nep-bec New Economics Papers
on Business Economics
Issue of 2021‒04‒19
seven papers chosen by
Vasileios Bougioukos
Bangor University

  1. Favoritism and firms: Micro evidence and macro implications By Asatryan, Zareh; Baskaran, Thushyanthan; Birkholz, Carlo; Gomtsyan, David
  2. Productivity effects of processing and ordinary export market entry: A time-varying treatments approach By Girma, Sourafel; Görg, Holger
  3. The performance impact of core component outsourcing: insights from the LCD TV industry By Viswanathan, Madhu; Mukherji, Prokriti; Narasimhan, Om; Chandy, Rajesh
  4. In Search of Lost Time: Firm Vintage and Macroeconomic Dynamics By HAMANO Masashige; OKUBO Toshihiro
  5. Characterization of Nash equilibria in Cournotian oligopolies with interdependent preferences By Marco F. Boretto; Fausto Cavalli; Ahmad Naimzada
  6. Immigrant Workers, Firm Export Performance and Import Competition By Léa Marchal; Giulia Sabbadini
  7. The interplay between green policy, electricity prices, financial constraints and jobs: firm-level evidence By Bijnens, Gert; Hutchinson, John; Konings, Jozef; Saint-Guilhem, Arthur

  1. By: Asatryan, Zareh; Baskaran, Thushyanthan; Birkholz, Carlo; Gomtsyan, David
    Abstract: We study the economic implications of regional favoritism, a form of distributive politics that redistributes resources spatially within countries. We use a large sample of enterprise surveys spanning across many low and middle income countries, and utilize transitions of national political leaders for identification. We document strong evidence of regional favoritism among firms located in close vicinity to leader's birthplaces but not in other regions, nor in home regions before leader's rise to power. Firms in favored regions become substantially larger in sales and employment, and also produce more output per worker, pay higher wages and, more generally, have higher total factor productivity. Furthermore, evidence from several mechanisms suggests that leaders divert public resources into their home regions by generating higher demand for firms operating in non-tradable sectors. A simple structural model of resource misallocation that is calibrated to match our empirical estimates implies that favoritism generates aggregat eoutput loss of 0.5% annually.
    Keywords: Regional favoritism,firm performance,enterprise surveys,resource misallocation
    JEL: D22 D72 O43 R11
    Date: 2021
  2. By: Girma, Sourafel; Görg, Holger
    Abstract: China's policy of encouraging export processing has been the topic of much discussion in the academic literature and policy debate. We use a recently developed econometric approach that allows for time varying "treatments" and estimate economically and statistically significant positive causal effects of entering into export processing and ordinary export markets on subsequent firm level productivity. These productivity effects are shown to be larger than those accruing to firms who enter into ordinary exporting. Interestingly, the estimation of quantile treatment effects shows that the positive effects do not accrue similarly to all types of firms, but are strongest for those at the low to medium end of the distribution of the productivity variable. We also find that export processors gain more when entering the industrialised North rather than the South, while this does not appear to matter much for ordinary exporting.
    Keywords: export processing,firm performance,China,time varying treatments
    JEL: F14 F61 O14
    Date: 2021
  3. By: Viswanathan, Madhu; Mukherji, Prokriti; Narasimhan, Om; Chandy, Rajesh
    Abstract: Firms in technology markets often outsource the manufacture of core components – components that are central to product performance and comprise a substantial portion of product costs. Despite the strategic importance of core component outsourcing, there is little empirical evidence (and many conflicting opinions) about its impact on consumer demand. We address this gap with an examination of panel data from the flat panel television industry, across key regions globally. Results from our estimation indicate that core component outsourcing reduces the firm’s ability to be on the technological frontier; this hurts demand, because our estimates suggest that consumers care about firms being on the frontier. On the other hand, such outsourcing also reduces costs. Finally, we find that outsourcing increases the intensity of competition in the marketplace. We assess these (often opposing) effects, and conduct thought experiments to quantify the performance impact of core component outsourcing.
    Keywords: high technology markets; outsourcing; technology frontier
    JEL: R14 J01
    Date: 2021–03–31
  4. By: HAMANO Masashige; OKUBO Toshihiro
    Abstract: This paper attempts to reproduce the past landscape of the economy with the help of evidence and structural models. For that purpose, we built a theoretical model consisting of endogenous firm entry and firm selection. Given the distribution of firm age and firm sales that we see today, we simulated age-specific technologies and fixed costs for operation. With these simulated parameters, we then reestablished the macroeconomic dynamics of each historical firm. With Japanese data from over 126 years, despite the massive presence of firms created after the Second World War until the oil crisis in the 1970s, we found that these historical firms show relatively low productivity. Old historical firms are subject to high fixed costs and high productivity. Finally, we demonstrated that our counterfactual fixed costs dramatically change the landscape of historical firms, as well as their characteristics.
    Date: 2021–03
  5. By: Marco F. Boretto; Fausto Cavalli; Ahmad Naimzada
    Abstract: We study the effects on the Nash equilibrium of the presence of a structure of social interdependent preferences in a Cournot oligopoly, described in terms of a game in which the network of interactions reflects on the utility functions of firms through a combination of weighted profits of their competitors as in [7]. Taking into account the channels of social and market interactions, we detail the consequence of preference interdependence on the best response of a firm, focusing on both direct and high degree of interdependence effects between two given firms. We characterize the Nash equilibrium in terms of social and market interactions among firms, through a Bonacich-like centrality measure and a scalar index describing the degree of competitiveness that characterizes an oligopoly with interdependent preferences. Finally, we study the equilibrium of some scenarios described by regular structures of interaction.
    Keywords: Cournot Game, Preference interdependence, Nash Equilibrium
    JEL: D43 C62 C70
    Date: 2021–03
  6. By: Léa Marchal (UP1 - Université Paris 1 Panthéon-Sorbonne, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Giulia Sabbadini (Institut de hautes études internationales et du développement - Graduate Institute of International and Development Studies [Geneva, Switzerland])
    Abstract: This paper investigates whether the employment of immigrant workers affects the performance of firms in their export markets when they are facing an increase in import competition. Exploiting the surge of Chinese imports following its accession to the World Trade Organization and using a sample of French manufacturing exporters from 2002 to 2015, we find that an increase in the growth rate of Chinese imports in a market has a negative effect on both the survival probability of firms and the growth rate of sales on that market. This negative effect on firm performance is mitigated by the employment of immigrant workers.
    Keywords: Firm,Heterogeneity,Immigrant workers,Import competition,Productivity
    Date: 2021–03
  7. By: Bijnens, Gert; Hutchinson, John; Konings, Jozef; Saint-Guilhem, Arthur
    Abstract: Increased investment in clean electricity generation or the introduction of a carbon tax will most likely lead to higher electricity prices. We examine the effect from changing electricity prices on manufacturing employment. Analyzing firm-level data, we find that rising electricity prices lead to a negative impact on labor demand and investment in sectors most reliant on electricity as an input factor. Since these sectors are unevenly spread across countries and regions, the labor impact will also be unevenly spread with the highest impact in Southern Germany and Northern Italy. We also identify an additional channel that leads to heterogeneous responses. When electricity prices rise, financially constrained firms reduce employment more than less constrained firms. This implies a potentially mitigating role for monetary policy. JEL Classification: E52, H23, J23, Q48
    Keywords: employment, environmental regulation, labor demand, manufacturing industry, monetary policy
    Date: 2021–04

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