nep-bec New Economics Papers
on Business Economics
Issue of 2013‒04‒27
eight papers chosen by
Vasileios Bougioukos
Bangor University

  1. Firm-Level Heterogeneity and the Decision to Export: A Real Option Approach By Naudé, Wim; Gries, Thomas; Bilkic, Natasa
  2. Choice of Invoicing Currency: New evidence from a questionnaire survey of Japanese export firms By ITO Takatoshi; KOIBUCHI Satoshi; SATO Kiyotaka; SHIMIZU Junko
  3. Dynamic stochastic general equilibrium model with banks and endogenous defaults of firms By Sergei Ivashchenko
  4. Undocumented Workers’ Employment across U.S. Business Cycles By David Brown; Serife Genc; Julie Hothckiss; Myriam Quispe-Agnoli
  5. Firm Market Power and the Earnings Distribution By Webber, Douglas A.
  6. Firm-Level Monopsony and the Gender Pay Gap By Webber, Douglas A.
  7. Dynamic Selection and the New Gains from Trade with Heterogeneous Firms By Thomas Sampson
  8. Trade Integration and Business Cycle Synchronization in the EMU: the Negative Effect of New Trade Flows By Jean-Sébastien Pentecôte; Jean-Christophe Poutineau; Fabien Rondeau

  1. By: Naudé, Wim (Maastricht School of Management); Gries, Thomas (University of Paderborn); Bilkic, Natasa (University of Paderborn)
    Abstract: In "new" new international trade theory, whether firms export or not are determined by their productivity. These models assume that firms enter a market to find their productivity levels revealed to them as in a lottery. In this paper we propose an alternative way to model whether firms export or not, namely as a firm-level decision akin to an investment decision with a real option value. We show that endogenizing the export decision is consistent with patterns of productivity and exporting reported in the empirical literature.
    Keywords: international new ventures, firm-level heterogeneity, start-ups, stochastic dynamic programming, trade, exports, productivity, real option theory, investment, firms, international entrepreneurship
    JEL: D92 D81 L26 M13
    Date: 2013–04
  2. By: ITO Takatoshi; KOIBUCHI Satoshi; SATO Kiyotaka; SHIMIZU Junko
    Abstract: This paper is the first comprehensive research using a questionnaire survey on the choice of invoicing currency with all Japanese manufacturing firms listed in the Tokyo Stock Exchange. Questionnaires were sent out to 920 Japanese firms in September 2009, and 227 firms responded. We present new firm-level evidence on invoicing currency by the destination and type of trading partners, with a particular emphasis on the difference between arms-length and intra-firm trades. We also conduct cross-section analysis to investigate what determines the invoicing choice of Japanese firms. Our novel findings are as follows. (1) The invoicing choice depends on whether it is an intra-firm trade or an arms-length trade. While yen invoicing tends to be chosen in arms-length trades, there is a strong tendency that invoicing in the importer's currency is used in intra-firm trades, suggesting that the parent firm in Japan assumes and manages the currency risk. In exports to Asian subsidiaries, U.S. dollar invoicing is used. (2) Firm size does matter in the choice of invoice currency. The larger (smaller) the size of the firms, the more likely they are to conduct intra-firm (arms-length, resp.) trades. (3) In terms of the number of Japanese firms, using yen invoicing is more prevalent than U.S. dollar invoicing. However, adjusting for the export value of each firm, the share of U.S. dollar invoicing is on average larger than that of yen invoicing, mainly because Japanese firms with a large volume of exports tend to have a global sales and production network where U.S. dollar invoicing is dominant, especially in the case of "triangular trade."
    Date: 2013–04
  3. By: Sergei Ivashchenko (St. Petersburg Institute for Economics and Mathematics, Russian Academy of Sciences (RAS))
    Abstract: A dynamic stochastic general equilibrium (DSGE) model with endogenous defaults of firms is developed. Proposed mechanism of defaults is very flexible. It takes into account amount of assets owned by firms. It suggests that banks receive some payment from firm after default. The model is estimated for USA and for Russia.
    Keywords: DSGE, endogenous defaults of firms
    JEL: E32 E43 E44 E47 G21
    Date: 2013–01–25
  4. By: David Brown; Serife Genc; Julie Hothckiss; Myriam Quispe-Agnoli
    Abstract: Using matched employer-employee data from the state of Georgia, this paper investigates how employment of undocumented workers varies along the business cycle and how it differs from the adjustment in employment of documented workers. The cyclical component of undocumented employment is found to be significantly more volatile than the cyclical component of documented employment. Simulation results indicate that complementarities between documented workers and capital account for almost 90 percent of the difference in measured volatility between documented and undocumented employment.
    Keywords: business cycles, illegal immigration, undocumented workers
    JEL: J J61
    Date: 2013
  5. By: Webber, Douglas A. (Temple University)
    Abstract: Using linked employer-employee data, I compute firm-level measures of the labor supply elasticity facing each private non-farm firm in the US. I provide the first direct evidence of the positive relationship between a firm's labor supply elasticity and the earnings of its workers. I also contrast the dynamic model method employed by this paper with the more traditional use of concentration ratios to measure a firm's labor market power. Finally, I construct a counterfactual earnings distribution which allows the effects of firm market power to vary across the earnings distribution.
    Keywords: monopsony
    JEL: J42 J21
    Date: 2013–04
  6. By: Webber, Douglas A. (Temple University)
    Abstract: Using a dynamic labor supply model and linked employer-employee data, I find evidence of substantial search frictions, with females facing a higher level of frictions than males. However, the majority of the gender gap in labor supply elasticities is driven by across firm sorting rather than within firm differences, a feature predicted in the search theory literature, but which has not been previously documented. The gender differential in supply elasticities leads to 3.3% lower earnings for women. Roughly 60% of the elasticity differential can be explained by marriage and children penalties faced by women but not men.
    Keywords: monopsony, discrimination
    JEL: J42 J71
    Date: 2013–04
  7. By: Thomas Sampson
    Abstract: This paper develops an open economy growth model in which firm heterogeneity increases the gains from trade. Technology spillovers from incumbent firms to entrants cause the productivity threshold for firm survival to grow over time as competition becomes tougher. By raising the profits of exporters, trade increases the entry rate and generates a dynamic selection effect that leads to higher growth. The paper shows that the gains from trade can be decomposed into: static gains that equal the total gains from trade in an economy without technology spillovers, and; dynamic gains that are strictly positive. Since trade raises growth through selection, not scale effects, the positive growth effect of trade vanishes when firms are homogeneous. Thus, firm heterogeneity creates a new source of dynamic gains from trade. Calibrating the model to the U.S. economy implies that dynamic selection approximately triples the gains from trade.
    Keywords: Gains from Trade, Endogenous Growth, Firm Heterogeneity
    JEL: F12 F43 O41
    Date: 2013–04
  8. By: Jean-Sébastien Pentecôte (University of Rennes 1 - CREM UMR CNRS 6211, France); Jean-Christophe Poutineau (University of Rennes 1 - CREM UMR CNRS 6211, France); Fabien Rondeau (University of Rennes 1 - CREM UMR CNRS 6211, France)
    Abstract: This paper questions the impact of trade integration on business cycle synchronization in the EMU by distinguishing increase of existing trade flows (the intensive margin) and creation of new trade flows (the extensive margin). Using a DSGE model, we find that synchronization is weakened when new firms are allowed to export in response to productivity gains. Using disaggregated data over 1995–2007 for the 10 founding members of the EMU and consistently with our model, we find that trade intensity has a positive direct effect while new trade flows have a negative effect on business cycle synchronization. Furthermore, new flows play essentially an indirect role by intensifying specialization and explain 60% of the overall effect of trade intensity and specialization on synchronization.
    Keywords: Trade Integration, New Trade Flows, Business Cycles, Synchronization, European Monetary Union
    JEL: F14 F15 F41 F44
    Date: 2013–04

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