The Globalization of Financial Markets and its effects on Swedish Industry Structure
There are a number of determinants of the increased globalization. One important explanation is the extensive deregulations of global financial markets which have taken place the last decades. These regulations have led to new types of ownership forms. In particular, private equity firms that buy, restructure and resell established firms have become important owners of corporations in countries such as the US, England and Sweden. Private equity firms are also becoming increasingly active across national borders. One tenth of all acquisitions that occurred across national borders during the period 1998–2008, were financed by private equity firms. The policy debate is characterized by a concern that these acquisitions are primarily driven by financial and tax benefits and may thereby lead to less efficient types of ownership and lower welfare. The purpose of this project is to study, both theoretically and empirically, the driving factors behind acquisitions made by private equity firms, and how this type of ownership affects society.
Project Manager: Joacim Tåg
The Effects of Globalization on Capital
This project studies capital ownership. “The Swedish Ownership model”, which until just recently dominated the stock market, is characterized by ownership limited to one or two owners. Usually, but not always, these owners have been Swedish families. The concentration of control was made possible through a growing divergence between control rights (vote shares) and dividends rights (capital shares) for the dominating owners. Another common feature has been that a family or group of owners through investment firms and box-in-box ownership has dominating influence in several firms. Sweden is currently in the middle of a structural change where the Swedish ownership model is clearly in decline, because it is at least in part being replaced by other models of corporate management. An important driving factor behind this development is the globalization of ownership. This project’s aim is twofold. First, the purpose is to increase our understanding of how the Swedish ownership- and control model is affected by globalization. Second, it aims to study which institutional changes in the legal framework could facilitate efficient management of firms with a dispersed ownership structure.
Project Manager: Magnus Henrekson
Political Incentives and Local Economic Development in China
The goal of this project is to increase our understanding of what drives local level decision making in a decentralized autocracy such as China. The project connects to a central question in political economics, namely how incentive structures stemming from political systems affect economic and social development. Since important political questions are often delegated to local levels, an increasing number of studies on incentives have focused on local legislators. The purpose of this project is to study the incentives of local political legislators in the autocratic state of China. While previous studies on this question have focused on growth, our project instead focuses on the development of local labor markets and priorities of politicians with regard to different types of public spending. The project primarily tends to two research questions. The first question focuses on how local educational investments are dependent on the cyclical process of promotions within the party state. The second question focuses both on how the incentives of local legislators and general demands for societal welfare affect access to capital through IPOs. In China, IPOs are strictly regulated processes in which decisions regarding which firms should gain access to stock enlistment are primarily decided on the local level. Therefore, local politicians have the possibility of diverting capital to whatever firms they prefer. Our hypothesis in this project is that the firms which contribute more to the local labor market take precedence in acquiring capital through IPOs.
Project Manager: Johanna Rickne
Globalization, Employment and Wages
This project aims to empirically evaluate labor market effects of increased international integration. The project departs from new economic theory on heterogeneous firms and workforces. Traditional trade theory assumes full flexibility in the labor market which would imply full employment. New theory on the other hand, stresses that wages are sticky and that the matching process between employers and employees can give rise to long term unemployment. Furthermore, these jobs imply that the effect on a certain type of labor force, for example in terms of wage changes, can differ depending on the type of firm. Increased globalization can for example lead to increased wages for the type of laborer whose qualifications best match the company profile. These newer theories result in a number of hypotheses on internationalization and labor market effects which we aim to empirically investigate using Swedish data. The empirical analysis is based on a large collection of data on the Swedish labor force which can be matched with data on Swedish firms. For instance, we investigate wage and employment effects of increased internationalization for different types of labor and in different types of firms. The project is a collaboration between Swedish empirical researchers and prominent theoretically-oriented American researchers.
Project Manager: Fredrik Heyman
Domestic Policy and International Trade Agreements
In an economically more integrated world, protectionist tendencies will have a large impact on the domestic economy. The postwar period is characterized by large successes when it comes to reducing tariffs and other trade barriers for industry commodities. Other sectors are however still characterized by trade barriers. The emergence of China with its relatively interventionistic industrial policy has brought great pressure on the international trade system. It has also become increasingly apparent that domestic regulations can be used to protect domestic industry at the expense of foreign firms. International trade agreements primarily aim to prevent countries from applying barriers at borders, such as tariffs and import quotas, for protectionist purposes. It is, however, not enough to agree on such policy instruments since domestic instruments such as taxes and regulations can also be used for protectionist purposes. All trade agreements therefore contain restrictions on how countries unilaterally can use domestic policy instruments. The central clause in this regard is the “national treatment clause” which demands that imported goods not be treated any differently to similar domestically produced ones. This principle holds for almost all types of public decisions, whether they concern environmental regulations, taxes, security etc. The form and interpretation of the principle regarding national treatment is complicated by the fact that domestic policy instruments are often used for more legitimate purposes than protectionism. It is therefore essential to define the principle so that it allows for such actions while at the same time preventing protectionism. One purpose with this project is to contribute to the understanding of how the principle of national treatment should be defined. Another purpose is to empirically highlight how policy instruments have been used in the dispute settlement mechanism in the World Trade Organization (WTO).
Project Manager: Henrik Horn
Globalization, Increased Competition and the Development of Firms
Firms both in Sweden and abroad have been exposed to increased competition in many forms. The development of globalization forces domestic firms to adapt to a tougher business climate, while trade reforms also bring new import and export possibilities. This project primarily consists of empirical studies which evaluate the effects of different types of increased competition, such as trade reforms, import-based competition and higher electricity prices during the 21th century. The studies explore the effects of these phenomena on firms’ choice of technology, trade patterns, size and productivity. One purpose with this project is to contribute to the understanding for how competition affects firms’ technological development and employment, which in turn may provide beneficial knowledge for future economic reforms.
Project Manager: Shon Ferguson
The Social Value of the Public Company
The legal burdens for firms that buy and sell stocks have increased significantly lately. This is also true for firms that have wished to list themselves on a public market. Partly for this reason, but also for many others, there has in the last 15 years been a decline in interest from firms in letting their stocks be traded on regulated markets. The purpose of this project is to summarize the literature as well as study this development by constructing a framework for better understanding how public stock trading can contribute to stronger political support for business sector friendly economic policies. Moreover, we aim to study the effects of stock market enlistment in Sweden on the composition of employees in enlisted firms.
Project Manager: Joacim Tåg
Digitalization and Globalization
The primary goal of this research project is to develop a better understanding of how globalization affects labor market outcomes. The project will also analyze how recent changes in digitalization and automation put pressures on firms and workers and how this is related to globalization. We will analyze the effects of globalization and digitalization in a Swedish context, which should provide insights with clear relevance for Swedish policy makers. We also believe our project has a broad scientific relevance and that results are of interest to researchers active in international economics and in labor economics.
Despite the very large public and academic debate on the effects of digitalization and automation, empirical evidence is scarce. Our analysis will be based on detailed matched employer-employee data for the period 1996-2013. There are a variety of important issues that we will explore in this project. More generally, our research will shed light on a number of critical issues such as: the identification of the individual characteristics of those who gain and lose from globalization and digitalization, the effects of globalization on the organization of firms and corporations and its implications for labor market outcomes, the impact of globalization and digitalization on wage inequality and job insecurity, what is the role played by firms in how new technologies are being implemented, to what extent are unemployment risks due to increased digitalization related to wages and educational levels for individual occupations, the interplay between digitalization, globalization and labor market outcomes, how is the internationalization of firms linked to digitalization, and do internationalized firms have a mix of employees with occupations that are systematically different from e.g. local firms in terms of automatization and digitalization of jobs.
Project Manager: Fredrik Heyman