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on Business Economics |
| By: | Breinlich, Holger; Fadinger, Harald; Nocke, Volker; Schutz, Nicolas |
| Abstract: | We evaluate the consequences of oligopolistic behavior for the estimation of gravity equations for trade flows. With oligopolistic competition, firm-level gravity equations based on a standard CES demand framework need to be augmented by markup terms that are functions of firms' market shares. At the aggregate level, the additional term takes the form of the exporting country's market share in the destination country multiplied by an exporter-destination-specific Herfindahl-Hirschman index. For both cases, we show how to construct appropriate correction terms that can be used to avoid problems of omitted variable bias. We illustrate the quantitative importance of our results for combined French and Chinese firm-level export data as well as for a sample of product-level imports by European countries. Our results show that correcting for oligopoly bias can lead to substantial changes in the coefficients on standard gravity regressors such as distance or the impact of currency unions. |
| Keywords: | gravity equation; oligopoly; CES demand; aggregative game |
| JEL: | F12 F14 L13 |
| Date: | 2021–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:114419&r= |
| By: | Coraggio, Luca (University of Naples Federico II); Pagano, Marco (University of Naples Federico II, and); Scognamiglio, Annalisa (University of Naples Federico II, and); Tåg, Joacim (Research Institute of Industrial Economics (IFN)) |
| Abstract: | Does the matching between workers and jobs help explain productivity differentials across firms? To address this question we develop a job-worker allocation quality measure (JAQ) by combining employer-employee administrative data with machine learning techniques. The proposed measure is positively and significantly associated with labor earnings over workers' careers. At firm level, it features a robust positive correlation with firm productivity, and with managerial turnover leading to an improvement in the quality and experience of management. JAQ can be constructed for any employer-employee data including workers' occupations, and used to explore the effect of corporate restructuring on workers' allocation and careers. |
| Keywords: | Jobs; Workers; Matching; Mismatch; Machine Learning; Productivity; Management |
| JEL: | D22 D23 D24 G34 J24 J31 J62 L22 L23 M12 M54 |
| Date: | 2022–04–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:1427&r= |
| By: | Albornoz, Facundo; Calvo-Pardo, Héctor; Corcos, Gregory; Ornelas, Emanuel |
| Abstract: | How do exporters expand their product scope and geographical presence? We argue that new exporters are uncertain about their profitability in different countries and products, but learn it as they start to export. As a consequence, exporters add products and countries sequentially, in an interdependent process. Exploiting disaggregated data on French exporters, we find empirical support consistent with such a mechanism, where firms learn from their initial export experiences and then adjust their sales, number of products and destination countries accordingly. Our results indicate that part of the learning is firm-specific, and not merely product- or market-specific. Furthermore, we find that firms tend to expand in the sub-extensive margin first by widening product scope within a destination and later by entering new destinations; and that firms' core products are particularly resilient despite being used to "test the waters" when entering additional countries. |
| Keywords: | export dynamics; experimentation; uncertainty; multiproduct firms; market inter-dependence |
| JEL: | F10 F14 L25 |
| Date: | 2021–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:114383&r= |
| By: | Banerjee, Suman (Stevens Institute of Technology); Estrin, Saul (London School of Economics); Pal, Sarmistha (University of Surrey) |
| Abstract: | Does the introduction of corporate transparency and disclosure rules in emerging economies affect compliance, and therefore earnings quality and firm performance? We explore these questions for an important emerging economy, Russia, using a natural experiment, the 2002 introduction of Russian corporate governance code. We exploit the exogenous variation in voluntary disclosure and find a significant increase in corporate disclosure among the domestic Russian firms over the period 2003-07 when firms gradually adopted some but not all disclosure rules. The immediate effect of the introduction was a drop in reported earnings. Market valuation, however, only improved for domestic firms after 2007, when all domestic firms had complied. However, cross-listed firms, which were already satisfying international standards, remained largely unaffected. Though average compliance by domestic firms was only 53%, average firm value of treated domestic firms, relative to cross-listed ones, went up by about 10%. Results are robust, confirm external validity and offer important policy implications for other emerging/transition economies. |
| Keywords: | increased disclosure, processing cost of information, market valuation, reported earnings, cost of capital, domestic vs. cross-listed firms, 2002 Russian Corporate Governance Code, difference-in-difference model, Russia |
| JEL: | G3 K29 O38 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15103&r= |
| By: | Görg, Holger (Kiel Institute for the World Economy); Mulyukova, Alina (Kiel Institute for the World Economy) |
| Abstract: | This paper exploits time and geographic variation in the adoption of Special Economic Zones in India to assess the direct and spillover effects of the program. We combine geocoded firm-level data and geocoded SEZs using a concentric ring approach, thus creating a novel dataset of firms with their assigned SEZ status. To overcome the selection bias we employ inverse probability weighting with time-varying covariates in a difference-in-differences frame-work. Our analysis yields that conditional on controlling for initial selection, SEZs induced no further productivity gains for within SEZ firms, on average. This is predominantly driven by relatively less productive firms, whereas more productive firms experienced significant productivity gains. However, SEZs created negative externalities for firms in the vicinity which attenuate with distance. Neighbouring domestic firms, large firms, manufacturing firms and non-importer firms are the main losers of the program. Evidence points at the diversion of inputs from non-SEZ to SEZ-firms as a potential mechanism. |
| Keywords: | firm performance, agglomerations, Special Economic Zones, India |
| JEL: | O18 O25 P25 R10 R58 R23 F21 F60 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15123&r= |
| By: | Brandily, Paul (Paris School of Economics); Hémet, Camille (Paris School of Economics); Malgouyres, Clément (Paris School of Economics) |
| Abstract: | We study job displacement in France. In the medium run, losses in firm-specific wage premium account for a substantial share of the overall cost of displacement. However, and despite the positive correlation between premium and productivity in the cross-section of firms, we find that workers are reemployed by high productivity, low labor share firms. The observed reallocation is therefore productivity-enhancing, yet costly for workers. We show that destination firms are less likely to conclude collective wage agreements and have lower participation rates at professional elections. Overall, our results point to a loss in bargaining power. |
| Keywords: | displaced workers, wage, reallocation, productivity, labor share |
| JEL: | J63 J31 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15105&r= |
| By: | Danae Arroyos-Calvera; Nattavudh Powdthavee |
| Abstract: | We examine whether a company's corporate reputation gained from their CSR activities and a company leader's reputation, one that is unrelated to his or her business acumen, can impact economic action fairness appraisals. We provide experimental evidence that good corporate reputation causally buffers individuals' negative fairness judgment following the firm's decision to profiteer from an increase in the demand. Bad corporate reputation does not make the decision to profiteer as any less acceptable. However, there is evidence that individuals judge as more unfair an ill-reputed firm's decision to raise their product's price to protect against losses. Thus, our results highlight the importance of a good reputation in protecting a firm against severe negative judgments from making an economic decision that the public deems unfair. |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2204.03450&r= |
| By: | Bouckaert, Jan (University of Antwerp); Stennek, Johan (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | We study how the legal profession manages representational conflicts of interest. Such conflicts arise when the same law firm represents clients with adverse interests. They may compromise the legal process, ultimately jeopardizing social welfare. We argue that current ethical standards, emphasizing disqualification over Chinese walls, may actually worsen the clients’ situation. Instead, the clients’ interests are today mainly protected by law firms being small. Despite low market concentration, law firms enjoy high earnings as representational conflicts create negative network externalities at the firm level. These profits are not eroded even in the long run as entry occurs through firm splitups. |
| Keywords: | law firms; professional services; dual representation; representational conflicts of interest; ethical standards; Chinese walls; recusals; negative network externalities; competition; self-regulation |
| JEL: | K40 L13 L22 L44 L84 |
| Date: | 2022–04 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0820&r= |