nep-bec New Economics Papers
on Business Economics
Issue of 2022‒01‒24
eight papers chosen by
Vasileios Bougioukos
London South Bank University

  1. Equilibrium Job Turnover and the Business Cycle By Carrillo-Tudela, Carlos; Clymo, Alex; Coles, Melvyn
  2. Shining with the Stars: Competition, Screening, and Concern for Coworkers' Quality By Barigozzi, Francesca; Cremer, Helmuth
  3. Procuring survival By Cappelletti, Matilde; Giuffrida, Leonardo M.
  4. Covid-19 pandemic, state aid and firm productivity By Bighelli, Tommaso; Lalinsky, Tibor; Vanhala, Juuso
  5. Idiosyncratic Shocks and Aggregate Fluctuations in an Emerging Market By Mr. Damiano Sandri; Mr. Francesco Grigoli; Emiliano Luttini
  6. Lobbying Physicians: Payments from Industry and Hospital Procurement of Medical Devices By Alon Bergman; Matthew Grennan; Ashley Swanson
  7. Endogenous Spatial Production Networks: Quantitative Implications for Trade and Productivity By Piyush Panigrahi
  8. How far Do gazelles run? Growth Patterns of Regular Firms, High Growth Firms and Startups By Ramy El-Dardiry; Benedikt Vogt

  1. By: Carrillo-Tudela, Carlos (University of Essex); Clymo, Alex (University of Essex); Coles, Melvyn (University of Essex)
    Abstract: This paper develops and estimates a fully microfounded equilibrium business cycle model of the US labor market with aggregate productivity shocks. Those microfoundations are consistent with evidence regarding the underlying distribution of firm growth rates across firms [by age and size] and, when aggregated, are consistent with macro-evidence regarding gross job creation and job destruction flows over the cycle. By additionally incorporating on-the-job search, we systematically characterise the stochastic relationships between aggregate job creation and job destruction flows across firms, gross hire and quit flows [churning] by workers across firms, as well as the persistence and volatility of unemployment and worker job finding rates over the cycle.
    Keywords: business cycle, firm dynamics, job search
    JEL: E24 E32 J62 J63
    Date: 2021–11
  2. By: Barigozzi, Francesca (University of Bologna); Cremer, Helmuth (Toulouse School of Economics)
    Abstract: We study how workers' concern for coworkers' ability (CfCA) affects competition in the labor market. We consider two firms offering nonlinear contracts to a unit mass of prospective workers. Firms may differ in their marginal productivity, while workers are heterogeneous in their ability (high or low), and in their taste for being employed by any of the two firms. Workers receive a utility premium when employed by the firm hiring the workforce with larger average ability and they suffer a utility loss in the opposite case. These premiums/losses are endogenously determined. When workers' ability is observable and the difference in firms' marginal productivities is strictly positive, we show that CfCA increases surplus but it also increases firms' competition for high-ability workers. As a result, CfCA benefits high-ability workers but is detrimental to firms. In addition, CfCA exacerbates the existing distortion in sorting of high-ability workers to firms: too many workers are hired by the least efficient firm. When ability is not observable, the additional surplus appropriated by high-ability workers is eroded by overincentivization (countervailing incentives) and the more so when CfCA is high. Conversely, high-types' sorting improves when CfCA is low and remains the same when it is high.
    Keywords: screening, competition, concern for coworkers’ quality, sorting
    JEL: D82 L13 M54
    Date: 2021–11
  3. By: Cappelletti, Matilde; Giuffrida, Leonardo M.
    Abstract: Public spending (i.e., 'G') enables governments to fulfill their fiscal policies. This paper takes a micro perspective and quantifies the impact of procurement spending - a specific component of G - on firm survival. We find that firms that receive public contracts survive longer, ceteris paribus, and that this effect accrues over time, reaching 20 percentage points after ten years. Our results are based on a novel dataset for Italy that combines balance sheet data on the universe of limited liability firms with administrative records on market entry and exit and quasi-universe of public contract data between 2008 and 2018. For construction auctions, we also rely on bid-level data to inform a regression discontinuity analysis. We find that the survival rate of winners relative to marginal losers is 70% higher after 36 months - or after two years and half of the median contract expiration. We explore several alternative channels that could rationalize our findings. We find that recipients do not become more productive, and their earnings become increasingly dependent on sales to public customers.
    Keywords: firm survival,firm dynamics,government demand,public procurement,demandshocks,productivity,auctions,regression discontinuity design
    JEL: D44 H32 H57
    Date: 2021
  4. By: Bighelli, Tommaso; Lalinsky, Tibor; Vanhala, Juuso
    Abstract: We study the consequences of the COVID-19 pandemic on productivity by matching firm performance outcomes with corresponding firm-level information on government support. Our cross-country evidence for five EU countries shows that the pandemic led to a significant short-term decline in productivity predominantly driven by the within-firm growth component. A thorough comparative analysis of the distribution of employment and overall direct subsidies, considering separately also relative firm-level support and the probability of being supported, reveals several common characteristics. In general, the pandemic support was distributed rather efficiently, i.e. towards “deserving” firms and only marginally towards “zombie” and non-viable firms. However, government subsidies appear to have had a limited effect on aggregate productivity developments.
    JEL: D22 H25 J38 L29
    Date: 2022–01–14
  5. By: Mr. Damiano Sandri; Mr. Francesco Grigoli; Emiliano Luttini
    Abstract: This paper provides the first assessment of the contribution of idiosyncratic shocks to aggregate fluctuations in an emerging market using confidential data on the universe of Chilean firms. We find that idiosyncratic shocks account for more than 40 percent of the volatility of aggregate sales. Although quite large, this contribution is smaller than documented in previous studies based on advanced economies, despite a higher degree of market concentration in Chile.We show that this finding is explained by larger firms being less volatile and by weaker propagation effects across Chilean firms.
    Keywords: Business cycle, emerging markets, firm-level shocks, granularity, propagation
    Date: 2021–12–10
  6. By: Alon Bergman; Matthew Grennan; Ashley Swanson
    Abstract: We draw upon newly merged administrative data sets to study the relationship between payments from medical technology firms to physicians and medical device procurement by hospitals. These payments (and the interactions that accompany them) may facilitate the transfer of valuable information to and from physicians. However, they may also influence physicians’ treatment decisions, and in turn hospital device procurement, in favor of paying firms. Payments are pervasive: 87 percent of device sales in our sample occurred at a hospital where a relevant physician received a payment from a device firm. Payments are also highly correlated with spending within a firm-hospital pair: event studies suggest that a large positive increase in payments to a given hospital from a given firm ($438 per physician on average, or 112 percent of the mean) is associated with 27 percent higher expenditures on the paying firm’s devices post-event. Finally, we explore how payments mediate the relationship between expertise and device procurement patterns. Hospitals affiliated with the top Academic Medical Centers (AMCs), which plausibly represent an expert benchmark, purchase a different mix of devices than other hospitals, and payments to hospitals outside the top AMCs are correlated with larger deviations from the procurement patterns of top AMC hospitals.
    JEL: D23 D73 I11 L15
    Date: 2021–12
  7. By: Piyush Panigrahi
    Abstract: Larger Indian firms selling inputs to other firms tend to have more customers, tend to be used more intensively by their customers, and tend to have larger customers. Motivated by these regularities, I propose a novel empirical model of trade featuring endogenous formation of input-output linkages between spatially distant firms. The empirical model consists of (a) a theoretical framework that accommodates first order features of firm-to-firm network data, (b) a maximum likelihood framework for structural estimation that is uninhibited by the scale of data, and (c) a procedure for counterfactual analysis that speaks to the effects of micro- and macroshocks to the spatial network economy. In the model, firms with low production costs end up larger because they find more customers, are used more intensively by their customers and in turn their customers lower production costs and end up larger themselves. The model is estimated using novel micro-data on firm-to-firm sales between Indian firms. The estimated model implies that a 10% decline in inter-state border frictions in India leads to welfare gains ranging between 1% and 8% across districts. Moreover, over half of the variation in changes in firms’ sales to other firms can be explained by endogenous changes in the network structure.
    Keywords: production networks, international trade, economic geography
    JEL: F11 F12 D24 C67 C68 L11 O11 O12 R12 R15 D85
    Date: 2021
  8. By: Ramy El-Dardiry (CPB Netherlands Bureau for Economic Policy Analysis); Benedikt Vogt (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: High growth firms receive a lot attention from policy. In many countries, policies to stimulate economic growth target startups -- loosely defined as young firms that often rely on new technology to develop scaleable business models. Despite their prominence in policy, it turns out to be difficult to study these firms empirically as there is no clear way to isolate startups from the broader set of entrants in an economy. Recently, the toolkit to study startups has been extended as privately owned databases about innovative firms have become available. These databases offer a potentially rich and up to date source of information which complements data from national statistics agencies. However, evidence on how representative these type of databases are when it comes to HGFs or the startup landscape of a country is scarce. Little is known about how growth patterns of firms included in private startup databases actually compare to the residual firm population in a country. A more thorough understanding of the general validity of private startup databases is therefore much needed.
    JEL: L25 L26
    Date: 2022–01

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