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Revealed time-preference

Author

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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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    1. Border, Kim C., 1992. "Revealed preference, stochastic dominance, and the expected utility hypothesis," Journal of Economic Theory, Elsevier, vol. 56(1), pages 20-42, February.
    2. Glenn W. Harrison & Morten I. Lau & Melonie B. Williams, 2002. "Estimating Individual Discount Rates in Denmark: A Field Experiment," American Economic Review, American Economic Association, vol. 92(5), pages 1606-1617, December.
    3. Bronars, Stephen G, 1987. "The Power of Nonparametric Tests of Preference Maximization [The Nonparametric Approach to Demand Analysis]," Econometrica, Econometric Society, vol. 55(3), pages 693-698, May.
    4. Maribeth Coller & Melonie Williams, 1999. "Eliciting Individual Discount Rates," Experimental Economics, Springer;Economic Science Association, vol. 2(2), pages 107-127, December.
    5. Ok, Efe A. & Masatlioglu, Yusufcan, 2007. "A theory of (relative) discounting," Journal of Economic Theory, Elsevier, vol. 137(1), pages 214-245, November.
    6. Christopher Chabris & David Laibson & Carrie Morris & Jonathon Schuldt & Dmitry Taubinsky, 2008. "Individual laboratory-measured discount rates predict field behavior," Journal of Risk and Uncertainty, Springer, vol. 37(2), pages 237-269, December.
    7. John Quah & Hiroki Nishimura & Efe A. Ok, 2013. "A Unified Approach to Revealed Preference Theory: The Case of Rational Choice," Economics Series Working Papers 686, University of Oxford, Department of Economics.
    8. Pender, John L., 1996. "Discount rates and credit markets: Theory and evidence from rural india," Journal of Development Economics, Elsevier, vol. 50(2), pages 257-296, August.
    9. Shane Frederick & George Loewenstein & Ted O'Donoghue, 2002. "Time Discounting and Time Preference: A Critical Review," Journal of Economic Literature, American Economic Association, vol. 40(2), pages 351-401, June.
    10. Benhabib, Jess & Bisin, Alberto & Schotter, Andrew, 2010. "Present-bias, quasi-hyperbolic discounting, and fixed costs," Games and Economic Behavior, Elsevier, vol. 69(2), pages 205-223, July.
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    Citations

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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.

    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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