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Revealed time-preference

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  • Pawel Dziewulski

Abstract

The literature has documented a positive effect of foreign ownership on firm performance. But is this effect due to a one-time knowledge transfer or does it rely on continuous injections of knowledge? To shed light on this question we focus on divestments, that is, foreign affiliates that are sold to local owners. To establish a causal effect of the ownership change we combine a difference-in-differences approach with propensity score matching. We use plant-level panel data from the Indonesian Census of Manufacturing covering the period 1990-2009. We consider 157 cases of divestment, where a large set of plant characteristics is available two years before and three years after the ownership change and for which observationally similar control plants exist. The results indicate that divestment is associated with a drop in total factor productivity accompanied by a decline in output, markups as well as export and import intensity. The findings are consistent with the benefits of foreign ownership being driven by continuous supply of headquarter services from the foreign parent.

Suggested Citation

  • Pawel Dziewulski, 2015. "Revealed time-preference," Economics Series Working Papers 748, University of Oxford, Department of Economics.
  • Handle: RePEc:oxf:wpaper:748
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    File URL: http://www.economics.ox.ac.uk/materials/papers/13996/paper-748.pdf
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    References listed on IDEAS

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    Cited by:

    1. Hiroki Nishimura & Efe A. Ok & John K.-H. Quah, 2017. "A Comprehensive Approach to Revealed Preference Theory," American Economic Review, American Economic Association, vol. 107(4), pages 1239-1263, April.
    2. Pawel Dziewulski & John Quah, 2014. "Testing for production with complementarities," Economics Series Working Papers 722, University of Oxford, Department of Economics.
    3. David Freeman, 2016. "Revealing Naïveté and Sophistication from Procrastination and Preproperation," Discussion Papers dp16-11, Department of Economics, Simon Fraser University.
    4. Federico Echenique, 2019. "New developments in revealed preference theory: decisions under risk, uncertainty, and intertemporal choice," Papers 1908.07561, arXiv.org, revised Dec 2019.

    More about this item

    Keywords

    revealed preference; testable restrictions; rationalisation; time-preference; discounted utility; hyperbolic discounting; exponential discounting;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C60 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis

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