nep-bec New Economics Papers
on Business Economics
Issue of 2023‒12‒18
five papers chosen by
Vasileios Bougioukos, London South Bank University

  1. Carbon Costs and Industrial Firm Performance: Evidence from International Microdata By Trinks, Arjan; Hille, Erik
  2. Asymmetric Models of Sales By David P. Myatt; David Ronayne
  3. The impact of regulation on innovation By Aghion, Philippe; Bergeaud, Antonin; Van Reenen, John
  4. Job Transitions and Employee Earnings After Acquisitions: Linking Corporate and Worker Outcomes By David Arnold; Kevin S. Milligan; Terry Moon; Amirhossein Tavakoli
  5. How regional business cycles diffuse across space and time: evidence from a Bayesian Markov switching panel of GDP and unemployment in Poland By Agnieszka Rabiej; Dominika Sikora; Andrzej Torój

  1. By: Trinks, Arjan; Hille, Erik
    JEL: D22 H23 Q41 Q48 Q52 Q58
    Date: 2023
  2. By: David P. Myatt (London Business School); David Ronayne (ESMT Berlin)
    Abstract: We broaden and develop the classic captive-and-shopper model of sales. Firstly, we allow for asymmetric marginal costs as well as asymmetric captive audiences. These asymmetries jointly determine the identities of the two or more firms we find compete (via randomized sales) to serve shoppers. In a leading case, the prices paid by shoppers fall following a cost rise for the firm that serves most of them. Secondly, we study asymmetric price adjustment opportunities via a two-stage game in which firms may cut but not raise their initial prices. In this setting (and in scenarios with risk aversion or endogenous move order) we predict the play of pure strategies and that a unique firm serves the shoppers. Despite the different pricing predictions across games, firms’ profits are equivalent. Welfare properties depend on whether firm asymmetry is predominantly on the supply side (costs) or on the demand side (captive audiences). Thirdly, we allow firms to choose production technologies via process innovations. One firm innovates distinctly more than others, attains a lower marginal cost, and ultimately serves the shoppers. We connect the distinctive asymmetric pattern of innovations to demand-side asymmetries and the shape of technology opportunity.
    Keywords: model of sales; captives; shoppers; price dispersion; clearinghouse models;
    JEL: D43 L11 M3
    Date: 2023–11–13
  3. By: Aghion, Philippe; Bergeaud, Antonin; Van Reenen, John
    Abstract: We present a framework that can be used to assess the equilibrium impact of regulation on endogenous innovation with heterogeneous firms. We implement this model using French firm-level panel data where there is a sharp increase in the burden of labor regulations on companies with 50 or more employees. Consistent with the model’s qualitative predictions, we find a sharp fall in the fraction of innovating firms just to the left of the regulatory threshold. Furthermore, we find a sharp reduction in the positive innovation response of firms to exogenous demand shocks just below the regulatory threshold. Using the structure of our model we quantitatively estimate parameters and find that the regulation reduces aggregate equilibrium innovation (and growth) by 5.7% which translates into a consumption equivalent welfare loss of at least 2.2%, approximately doubling the static losses in the existing literature.
    Keywords: innovation; regulation; patents; firm size
    JEL: O31 L11 L51 J80 L25
    Date: 2023–11–01
  4. By: David Arnold; Kevin S. Milligan; Terry Moon; Amirhossein Tavakoli
    Abstract: This paper connects changes in employer characteristics through job transitions to employee earnings following mergers and acquisitions (M&As). Using firm balance sheet data linked to individual earnings data in Canada and a matched difference-in-differences design, we find that after M&As acquirers expand while targets shrink substantially relative to their matched control groups. Additionally, profit margins decrease for both acquirers and targets in the medium run. Furthermore, workers at target firms suffer losses in earnings, and this decline in earnings is entirely driven by workers who move to other firms after an M&A event. We find that workers leaving target firms after M&As move to larger firms with higher wage premiums, but with much worse match qualities on average. Taken together, it appears that job transitions to employers with poor match qualities primarily explain the post-M&A decline in worker earnings in our setting.
    JEL: E21 G34 J31 J42 L25
    Date: 2023–11
  5. By: Agnieszka Rabiej; Dominika Sikora; Andrzej Torój
    Abstract: We investigate the regional business cycles at NUTS-3 granularity in Poland (N=73) using two variables in parallel: GDP dynamics and unemployment. The model allows for both idiosyncratic business cycle fluctuations in a region in the form of 2-state Markov chain, as well as spatial interactions with other regions. The posterior distribution of the parameters is simulated with a Metropolis-within-Gibbs procedure. We find that the regions can be classified into business cycle setters and takers, and this classification exhibits a high degree of overlap with the line of division between metropolitan versus peripheral regions. We also find that, under large N, the fixed-effects methods, as proposed in the previous literature, are vulnerable to both identification issues and (MCMC) convergence problems, especially with short T, which is of critical importance in GDP on the considered spatial granularity level.
    Keywords: business cycle, spatial autoregression, NUTS-3, Markov switching, Bayesian analysis
    JEL: C11 C23 C24 R12
    Date: 2023–01

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