nep-bec New Economics Papers
on Business Economics
Issue of 2022‒06‒27
nine papers chosen by
Vasileios Bougioukos
London South Bank University

  2. Opposing firm-level responses to the China shock: horizontal competition versus vertical relationships By Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc J. Melitz; Thomas Zuber
  3. The impact of Covid-19 on US firms By Nicholas Bloom; Robert S. Fletcher; Ethan Yeh
  4. Technological change and domestic outsourcing By Antonin Bergeaud; Clement Malgouyres; Clement Mazet-Sonilhac; Sara Signorelli
  5. Trade and innovation By Marc J. Melitz; Stephen J. Redding
  6. Who Benefits from Firm Success? Heterogenous Rent Sharing in New Zealand By Allan, Corey; Maré, David C.
  7. Survival of the fittest: Tourism Exposure and Firm Survival By Hugo Reis; Paulo M.M. Rodrigues; Filipe B. Caires
  8. Job Satisfaction, Structure of Working Environment and Firm Size By Aysit Tansel; Saziye Gazioglu
  9. Business cycle clocks: Time to get circular By António Rua; Nuno Lourenço

  1. By: Abraham Assefa; Darya Lapitskaya; Lenno Uusküla
    Abstract: The paper studies the effects of technology shocks on the creation and destruction of firms. Using US data and a VAR model the paper finds Schumpeterian creative destruction for investment-specific technology shocks. A positive investment-specific technology shock increases the number of firms opening, but also leads to a higher number of firms closing. In contrast, labour-neutral technology shocks also benefit old firms. An increase in overall productivity leads to an increase in the number of new firms and a drop in the number of failures. Both margins contribute to an increase in the number of firms in the economy. A medium-scale DSGE model with endogenous entry and exit that is that is augmented with additional features is able to capture these stylised facts.
    Keywords: VAR, DSGE, Firm dynamics, Productivity, Firm turnover, Technology shocks, Investment specific technology shocks
    Date: 2022
  2. By: Philippe Aghion; Antonin Bergeaud; Matthieu Lequien; Marc J. Melitz; Thomas Zuber
    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
    Date: 2021–08–09
  3. By: Nicholas Bloom; Robert S. Fletcher; Ethan Yeh
    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
    Date: 2021–08–12
  4. By: Antonin Bergeaud; Clement Malgouyres; Clement 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 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
    Date: 2021–07–28
  5. By: Marc J. Melitz; Stephen J. Redding
    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
    Date: 2021–06–17
  6. By: Allan, Corey; Maré, David C. (Motu Economic and Public Policy Research Trust)
    Abstract: We examine heterogeneous rent-sharing in New Zealand using LEED data. Using a refined measures of quasi-rents per worker, we find that 20% to 30% of workers are in zero-excess-rent firms - disproportionately women, Māori or Pacific peoples, low-qualified workers, and those in hospitality, admin services, and retail industries,. The overall rent-sharing elasticity of 0.03 is equivalent to $38 higher earnings per $1,000 of excess rents per worker. Sharing varies by qualification, tenure, and ethnicity, but not by firm size or age. In most industries, workers receive $1,500-$2,000 of rents per year. Sharing is highest in auxiliary finance and professional services sectors and lowest in grocery retailing, food and beverage manufacturing and utilities. There is some evidence of insurance-type behaviour by firms. Differences in bargaining power are also likely to affect rent sharing variation.
    Keywords: wage determination, rent-sharing, imperfect competition
    JEL: J31 J71 J10 D22
    Date: 2022–04
  7. By: Hugo Reis; Paulo M.M. Rodrigues; Filipe B. Caires
    Abstract: In this paper, we estimate a discrete-time hazard model to study firm survival in the Portuguese Tourism sector. This sector has experienced a remarkable performance over the last decades. When compared to other sectors, tourism firms are more likely to exit: (i) if they are young (less than 10 years of existence); and (ii) if they belong to the lower tail of the firm distribution (i.e. belong to the group of worse performers). Within tourism related sectors, we find that firms whose activities are offered mostly to tourists, such as travel agencies and hotels, are always among the best performers in terms of survival. Moreover, despite of Tourism being one of the most volatile sectors in periods of high uncertainty, results show a higher survival resilience among established tourism associated firms.
    JEL: C23 C55 L25 L83
    Date: 2022
  8. By: Aysit Tansel (Department of Economics Middle East Technical University, IZA, ERF Cario); Saziye Gazioglu (Department of Economics and Instituted of Applied Mathematics (IAM) Middle East Technical University, Department of Economics University of Aberdeen)
    Abstract: Employees’ wellbeing is important to the firms. Analysis of job satisfaction may give insight into various aspect of labor market behavior, such as worker productivity, absenteeism and job turn over. Little empirical work has been done on the relationship between structure of working environment and job satisfaction. This paper investigates the relationship between working environment, firm size and worker job satisfaction. We use a unique data of 28,240 British employees, Workplace Employee Relations Survey. In this data set the employee questionnaire is matched with the employer questionnaire. Four measures of job satisfaction considered are satisfaction with influence over job, satisfaction with amount of pay, satisfaction with sense of achievement and satisfaction with respect from supervisors. They are all negatively related to the firm size implying lower levels of job satisfaction in larger firms. The firm size in return is negatively related to the degree of flexibility in the working environment. The small firms have more flexible work environments. We further find that, contrary to the previous results lower levels of job satisfaction in larger firms can not necessarily be attributed to the inflexibility in their structure of working environment.
    Keywords: Job Satisfactions, Firm Size, Working Environment, Linked Employer-Employee data, Britain.
    JEL: J21 J28 J29 J81
    Date: 2022–06
  9. By: António Rua; Nuno Lourenço
    Abstract: Assessing the momentum of the business cycle is of utmost importance for policymakers and private agents. In this respect, the use of business cycle clocks has gained prominence among national and international institutions to depict the current stage of the business cycle. Drawing on circular statistics, we propose a novel approach to business cycle clocks in a datarich environment. The method is applied to the main euro area countries resorting to a large dataset covering the last three decades. We document the usefulness of the circular business cycle clock to capture the business cycle stage, including peaks and troughs, with the findings being supported by the cross-country evidence.
    JEL: C30 C55 E32
    Date: 2022

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