nep-bec New Economics Papers
on Business Economics
Issue of 2017‒12‒18
nine papers chosen by
Vasileios Bougioukos
Bangor University

  1. Trading firms and trading costs in services: Firm-level analysis By Dorothée Rouzet; Sebastian Benz; Francesca Spinelli
  2. Quantile Approach for Distinguishing Agglomeration from Firm Selection in Stata By KONDO Keisuke
  3. Why do manufacturing firms produce services? Evidence for the servitization paradox in Belgium By Catherine Fuss; Pierre Blanchard; Claude Mathieu
  4. The Productivity Puzzle and Misallocation: an Italian Perspective By S. Calligaris; M. Del Gatto; F. Hassan; G. I.P. Ottaviano; F. Schivardi
  5. Ecommerce and Firm Performance: Evidence from Korea By Lee, Kyu Yub
  6. How Does Firm Performance Affect Wages? Evidence from Idiosyncratic Export Shocks By Andrew Garin; Filipe Silverio
  7. Export Decision under Risk By José De Sousa; Anne-Célia Disdier; Carl Gaigné
  8. Globalization, Agricultural Markets and Mass Migration By Rowena Gray; Gaia Narciso; Gaspare Tortorici
  9. Human Capital and Financial Development By Virgiliu Midrigan; Fernando Leibovici; Julio Blanco

  1. By: Dorothée Rouzet; Sebastian Benz; Francesca Spinelli
    Abstract: This report presents evidence on how services trade restrictions influence the decisions and performance of firms engaged in international markets, drawing on micro-data from Belgium, Finland, Germany, Italy, Japan, Sweden, the United Kingdom, and the United States. It first describes the patterns of services exports and affiliate sales at the firm level, uncovering a number of stylised facts about the firms engaged in international trade in services, their choices of modes of supply and the links between services trade and manufacturing activities. The report then relates these outcomes to services trade policy barriers in destination markets as measured by the OECD STRI. It demonstrates that complex and restrictive regulatory environments limit the volume of services that firms are able to trade as well as the number of firms that engage with those markets. Hence services trade restrictions reflect not only ad valorem trade costs, but also fixed and sunk costs. Such barriers do not affect all firms equally. Restrictive services trade regulations disproportionately discourage SMEs. Size, productivity and previous exporting experience appear to be decisive factors in dealing with at-the-border and behind-the-border trade barriers. Finally, the cost of regulatory compliance is lower for foreign-owned firms with headquarters located in the export destination country and for firms that trade bundles of services and manufacturing products, than it is for pure services exporters.
    Keywords: competition, firm-level data, foreign affiliates, productivity, regulation
    JEL: D22 F13 F14 L22 L25 L8 L9
    Date: 2017–12–12
  2. By: KONDO Keisuke
    Abstract: Firms and workers, on average, are more productive in larger cities. One possible explanation which has been studied for a long time is that firms and workers in larger cities benefit from agglomeration economies. Another possible explanation is that the higher concentration of economic activities in larger cities forces tougher competition, and less productive firms cannot survive there. To distinguish agglomeration from firm selection, Combes et al. (2012, "The productivity advantages of large cities: Distinguishing agglomeration from firm selection," Econometrica, vol. 80) newly propose a quantile approach. This paper introduces the estquant command that implements their quantile approach in Stata. Our Monte Carlo experiments emphasize the importance of simultaneously considering agglomeration and selection.
    Date: 2017–03
  3. By: Catherine Fuss (Economics and Research Department, NBB); Pierre Blanchard (UPEC); Claude Mathieu (UPEC)
    Abstract: The increasing role of services in GDP results from the growing share of service industries, but also from the fact that firms produce services along with goods. This paper investigates the determinants of service provision by manufacturing firms. First, it develops a model of differentiated products with, on the demand side, complementarities between the firm’s goods and services, and, on the supply side, rivalry in the allocation of expertise between the production of goods and the provision of services. Second, it provides an econometric assessment of the determinants of servitization for manufacturing firms, using a fractional Probit model with heterogeneity, controlling for endogeneity with respect to unobserved firm characteristics. Both the theoretical model and empirical estimates point to a non-linear relationship between servitization and firm productivity. The relationship is further shaped by the sector environment as well as intrinsic characteristics of the goods and services supplied.
    Keywords: Services, multi-product firms, firm behavior, Total Factor Productivity, panel data analysis, non linear model.
    JEL: D24 D29 L11 L22 L23 L25
    Date: 2017–11
  4. By: S. Calligaris; M. Del Gatto; F. Hassan; G. I.P. Ottaviano; F. Schivardi
    Abstract: Productivity has recently slowed down in many economies around the world. A crucial challenge in understanding what lies behind this " productivity puzzle" is the still short time span for which data can be analysed. An exception is Italy where productivity growth started to stagnate 25 years ago. Italy therefore offers an interesting case to investigate in search of broader lessons that may hold beyond local specificities. We find that resource misallocation has played a sizeable role in slowing down Italian productivity growth. If misallocation had remained at its 1995 level, in 2013 Italy's aggregate productivity would have been 18% higher than its actual level. Misallocation has mainly risen within sectors than between them, increasing more in sectors where the world technological frontier has expanded faster. Relative specialization in those sectors explains the patterns of misallocation across geographical areas and firm size classes. The broader message is that an important part of the explanation of the productivity puzzle may lie in the rising difficulty of reallocating resources between firms in sectors where technology is changing faster rather than between sectors with different speeds of technological change.
    Keywords: misallocation;tfp;productivity;Productivity Puzzle;italy
    Date: 2017
  5. By: Lee, Kyu Yub (Korea Institute for International Economic Policy)
    Abstract: Official estimates peg global business-to-business ecommerce at 15 trillion dollars and global business-to-consumer ecommerce at 1.2 trillion dollars in 2013 (UNCTAD 2015). When we turn to official estimates for Korea, it is easy to find that Korea’s business-to-consumer ecommerce market is grow-ing at more than twenty percent per year and has emerged as the third larg-est global ecommerce market in Asia. It is not very much surprising to know the numbers for Korea since Korea is one of the world’s most ad-vanced countries in terms of information and communication technology. However, it is somewhat surprising that we know little about how ecom-merce firms or establishments are distributed in the economy of Korea. In addition, we know little about how ecommerce establishments perform relative to their counterparts of a similar age and size in the same industry. The paper aims to characterize and test performance differences between ecommerce and non-ecommerce firms or establishments. Although the number of ecommerce establishments makes up a small fraction of the economy, ecommerce establishments have a heavier weight in sales, em-ployment, and wage. Due to endogeneity of ecommerce variable, the paper reconstructs the 2010 Korea Census dataset by using Propensity Matching Score and shows that in manufacture ecommerce establishments have, on average, larger sales-per-worker and pay higher wage whereas in services ecommerce ones have higher sales-per-worker but pay no larger wage than their counterparts of a similar age and size in the same industry. It also adds quantile estimates showing that sales-per-worker differences between ecommerce and non-ecommerce establishments in manufacture are positive and statistically significant only at lower quantiles of the distribution. In ser-vices, sales-per-worker differences between them are positive and signifi-cant at most of distribution but turns to be negative, though not significant, at above upper quantile of the distribution.
    Keywords: Ecommerce; Firm Performance; Sales-per-worker; Wage
    JEL: F10
    Date: 2017–12–12
  6. By: Andrew Garin; Filipe Silverio
    Abstract: In the canonical competitive labor market model, firms are wage-takers and idiosyncratic shocks to individual firms do not affect wages. However, when labor markets are frictional, wages may directly depend on firm-specific factors. We test how sensitive wages are to firm-level labor demand by estimating the incidence of idiosyncratic export demand shocks on the wages of incumbent workers in Portugal during the Great Recession (2008-2010). Using detailed export records, we construct measures of firm exposure to unanticipated shocks to the demands of different countries for specific products. The shocks predict changes in output and payroll at affected firms, but not at other similar firms. We combine the export demand measures with firm balance sheet data and matched longitudinal administrative employer-employee records to estimate the impact of idiosyncratic firm-level demand shocks on employee outcomes. We find that idiosyncratic shocks that decreased sales or value added by 10 percent caused wages to grow 1.5 percent less for incumbent workers who were employed by affected firms in 2007. Furthermore, we find that these pass-through effects are stronger in industries with higher durability of employment relationships and lower employee turnover rates. These results support a model in which barriers to replacing incumbent workers give rise to internal labor markets within the firm, exposing workers to their employersâ idiosyncratic conditions.
    JEL: J31 J23 M52
    Date: 2017–12–13
  7. By: José De Sousa; Anne-Célia Disdier; Carl Gaigné
    Abstract: Using firm and industry data, we unveil two empirical regularities: (i) Demand uncertainty not only reduces export probabilities but also decreases export quantities and increases export prices; (ii) The most productive exporters are more affected by higher industry-wide expenditure volatility than are the least productive exporters. We rationalize these regularities by developing a new firm-based trade model wherein managers are risk averse. Higher volatility induces the reallocation of export shares from the most to the least productive incumbents. Greater skewness of the demand distribution and/or higher trade costs weaken this effect. Our results hold for a large class of consumer utility functions.
    Keywords: firm exports, demand uncertainty, risk aversion, expenditure volatility, skewness
    JEL: D21 D22 F12 F14
    Date: 2017
  8. By: Rowena Gray (University of California-Merced); Gaia Narciso (Trinity College Dublin); Gaspare Tortorici (Trinity College Dublin)
    Keywords: Age of mass migration; determinants of migration; agricultural shocks
    JEL: N93 N13 F22 O15
    Date: 2017–12
  9. By: Virgiliu Midrigan (New York University); Fernando Leibovici (Federal Reserve Bank of St. Louis); Julio Blanco (University of Michigan)
    Abstract: We study an economy with capital-skill complementarities, an endogenous human capital and occupational choice decision and firm-level financing constraints. We ask: to what extent do financial frictions reduce output per worker across countries? In our economy, firm-level frictions depress physical capital accumulation and, in equilibrium, also reduce the acquisition of human capital, thus amplifying the decline in output per worker. We estimate the model using repeated cross-sections of individual workers' educational attainment, labor earnings and occupational choice, both for U.S. time-series, as well as for a cross-section of countries. We find that financial frictions have much larger effects on output per worker in our economy than they do in economies with a fixed supply of human capital.
    Date: 2017

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