nep-bec New Economics Papers
on Business Economics
Issue of 2023‒09‒18
seven papers chosen by
Vasileios Bougioukos, London South Bank University

  1. Labour Supply and Firm Size By Lin Shao; Faisal Sohail; Emircan Yurdagul
  2. Demand Volatility and Firm Export Margins: Evidence from Egypt By Yasmine Kamal
  3. Digitalization and Firm Performance in The Middle East and North Africa: Case Studies of Jordan, Morocco, and Egypt By Nong Zhu; Xubei Luo
  4. Industry Wage Differentials: A Firm-Based Approach By David Card; Jesse Rothstein; Moises Yi
  5. Does Digitalization Matter? Evidence from Egyptian and Jordanian Firms By Chahir Zaki
  6. Corporate Governance exercised through the delicate balance between Shareholder’s rights and Board roles in Europe By Ngcetane-Vika, Thelela
  7. Long Term Expectations and Aggregate Fluctuations By Pedro Bordalo; Nicola Gennaioli; Rafael La Porta; Matthew O'Brien; Andrei Shleifer

  1. By: Lin Shao; Faisal Sohail; Emircan Yurdagul
    Abstract: Larger firms feature i) longer hours worked, ii) higher wages, and iii) smaller (larger) wage penalties for working long (short) hours. We reconcile these patterns in a general equilibrium model, which features the endogenous interaction of hours, wages, and firm size. In the model, workers willing to work longer hours sort into larger firms that offer a wage premium. Complementarities in hours worked generate wage penalties that increase with the distance from the average firm hours. We use the model to argue about the importance of the interaction between hours, wages, and firm size on inequality.
    Keywords: Firm dynamics; Labour markets
    JEL: E24 J2 J31
    Date: 2023–08
  2. By: Yasmine Kamal (Cairo University)
    Abstract: This study explains the export behavior of Egyptian firms under demand volatility in destination countries using detailed customs data and high-dimensional fixed effects. It finds that demand volatility negatively affects both intensive and extensive export margins. The effects are particularly evident for large firms that reduce their export sales (especially over time) to more volatile destinations/products and are therefore more likely to exit from exporting more volatile products and less (more) likely to enter (exit) more volatile destinations. These findings corroborate recent literature that emphasizes the greater elasticity of large firms to foreign demand shocks. They are also in line with risk aversion models in which the average risk premium increases with firm size. Given the disproportionate adverse impacts on large exporters, we find that higher demand volatility leads to lower aggregate exports, especially to geographically close countries with low trade costs. Accordingly, uncertainty in demand lessens the positive effect of lower trade barriers on exports.
    Date: 2023–03–20
  3. By: Nong Zhu (Institut National de la Recherche Scientifique); Xubei Luo (The World Bank)
    Abstract: In a digitalizing global economy, countries that successfully harness the potential of e-commerce are better placed to take advantage of the access to regional and international markets for sustainable growth, while those that fail to do so may risk falling behind. For the Middle East and North Africa (MENA) region, digitalization of business activities is key to connect producers with customers, support the integration of regional and global value chains (GVCs), and foster the dynamism of private sector to aid productive job creation and inclusive growth. This study aims to examine the relationships between participation in e-commerce and firm performance (measured by production, productivity, export and/or import, and innovation) in MENA, with case studies in Jordan, Morocco, and Egypt. The analyses are based on an original survey at firm-level, carried out by the Economic Research Forum (ERF) in 2022, and data from the World Bank Enterprise Survey. The main findings are as follows: (i) E-commerce participation is relatively low in the three case study countries compared with regional peers or countries with similar development levels. (ii) E-commerce participation varies widely across firms with different characteristics: large firms, young firms, firms in “information and communication” sector, and firms with more educated workers are more likely to participate in e-commerce. (iii) Production is positively associated with e-commerce participation. However, among the three countries, the positive association between e-commerce participation and productivity is significant only in Jordan where e-commerce is most developed. (iv) Participation in e-commerce is also positively associated with firms’ exports and/or imports and innovation activities. (v) Depending on the level of e-commerce development and the structural characteristics, the role of the difference in the attributes between e-firms and non-efirms and the difference in the returns to these attributes in firm performance may vary. (vi) Firms involved in e-commerce are performing better than other firms during the COVID-19 pandemic. Overall, our study finds that e-commerce is positively associated with the viability of enterprises and their ability to maintain the level of sales.
    Date: 2023–04–20
  4. By: David Card; Jesse Rothstein; Moises Yi
    Abstract: We revisit the estimation of industry wage differentials using linked employer-employee data from the U.S. LEHD program. Building on recent advances in the measurement of employer wage premiums, we define the industry wage effect as the employment-weighted average workplace premium in that industry. We show that cross-sectional estimates of industry differentials overstate the pay premiums due to unmeasured worker heterogeneity. Conversely, estimates based on industry movers understate the true premiums, due to unmeasured heterogeneity in pay premiums within industries. Industry movers who switch to higher-premium industries tend to leave firms in the origin sector that pay above-average premiums and move to firms in the destination sector with below-average premiums (and vice versa), attenuating the measured industry effects. Our preferred estimates reveal substantial heterogeneity in narrowly-defined industry premiums, with a standard deviation of 12%. On average, workers in higher-paying industries have higher observed and unobserved skills, widening between-industry wage inequality. There are also small but systematic differences in industry premiums across cities, with a wider distribution of pay premiums and more worker sorting in cities with more high-premium firms and high-skilled workers.
    JEL: J31 J62
    Date: 2023–08
  5. By: Chahir Zaki (Cairo University)
    Abstract: Generally, digitalized firms are more productive, more likely to export, and more likely to rely skilled labor. This paper thus analyzes the effect of digitalization on firms’ performance (measured by exports and sales) and labor characteristics (measured by female workers, unpaid workers, parttime workers and workers with permanent contract). To do so, I rely on a newly collected dataset that focuses on firms’ digitalization. I use variables related to digitalization (whether the firm has a website or not, uses smartphones or not, online selling and buying, the Internet, is listed on an application and self-built sales website that enables online payments). The main findings show that the results are more robust for labor characteristics than for performance variables. Indeed, while, in Egypt, digitalization is associated to more women, less unpaid workers and more workers with permanent contract, the result is less robust for sales and exports. Yet, for sales, the use of the Internet is significant in both Egypt and Jordan. Listing the firm on an application is positively associated to sales in Egypt but not in Jordan. In terms of exports, self-built websites for payments in Egypt and using Internet in Jordan are significant.
    Date: 2023–04–20
  6. By: Ngcetane-Vika, Thelela (Wits University, Johannesburg, South Africa)
    Abstract: Corporate governance is fundamental to well-run organisations. Accordingly, it is associated with the positive performance of corporations and international best practices. It is the blueprint that helps shareholders scope their activities and engagement within a company, including the role and structures of the Board of Directors (BoD). It is against this backdrop that the BoD is the nexus between executive leadership and corporate governance, a hallmark of an effective functioning corporation and the affirming of an integrative approach. Thus, good corporate governance is arguably an important tool in curbing corporate malfeasance and limiting scandals in corporations. Conversely, poor corporate governance is observed when there are lapses in this relationship between shareholder‘s rights and board roles. Invariably, this leads to corporate lapses and scandals. Europe has made strides in corporate governance, through its developing legislative framework. Pursuantly, corporate governance theories exercised in Europe posit ownership and management as key variables to achieving well-run organizations. Thus, central to corporate governance is the principle of separation of ownership and management. In tandem with this view, good corporate governance is achieved through the delicate balance of the rights of shareholders as owners of the company and the roles of directors who have the duty to run the affairs of the company, as enshrined in the Statute governing Company law. The empirical basis for this paper has included collecting data mostly from primary and secondary sources, including literature review on books, articles, case laws and relevant Statutes. The paper contributes to theory, practice, and policy formulation but specifically, to the importance of shareholders’ rights and board roles in corporate governance in Europe. Similarly, policy-makers could find these insights useful to inform evidence-based practices and policymaking
    Date: 2023–08–21
  7. By: Pedro Bordalo; Nicola Gennaioli; Rafael La Porta; Matthew O'Brien; Andrei Shleifer
    Abstract: In line with Keynes’ intuition, volatility in the stock market and in real economic activity are linked by expectations of long term profits. We show that analysts’ optimism about the long term earnings growth of S&P 500 firms is associated with a near term boom in major US financial markets, real investment, and other business cycle indicators. The same optimism however predicts disappointing earnings growth and a contraction in financial markets and real activity one to two years later. Overreaction of measured long term profit expectations emerges as a promising mechanism for reconciling Shiller’s excess volatility puzzle with the business cycle.
    JEL: E0 E32 E44 E7 G01 G10
    Date: 2023–08

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