Organizational Architecture and the Degree of Flexibility in Production Costs
Gonzalo Castañeda* and Rubén Chavarín+
*El Colegio de México, +Universidad de Guadalajara.
Abstract
An agent-based model is built with the aim of explaining the effect of organizational architecture on the performance (network size and stability) of a business group. An artificial network is grown in which each node (firm) is subject to random income shocks while the degree of flexibility of the productive system (labor marker rigidity and technology’s capita-labor ratio) is assumed exogenously. Two variants of organizational architecture are considered: (i) decentralized management, where each node makes local decisions and behaves opportunistically with a positive probability when a troubled partner needs to be rescued and (ii) centralized management, where financial transfers from other firms are made with certainty as long as there are funds available, although, the functioning of this network entails some monitoring cost. This theoretical background is used to explore the Mexican experience of the nineteenth and twentieth centuries.
JEL Code: D23, D85, C15, N86
Key Words: organizational architecture; management systems; networks; agent-based model; Mexican firms
jueves, 13 de noviembre de 2008
Documento de Trabajo CIIE, No. 2008-08
The Rise and Fall of Socially Embedded Entrepreneurial Spin offs
Gonzalo Castañeda
Abstract
This paper develops an overlapping generations model to analyze the construction and ulterior collapse of ethnic business networks. The micro-foundation of the network expansion is based on bounded rationality, heterogeneous agents and their embeddedness in a particular form of social governance. The solution of the model, by graphical means and numerical simulations, offers valuable insights on how a downfall in this type of network is endogenously generated. The mathematical model and the simulations are motivated with some qualitative observations of the Barcelonnettes’ business empire, a group of French immigrants who setup an immigration chain in Mexico in the XIX century.
JEL Code: L14, N86, C15
Key works: business networks; immigration chains; social embeddedness; non-linear dynamics
Gonzalo Castañeda
Abstract
This paper develops an overlapping generations model to analyze the construction and ulterior collapse of ethnic business networks. The micro-foundation of the network expansion is based on bounded rationality, heterogeneous agents and their embeddedness in a particular form of social governance. The solution of the model, by graphical means and numerical simulations, offers valuable insights on how a downfall in this type of network is endogenously generated. The mathematical model and the simulations are motivated with some qualitative observations of the Barcelonnettes’ business empire, a group of French immigrants who setup an immigration chain in Mexico in the XIX century.
JEL Code: L14, N86, C15
Key works: business networks; immigration chains; social embeddedness; non-linear dynamics
Documento de Trabajo CIIE, No. 2008-07
Cultural Thresholds, Collective Action and Institutional Reform
Gonzalo Castañeda
Abstract
This paper presents a theory that analyzes the propagation of a cultural variant that induces the cohesiveness of civil society and, thus, the society’s capacity to solve collective action problems. The model combines tools of evolutionary game theory with a solution concept for strategic behavior where rationally bounded decisions are made sequential. With this framework, it is possible to explain the co-evolution of contemporary cultural values with economic/political variables, as well as the importance of the historical legacy in establishing the country’s development path. Likewise, it is argued that economic theorizing requires cultural arguments for a better understanding of institutional inertias, lock-ins, and poverty traps.
Gonzalo Castañeda
Abstract
This paper presents a theory that analyzes the propagation of a cultural variant that induces the cohesiveness of civil society and, thus, the society’s capacity to solve collective action problems. The model combines tools of evolutionary game theory with a solution concept for strategic behavior where rationally bounded decisions are made sequential. With this framework, it is possible to explain the co-evolution of contemporary cultural values with economic/political variables, as well as the importance of the historical legacy in establishing the country’s development path. Likewise, it is argued that economic theorizing requires cultural arguments for a better understanding of institutional inertias, lock-ins, and poverty traps.
domingo, 31 de agosto de 2008
Documento de Trabajo CIIE, No. 2008-06
Indicadores de Desempeño y Vulnerabil idad de las Finanzas Públicas Estatales en México
Alfonso Mendoza Velázquez
Abstract
La vulnerabilidad e inestabilidad de los sistemas financieros son temas latentes en la práctica y estudio de la economía dado los eventos recientes de colapso en varios
mercados. Este artículo define la inestabilidad financiera de los gobiernos statales como la acumulación creciente y excesiva de deuda más allá de su valor social neto. A partir de un análisis multivariado en este documento se desarrollan seis índices que miden el pulso de las finanzas públicas estatales en México del año 2001 al 2007. Estos índices, no correlacionados entre sí, capturan más del 90% de la variabilidad estadística observada en las finanzas públicas estatales en México e indican la posición relativa de cada entidad federativa contra el resto de los estados en materia de dimensión financiera, apalancamiento, sostenibilidad de la deuda, resultados e inversión. Con estos índices se forma además un indicador de vulnerabilidad financiera agregado. El conjunto de indicadores puede ser usado, entre otros, por el funcionario local para comparar la posición relativa de su entidad respecto a otros estados y por el regulador/supervisor para determinar la vulnerabilidad del sistema financiero subsoberano en su conjunto.
Alfonso Mendoza Velázquez
Abstract
La vulnerabilidad e inestabilidad de los sistemas financieros son temas latentes en la práctica y estudio de la economía dado los eventos recientes de colapso en varios
mercados. Este artículo define la inestabilidad financiera de los gobiernos statales como la acumulación creciente y excesiva de deuda más allá de su valor social neto. A partir de un análisis multivariado en este documento se desarrollan seis índices que miden el pulso de las finanzas públicas estatales en México del año 2001 al 2007. Estos índices, no correlacionados entre sí, capturan más del 90% de la variabilidad estadística observada en las finanzas públicas estatales en México e indican la posición relativa de cada entidad federativa contra el resto de los estados en materia de dimensión financiera, apalancamiento, sostenibilidad de la deuda, resultados e inversión. Con estos índices se forma además un indicador de vulnerabilidad financiera agregado. El conjunto de indicadores puede ser usado, entre otros, por el funcionario local para comparar la posición relativa de su entidad respecto a otros estados y por el regulador/supervisor para determinar la vulnerabilidad del sistema financiero subsoberano en su conjunto.
Documento de Trabajo CIIE, No. 2008-05
Experienced Poverty and Income Poverty in Mexico: A Subjective Well-Being Approach
Mariano Rojas
This paper uses a life-satisfaction conception of well-being to define experienced poverty. Based on a domains-of-life approach, it shows that experienced poverty is a broader concept than income poverty and that they lead to substantial dissonance in the classification of persons as poor. It is argued that experienced poverty better captures the complexity of being human. It is shown that raising the income received by persons does not automatically translate into greater well-being. It states that public policy should be concerned not only about getting people out of income poverty, but also about placing them in a life-satisfying situation.
Mariano Rojas
This paper uses a life-satisfaction conception of well-being to define experienced poverty. Based on a domains-of-life approach, it shows that experienced poverty is a broader concept than income poverty and that they lead to substantial dissonance in the classification of persons as poor. It is argued that experienced poverty better captures the complexity of being human. It is shown that raising the income received by persons does not automatically translate into greater well-being. It states that public policy should be concerned not only about getting people out of income poverty, but also about placing them in a life-satisfying situation.
Documento de Trabajo CIIE, No. 2008-04
The Information Content and Redistribution Effects of State and Municipal Rating Changes in Mexico
Alfonso Mendoza Velázquez
Abstract
The fiscal and financial reforms carried out in Mexico in 2000 have encouraged a widespread presence of rating agencies and have allowed several States and Municipalities to raise funds through bond offerings in the capital market. Any local government in Mexico intending to access credit and capital markets must count with at least one credit rating from one of the three main agencies: FitchRatings, Moody’s and Standard & Poor’s. This paper investigates the impact of rating changes to State and Municipal governments on bond returns in Mexico. By employing a Capital Asset Pricing Model (CAPM) structure for the mean equation that allows conditional volatility, we find strong support for the Information Content Signaling Hypothesis (ICSH), i.e., rating upgrades (downgrades) are followed by greater (lower) bond returns. We also find some support for the Wealth Redistribution Hypothesis (WRH) indicating that rating upgrades (downgrades) are followed by lower (greater) bond returns. In addition to this, we find high volatility persistence, significant asymmetric responses of volatility to bad and good news, a negative association between market volatility and the level of bond returns and significant effects of volatility in response to rating changes. Finally, the estimations show the market anticipates and responds to rating changes within five-day momentum windows. There is a comparatively stronger reaction of returns on the event day favoring the hypothesis of market inefficiency.
Alfonso Mendoza Velázquez
Abstract
The fiscal and financial reforms carried out in Mexico in 2000 have encouraged a widespread presence of rating agencies and have allowed several States and Municipalities to raise funds through bond offerings in the capital market. Any local government in Mexico intending to access credit and capital markets must count with at least one credit rating from one of the three main agencies: FitchRatings, Moody’s and Standard & Poor’s. This paper investigates the impact of rating changes to State and Municipal governments on bond returns in Mexico. By employing a Capital Asset Pricing Model (CAPM) structure for the mean equation that allows conditional volatility, we find strong support for the Information Content Signaling Hypothesis (ICSH), i.e., rating upgrades (downgrades) are followed by greater (lower) bond returns. We also find some support for the Wealth Redistribution Hypothesis (WRH) indicating that rating upgrades (downgrades) are followed by lower (greater) bond returns. In addition to this, we find high volatility persistence, significant asymmetric responses of volatility to bad and good news, a negative association between market volatility and the level of bond returns and significant effects of volatility in response to rating changes. Finally, the estimations show the market anticipates and responds to rating changes within five-day momentum windows. There is a comparatively stronger reaction of returns on the event day favoring the hypothesis of market inefficiency.
Documento de Trabajo CIIE, No. 2008-03
X-inefficiency in the use of income to attain economic satisfaction
Mariano Rojas
Abstract
This investigation uses a subjectivewell-being approach to provide a novel empirical answer to an old normative debate in economic literature: whether consumers use efficiently their income. Basedona large database fromMexico, the paper shows that there exists substantial X-inefficiency in the use of income; even when a relaxed criterion to define the thick frontier is followed. X-inefficiency in the use of income can emerge from personal errors and from social-organization deficiencies. Sustainable development concerns make it critical to focus on reducing X-inefficiency as an alternative way to increase economic well-being.
Mariano Rojas
Abstract
This investigation uses a subjectivewell-being approach to provide a novel empirical answer to an old normative debate in economic literature: whether consumers use efficiently their income. Basedona large database fromMexico, the paper shows that there exists substantial X-inefficiency in the use of income; even when a relaxed criterion to define the thick frontier is followed. X-inefficiency in the use of income can emerge from personal errors and from social-organization deficiencies. Sustainable development concerns make it critical to focus on reducing X-inefficiency as an alternative way to increase economic well-being.
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