nep-bec New Economics Papers
on Business Economics
Issue of 2021‒10‒18
ten papers chosen by
Vasileios Bougioukos
London South Bank University

  1. Productivity-wage nexus at the firm-level in Portugal: Decoupling and divergences By Alexandre Mergulhão; José Azevedo Pereira
  2. Benefits of internationalisation for acquirers and targets - But unevenly distributed By Frey, Rainer; Goldbach, Stefan
  3. The granular economy of Kazakhstan By Jozef Konings; Galiya Sagyndykova; Venkat Subramanian; Astrid Volckaert
  4. Role of Beliefs About Firm Profits and Image in Firm Recycling Behavior: Evidence from Georgia Horticultural Firms By Florkowski, Wojciech J.; Nouve, Yawotse
  5. Tax Evasion by Firms By Laszlo Goerke
  6. Behavior-based Price Discrimination in the Domestic and International Mixed duopoly By Okuyama, Suzuka
  7. Cost Uncertainty in an Oligopoly with Endogenous Entry By Laszlo Goerke; Marco de Pinto
  8. Does Retrenchment Boost Performance? Evidence from Fallen Angels By Farroukh, Karim; Koski, Jennifer L.; Werner, Ingrid M.
  9. Selecting valuation distributions: non-price decisions of multi-product firms By Stefanie Bossard; Armin Schmutzler
  10. Membership in Employers' Associations and Collective Bargaining Coverage in Germany By Jirjahn, Uwe

  1. By: Alexandre Mergulhão; José Azevedo Pereira
    Abstract: There is a growing international concern about the slowdown in productivity growth, especially as labor productivity enhancements are important drivers of higher general-ised living standards.Using administrative data of firms in Portugal between 2010 and 2016, we analyse the relationships between productivity and wages. At odds with neoclassical theory of mar-ginal productivity of labor, we find that two thirds of firms insufficiently raised wages giv-en observed productivity growth. Employing unconditional quantile regressions, we in-vestigate some quantifiable determinants of the productivity-wage gap at different parts of the distributions. Most of the documented dynamics contributed not only to the diver-gence of productivity and wages but also to the decoupling of productivity and wage growth. We argue that labor market flexibilisation intensified segmentation, providing incentives for non standard contracts. Both dimensions, as well as higher board com-pensations, international trade and on-the-job training weakened the link between productivity and wages.
    Keywords: compensation, income distribution, Productivity, public policy, Quantile regressions, wage share
    JEL: C3 D2 D31 D33 J31 J38
    Date: 2021–10–18
  2. By: Frey, Rainer; Goldbach, Stefan
    Abstract: In some countries around the world, the advantages of globalisation have been increasingly called into question recently. In particular, takeovers by foreign firms raise suspicions of technology theft and job cuts at the newly acquired local plant. By looking at Germany, as a large open economy, between 1999 and 2018 we first see that both German firms that are acquired by foreign investors and German firms which invest abroad show similar characteristics: they are on average larger, more innovative and productive, but less profitable than purely national firms. With internationalisation, a variety of positive effects emerge. With respect to takeovers of German companies by foreign investors, the productivity and sales of the German affiliate increase while the foreign owners tend to step up expenditure on the labour force in Germany in the aftermath of the acquisition - compared to purely domestically owned firms. In the case of German firms going international, we find positive productivity and sales effects for relatively small companies investing abroad, and this internationalisation is not to the detriment of the domestic labour force. Thus, all in all, this supports a positive view of globalisation. However not all firms benefit: in particular, sector, firm size and time horizon have a bearing on the outcome.
    Keywords: globalisation,firm acquisition,M&A,productivity,sales,innovativeness,know-how,technology,labour costs,employment,wages,firm heterogeneity
    JEL: D22 D24 F23 G34
    Date: 2021
  3. By: Jozef Konings (Nazarbayev University, Graduate School of Business); Galiya Sagyndykova (Nazarbayev University, Department of Economics); Venkat Subramanian (Nazarbayev University, Graduate School of Business); Astrid Volckaert (KU Leuven, Faculteit Economie en Bedrijfswetenschappen, Vlaams Instituut voor Economie en Samenleving (VIVES))
    Abstract: This paper analyzes the importance of idiosyncratic firm specific shocks for explaining macroeconomic fluctuations in an emerging economy. To this end, we use detailed quarterly firm level data to document that the firm size distribution is fat-tailed and that idiosyncratic shocks of the largest 30 firms appear to explain nearly 80% of the growth in aggregate total factor productivity. This confirms earlier research for the U.S. of the "granular hypothesis" (Gabaix, 2011). Thus individual firm shocks do not average out in the aggregate as is assumed in most of the macroeconomic literature, instead, macroeconomic questions can be answered by analyzing the behavior of the largest firms.
    Keywords: granularity, firm heterogeneity, aggregate fluctuations, Total Factor Productivity, transitional economies
    JEL: D24 E23 E32 L16 L25 P27
    Date: 2021–10
  4. By: Florkowski, Wojciech J.; Nouve, Yawotse
    Keywords: Environmental Economics and Policy, Resource/Energy Economics and Policy, Agribusiness
    Date: 2021–08
  5. By: Laszlo Goerke (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University)
    Abstract: This contribution surveys theoretical analyses of tax evasion by firms. It uses a simple model in which the firm determines economic activity and the under-declaration of the tax base to integrate various approaches into a coherent analytical framework. Initially, the chapter characterises the basic features of the firm's decision. Subsequently, it considers the effects of firm-size heterogeneity, restrictions on evasion behaviour, the co-existence of tax evasion with other illegal activities, output market interactions, non-profit objectives, and corporate governance issues.
    Keywords: Firm, Tax Avoidance, Tax Evasion
    JEL: H25 H26 K34
    Date: 2021–04
  6. By: Okuyama, Suzuka
    Abstract: We investigate mixed markets in which a social welfare-maximizing public firm and a private firm engage in behavior-based price discrimination. We consider two cases: one where the private firm is completely owned by domestic shareholders and one where it is completely owned by foreign shareholders. In the domestic mixed duopoly, BBPD is irrelevant from the viewpoint of social welfare. This is because poaching does not occur. In the international mixed duopoly, BBPD reduces the public firm’s market share but improves domestic social welfare. This is because the outflow to foreign shareholders decreases. We also consider domestic and international pure duopoly and find that the presence of public firms reduces welfare loss caused by BBPD.
    Keywords: Behavior-based price discrimination, Mixed oligopoly, Foreign firms, Privatization
    JEL: D43 H42 L13
    Date: 2021–10–08
  7. By: Laszlo Goerke (Institute for Labour Law and Industrial Relations in the European Union (IAAEU), Trier University); Marco de Pinto (University of Applied Labour Studies)
    Abstract: How does cost uncertainty affect the welfare consequences of an oligopoly? To answer this question, we investigate a Cournot oligopoly in which firms produce a homogeneous commodity and market entry is feasible. Marginal costs are unknown ex-ante, i.e. prior to entering the market. They become public knowledge before output choices are made. We show that uncertainty induces additional entry in market equilibrium and also raises the socially optimal number of firms. Since the first change dominates, the excessive entry distortion is aggravated. This prediction is robust to various extensions of the analytical set-up. Furthermore, the welfare loss due to oligopoly tends to increase with uncertainty.
    Keywords: Oligopoly, Excessive Entry, Uncertainty, Welfare
    JEL: D43 L13
    Date: 2021–05
  8. By: Farroukh, Karim (U of Washington); Koski, Jennifer L. (U of Washington); Werner, Ingrid M. (Ohio State U)
    Abstract: We study restructuring by firms whose stock prices experience a sharp decline to a low price level-fallen angels. In response to a price decline, firms can retrench by reducing investments and cutting the workforce, or increase leverage and investments hoping for lottery-like payoffs. We find that relative to a matched sample, fallen angels retrench. While retrenchment helps boost stock prices, reducing fixed assets and employment also increase firm risk, lower growth opportunities, and reduce the probability a firm remains listed. We find no consistent evidence that retrenchment actions undertaken by fallen angels affect future operating performance.
    JEL: G10 G30 G34
    Date: 2021–06
  9. By: Stefanie Bossard; Armin Schmutzler
    Abstract: This paper analyzes decisions of multi-product firms regarding product selection, innovation and advertising as choices of consumer valuation distributions. We show that a profit-maximizing monopolist chooses these distributions so as to maximize the dispersion of the valuation differences between goods across consumers. By contrast, she chooses the willingness-to-pay to be maximally or minimally dispersed, depending on the set of available distributions. In our benchmark model with uniform valuation differences, prices are increasing in valuation difference heterogeneity, but in more general settings this is not necessarily true. Moreover, the relation between willingness-to-pay heterogeneity and prices may well be non-monotone. Over wide parameter ranges, the firm’s choice of valuation distribution does not maximize net consumer surplus. This problem is exacerbated when the firm has access to strategies that distort valuation heterogeneity or willingness-to-pay heterogeneity.
    Keywords: Product choice, multiproduct firms, product heterogeneity, valuation distributions, consumer confusion
    JEL: D43 L13 M30
    Date: 2021–10
  10. By: Jirjahn, Uwe
    Abstract: While there is a strong overlap between membership in employers' associations and collective bargaining coverage, the overlap is far from being perfect. Using unique firm-level data from Germany, this study estimates the determinants of the membership in employers' associations and the coverage by industry-level or firm-level agreements. The analysis particularly focuses on the various constellations of membership and collective bargaining status. The results show that firm-level worker representation, foreign ownership, work organization, firm size, age and East-West differences are important determinants. Altogether, the analysis demonstrates that a more differentiated picture of industrial relations can be obtained by considering both membership in employers' associations and collective bargaining coverage.
    Keywords: Employers’ associations,industry-level bargaining,firm-level bargaining,foreign ownership,works councils,union density
    JEL: F23 F66 J51 J52
    Date: 2021

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