nep-bec New Economics Papers
on Business Economics
Issue of 2020‒12‒21
eleven papers chosen by
Vasileios Bougioukos
Bangor University

  1. Competitive CSR in a strategic managerial delegation game with a multiproduct corporation By Garcia, Arturo; Leal, Mariel; Lee, Sang-Ho
  2. Technology Within and Across Firms By Xavier Cirera; Diego A. Comin; Marcio Cruz; Kyung Min Lee
  3. Foreign Shocks as Granular Fluctuations By Julian di Giovanni; Andrei A. Levchenko; Isabelle Mejean
  4. Formalization and productivity: Firm-level evidence from Viet Nam By Jann Lay; Tevin Tafese
  5. Monetary policy, firm exit and productivity By Hartwig, Benny; Lieberknecht, Philipp
  6. What Is the Role of Firm-Specific Pay Policies on the Gender Earnings Gap in Canada? By Li, Jiang; Dostie, Benoit; Simard-Duplain, Gaëlle
  7. Aggregate Implications of Firm Heterogeneity: A Nonparametric Analysis of Monopolistic Competition Trade Models By Rodrigo Adão; Costas Arkolakis; Sharat Ganapati
  8. Pollution Reduction by Rationalization in Indian Firms By Inma Martínez-Zarzoso; Shampa Roy-Mukherjee; Finn-Ole Semrau; Anca M. Voicu
  9. The extensive margin and US aggregate fluctuations: A quantitative assessment By M. Casares; H. Khan; Jean-Christophe Poutineau
  10. Do Larger Importing Firms Face Lower Freight Rates? By Adina Ardelean; Volodymyr Lugovskyy
  11. Do Standards Improve the Quality of Traded Products? By Anne-Célia Disdier; Carl Gaigné; Cristina Herghelegiu

  1. By: Garcia, Arturo; Leal, Mariel; Lee, Sang-Ho
    Abstract: We study the firm's strategic choice of corporate social responsibility (CSR) in a managerial delegation framework where a multiproduct corporation competes against a single plant firm. We examine simultaneous-move versus sequential-move in output choices when CSR decisions are simultaneous. We show that both firms adopt CSR in a simultaneous-move game, whereas only the follower firm adopts CSR (but not the leader firm) in sequential-move games. We also consider an endogenous timing game in output choices between the two firms and show that a simultaneous-move is an equilibrium when the products are substitutes or weak complements, while a single plant firm's leadership is an equilibrium when the products are sufficiently strong complements. Our findings can explain the widely observed phenomenon, in the real world, of different industries in which firms' CSR activities are more or less (even non-CSR or negative CSR) commonly widespread. It also partially helps us understand CSR's strategic motives and its relations with the firm's profits.
    Keywords: corporate social responsibility; managerial delegation; multiproduct corporation; endogenous timing game
    JEL: D21 L13 L22 M14
    Date: 2020–11
  2. By: Xavier Cirera; Diego A. Comin; Marcio Cruz; Kyung Min Lee
    Abstract: We collected data on the sophistication of technologies used at the business function level for a representative sample of firms in Vietnam, Senegal, and the Brazilian state of Ceará. Our analysis finds a large variance in technology sophistication across the business functions of a firm. Specifically, the within-firm variance in technology sophistication is greater than the variance in sophistication across firms, which in turn is greater than the variance in sophistication across regions or countries. We document a stable cross-firm relationship between technology at the business function and firm levels that we name the technology curve. We uncover significant heterogeneity in the slopes of the technology curves across business functions, a finding that is consistent with non-homotheticities in firm-level technology aggregators. Firm productivity is positively associated with the within-firm variance and the average level of technology sophistication. Development accounting exercises show that cross-firm variation in technology accounts for one-third of cross-firm differences in productivity and one-fifth of the agricultural versus non-agricultural gap in cross-country differences in firm productivity.
    JEL: D2 E23 L23 O10 O40
    Date: 2020–11
  3. By: Julian di Giovanni; Andrei A. Levchenko; Isabelle Mejean
    Abstract: This paper uses a dataset covering the universe of French firm-level sales, imports, and exports over the period 1993-2007 and a quantitative multi-country model to study the international transmission of business cycle shocks at both the micro and the macro levels. The largest firms are both important enough to generate aggregate fluctuations (Gabaix, 2011), and most likely to be internationally connected. This implies that foreign shocks are transmitted to the domestic economy primarily through the largest firms. We first document a novel stylized fact: larger French firms are significantly more sensitive to foreign GDP growth. We then implement a quantitative framework calibrated to the full extent of observed heterogeneity in firm size, exporting, and importing. We simulate the propagation of foreign shocks to the French economy and report one micro and one macro finding. At the micro level heterogeneity across firms predominates: 40 to 85% of the impact of foreign fluctuations on French GDP is accounted for by the “foreign granular residual” — the term capturing the fact that larger firms are more affected by the foreign shocks. At the macro level, firm heterogeneity dampens the impact of foreign shocks, with the GDP responses 10 to 20% larger in a representative firm model compared to the baseline model.
    JEL: E32 F15 F23 F44 F62 L14
    Date: 2020–11
  4. By: Jann Lay; Tevin Tafese
    Abstract: Using a firm-level panel dataset on private small- and medium-sized enterprises (SMEs) in Viet Nam's manufacturing sector, this paper examines productivity dynamics of formal and informal firms. We decompose productivity changes into changes within and between formal and informal firms. We assess the contributions of firm entry and exit as well as informal-formal transitions. Our results show that productivity is considerably lower and misallocation more prevalent in the informal than in the formal sector.
    Keywords: formalization, Productivity, Firm productivity, Viet Nam, Misallocation
    Date: 2020
  5. By: Hartwig, Benny; Lieberknecht, Philipp
    Abstract: We analyze the influence of monetary policy on firms' extensive margin and productivity. Our empirical evidence for the U.S. based on a macro-financial SVAR suggests that expansionary monetary policy shocks stimulate corporate profits, reduce firm exit and increase firm entry. In the medium run, exit overshoots the baseline. We rationalize these findings in a general equilibrium model featuring endogenous entry and exit. In the model, expansionary monetary policy shocks increase firm profits by stimulating aggregate demand and thereby allow less productive firms to remain in the market. As the monetary stimulus fades, these lessproductive firms become unprofitable such that exit overshoots. This exit channel of monetary policy implies a flatter aggregate supply curve and therefore amplifies output responses, but dampens inflationary effects.
    Keywords: firm exit,firm entry,extensive margin,corporate profits,monetarypolicy
    JEL: E24 E32 E52 E58 L11
    Date: 2020
  6. By: Li, Jiang (Statistics Canada); Dostie, Benoit (HEC Montreal); Simard-Duplain, Gaëlle (University of British Columbia)
    Abstract: Using data from the Canadian Employer-Employee Dynamics Database between 2001 and 2015, we examine the impact of firms' hiring and pay-setting policies on the gender earnings gap in Canada. Consistent with the existing literature and following Card, Cardoso, and Kline (2016), we find that firm-specific premiums explain nearly one quarter of the 26.8% average earnings gap between female and male workers. On average, firms' hiring practices – due to difference in the relative proportion of women hired at high-wage firms, or sorting – and pay-setting policies – due to differences in pay by gender within similar firms – each explain about one half of this firm effect. The compositional difference between the two channels varies substantially over the life-cycle, by parental and marital status, and across provinces.
    Keywords: gender wage gap, firm effects, marital status, linked employer-employee data, pay-setting, sorting
    JEL: J16 J31 J51 J71
    Date: 2020–11
  7. By: Rodrigo Adão; Costas Arkolakis; Sharat Ganapati
    Abstract: We measure the role of firm heterogeneity in counterfactual predictions of monopolistic competition trade models without parametric restrictions on the distribution of firm fundamentals. We show that two bilateral elasticity functions are sufficient to nonparametrically compute the counterfactual aggregate impact of trade shocks, and recover changes in economic fundamentals from observed data. These functions are identified from two semiparametric gravity equations governing the impact of bilateral trade costs on the extensive and intensive margins of firm-level exports. Applying our methodology, we estimate elasticity functions that imply an impact of trade costs on trade flows that falls when more firms serve a market because of smaller extensive margin responses. Compared to a baseline where elasticities are constant, firm heterogeneity amplifies both the gains from trade in countries with more exporter firms and the welfare gains of European market integration in 2003-2012.
    JEL: C14 F12 F14 F15
    Date: 2020–11
  8. By: Inma Martínez-Zarzoso (University of Göttingen); Shampa Roy-Mukherjee (University of East London); Finn-Ole Semrau (IFW, Kiel Institute for the World Economy); Anca M. Voicu (Rollins College)
    Abstract: This paper uses data for Indian firms over the period 1987 to 2016 to estimate a panel data model that considers firm heterogeneity to estimate the relationship between energy intensity and internationalization strategies of the firm. Both, the extensive and intensive margins of exports are considered as explanatory factors of energy intensity together with a number of control variables including estimated total factor productivity, foreign ownership, size and innovation activities. The main results indicate that exporters are more energy efficient than non-exporters and that there is heterogeneity between industries. More energy-intensity industries present a higher reduction in energy intensity for exporters in comparison to non-exporters.
    Keywords: Indian firms; energy intensity; exporting firms; trade liberalization; panel data
    Date: 2020
  9. By: M. Casares (UPNA - Universidad Pública de Navarra [Espagne]); H. Khan (Carleton University); Jean-Christophe Poutineau (CREM - Centre de recherche en économie et management - UNICAEN - Université de Caen Normandie - NU - Normandie Université - UR1 - Université de Rennes 1 - UNIV-RENNES - Université de Rennes - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We report empirical evidence indicating that US net business formation has recently turned more volatile, procyclical and persistent. To study these stylized facts, we estimate a DSGE model with endogenous entry and exit. Business units feature heterogeneous productivity and they shut down if the present value of expected future dividends falls below the current liquidation value. The model provides a better fit than a constant exit rate model with the fluctuations of US business formation. The introduction of the extensive margin amplifies the effects of technology and risk-premium shocks, and reduces the procyclicality of firm-level production. The main sources of variability of the US aggregate fluctuations during the Great Recession are countercyclical technology shocks, persistent adverse risk-premium shocks, and expansionary monetary policy shocks.
    Keywords: DSGE Models,Entry and exit,Extensive margin,US Business cycles,entry and exit,DSGE models,US business cycles
    Date: 2020
  10. By: Adina Ardelean (Santa Clara University); Volodymyr Lugovskyy (Indiana University)
    Abstract: This paper documents that, even within a narrowly defined product and port-to-port route, the maritime international freight rates are lower for larger importing firms. Even after controlling for shipment sizes, the 90th-percentile importing firm faces a 20% lower freight rate and, as a result, a 1.8% lower delivered price for a given product and route than the 10th-percentile firm. The firm size matters only in the presence of some degree of competition among shippers—monopoly shippers charge a higher, but symmetric freight rates across all firms. These results are consistent with our theoretical predictions and are robust to multiple robustness checks, including controlling for the size of an exporting firm. We further argue that asymmetries in access to imports affect input prices, TFP estimation, and magnify the extent of firm size heterogeneity.
    Keywords: Freight Rates, Firm Size Advantage, Maritime Shipping
    Date: 2020–02
  11. By: Anne-Célia Disdier (PSE - Paris School of Economics); Carl Gaigné (SMART - Structures et Marché Agricoles, Ressources et Territoires - AGROCAMPUS OUEST - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Cristina Herghelegiu (ULB - Université libre de Bruxelles)
    Abstract: We examine whether standards raise the quality of traded products by correcting mar-ket failures associated with information asymmetry on product attributes. Our predictionson their quality and selection effects are based on a new trade model under uncertaintyabout product quality in which heterogeneous firms can strategically invest in quality sig-naling. Using French firm-level data, we exploit information on prices and productivity toestimate the quality of exported products. Higher quality is assigned to products suppliedby an exporter with higher marginal costs conditional on productivity. In accordance withour theory, quality standards enforced on products by destination countries (i) reduce theexport probability of low-quality firms but also that of high-quality low-productivity firms;(ii) increase the export participation and sales of high-productivity high-quality firms; (iii)improve the average quality of consumption goods exported by France.
    Keywords: Firm exports,quality standards,information asymmetry,product quality
    Date: 2020–01–08

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