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on Business Economics |
| By: | Guner, Nezih (Universitat Autònoma de Barcelona); Ruggieri, Alessandro (University of Nottingham) |
| Abstract: | For a large set of countries, we document how the labor earnings inequality varies with GDP per capita. As countries get richer, the mean-to-median ratio and the Gini coefficient decline. Yet, this decline masks divergent patterns: while inequality at the top of the earnings distribution falls, inequality at the bottom increases. We interpret these facts within a model economy with heterogeneous workers and firms, featuring industry dynamics, search and matching frictions, and skill accumulation of workers through learning-by-doing and on-the-job training. The benchmark economy is calibrated to the UK. We then study how the earnings distribution changes with distortions that penalize high-productivity firms and frictions that reduce match formation. Distortions and frictions reduce employment, average firm size, and GDP per capita. They also affect how much firms are willing to pay workers, how well high-skill workers are matched with high-productivity firms, and how much training workers receive. The model generates the observed cross-country relation between GDP per capita and earnings inequality, as well as a host of cross-country facts on firm size distribution, firms' training decisions, and workers' life-cycle and job tenure earnings profiles. |
| Keywords: | earnings inequality, labor market frictions, correlated distortions, human capital, on-the-job training, productivity, firm size, life-cycle earning proles |
| JEL: | E23 E24 J24 O11 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15174&r= |
| By: | Aghion, Philippe; Bergeaud, Antonin; Lequien, Matthieu; Melitz, Marc J.; Zuber, Thomas |
| Abstract: | We decompose the "China shock" into two components that induce different adjustments for firms exposed to Chinese exports: a horizontal shock affecting firms selling goods that compete with similar imported Chinese goods, and a vertical shock affecting firms using inputs similar to the imported Chinese goods. Combining French accounting, customs, and patent information at the firm-level, we show that the horizontal shock is detrimental to firms' sales, employment and innovation. Moreover, this negative impact is concentrated on low-productivity firms. By contrast, we find a positive effect - although often not significant - of the vertical shock on firms' sales, employment and innovation. |
| Keywords: | competition shock; patent; firms; import |
| JEL: | F14 O19 O31 O33 O34 |
| Date: | 2021–08–09 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:113915&r= |
| By: | Valeria Gattai; Piergiovanna Natale; Francesca Rossi |
| Abstract: | Employing firm-level panel data from 2011 to 2015, we investigate the relationship between board diversity and outward foreign direct investment (OFDI) among firms headquartered in Europe. Previous studies suggest that best-performing firms self-select into OFDI and that board diversity affects firm performance and strategic decisions. Our focus is on board diversity in terms of gender and nationality as determinants of OFDI. After controlling for endogeneity using instrumental variables and control function methods, we find that board diversity positively affects OFDI by increasing firm performance; however, firms with more diverse boards are less likely to open foreign subsidiaries. Our findings also reveal that the negative effect of board diversity on OFDI is stronger in more productive firms. |
| Keywords: | Board diversity, Outward Foreign Direct Investment (OFDI), Foreign Direct Investment (FDI), Firm performance, Europe |
| JEL: | F23 G30 J16 |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:mib:wpaper:491&r= |
| By: | Bergeaud, Antonin; Malgouyres, Clement; Mazet-Sonilhac, Clement |
| 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 broad-band 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 organization; labor market; outsourcing |
| JEL: | G14 G21 O33 |
| Date: | 2021–07–28 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:113919&r= |
| By: | De Lyon, Joshua; Pessoa, João Paulo |
| Abstract: | We exploit the recent surge in Chinese export growth to study the effects of a trade shock on workers and firms in a foreign market, the UK, in the period 2000-2007. We find that individuals initially employed in sectors highly exposed to growth in imports from China experienced lower income growth and remained out of employment longer than workers in sectors that were less exposed to import competition. The effects are heterogeneous, with initially lower-paid workers suffering more in terms of employment and earnings than those initially better-paid, and female workers experiencing a greater relative fall in total earnings than males, mostly through reduced years of employment. Plants in industries more exposed to Chinese products displayed lower employment growth and higher probability of going out of business than plants in sectors more insulated from competition with China, with stronger effects for larger plants. |
| Keywords: | globalisation; employment; wages; UK economy |
| JEL: | F14 F16 J30 J60 |
| Date: | 2021–01–08 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:114281&r= |
| By: | Bloom, Nicholas; Fletcher, Robert S.; Yeh, Ethan |
| Abstract: | We use survey data on an opt-in panel of around 2,500 US small businesses to assess the impact of COVID-19. We find a significant negative sales impact that peaked in Quarter 2 of 2020, with an average loss of 29% in sales. The large negative impact masks significant heterogeneity, with over 40% of firms reporting zero or a positive impact, while almost a quarter report losses of more than 50%. These impacts also appear to be persistent, with firms reporting the largest sales drops in mid-2020 still forecasting large sales losses a year later in mid-2021. In terms of business types, we find that the smallest offline firms experienced sales drops of over 40% compared to less than 10% for the largest online firms. Finally, in terms of owners, we find female and black owners reported significantly larger drops in sales. Owners with a humanities degree also experienced far larger losses, while those with a STEM degree saw the least impact. |
| Keywords: | Covid-19; US firms; offline firms; online firms; coronavirus |
| JEL: | R14 J01 |
| Date: | 2021–08–12 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:113914&r= |
| By: | Impink, Stephen Michael; Prat, Andrea; Sadun, Raffaella |
| Abstract: | This paper uses novel, firm-level measures derived from communications metadata before and after a CEO transition in 102 firms to study if CEO turnover impacts employees' communication flows. We find that CEO turnover leads to an initial decrease in intra-firm communication, followed by a significant increase approximately five months after the CEO change. The increase is driven primarily by vertical (i.e. manager to employee) communication. Greater increases in communication after CEO change are associated with greater increases in firm market returns. |
| Keywords: | CEO change; communication; alignment |
| JEL: | R14 J01 J50 |
| Date: | 2021–09–08 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:113873&r= |
| By: | Santiago Camara |
| Abstract: | This paper presents evidence on the granular nature of firms' network of foreign suppliers and studies its implications for the impact of supplier shocks on domestic firms' performance. To demonstrate this, I use customs level information on transactions between Argentinean firms and foreign firms. I highlight two novel stylized facts: (i) the distribution of domestic firms' number of foreign suppliers is highly skewed with the median firm reporting linkages with only two, (ii) firms focus imported value on one top-supplier, even when controlling for firm size. Motivated by these facts I construct a theoretical framework of heterogeneous firms subject to search frictions in the market for foreign suppliers. Through a calibration exercise I study the framework's predictions and test them in the data using a shift-share identification strategy. Results present evidence of significant frictions in the market for foreign suppliers and strong import-export complementarities. |
| Date: | 2022–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2203.07282&r= |
| By: | Melitz, Marc J.; Redding, Stephen J. |
| Abstract: | Two central insights from the Schumpeterian approach to innovation and growth are that the pace of innovation is endogenously determined by the expectation of future profits and that growth is inherently a process of creative destruction. As international trade is a key determinant of firm profitability and survival, it is natural to expect it to play a key role in shaping both incentives to innovate and the rate of creative destruction. In this paper, we review the theoretical and empirical literature on trade and innovation. We highlight four key mechanisms through which international trade affects endogenous innovation and growth:(i) market size; (ii) competition; (iii) comparative advantage; (iv) knowledge spillovers. Each of these mechanisms offers a potential source of dynamic welfare gains in addition to the static welfare gains from trade from conventional trade theory. Recent research has suggested that these dynamic welfare gains from trade can be substantial relative to their static counterparts. Discriminating between alternative mechanisms for these dynamic welfare gains and strengthening the evidence on their quantitative magnitude remain exciting areas of ongoing research. |
| Keywords: | innovation; growth; international trade |
| JEL: | F10 F43 O30 O40 |
| Date: | 2021–06–17 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:113930&r= |
| By: | Satyajit Chatterjee (Federal Reserve Bank of Philadelphia); Burcu Eyigungor (Federal Reserve Bank of Philadelphia) |
| Abstract: | Online appendix for the Review of Economic Dynamics article |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:red:append:21-40&r= |
| By: | Alessandro Di Nola; Leo Kaas; Haomin Wang |
| Abstract: | While the COVID-19 pandemic had a large and asymmetric impact on firms, many countries quickly enacted massive business rescue programs which are specifically targeted to smaller firms. Little is known about the effects of such policies on business entry and exit, factor reallocation, and macroeconomic outcomes. This paper builds a general equilibrium model with heterogeneous and financially constrained firms in order to evaluate the short- and long-term consequences of small firm rescue programs in a pandemic recession. We calibrate the stationary equilibrium and the pandemic shock to the U.S. economy, taking into account the factual Paycheck Protection Program (PPP) as a specific grant policy. We find that the policy has only a small impact on aggregate employment because (i) jobs are saved predominately in less productive firms that account for a small share of employment and (ii) the grant induces a reallocation of resources away from larger and less impacted firms. Much of this reallocation happens in the aftermath of the pandemic episode. While a universal grant reduces the firm exit rate substantially, a targeted policy is not only more cost-effective, it also largely prevents the creation of “zombie firms” whose survival is socially inefficient. |
| Keywords: | Covid-19, heterogeneous firms, business subsidies, Paycheck Protection Program |
| JEL: | E22 E65 G38 H25 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_9641&r= |
| By: | Bajgar, Matej; Criscuolo, Chiara; Timmis, Jonathan |
| Abstract: | This paper presents new evidence on the growing scale of big businesses in the United States, Japan and 11 European countries. It documents a broad increase in industry concentration across the majority of countries and sectors over the period 2002 to 2014. The rising concentration is strongly associated with intensive investment in intangibles, particularly innovative assets, software and data, and this relationship is magnified in more globalized and digital-intensive industries. The results are consistent with intangibles disproportionately benefiting large firms and enabling them to scale up and raise their market shares, increasingly over time. |
| Keywords: | competition; industry and entrepreneurship; innovation |
| JEL: | E22 L10 L25 |
| Date: | 2021–10–28 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:113851&r= |