nep-bec New Economics Papers
on Business Economics
Issue of 2024‒01‒29
seven papers chosen by
Vasileios Bougioukos, London South Bank University

  1. The TCJA and Domestic Corporate Tax Rates By Christine L. Dobridge; Patrick Kennedy; Paul Landefeld; Jacob Mortenson
  2. Vertical Differentiation through Product Design By Riegel, Max
  3. The Covid-19 crisis was different:Assessing the Italian firms in trouble through a new indicator of financial solidity By Carlo Boselli; Stefano Costa; Marco Rinaldi; Claudio Vicarelli
  4. Emigration, Business Dynamics, and Firm Heterogeneity in North Macedonia By Ninghui Li; Thomas Pihl Gade
  5. Immigration, monopsony and the distribution of firm pay By Michael Amior; Jan Stuhler
  6. The transmission of trade shocks across countries: firm-level evidence from the Covid-19 crisis By Konstantins Benkovskis; Jaanika Merikull; Aurelija Proskute
  7. When Managers Become Robin Hoods: A Mixed Method Investigation By Russell Cropanzano; Daniel P. Skarlicki; Thierry Nadisic; Marion Fortin; Phoenix van Wagoner; Ksenia Keplinger

  1. By: Christine L. Dobridge; Patrick Kennedy; Paul Landefeld; Jacob Mortenson
    Abstract: We study changes in tax positions for U.S. C corporations following passage of the 2017 tax legislation commonly known as the Tax Cuts and Jobs Act (TCJA). While existing research has focused primarily on publicly traded companies, data limitations have prevented more holistic analyses of the corporate sector. Using a representative sample of U.S. corporate tax returns, we highlight how trends in effective tax rates (ETRs) and exposure to the legislation’s main provisions varied for public, private, multinational, domestic, and large versus small firms. We document several novel facts, including that ETRs increased on average for privately held, domestic firms and for firms in the bottom 90% of the firm sales distribution after TCJA. In contrast, public, multinational, and large firms saw substantial ETR cuts on average. We find that firms' pre-TCJA exposure to changes in the corporate tax rate and treatment of net operating losses have the strongest correlation with post-TCJA ETR changes. Overall, the analysis underscores the divergent impacts of TCJA on different firm types and illuminates the economic scope and relative significance of TCJA’s myriad provisions.
    Keywords: Corporate taxes; Tax Cuts and Jobs Act; Tax reform
    JEL: H20 H25
    Date: 2023–12–15
  2. By: Riegel, Max
    Abstract: I study pricing and product design choices of multiproduct firms in a model of directed search. Product design introduces vertical differentiation à la Gabszewicz and Thisse (1979) as well as Shaked and Sutton (1982). While all consumers have a preference for a more niche product design, consumers with lower search costs benefit relatively more. Firms gain from dispersion in tastes through product design and choose maximum differentiation in equilibrium. The firm with the broader product design sets a lower price and attracts consumers with high search costs.
    Keywords: product design; vertical differentiation; consumer search; directed search; search cost heterogeneity
    JEL: D43 D83 L15
    Date: 2023–12–06
  3. By: Carlo Boselli (Italian National Statistical Institute); Stefano Costa (Italian National Statistical Institute); Marco Rinaldi (Italian National Statistical Institute); Claudio Vicarelli (Italian National Statistical Institute)
    Abstract: We present a new indicator of economic-financial solidity (EFSI) of Italian firms, considering profitability, solidity and firm liquidity, all evaluated in terms of their sustainability over time. On the basis of EFSI values, we classify firms in four classes, according to their degree of exposure to income and financial risks: Healty, Fragiles, At-risk, Highly at-risk. This indicator shows that in 2011-2020 a tightening process of economic and financial structure took place in the Italian business system, a trend that surprisingly continued also during the pandemic year. To investigate this, we consider the entry of firms into the Highly at-risk class (“downgrades†) in 2019-20. Through a matching technique, we run two counterfactual exercises, estimating at a sector-firm size level what the downgrade rates would have been during the crisis of 2019-20 had the business system had the same economic-financial structure prevailing in 2011 (i.e. at the eve of 2011-12 crisis) or in 2019 (i.e. the last year of economic growth). By this way, we can evaluate whether, and to what extent, the financial support to firms during 2020 contributed to the resilience of the Italian business system. Our results show that, with respect to pre-Covid year, firm aids limited the negative consequences of the pandemic especially on the smaller firms (those more severely hit by the crisis); with respect the 2011-12 crisis, in several sectors support measures more than fully compensate for the negative effects of the pandemic notwithstanding its stronger economic impact on GDP than the previous crisis episode.
    Keywords: Covid-19; Economic-financial solidity; Firm aids; Mahalanobis-metric matching
    JEL: G01 H12 H81 H84 L60 L80
    Date: 2023
  4. By: Ninghui Li; Thomas Pihl Gade
    Abstract: High emigration rates are a challenge in the Western Balkans. High emigration rates might lead to inadequate skilled labor and affect firm creation, capital formation, and economic convergence. The 2021 North Macedonia census reveals that more than 12.4% of North Macedonians live abroad. To assess the consequences, we estimate the impact of emigration on the number of firms and capital formation. Business dynamics can affect emigration reversely. To alleviate the endogeneity bias, we use a shift-share instrument with the historical diaspora networks and destination countries’ GDP growth rate as a source of exogenous variations. Our results show that (1) In the short run, a 1 percentage point increase in the emigration rate leads to a 2.91% decrease in the number of firms in the area of origin; (2) The long-run effects of emigration on the number of firms are less negative than the short-run impacts; (3) Emigration mainly reduces the number of micro and small firms; (4) Emigration affects the number of firms and capital formation more in the industrial sector than the other sectors, through the skilled labor shortage channel. This paper contributes to the literature on emigration and provides implications and policy considerations for developing countries, where high emigration rates are prevalent.
    Keywords: Emigration; Labor market; Firm dynamics; Capital formation; North Macedonia; Panel data.
    Date: 2023–12–22
  5. By: Michael Amior; Jan Stuhler
    Abstract: We argue that the arrival of immigrants with low reservation wages can strengthen the monopsony power of firms. Firms can exploit "cheap" migrant labor by offering lower wages, though at the cost of forgoing potential native hires who demand higher wages. This monopsonistic trade-off can lead to large negative effects on native employment, which exceed those in competitive models, and which are concentrated among low-paying firms. To validate these predictions, we study changes in wage premia and employment across the firm pay distribution, during a large immigration wave in Germany. These adverse effects are not inevitable and may be ameliorated through policies which constrain firms' monopsony power over migrants.
    Keywords: immigration, monopsony, firms
    Date: 2024–01–04
  6. By: Konstantins Benkovskis (Latvijas Banka); Jaanika Merikull (Eesti Pank); Aurelija Proskute (Lietuvos bankas)
    Abstract: This paper studies the margins and heterogeneity of adjustments to trade shocks by estimating how Covid-19 restrictions affected imports and exports. We use data from Lithuania, Latvia and Estonia on foreign trade at the level of the firm and the partner country and at monthly frequency from January 2019 to December 2020. The focus is on the short-term adjustment and on the first wave of the pandemic. We find that the adjustment to the restrictions mostly occurs through the intensive margin, meaning trade values are reduced rather than trade in cer- tain markets or products ceasing. It is further observed that quantity played a more important role in the adjustment process than prices and that both upstream and downstream restrictions played an equally important role in the decline of foreign trade. It is shown that differentiated products that are difficult to replace are responsible for this adjustment pattern.
    Keywords: transmission of shocks, input-output linkages, global value chains, Covid-19, workplace closing
    JEL: F14 F61 D22
    Date: 2024–01–12
  7. By: Russell Cropanzano; Daniel P. Skarlicki; Thierry Nadisic (EM - emlyon business school); Marion Fortin; Phoenix van Wagoner; Ksenia Keplinger
    Abstract: When subordinates have suffered an unfairness, managers sometimes try to compensate them by allocating something extra that belongs to the organization. These reactions, which we label as managerial Robin Hood behaviors, are undertaken without the consent of senior leadership. In four studies, we present and test a theory of managerial Robin Hoodism. In study 1, we found that managers themselves reported engaging in Robin Hoodism for various reasons, including a moral concern with restoring justice. Study 2 results suggested that managerial Robin Hoodism is more likely to occur when the justice violations involve distributive and interpersonal justice rather than procedural justice violations. In studies 3 and 4, when moral identity (trait or primed) was low, both distributive and interpersonal justice violations showed similar relationships to managerial Robin Hoodism. However, when moral identity was high, interpersonal justice violations showed a strong relationship to managerial Robin Hoodism regardless of the level of distributive justice.
    Keywords: Organizational justice, managerial Robin Hood behaviors, deonance, moral identity, positive deviance
    Date: 2022–04–01

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