuting distances as well. We test these predictions on Dutch register data. Our empirical results show that outright homeowners have lower exit rates from unemployment than renters and are more reluctant to accept long commutes, which confirms Oswald’s thesis. However, highly leveraged homeowners have higher exit rates than renters and are more inclined to accept longer commutes, which confirms earlier findings in the literature.

Does Access to Health Insurance Influence Work Effort Among Disability Cash Benefit Recipients?

There is considerable policy concern about “DI lock” – that tying public health insurance coverage to cash disability benefit receipt contributes to the low exit rates due to work. This concern led Congress to institute continued health insurance eligibility after disability beneficiaries leave the cash-benefit rolls for work-related reasons. However, unlike the long literature on “job lock,” the importance of the DI lock hypothesis – either before or after these extensions – has remained unquantified.This paper tests whether “perceived DI lock” remains among disability beneficiaries, and whether state health insurance policies help alleviate the problem and encourage work among beneficiaries. The analysis includes both DI and SSI beneficiaries and tests if there are differential patterns between the two programs. We exploit state variation in the access and cost of health insurance caused by regulation of the non-group market, the existence of Medicaid buy-in programs, and Medicaid generosity, as well as detailed disability and health insurance program interactions. While we find little evidence overall of persistent DI-lock, heterogeneity is very important in this context. Our estimates suggest that increasing health insurance access does increase the likelihood of positive earnings among a subset of disability beneficiaries. We find evidence of SSI lock among beneficiaries with some Medicaid expenditures and find that both non-group health insurance regulation and generous Medicaid eligibility help alleviate the problem. We find evidence of remaining DI lock among individuals who do not have access to supplemental health insurance outside of Medicare. Medicaid buy-in programs alleviate the remaining DI lock.

Sectoral patterns of firm exit in Italian provinces

There is considerable variation in the firm exit rate across the 103 provinces in Italy. This paper investigates a range of determinants of the exit rate for twelve different sectors in the Italian provinces for a period of eleven years. The analysis shows that the exit rate is positively affected by entry in the previous year (displacement) in the same sector. Previous exit has a different effect for the manufacturing industry as compared to the business services. More specifically, exit persists in manufacturing while in the business services it is rather exit in related sectors in the same province that leads to increased exit, probably due to the loss of clients or suppliers. The presence of industrial districts diminishes exit, especially in two manufacturing sectors (Food and Clothing), Commerce and Transport. Provinces with strong trademark activity appear to have lower exit rates.

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.

Globalisation, Multinationals and Productivity in Japan’s Lost Decade

Myriad hypotheses have been advanced to explain the dismal performance of the post-1990 Japanese economy. In this paper we use plant and firm data to investigate the issue. The low rate of productivity growth in Japan is also often seen as a product of Japanese MNEs offshoring production and shutting plants that are relative to others in their industry, high productivity. We find that this is true, plants shut by MNEs are relatively more productive than the industry average, but they are generally weaker elements of the MNE more generally. This behaviour is also not distinct to MNEs. Our analysis suggests that the rate of productivity growth within firms is also partly a consequence of low entry and exit rates. Generally we find that the determinants of productivity change are similar to those found for other countries, but that productivity improvement is lower in industries in which globalisation is higher. The low rate of entry and exit in Japan therefore means that this affects more firms than would otherwise have been the case.

Self-employment duration in urban and rural locations

Previous research has shown that the local environment is important for self-employment. The dynamics of self-employment varies between areas characterized by different labour market conditions, entrepreneurial traditions and other structural factors. This article analyses self-employment spells in Finland with a large register-based data set from the period 1987 to 2002. The main aim is to investigate the role of region-specific factors as compared with individual-specific and other factors on the duration of self-employment spells. First, the descriptive analysis shows that the exit rates from self-employment and the length of self-employment spells depend upon location (urban versus rural area) and the cyclical trends in the economy. Second, self-employment duration is modelled using discrete time survival analysis. It is found that rural areas have significantly lower exit rates in the first years of self-employment than urban areas.

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.