nep-bec New Economics Papers
on Business Economics
Issue of 2022‒08‒29
seven papers chosen by
Vasileios Bougioukos
London South Bank University

  1. Adjustment costs and factor demand: new evidence from firms' real estate By Bergeaud, Antonin; Ray, Simon
  2. Ownership Networks and Earnings Inequality By Federico Huneeus; Borja Larrain; Mauricio Larrain; Mounu Prem
  3. Fiscal Consolidation and Firm Level Productivity: Evidence from Advanced Economies By Maxwell Tuuli; Ngo Van Long
  4. Small Firm Growth and the VAT Threshold : Evidence for the UK By Liu, Li; Lockwood, Ben; Tam. Eddy
  5. Firm Export Dynamics and the Exchange Rate: A Quantitative Exploration By Bernabe Lopez-Martin
  6. Idiosyncratic Shocks and Aggregate Fluctuations in an Emerging Market By Francesco Grigoli; Emiliano Luttini; Damiano Sandri
  7. Perspective Is Everything: How Shifts in Firm Level Risk Perceptions Affect Optimal Production Plant Capital Investment Decisions By Worley, Julian M.; Dorfman, Jeffrey H.

  1. By: Bergeaud, Antonin; Ray, Simon
    Abstract: We study corporate real estate frictions and their effect on firm dynamics and labour demand. We build and simulate a general equilibrium model with heterogeneous firms that predicts the response of firms to a productivity shock in the presence of fixed adjustment costs on real estate. Using a large firm-level database merged with local real estate prices, we then exploit variations in the tax on capital gains to document a causal effect of adjustment costs on firms' labour demand and derive new results on the causes and implications of firms' local relocation.
    JEL: D21 H25 J21 O52
    Date: 2021–01–01
  2. By: Federico Huneeus; Borja Larrain; Mauricio Larrain; Mounu Prem
    Abstract: We use matched employer-employee data together with data on the ownership networks of Chilean firms to document a novel relationship between inequality in labor income and ownership structures. Exploiting transitions of firms in and out of networks, we show that network afiliation is associated with higher inequality along two dimensions. First, network firms pay higher average wages than stand-alone firms, increasing between-firm inequality. Second, the dispersion of wages within a network firm is higher than within a stand-alone firm, increasing within-firm inequality. The effects are driven by increases in the wages of top workers, and by the entry of new top workers. Our findings shed light on the relationship between ownership structures and the distribution of labor income in the economy.
    Date: 2022–03
  3. By: Maxwell Tuuli; Ngo Van Long
    Abstract: Productivity dispersion across countries has led to several studies on the determinants of firm level productivity and the role of macroeconomic policies in determining productivity. In this paper, we investigate the effect of fiscal consolidation on firm level productivity in 12 advanced economies by combining an updated dataset of fiscal consolidation measures with firm level productivity. We find that fiscal consolidation (i.e., discretionary tax hikes and spending cuts), is detrimental to firm level productivity in advanced economies. We also find that high levels of fiscal consolidation are particularly harmful to firm level productivity compared to lower levels of fiscal consolidation. Furthermore, we find that tax based fiscal consolidation hinders firm level productivity more compared to spending based fiscal consolidation. This implies that the size and composition of fiscal consolidation matter in understanding the relationship between fiscal consolidation and firm level productivity.
    Keywords: Fiscal consolidation; Taxes; Spending; Total Factor Productivity; firm level productivity; fiscal consolidation matter; fiscal consolidation measure; productivity dispersion; effect of fiscal consolidation; Productivity; Financial sector development; Global
    Date: 2022–07–01
  4. By: Liu, Li (International Monetary Fund); Lockwood, Ben (University of Warwick); Tam. Eddy (King's College london)
    Abstract: This paper studies the effect of the VAT threshold on firm growth in the UK, using exogenous variation over time in the threshold, combined with turnover bin fixed effects, for identification. We find robust evidence that annual growth in turnover slows by about 1 percentage point when firm turnover gets close to the threshold, and weaker evidence of higher growth when the threshold is passed. Growth in firm costs shows a similar pattern, indicating that the response to the threshold is likely to be a real response rather than an evasion response. Firms that habitually register even when their turnover is below the VAT threshold (voluntary registered firms) have growth that is unaffected by the threshold, whereas firms that select into the Flat-Rate Scheme have a less pronounced slowdown response than other firms. Similar patterns of turnover and cost growth around the threshold are also observed for non-incorporated businesses. Finally, simulation results clarify the relative contribution of "noncrossers" ( firms who eventually register for VAT) and "non-crossers" (those who permanently stay below the threshold) in explaining our empirical findings. JEL Classification: H22 ; H25 ; H26
    Keywords: VAT ; size-based threshold ; firm growth
    Date: 2022
  5. By: Bernabe Lopez-Martin
    Abstract: This article provides a theoretical model of firm dynamics that replicates the export elasticity values estimated in the empirical literature, and the heterogeneous export response of firms against exchange rate fluctuations. I analyze alternative versions of the model, which allows for a decomposition of the contributions of the different mechanisms (distribution costs, imported intermediate inputs, gradual growth of foreign demand, market access costs in foreign/domestic currency). I evaluate the intensive and extensive margins of exports, and examine the behavior at the aggregate and firm levels. Distribution costs represent the most important factor, but are not sufficient, to replicate elasticity estimations. I show that this mechanism substantially exceeds the relevance of imported intermediate inputs. Distribution costs allow the model to replicate the heterogeneous response of foreign sales to exchange rate movements by decreasing the demand elasticity of more productive firms. I provide a quantitative test using firm-level panels constructed from model simulations and contrast the results with empirical specifications.
    Date: 2022–01
  6. By: Francesco Grigoli; Emiliano Luttini; Damiano Sandri
    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.
    Date: 2022–03
  7. By: Worley, Julian M.; Dorfman, Jeffrey H.
    Keywords: Agribusiness, Risk and Uncertainty, Marketing
    Date: 2022–08

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