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on Business Economics |
| By: | Nicolò Gnocato (Bank of Italy); Concetta Rondinelli |
| Abstract: | A recent strand of literature has investigated the granular sources of the business cycle, i.e. to what extent firm-level dynamics have an impact on aggregate fluctuations. From a conceptual point of view, in the presence of fat-tailed firm-size distributions, shocks to large firms may not average out and may then have a direct effect on aggregate fluctuations; in addition, firm-to-firm linkages can propagate shocks to individual firms, leading to movements at the aggregate level. Using Cerved and INPS data, we test the granular hypothesis on a large sample of Italian firms, covering the period 1999-2014. Idiosyncratic Total Factor Productivity (TFP) shocks are found to explain around 30 per cent of aggregate TFP volatility; furthermore, the contribution of these linkages to firm-specific aggregate volatility is more important than that of the direct effect, especially for the manufacturing sector. |
| Keywords: | aggregate fluctuations, firm-level dynamics, productivity |
| JEL: | D24 E32 L25 |
| Date: | 2018–09 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1190_18&r=bec |
| By: | Richard L. Carson (Department of Economics, Carleton University) |
| Abstract: | This paper argues that product differentiation is compatible with perfect competition under free entry and exit and small firm size relative to size of market. Despite Chamberlin’s view, monopolistic competitors are price takers, even though each firm’s product has no perfect substitute. There is a difference between perfect competition with product homogeneity and perfect competition with differentiated products, however. Advertising can pay off with differentiated products because products have separate identities—and price depends on quality—even though firms are price takers for any given quality. A differentiated oligopoly may resemble monopolistic competition a la Chamberlin in some ways. |
| Keywords: | Monopolistic Competition, Perfect Competition, Product Differentiation |
| JEL: | D41 D43 |
| Date: | 2018–10–17 |
| URL: | http://d.repec.org/n?u=RePEc:car:carecp:18-12&r=bec |
| By: | Mónica Correa-López (Banco de España); Beatriz de Blas (Universidad autónoma de Madrid) |
| Abstract: | Large US firms, by diffusing embodied technology through trade in intermediates, appear to drive Europe’s output over the medium term. We develop a two-country model of endogenous growth in varieties, cross-country firm heterogeneity and trade to match this evidence. A US TFP slowdown generates a pronounced recession in Europe, while a negative investment-specific shock also imparts a protracted recession in the US, since GDP and firm productivity stay below trend beyond a decade. Heterogeneous firms, with endogenously changing productivity cut-offs, and the responses of innovators and adopters determine medium-term adjustment, as import switching processes unfold. |
| Keywords: | international business cycles, heterogeneous firms, embodied growth, trade |
| JEL: | E32 F14 L11 F44 O33 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:bde:wpaper:1835&r=bec |
| By: | Yu Shi |
| Abstract: | This paper identifies a new mechanism leading to inefficiency in capital reallocation at the extensive margin when an economy experiences a sectoral boom. I argue that imperfections in the financial market and capital barriers to entry in the booming sector create a misallocation of managerial talent. Using comprehensive firm-level data from China, I first provide evidence that more productive firms reallocate capital to the booming real estate sector, and demonstrate that the pattern is likely driven by fewer financial constraints on these firms. I then use a structural estimation to verify the talent misallocation. Finally, I calibrate a dynamic model and find that the without the misallocation, the TFP growth in the manufacturing sector would have improved by 0.5% per year. |
| Date: | 2018–09–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:18/221&r=bec |
| By: | M.A. Véganzonès-Varoudakis (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique); Hoang Thanh Mai Nguyen (KU Leuven - Catholic University of Leuven) |
| Abstract: | Drawing on the World Bank Enterprise Surveys, we revisit the link between firm-level investment climate and productive performance for a panel of enterprises surveyed twice in time in 70 developing countries and 11 manufacturing industries. We take advantage of the time dimension available for an increasing number of countries to tackle the endogeneity issue stressed in previous studies. We also use pertinent econometric techniques to address other biases inherent in the data (e.g.measurement errors, missing observations and multicollinearity). Our results reinforce previous findings by validating, with a larger than usual sample of countries and industries, the importance of a larger set of environment variables. We show that infrastructure quality, information & communication technologies, skills and experience of the labour force, cost of and access to financing, security and political stability, competition and government relation contribute to firms' and countries' performances gap. The empirical analysis also illustrates that firms which choose an outward orientation have higher productivity level. Nevertheless, outward oriented enterprises are more sensitive to investment climate limitations. These findings have important policy implications by showing which dimensions of the business environment, in which industry, could help manufacturing firms to be more competitive in the present context of increasing globalization. |
| Keywords: | Investment climate,outward orientation,total factor productivity,manufacturing,firm-level data |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-01618733&r=bec |
| By: | Emannuel Dhyne (Economics and Research Department, National Bank of Belgium); Joep Konings (KU Leuven, VIVES; University of Liverpool Management School and CEPR); Joep Konings (KU Leuven, VIVES); Stijn Vanormelingen, (KU Leuven, Campus Brussels) |
| Abstract: | Using a novel comprehensive data set of IT investment at the firm level, we find that a firm investing an additional euro in IT increases value added by 1 euro and 38 cents on average. This marginal product of IT investment increases with firm size and varies across sectors. IT explains about 10% of productivity dispersion across firms. While we find substantial returns of IT at the firm level, such returns are much lower at the aggregate level. This is due to underinvestment in IT (IT capital deepening is low) and misallocation of IT investments. |
| Keywords: | Information technology, total factor productivty |
| JEL: | D24 L10 O14 O49 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbb:reswpp:201810-346&r=bec |
| By: | Konstantinos Charistos (Department of Economics, University of Macedonia) |
| Abstract: | The impact of leniency programs on cartelists’ decision to allocate the incriminating evidence is investigated. Firms are allowed to possess either exclusive or common pieces of cartel-related evidence. The cartel organization is able to allocate the incriminating evidence in an attempt to enhance the sustainability of the illicit agreement. Assuming that the Antitrust Authority (AA) provides incentives that induce confession, reporting is either partial or universal. It is shown that in the former case the cartel organization selects to split and equally share the evidence (each firm possesses only exclusive pieces) whereas in the latter case every firm may possess perfect evidence. Unless the conviction of an investigated cartel is unlikely, when the AA optimally anticipates the cartel’s ability to allocate the evidence, only partial information is obtained. |
| Keywords: | Antitrust enforcement, Collusion, Leniency programs. |
| JEL: | K21 L12 L41 |
| Date: | 2018–10 |
| URL: | http://d.repec.org/n?u=RePEc:mcd:mcddps:2018_11&r=bec |
| By: | Giovanni Dosi; Dario Guarascio; Andrea Ricci; Maria Enrica Virgillito |
| Abstract: | What has been the dynamics of productivity in the Italian business firms in the aftermath of the crisis? And what has been the impact of training efforts upon such dynamics? In this work we address these questions exploring a unique Italian microlevel dataset which links information on the amount and the nature of training and the balance-sheet data. First, we document what we call a neo-dualist tendency with a leader-laggard dynamics entailing a widening support of the productivity distributions. Second, we analyze the relationship between productivities and training intensities by means of quantile regression analysis, also controlling for additive fixed effects by means of Canay (2011) technique. There is indeed some relationship in the whole sample which however gets weaker when disaggregating by sector and by size. Moreover, hardly any dynamic relationship appears, either between initial training intensities and subsequent productivity changes, nor between changes in both variables. Our results do not imply of course that training is not important, but that its effectiveness must be shaped by other firm-specific characteristics, plausibly associated with idiosyncratic organizational capabilities. |
| Keywords: | productivity, firm-level heterogeneity, training, organizational capabilities |
| Date: | 2018–10–25 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2018/34&r=bec |
| By: | Lorenzo, Menna; Patrizio, Tirelli; |
| Abstract: | Recent developments in the asset pricing literature show that a combination of technology and distributive shocks can rationalize observed risk premia when firm ownership is concentrated in the hands of few households. We find that distributive shocks are unnecessary when nominal price rigidity is taken into account. Our results are driven by the income redistribution associated to procyclical variations in profit margins when firms ownership is concentrated, prices are sticky and technology shocks hit the economy. In this regard, standard DSGE models that allow for firm ownership concentration have the potential to replicate both business cycle facts and the moments of financial variables. |
| Keywords: | asset pricing, equity premium, limited asset market participa- tion, business cycle, DSGE, sticky prices. |
| JEL: | E32 G12 |
| Date: | 2018–10–25 |
| URL: | http://d.repec.org/n?u=RePEc:mib:wpaper:388&r=bec |
| By: | He, Xi |
| Keywords: | Industrial Org./Supply Chain Management, Food and Agricultural Policy Analysis, Agribusiness Economics and Management |
| Date: | 2018–06–20 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea18:274206&r=bec |