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on Business Economics |
| By: | Epstein, Brendan; Finkelstein Shapiro, Alan; Gonzalez Gomez, Andres |
| Abstract: | Using data for a large sample of countries, we find a robust economic and quantitatively significant positive relationship between new firm density and house price volatility. A business cycle model with endogenous firm entry, housing, and housing finance constraints successfully replicates this new fact, both qualitatively and quantitatively. Greater average firm entry is associated with higher average house prices. This makes the cost of housing loans more sensitive to housing-finance shocks, leading to sharper credit and lending-spread fluctuations, and ultimately factually-sharper house price fluctuations. We find broad empirical validation for this mechanism. |
| Keywords: | Endogenous firm entry, firm dynamism, housing price dynamics, fi- nancial frictions and shocks, business cycles |
| JEL: | E30 E32 E44 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:88694&r=bec |
| By: | Chen, Yi-Fan (Academia Sinica); Hsu, Wen-Tai (School of Economics, Singapore Management University); Peng, Shin-Kun (Academia Sinica) |
| Abstract: | We study a trade model with monopolistic competition a la Melitz (2003) that is standard except that firm heterogeneity is endogenously determined by firms innovating to enhance their productivities. We show that the equilibrium productivity and firm-size distributions exhibit power-law tails under rather general conditions on demand and technology. In particular, the emergence of the power laws is essentially independent of the underlying primitive heterogeneity among firms. We investigate the model’s welfare implications, and conduct a quantitative analysis of welfare gains from trade. We find that, conditional on the same trade elasticity and values of the common parameters, our model yields 40% higher welfare gains from trade than a standard model with exogenously given productivity distribution. |
| Keywords: | Innovation; Power law; Regular variation; Welfare gains from trade; Firm heterogeneity |
| JEL: | F12 F13 F41 |
| Date: | 2018–09–04 |
| URL: | http://d.repec.org/n?u=RePEc:ris:smuesw:2018_017&r=bec |
| By: | Roberto Alvarez; Mauricio Jara; Carlos Pombo |
| Abstract: | This paper examines the relation between firm investment ratios and institutional blockholders for a sample of 6,300 publicly traded firms in 16 large emerging markets for the 2004–2016 period. Results show that independent, long-term, and local institutional investors boost investment ratios, which is consistent with the monitoring role and blockholder voice intervention hypotheses. The presence of institutional blockholders, regardless of their monitoring involvement, reduces firmcash flow sensitivity ratios and thus reduces firms’ financial constraints. Minority institutional investors complement the positive effect of blockholders investors. However, the effect on financial constraints decreases as the quality of the country's institutions increases. |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:udc:wpaper:wp469&r=bec |
| By: | Eran Hoffmann (Stanford University) |
| Abstract: | This paper proposes a new theory of business cycles based on the idea that financial uncertainty shocks change the nature of innovation. When investors become more risk tolerant, they fund riskier startups with greater growth potential. As these ambitious startups grow, the initial shock propagates and generates a boom in output and employment. I develop a heterogeneous firm industry model of the US business sector with countercyclical risk premia and innovation by startups and existing firms. The quantitative implementation of the model jointly matches time series properties of stock returns and macroeconomic aggregates, as well as micro evidence on firm cohort growth over the cycle. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:553&r=bec |
| By: | Haotian Xiang (Wharton School of the University of Pennsylvania) |
| Abstract: | I investigate the impact of bank capital requirements in a business cycle model with corporate debt choice. Compared to non-bank investors, banks provide restructurable loans that reduce firm bankruptcy losses and enhance production efficiency. Raising capital requirements eliminates deposit insurance distortions but also deposit tax shields. As a result, firms cut back on both bank and non-bank borrowing while going bankrupt more frequently. Implementing an optimal capital ratio of 11 percent in the US produces limited marginal impacts on aggregate quantities and welfare. |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:red:sed018:327&r=bec |
| By: | Kwok Tong Soo |
| Abstract: | We develop a simple model of multinational firms, in which firms engage in production abroad to take advantage of cheap labour. There are gains from multinational firms beyond the standard gains from trade. The model makes two empirically testable predictions. First, firms with more foreign employment also have more domestic employment; multinationals are not net exporters of jobs. Second, the expansion of multinational activity will increase the overall size of the firm. We find that both predictions hold empirically, using a sample of the largest multinational firms. In addition, the presence of multinational firms raises welfare relative to when they are absent, although the proportional gain is not large. |
| Keywords: | Multinational firms, comparative advantage |
| JEL: | F12 F23 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:lan:wpaper:244952396&r=bec |
| By: | Karoly Miklos Kiss (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences and University of Pannonia, Veszprem); Laszlo Lorincz (Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences and Corvinus University of Budapest); Zsolt Csafordi (Erasmus University Rotterdam); Balazs Lengyel (Agglomeration and Social Networks Lendület Research Group Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences and International Business School Budapest) |
| Abstract: | How does technological relatedness influence the portfolio of multi-product firms hit by external shocks? To answer this question, we look at the effect of product-specific demand shocks on product portfolios of Hungarian firms in the 2005-2012 period. We find that production have become more cohesive in terms of technological relatedness if firms were exposed to demand shocks. Evidence suggests that firms in crisis drop or downsize additional products not related to their core product and concentrate resources on related products. |
| Keywords: | product diversification, technological relatedness, industry space network, dynamics of product portfolio, crisis |
| JEL: | C23 D22 D24 L25 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:has:discpr:1823&r=bec |
| By: | Tejeda, Hernan A.; Kim, Man-Keun |
| Keywords: | Demand and Price Analysis, Risk and Uncertainty, Agribusiness |
| Date: | 2017–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea17:258141&r=bec |
| By: | Minas Vlassis (Department of Economics, University of Crete, Greece); Polyxeni Gioti |
| Abstract: | In the present paper we develop a two-period unionized mixed duopoly model, furnished with second period- demand shocks, where decentralized firm-specific wage bargains are struck in each period before product market competition is in place. |
| Keywords: | Unions, Oligopoly, firing restrictions, Eurosclerosis |
| JEL: | C70 C71 C60 |
| Date: | 2018–09–24 |
| URL: | http://d.repec.org/n?u=RePEc:crt:wpaper:1802&r=bec |
| By: | Villegas, Laura |
| Keywords: | Agricultural and Food Policy, Resource/Energy Economics and Policy, Production Economics |
| Date: | 2017–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea17:259136&r=bec |
| By: | Tracey, Marlon R. (Southern Illinois University Edwardsville); Polachek, Solomon (Binghamton University, New York) |
| Abstract: | The Short-Time Compensation (STC) program enables US firms to reduce work hours via pro-rated Unemployment Insurance (UI) benefits, rather than relying on layoffs as a cost-cutting tool. Despite the program's potential to preclude skill loss and rehiring/ retraining costs, firms' participation rates are still very low in response to economic downturns. Using firm-level UI administrative data, we show why by illustrating which type firms benefit from the program and which do not. Semiparametric estimation indicates STC reduces layoff rates for cyclically sensitive firms by about 15%, but has no effect for more cyclically stable firms. |
| Keywords: | short-time compensation, layoffs, inverse probability weighting, heterogeneity, finite mixture model |
| JEL: | C21 C38 J63 J65 |
| Date: | 2018–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11746&r=bec |