nep-bec New Economics Papers
on Business Economics
Issue of 2022‒11‒21
seven papers chosen by
Vasileios Bougioukos
London South Bank University

  1. Do Innovative Firms Pay Higher Wages ? Micro-Level Evidence from Brazil By Cirera,Xavier; Soares Martins Neto,Antonio
  2. Privatization, Entry and Corporate Social Responsibility with Consumer Cognition By Wen, Jun; Diao, Yu; Wang, Leonard F. S.; Sun, Ji
  3. Corporate governance benefits of mutual fund cooperation By Renjie, Rex Wang; Verwijmeren, Patrick; Xia, Shuo
  4. The Heterogenous Effects of Employers’ Concentration on Wages: Better Sorting or Uneven Rent Extracting? By Axelle Arquié; Julia Bertin
  5. How do firms innovate in Latin America? By Vargas, Fernando
  6. The Effect of Supply Base Diversification on the Propagation of Shocks By Girish Bahal; Connor Jenkins; Damian Lenzo
  7. Labor Share Decline and Productivity Slowdown: A Micro-Macro Analysis By Francesca Crucitti; Lorenza Rossi

  1. By: Cirera,Xavier; Soares Martins Neto,Antonio
    Abstract: Several studies have documented a positive and causal relationship product or process innovation -- and labor productivity. Given the links between labor productivity and wages, a likely implication of this positive relationship is that innovation is associated with higher wages of more productive firms. This paper explores the relationship between innovation and wages using Brazil's employer-employee census and a novel measure of innovation derived from the share of technical and scientific occupations of workers in the firm. The results show a robust and positive wage premium associated with innovative firms. The decomposition of this innovation-related wage premium suggests a series of important stylized facts: (i) the innovation wage premium is larger for manufacturing but also positive and significant for agriculture and services; (ii) it is larger for large firms, but also positive and significant for all firm size categories including micro firms; and (iii) it is larger for medium- and low-skill occupations, although this depends on the use of firm fixed effects. More importantly, the paper explores the causality between innovation and wages and finds empirical support for the ideas that “self-selection†—firms that innovate already pay higher wages before becoming innovators -- and increases in wages associated with starting innovation activity, which are persistent for three years after firms start innovating.
    Keywords: Labor Markets,Food&Beverage Industry,Plastics&Rubber Industry,Business Cycles and Stabilization Policies,Textiles, Apparel&Leather Industry,Pulp&Paper Industry,Common Carriers Industry,Construction Industry,General Manufacturing,Skills Development and Labor Force Training,Food Security
    Date: 2020–10–19
  2. By: Wen, Jun; Diao, Yu; Wang, Leonard F. S.; Sun, Ji
    Abstract: In this paper, we formulate a mixed triopoly with product differentiation and consumer cognition in which a welfare-maximizing public firm and CSR-concerned private firms conduct quantities competition. The government decides the optimal degree of privatization of public firm. We find that the privatization degree of public firm is closely related to product differentiation and consumer cognition. When private firm enters, whether CSR efforts are made or not, the degree of privatization will be higher. Furthermore, if the public firm is the leader of the industry, government’s optimal choice of privatization is not to privatize. The total output level, consumer surplus and social welfare are lower than those of Cournot competitors.
    Keywords: Privatization; Corporate Social Responsibility; Mixed Triopoly; Consumer Cognition
    JEL: D43 L13 L21 L31 M14
    Date: 2022–10–26
  3. By: Renjie, Rex Wang; Verwijmeren, Patrick; Xia, Shuo
    Abstract: Mutual fund families increasingly hold bonds and stocks from the same firm. We study the implications of such dual holdings for corporate governance and firm decision-making. We present evidence that dual ownership allows financially distressed firms to increase investments and to refinance by issuing bonds with lower yields and fewer restrictive covenants. As such, dual ownership reduces shareholder-creditor conflicts, especially when families encourage cooperation among their managers. Overall, our results suggest that mutual fund families internalize the shareholder-creditor agency conflicts of their portfolio companies, highlighting the positive governance externalities of intra-family cooperation.
    Keywords: corporate governance,debt overhang,investment,mutual funds
    JEL: G23 G32 G34
    Date: 2022
  4. By: Axelle Arquié; Julia Bertin
    Abstract: Are workers equal in front of employers' concentration? We show, using instrumental variable estimations for France between 2000 and 2019, that employers' concentration has a negative heterogenous effect on wage, with the lowest earners being the most vulnerable. This increased wage inequality could reflect some efficiency gains if concentration allows employers to impose a more demanding selection process, improving sorting i.e. workers selection, thus generating both inequality and higher productivity. We find, exploring within-firm and between-firm inequality, that it is not the case. Employers' concentration instead generates wage inequality by undercutting relatively more the bargaining power of the lowest earners.
    Keywords: Labor Market Concentration;Inequality;Sorting
    JEL: J31 J42
    Date: 2022–10
  5. By: Vargas, Fernando
    Abstract: The study of innovation in Latin American firms has concentrated almost exclusively on the determinants and impacts of innovation investments and outputs. Less attention has been paid to how firms innovate. This study applies factor and cluster analysis to a unique dataset of harmonized innovation surveys from Argentina, Chile, Colombia, Ecuador, El Salvador, Paraguay, Peru, and Uruguay, to identify the main innovation practices and strategies performed by Latin American firms. Three of the four identified innovation strategies can be linked to results from similar studies using European firm-level data. However, none of these strategies resembles a strong science or research orientation. An approach to "open management" innovation emerges as idiosyncratic for Latin American firms. These innovation strategies are associated with differences in sales growth and labor productivity. The analysis also shows that firm resources and capabilities drive innovation strategy selection.
    JEL: L20 O12 O14 O30 O32 O33 O54
    Date: 2022–05–23
  6. By: Girish Bahal; Connor Jenkins; Damian Lenzo
    Abstract: This paper studies the role of supply base diversification on the propagation of shocks through production networks. We identify exogenous shocks with the occurrence of natural disasters in the US between 1978 and 2017. We find that affected suppliers reduce customers’ sales growth by ≈25%, on average. Notably, firms that source intermediate inputs across many suppliers, geographies, or industries attenuate shocks to their suppliers by ≈60-70%. We interpret our empirical findings using a general equilibrium model of production networks. First, we establish that diverse firms exhibit gross substitutability among inputs relative to non-diverse firms, suggesting diverse firms insulate themselves by substituting away from disrupted suppliers. By estimating the structural elasticity parameters, we find real GDP would have been ≈$740 billion lower in 2017 in the absence of diversified firms.
    Keywords: production network, propagation of firm-level shocks, supply-chain diversity
    JEL: L14 E23 E32
    Date: 2022–09
  7. By: Francesca Crucitti; Lorenza Rossi
    Abstract: This paper uses firm-level data to empirically investigate the relative contribution of the declining relative price of investments, the increasing automation, and the rising price markups on the labor share decline and productivity slowdown witnessed in the last 20 years in the Spain manufacturing sector. The results point to automation and markups as important drivers of both phenomena, while the relative price of investments has the opposite sign, coherent with the evidence of capital-labor complementarity. A theoretical model characterized by rm heterogeneity, endogenous markups distribution, and financial market frictions, parsimoniously accounts for the empirical findings, and it is used to draw aggregate implications. Last, the model accounts for the observed changes in the distribution of rm markup and size and for the decline in business dynamism that occurred in the last decades.
    Keywords: Labor share, TFP Losses, Firm dynamics, Capital Misallocation
    JEL: E22 E25 O16 O33 O40
    Date: 2022

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