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on Business Economics |
| By: | Chaudhary, Amit (University of Warwick) |
| Abstract: | Misallocation of resources in an economy makes firms less productive. I document the roles of heterogeneity, sorting, and complementarity in a framework where workers, managers, and firms interact to shape productivity. The approach I follow uses the movement of workers and managers across firms to identify the distribution of productivity. I webscraped novel microdata of crime reports from the Indian police department and combined them with the worker-level measurement of productivity. Using this data I show that the third source of heterogeneity in the form of manager ability is an important driver of differences in firm productivity. I empirically identify complementarities between workers, managers, and firms using my estimation methodology. Counterfactual results show that reallocating workers by applying a positive assortative sorting rule can increase police department productivity by 10%. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1377&r= |
| By: | Werner, Tobias |
| Abstract: | As self-learning pricing algorithms become popular, there are growing concerns among academics and regulators that algorithms could learn to collude tacitly on non-competitive prices and thereby harm competition. I study popular reinforcement learning algorithms and show that they develop collusive behavior in a simulated market environment. To derive a counterfactual that resembles traditional tacit collusion, I conduct market experiments with human participants in the same environment. Across different treatments, I vary the market size and the number of firms that use a self-learned pricing algorithm. I provide evidence that oligopoly markets can become more collusive if algorithms make pricing decisions instead of humans. In two-firm markets, market prices are weakly increasing in the number of algorithms in the market. In three-firm markets, algorithms weaken competition if most firms use an algorithm and human sellers are inexperienced. |
| Keywords: | Artificial Intelligence,Collusion,Experiment,Human-Machine Interaction |
| JEL: | C90 D83 L13 L41 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:372&r= |
| By: | Antonin Bergeaud; Clément Malgouyres; Clément Mazet-Sonilhac; Sara Signorelli |
| Abstract: | Domestic outsourcing has grown substantially in developed countries over the past two decades. This paper addresses the question of the technological drivers of this phenomenon by studying the impact of the staggered diffusion of broadband internet in France during the 2000s. Our results confirm that broadband technology increases firm productivity and the relative demand for high-skill workers. Further, we show that broadband internet led firms to outsource some non-core occupations to service contractors, both in the low and high-skill segments. In both cases, we find that employment related to these occupations became increasingly concentrated in firms specializing in these activities, and was less likely to be performed in-house within firms specialized in other activities. As a result, after the arrival of broadband internet, establishments become increasingly homogeneous in their occupational composition. Finally, we provide suggestive evidence that high-skill workers experience salary gains from being outsourced, while low-skill workers lose out. |
| Keywords: | broadband, Firm Organisation, Labour Market, Outsourcing |
| JEL: | G14 G21 O33 |
| Date: | 2021–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:oec:elsaab:264-en&r= |
| By: | Ruediger Bachmann; Kai Carstensen; Stefan Lautenbacher; Martin Schneider |
| Abstract: | This paper studies how managers plan under uncertainty. In a new survey panel on German manufacturing firms, we show that uncertainty reflects change: Planning incorporates higher subjective uncertainty about future sales growth when the firm has just experienced unusual growth, and more so if the experience was negative. At the quarterly frequency, subjective uncertainty closely tracks conditional volatility of shocks: Both exhibit an asymmetric V-shaped relationship with past growth. In the cross section of firms, however, subjective uncertainty differs from conditional volatility: planning in successful firms—either large or fast-growing—reflects lower subjective uncertainty than in unsuccessful firms even when the size of the shocks is the same. |
| JEL: | C83 D22 E20 E23 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29430&r= |
| By: | P. Rovelli; C. Benedetti; A. Fronzetti Colladon; A. De Massis |
| Abstract: | This study explores the role of external audiences in determining the importance of family firm brands and the relationship with firm performance. Drawing on text mining and social network analysis techniques, and considering the brand prevalence, diversity, and connectivity dimensions, we use the semantic brand score to measure the importance the media give to family firm brands. The analysis of a sample of 52,555 news articles published in 2017 about 63 Italian entrepreneurial families reveals that brand importance is positively associated with family firm revenues, and this relationship is stronger when there is identity match between the family and the firm. This study advances current literature by offering a rich and multifaceted perspective on how external audiences perceptions of the brand shape family firm performance. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2110.13815&r= |
| By: | Kim, Jinhwan (Stanford Graduate School of Business); Olbert, Marcel (London Business School) |
| Abstract: | We investigate the relationship between private firms’ disclosures and the demand for the equity of their publicly traded peers. Using data on the global movement of public equity, we find that a one standard deviation increase in private firm disclosure transparency – proxied by the number of disclosed private firms’ financial statement line items — reduces global investors’ demand for public equity by 13% to 16% or by $206 million to $253 million in dollar terms. These findings are consistent with private firm disclosures generating negative pecuniary externalities – global investors reallocate their capital away from public firms to more transparent private firms — and less consistent with these disclosures creating positive information externalities that would benefit public firms. Consistent with this interpretation, we find that the reduction in demand for public equity is offset by a comparable increase in capital allocation to more transparent private firms. Using staggered openings of the Bureau van Dijk database offices in each investee country as a plausibly exogenous shock to private firm disclosures, we conclude that the negative relationship between private firm disclosures and public equity demand is likely causal. |
| JEL: | F21 F30 G15 G30 M16 M40 M41 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3957&r= |
| By: | Kehinde Abiodun (Department of Economics and Business, Colorado School of Mines); Ben Gilbert (Department of Economics and Business, Colorado School of Mines) |
| Abstract: | Universal electrification is a necessary but not sufficient condition for reliable electricity supply. We examine the effect of power outages on firm performance in four middle-income countries with universal electrification. Using data from the World Bank Enterprise Survey on over 8,000 firms from 39 regions across Egypt, Morocco, Tunisia, and Indonesia, we find no discernable average effect on firm performance. There is considerable cross-country heterogeneity, however. Firms in Tunisia and Egypt --- the two countries in our sample with the greatest frequency of outages --- suffer statistically and economically significant losses from outages, while firms in Indonesia and Morocco show no effect. The losses are high in both Tunisia and Egypt, where outages reduce total annual sales by 15 and 25 percent, respectively. These findings suggest that while universal electrification is an important development goal, it should be considered together with investments in reliability. |
| Keywords: | universal electrification, power outages, reliability, middle-income countries |
| JEL: | D24 H54 O13 O14 |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:mns:wpaper:wp202103&r= |
| By: | Roxanne Merenda |
| Abstract: | This paper exploits a panel data ranging from 2010 to 2019 to investigate firm-level determinants of export intensity in the Portuguese defense industry, using a fixed effects model. As in any study exploiting corporate finance panel data, it is likely that some variables are endogenous due to reverse causality. Although we address this issue, the interpretation of our results cannot be fully causal. We find evidence that learning economies, proxied by export persistence, are the largest determinants associated with export intensity at firm level. Worker productivity and firm size also play a positive and significant role. Financial indicators such as financial pressure and leverage ratio negatively correlate with export intensity, albeit not always significantly. Finally, and contrary to the literature, we cannot find evidence that the Portuguese defense industry’s competitiveness rely on investment and R&D, nor is it impacted by geographical agglomeration. |
| Keywords: | Exports, Competitiveness, Firm-level data, Defense industry |
| JEL: | D22 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:mde:wpaper:0159&r= |
| By: | Michael Peters; Conor Walsh |
| Abstract: | Population growth has declined markedly in almost all major economies since the 1970s. We argue this trend has important consequences for the process of firm dynamics and aggregate growth. We study a rich semi-endogenous growth model of firm dynamics, and show analytically that a decline in population growth reduces creative destruction, increases average firm size and concentration, raises market power and misallocation, and lowers aggregate growth in the long-run. We also show lower population growth has positive effects on the level of productivity, making the short-run welfare impacts ambiguous. In a quantitative application to the U.S, we find that the slowdown in population growth since the 1980s and the projected continuation of this trend accounts for a substantial share of the fall in the entry and exit rates and the increase in firm size. By contrast, the impact on markups is modest. The effect on aggregate growth is positive for around two decades, before turning negative thereafter. |
| JEL: | J11 L11 O3 O4 O44 |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29424&r= |
| By: | Hensel, Lukas (Peking University); Tekleselassie, Tsegay (Policy Studies Institute); Witte, Marc (IZA) |
| Abstract: | Firms often use social networks to find workers, limiting the pool of potential applicants. We conduct a field experiment subsidizing firms' formal vacancy posting. The subsidies increase non-network employee search and shift vacancies towards high-skilled positions. Post-treatment, firms continue searching for high-skilled workers despite reverting to network-based search. This change in skill requirements does not increase vacancy posting or hiring, suggesting substitutability between workers of different skill levels. Finally, we experimentally show that information asymmetries about applicants' skills do not limit firms' formal search. Our results highlight that exposure to different labor market segments can permanently change firms' labor demand. |
| Keywords: | firms, hiring, social networks, formalization, field experiments |
| JEL: | D22 J23 J46 C93 |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14839&r= |
| By: | Yulong Chen; Liyuan Ma; Peter F. Orazem (Center for Agricultural and Rural Development (CARD) at Iowa State University) |
| Abstract: | The federal government has invested $60 billion thus far in rural broadband deployment, and, recently, FCC chairman Ajit Pai launched the Rural Digital Opportunity Fund, which will add up to $20.4 billion to further expand broadband in underserved rural areas. However, broadband expansion may not reverse the decades-long population shift from rural to urban markets and it does not affect all economic sectors equally. Chen, Ma, and Orazem look at the overall effect of broadband on net rural firm entry and find that the construction, manufacturing, wholesale trade, real estate, and arts and entertainment industries see the most positive benefits, but the broadband effect is too small to reverse the 70-year long rural to urban shift in population and economic activity. |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:ias:cpaper:apr-spring-2020-4&r= |