nep-bec New Economics Papers
on Business Economics
Issue of 2024‒02‒19
seven papers chosen by
Vasileios Bougioukos, London South Bank University

  1. Do larger firms exert more market power? Markups and markdowns along the size distribution By Mertens, Matthias; Mottironi, Bernardo
  2. Making the invisible hand visible: managers and the allocation of workers to jobs By Minni, Virginia Magda Luisa
  3. AI Unboxed and Jobs: A Novel Measure and Firm-Level Evidence from Three Countries By Engberg, Erik; Görg, Holger; Lodefalk, Magnus; Javed, Farrukh; Längkvist, Martin; Monteiro, Natália Pimenta; Kyvik Nordås, Hildegunn; Schroeder, Sarah; Tang, Aili
  4. Rethinking revealed comparative advantage with micro and macro data By Huang, Hanwei; Ottaviano, Gianmarco Ireo Paolo
  5. Robots and Extensive Margins of Exports - Evidence for Manufacturing Firms from 27 EU Countries By Joachim Wagner
  6. Techies and Firm Level Productivity By J.J. Harrigan; Ariell Reshef; Farid Toubal
  7. Financial Constraints and Firm Adjustments During a Sales Disruption By Juan-Andrés Castro; Enzo A. Cerletti

  1. By: Mertens, Matthias; Mottironi, Bernardo
    Abstract: Several models posit a positive cross-sectional correlation between markups and firm size, which characterizes misallocation, factor shares, and gains from trade. Accounting for labor market power in markup estimation, we find instead that larger firms have lower product markups but higher wage markdowns. The negative markup-size correlation turns positive when conditioning on markdowns, suggesting interactions between product and labor market power. Our findings are robust to common criticism (e.g., price bias, non-neutral technology) and hold across 19 European countries. We discuss possible mechanisms and resulting implications, highlighting the importance of studying input and output market power in a unified framework.
    Keywords: markups; markdowns; market power; firm size
    JEL: L11 L13 L25 J42
    Date: 2023–09–21
  2. By: Minni, Virginia Magda Luisa
    Abstract: Why do managers matter for firm performance? This paper provides evidence of the critical role of managers in matching workers to jobs within the firm using the universe of personnel records from a large multinational firm. The data covers 200, 000 white-collar workers and 30, 000 managers over 10 years in 100 countries. I identify good managers as the top 30% by their speed of promotion and leverage exogenous variation induced by the rotation of managers across teams. I find that good managers cause workers to reallocate within the firm through lateral and vertical transfers. This leads to large and persistent gains in workers' career progression and productivity. Seven years after the manager transition, workers earn 30% more and perform better on objective performance measures. In terms of aggregate firm productivity, doubling the share of good managers would increase output per worker by 61% at the establishment level. My results imply that the visible hands of managers match workers' specific skills to specialized jobs, leading to an improvement in the productivity of existing workers that outlasts the managers' time at the firm.
    Keywords: managers; career trajectories; internal labor markets; productivity
    JEL: J24 M5
    Date: 2023–10–05
  3. By: Engberg, Erik (Örebro University); Görg, Holger (Kiel Institute for the World Economy); Lodefalk, Magnus (Örebro University); Javed, Farrukh (Örebro University); Längkvist, Martin (Örebro University); Monteiro, Natália Pimenta (University of Minho); Kyvik Nordås, Hildegunn (Council on Economic Policies); Schroeder, Sarah (Aarhus University); Tang, Aili (Örebro University)
    Abstract: We unbox developments in artificial intelligence (AI) to estimate how exposure to these developments affect firm-level labour demand, using detailed register data from Denmark, Portugal and Sweden over two decades. Based on data on AI capabilities and occupational work content, we develop and validate a time-variant measure for occupational exposure to AI across subdomains of AI, such as language modelling. According to the model, white collar occupations are most exposed to AI, and especially white collar work that entails relatively little social interaction. We illustrate its usefulness by applying it to near-universal data on firms and individuals from Sweden, Denmark, and Portugal, and estimating firm labour demand regressions. We find a positive (negative) association between AI exposure and labour demand for high-skilled white (blue) collar work. Overall, there is an up-skilling effect, with the share of white-collar to blue collar workers increasing with AI exposure. Exposure to AI within the subdomains of image and language are positively (negatively) linked to demand for high-skilled white collar (blue collar) work, whereas other AI-areas are heterogeneously linked to groups of workers.
    Keywords: artificial intelligence, labour demand, multi-country firm-level evidence
    JEL: E24 J23 J24 N34 O33
    Date: 2024–01
  4. By: Huang, Hanwei; Ottaviano, Gianmarco Ireo Paolo
    Abstract: The Balassa's index of revealed comparative advantage does not necessarily reveal Ricardian comparative advantage. We propose an alternative sufficient statistics approach based on a quantitative standard trade model incorporating firm and product selection. We show that the model's micro foundations do not necessarily imply that the relevant data for the proposed sufficient statistics must include micro information, but its micro structure is needed to understand how only macro information can be used instead. Applying our approach to Chinese micro data and cross-country macro data, we find that firm behavior has far-reaching implications for understanding aggregate productivity and revealed comparative advantage.
    Keywords: revealed comparative advantage; sufficient statistics; firm heterogeneity; multi-product firms
    JEL: N0 J1 C1
    Date: 2023–11–28
  5. By: Joachim Wagner (Leuphana Universität Lüneburg, Institut für Volkswirtschaftslehre and Kiel Centre for Globalization)
    Abstract: The use of robots by firms can be expected to go hand in hand with higher productivity, higher product quality and more product innovation, which should be positively related to export activities. This paper uses firm level data from the Flash Eurobarometer 486 survey conducted in February – May 2020 to investigate the link between the use of robots and export activities in manufacturing enterprises from the 27 member countries of the European Union. Applying standard parametric econometric models and a new machine-learning estimator, Kernel-Regularized Least Squares (KRLS), we find that firms which use robots do more often export, do more often export to various destinations all over the world, and do export to more different destinations. The estimated robots premium for extensive margins of exports is statistically highly significant after controlling for firm size, firm age, patents, and country. Furthermore, the size of this premium can be considered to be large. Extensive margins of exports and the use of robots are positively related.
    Keywords: Robots, exports, firm level data, Flash Eurobarometer 486, kernel-regularized least squares (KRLS)
    JEL: D22 F14
    Date: 2024–01
  6. By: J.J. Harrigan; Ariell Reshef (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Farid Toubal (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique, CEPR - Center for Economic Policy Research - CEPR, LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres - CNRS - Centre National de la Recherche Scientifique)
    Abstract: We study the impact of techies—engineers and other technically trained workers—on firm-level productivity. We first report new facts on the role of techies in the firm by using French administrative data and unique surveys. Techies are STEM-skill intensive and are associated with innovation, as well as with technology adoption, management, and diffusion within firms. Using structural econometric methods, we estimate the causal effect of techies on firm-level Hicks-neutral productivity in both manufacturing and non-manufacturing industries. We find that techies raise firm-level productivity, and this effect goes beyond the employment of R&D workers, extending to ICT and other techies. In non-manufacturing firms, the impact of techies on productivity operates mostly through ICT and other techies, not R&D workers. Engineers have a greater effect on productivity than technicians.
    Keywords: productivity, R&D, ICT, techies, STEM skills.
    Date: 2024–01–31
  7. By: Juan-Andrés Castro; Enzo A. Cerletti
    Abstract: We address two main questions: (i) how do firms respond to an unanticipated shock to their cash flows, and (ii) what is the role of financial constraints in mediating such response? To answer these questions, we study the behavior of Chilean firms during the 2019 social unrest, which caused a series of disruptions to the firms’ activity over several months. Exploiting quasi-experimental variation in the exposure of firms to these incidents, we find that more exposed firms experience larger declines in sales, larger employment losses, and are more likely to fall behind in their financial obligations than less affected firms. Moreover, these responses are significantly stronger for those firms more likely to be financially constrained. A back-of-the-envelope calculation suggests that constrained firms translate almost half the decline in sales into lower demand for labor and intermediate inputs, more than double the transmission of unconstrained firms.
    Date: 2023–10

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