nep-bec New Economics Papers
on Business Economics
Issue of 2018‒10‒01
eleven papers chosen by
Vasileios Bougioukos
Bangor University

  1. Firm Dynamism and Housing Price Volatility By Epstein, Brendan; Finkelstein Shapiro, Alan; Gonzalez Gomez, Andres
  2. Innovation, Firm Size Distribution, and Gains from Trade By Chen, Yi-Fan; Hsu, Wen-Tai; Peng, Shin-Kun
  3. Do institutional blockholders influence corporate investment? Evidence from emerging markets By Roberto Alvarez; Mauricio Jara; Carlos Pombo
  4. The Cyclical Composition of Startups By Eran Hoffmann
  5. Corporate Debt Choice and Bank Capital Regulation By Haotian Xiang
  6. Multinationals do not export jobs, and other related results By Kwok Tong Soo
  7. Related and unrelated diversification in crisis and in prosperity By Karoly Miklos Kiss; Laszlo Lorincz; Zsolt Csafordi; Balazs Lengyel
  8. Identifying Dynamic Relationships and Market Structures among US Dairy Commodity Prices By Tejeda, Hernan A.; Kim, Man-Keun
  9. A Two-Period Unionized Mixed Oligopoly Model: Public-Private Wage Differentials and “Eurosclerosis†Reconsidered By Minas Vlassis; Polyxeni Gioti
  10. Shady Business: Why do Puerto Rican Coffee Farmers Adopt Conservation Agriculture Practices? By Villegas, Laura
  11. Heterogeneous Layoff Effects of the US Short-Time Compensation Program By Tracey, Marlon R.; Polachek, Solomon

  1. 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
  2. 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
  3. 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
  4. 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
  5. 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
  6. 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
  7. 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
  8. By: Tejeda, Hernan A.; Kim, Man-Keun
    Keywords: Demand and Price Analysis, Risk and Uncertainty, Agribusiness
    Date: 2017–06–15
  9. 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
  10. By: Villegas, Laura
    Keywords: Agricultural and Food Policy, Resource/Energy Economics and Policy, Production Economics
    Date: 2017–06–15
  11. 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

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