nep-bec New Economics Papers
on Business Economics
Issue of 2024‒03‒18
eight papers chosen by
Vasileios Bougioukos, London South Bank University

  1. Entry, exit, and market structure in a changing climate By Michele Cascarano; Filippo Natoli; Andrea Petrella
  2. Firms and inequality when unemployment is high By Bassier, Ihsaan
  3. Small Firm Growth and the VAT Threshold Evidence for the UK By Ms. Li Liu; Mr. Ben Lockwood; Eddy H.F. Tam
  4. Robots and extensive margins of exports: Evidence for manufacturing firms from 27 EU countries By Wagner, Joachim
  5. Mining spillovers and the formal-informal duality in manufacturing and services By Saumik Paul; Dhushyanth Raju
  6. Firm-level effects of sanctions By Hinz, Julian
  7. Moving apart: job-driven residential mobility and the gender pay gap Evidence from a large industrial firm. By Matthieu Bunel; Dominique Meurs; Élisabeth Tovar
  8. Relationship-Specific Investments and Firms' Boundaries: Evidence from Textual Analysis of Patents By Bena, Jan; Erel, Isil; Wang, Daisy; Weisbach, Michael S.

  1. By: Michele Cascarano (Bank of Italy); Filippo Natoli (Bank of Italy); Andrea Petrella (Bank of Italy)
    Abstract: Climate change has long-term effects on the size and composition of a country's business sector. Using administrative data on the universe of Italian firms, we find that an increase in the number of very hot days per year persistently reduces the growth rate of active firms in the market in the medium run. This is due to a drop in firm entry and an increase in firm exit, with relocation playing a minor role. A firm-level investigation reveals a dichotomy between firms that persistently suffer as a result of higher temperatures and those that improve their profitability by adapting to a hotter climate: a combination of size and age best identifies the two groups, where older, smaller-sized firms lie at one extreme and younger, larger firms at the other. According to an average climate scenario, the projected evolution of local temperatures will impact firm demography further, also exacerbating the divergent effects across warmer and colder areas over the current decade.
    Keywords: climate change, temperatures, firm dynamics
    JEL: D22 R12 Q54
    Date: 2023–07
  2. By: Bassier, Ihsaan
    Abstract: How important are firms for wage inequality in developing countries where structural unemployment is high? Research focused on contexts close to full employment has suggested a substantial role of firms in labor market inequality. Using matched employer-employee data from South Africa, I find that firms explain a larger share of wage variation than in richer countries. I consider drivers of this, documenting first a higher productivity dispersion as found for other developing countries. Secondly, I estimate the separations elasticity by instrumenting wages of matched workers with firm wages, and I find a low separations elasticity. This generates a high degree of monopsony, and the correspondingly high estimated rent-sharing elasticity helps explain the important role of firm wage policies in inequality. Monopsony may be driven by higher unemployment, and regional heterogeneity provides suggestive evidence for this. Such firm-level competitive dynamics may exacerbate inequality in developing countries more generally.
    Keywords: inequality; firm wage premia; unemployment; monopsony
    JEL: D31 J31 J42 J63 J64
    Date: 2022–10–07
  3. By: Ms. Li Liu; Mr. Ben Lockwood; Eddy H.F. Tam
    Abstract: This paper studies the effect of the VAT threshold on firm growth in the UK, using exogenous variation over time in the threshold, combined with turnover bin fixed effects, for identification. We find robust evidence that annual growth in turnover slows by about 1 percentage point when firm turnover gets close to the threshold, with no evidence of higher growth when the threshold is passed. Growth in firm costs shows a similar pattern, indicating that the response to the threshold is likely to be a real response rather than an evasion response. Firms that habitually register even when their turnover is below the VAT threshold (voluntary registered firms) have growth that is unaffected by the threshold, whereas firms that select into the Flat-Rate Scheme have a less pronounced slowdown response than other firms. Similar patterns of turnover and cost growth around the threshold are also observed for non-incorporated businesses. Finally, simulation results clarify the relative contribution of ``crossers" (firms who eventually register for VAT) and ``non-crossers" (those who permanently stay below the threshold) in explaining our empirical findings.
    Keywords: VAT; size-based threshold; firm growth
    Date: 2024–02–16
  4. By: Wagner, Joachim
    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 leastsquares (KRLS)
    JEL: D22 F14
    Date: 2024
  5. By: Saumik Paul; Dhushyanth Raju
    Abstract: This study examines the effects of mining productivity shocks on the formal-informal duality in manufacturing and services. Using firm census data from 2014 for Ghana, we measure the rates of informality along extensive (unregistered firms) and intensive (registered firms hiring labourers 'off the books') margins. We find that the changes in the rates of informality along both margins across sectors following mining shocks are heterogeneous.
    Keywords: Mining, Informality, Firm productivity, Ghana
    Date: 2024
  6. By: Hinz, Julian
    Keywords: Agribusiness, Agricultural Finance, International Relations/Trade
    Date: 2023–12
  7. By: Matthieu Bunel; Dominique Meurs; Élisabeth Tovar
    Abstract: This article uses a 15-year panel data set from a large French industrial firm to investigate the role of intra-firm job-driven residential mobility on the gender pay gap of executives. We find that job-driven residential mobility is highly profitable for both male and female workers due to a generous mobility bonus policy, but that it does not affect their careers. We also find that female executives are less likely than males to experience job-driven residential mobility, and that it brings higher gains to male relative to female executives. However, these differences between men and women linked to the mobility allowance make limited contribution to the total gender pay gap, which is almost entirely due to other bonuses linked to the positions held.
    Keywords: insider econometrics, personnel economics, gender pay gap, job mobility, residential mobility
    JEL: J16 J31 M12 R23
    Date: 2024
  8. By: Bena, Jan (U of British Columbia); Erel, Isil (Ohio State U and ECGI); Wang, Daisy (Ohio State U); Weisbach, Michael S. (Ohio State U and ECGI)
    Abstract: The hold-up problem can impair firms' abilities to make relationship-specific investments through contracts. Ownership changes can mitigate this problem. To evaluate changes in the specificity of human capital investments, we perform textual analyses of patents filed by lead inventors from both acquirer and target firms before and after acquisitions. Inventors whose human capital is highly complementary with the patent portfolios of their acquisition partners are more likely to stay with the combined firm post-deal and subsequently make their investments more specific to the partner's assets. As ownership of another firm results in increasingly specific investments to that firm's assets, contracting issues related to relationship-specific investments is likely a motive for acquisitions.
    JEL: G34 L14 L22
    Date: 2023–12

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