nep-bec New Economics Papers
on Business Economics
Issue of 2024‒04‒08
eleven papers chosen by
Vasileios Bougioukos, London South Bank University

  1. In the Land of AKM: Explaining the Dynamics of Wage Inequality in France By D.Babet; O.Godechot; M.G. Palladino
  2. Rise in Wage Inequality between Firms: Evidence from Japan 1995-2013 By KAMBAYASHI Ryo; TANAKA Satoshi; YAMAGUCHI Shintaro
  3. Cloud computing and extensive margins of exports: Evidence for manufacturing firms from 27 EU countries By Wagner, Joachim
  4. Fostering SME survival through insolvency proceedings: a legitimacy perspective on retrenchment, age, and firm-specific distress By Rachid Achbah; Marc Fréchet
  5. Shining with the stars: Competition, screening, and concern for coworkers’ quality By Francesca Barigozzi; Helmuth Cremer
  6. Technological Synergies, Heterogeneous Firms, and Idiosyncratic Volatility By Jesus Fernandez-Villaverde; Yang Yu; Francesco Zanetti
  7. R(a)ising Prices While Struggling: Firms’ Financial Constraints and Price Setting By Nicoletta Berardi
  8. Using High-dimensional Corporate Governance Variables to Predict Firm Performance By Nicholas BENES; Ben GARTON; MIYAKAWA Daisuke; YAMANOI Junichi
  9. Risk-reward trade-offs: Modes of innovation and economic performance of young firms By Runst, Petrik; Thomä, Jörg
  10. Urban-Biased Structural Change By Chen, Natalie; Novy, Dennis; Perroni, Carlo; Chern Wong, Horng
  11. Do climate policies lead to outsourcing? Evidence from firm-level imports By Rottner, Elisa

  1. By: D.Babet (Insee); O.Godechot (Sciences Po, CRIS-CNRS and AxPo); M.G. Palladino (Banque de France; Sciences Po)
    Abstract: We use a newly built and quasi-exhaustive matched employer-employee database to study firms contribution towage inequalities in France. We employ the Abowd, Kramarz, and Margolis (1999) model (hereafter AKM) to decompose log-wage variance into between- and within-firm components. Our analysis covering the period from 2002 to 2019 reveals a significant increase in between-firm inequalities, driven by a growing tendency of high-wage workers to cluster together in high premium firms. These phenomena are directly associated with changes in firms demographics and workforce composition. Over the same period, bottom earnings percentiles increased more than the rest of the distribution, in line with the rise in the legal minimum wage. As a result, within-firm inequalities decreased, almost offsetting the rising between-firm inequalities.
    Keywords: Wage inequality, firm wage premium, AKM decomposition
    JEL: E24 J31 C33
    Date: 2023
  2. By: KAMBAYASHI Ryo; TANAKA Satoshi; YAMAGUCHI Shintaro
    Abstract: Using firm employer-employee matched data, we document changes in wage inequality in Japan from 1995 to 2013. We find that between-firm logwage variance rose and led to the rise in the overall logwage variance for male full-time workers, while within-firm logwage variance remain unchanged. The rise of between-firm variance is driven by changes in returns based on firms’ technology and other characteristics, firm fixed effects, and the entry and exit of firms. By contrast, changes in the distribution of observed firm characteristics and returns to human capital had little effect on the between-firm logwage variance.
    Date: 2024–03
  3. By: Wagner, Joachim
    Abstract: The use of cloud computing by firms can be expected to go hand in hand with higher productivity, more innovations, and lower costs, and, therefore, should be positively related to export activities. Empirical evidence on the link between cloud computing and exports, however, is missing. This paper uses firm level data for manufacturing enterprises from the 27 member countries of the European Union taken from the Flash Eurobarometer 486 survey conducted in February - May 2020 to investigate this link. Applying standard parametric econometric models and a new machine-learning estimator, Kernel-Regularized Least Squares (KRLS), we find that firms which use cloud computing do more often export, do more often export to various destinations all over the world, and do export to more different destinations. The estimated cloud computing 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 cloud computing are positively related.
    Keywords: Cloud computing, exports, firm level data, Flash Eurobarometer 486, kernel-regularized least squares (KRLS)
    JEL: D22 F14
    Date: 2024
  4. By: Rachid Achbah (UL2 UFR SEG - Université Lumière - Lyon 2 - UFR de Sciences économiques et de gestion - UL2 - Université Lumière - Lyon 2, COACTIS - COnception de l'ACTIon en Situation - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne); Marc Fréchet (UJM - Université Jean Monnet - Saint-Étienne, COACTIS - COnception de l'ACTIon en Situation - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne)
    Abstract: This study examines the interaction between insolvency proceedings and strategic variables and their relationship with firm survival. Unlike previous research, this study considers the firm's legal status, including insolvency proceedings, and fills a gap in the literature by considering legal considerations in business studies. Adopting a legitimacy perspective, we employ a Cox proportional hazards model to construct a survival model based on a theoretical framework encompassing insolvency proceedings retrenchment, firm age, and causes of financial distress. Our sample consists of French SMEs facing financial difficulties. The findings reveal that initiating insolvency proceedings is negatively associated with firm survival. However, retrenchment of employees or assets during insolvency proceedings is associated with a higher likelihood of survival. Contrary to expectations, firm age showed a negative association with firm survival during the insolvency proceedings. Moreover, the study revealed a positive association between insolvency proceedings and firm survival in cases of firm-specific financial distress. This research provides new insights into the relationship between insolvency proceedings and firm survival.
    Keywords: SMEs, Insolvency proceedings, Legitimacy, Retrenchment, Firm survival, SMEs Insolvency proceedings Legitimacy Retrenchment Firm Survival, Firm Survival
    Date: 2024–02–10
  5. By: Francesca Barigozzi (UNIBO - Alma Mater Studiorum Università di Bologna = University of Bologna); Helmuth Cremer (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Abstract: We study how workers' concern for coworkers' ability (CfCA) affects competition in the labor market. Two firms offer nonlinear contracts to a unit mass of prospective workers. Firms may differ in their marginal productivity, while workers are heterogeneous in their ability (high or low) and their taste for being employed by any of the two firms. Workers receive a utility premium when employed by the firm hiring most high-ability workers and suffer a utility loss if hired by its competitor. These premiums/losses are endogenously determined. We characterize contracts and workers' sorting into the two firms under complete and private information on workers' ability. We show that CfCA is detrimental to firms, but it benefits high-ability workers, especially when their ability is observable. In addition, CfCA exacerbates the existing distortion in high-ability workers' sorting into the two firms.
    Keywords: Concern for coworkers’ quality, Competition, Screening, Sorting
    Date: 2024–03
  6. By: Jesus Fernandez-Villaverde (University of Pennsylvania); Yang Yu (Shanghai Jiaotong University); Francesco Zanetti (University of Oxford)
    Abstract: This paper shows the importance of technological synergies among heterogeneous firms for aggregate fluctuations. First, we document six novel empirical facts using microdata that suggest the existence of important technological synergies between trading firms, the presence of positive assortative matching among firms, and their evolution during the business cycle. Next, we embed technological synergies in a general equilibrium model calibrated on firm-level data. We show that frictions in forming trading relationships and separation costs explain imperfect sorting between firms in equilibrium. In particular, an increase in the volatility of idiosyncratic productivity shocks significantly decreases aggregate output without resorting to non-convex adjustment costs.
    Keywords: Technological synergies, heterogeneous firms, idiosyncratic uncertainty
    JEL: C63 C68 C78 E32 E37 E44 G12
    Date: 2024–08–03
  7. By: Nicoletta Berardi
    Abstract: Working Paper Series no. 942. This paper investigates the interaction between financial constraints faced by firms and their price setting behaviour. We find systematic differences in the frequencies of price increases and decreases between financially constrained and unconstrained firms, consistently across several alternative proxies. Financial constraints affect price adjustments asymmetrically. When firms are financially struggling, they are more likely to increase their prices, while simultaneously exhibiting greater rigidity in lowering prices.
    Keywords: Producer Price Setting, Firm Financial Constraints, Customer Market
    JEL: E31 G30
    Date: 2024
  8. By: Nicholas BENES; Ben GARTON; MIYAKAWA Daisuke; YAMANOI Junichi
    Abstract: The purpose of this paper is to empirically identify and quantify correlations between corporate governance practices of firms and their future financial performance. LASSO estimation technique was used on a comprehensive set of corporate governance-related variables provided by The Board Director Training Institute of Japan (BDTI) and compared to firms’ total shareholder returns (TSR) as well as other performance measures for the listed firms in Japan. Through LASSO, we find the following: First, a number of corporate governance policies or attributes that relate to external monitoring have positive correlations with future TSR as expected. Second, somewhat unexpectedly, only a few variables associated with internal monitoring and incentive practices show correlations with future TSR. Third, such unconditional associations between specific corporate governance practices and TSR are affected by other governance practices. After confirming the stability of these results through OLS estimation, we constructed a prediction model of firms’ future TSR and further show that the investment strategy based on the model’s predictions could generate non-negligible improvement in returns by including the corporate governance-related variables in the predictors. These results suggest that high-dimensional corporate governance variables contain more informative signals associated with future firm performance than simple reliance on purely financial data can provide.
    Date: 2024–02
  9. By: Runst, Petrik; Thomä, Jörg
    Abstract: The literature has established that young firms engaged in R&D exhibit a pronounced asymmetry in their economic performance, with high premia at the upper end of the conditional growth distribution. We argue that this binary view - i.e., R&D-oriented firms versus all others - is somewhat limited. In particular, non-R&D innovation activity should be treated as an important category in its own right, and that its sui generis mode of learning is reflected in a distinct growth pattern. We examine data from the German IAB/ZEW Start-up Panel. Our evidence suggests that young non-R&D innovators also exhibit asymmetric and improved economic performance relative to non-innovators, although less so than R&D firms. Our results also suggest that firms engaged in non-R&D innovation grow in a less risky and costly way than R&D innovators, and that a young firm's decision whether to engage in R&D for the purpose of innovation and growth can therefore usefully be understood as being driven by a specific risk-return trade-off.
    Keywords: Firm growth, R&D, non-R&D innovation, Modes of innovation
    JEL: D21 L11 L25 L26 O31
    Date: 2024
  10. By: Chen, Natalie (University of Warwick, CEPR and CESifo); Novy, Dennis (University of Warwick, CEPR, CEP/LSE and CESifo); Perroni, Carlo (University of Warwick and CEFiso); Chern Wong, Horng (Stockholm University)
    Abstract: Using firm-level data from France, we document that the shift of economic activity from manufacturing to services over the last few decades has been urban-biased: structural change has been more pronounced in areas with higher population density. This bias can be accounted for by the location choices of large services firms that sort into big cities and large manufacturing firms that increasingly locate in suburban and rural areas. Motivated by these findings, we estimate a structural model of city formation with heterogeneous firms and international trade. We find that agglomeration economies have strengthened for services but weakened for manufacturing. This divergence is a key driver of the urban bias but it dampens aggregate structural change. Rising manufacturing productivity and falling international trade costs further contribute to the growth of large services firms in the densest urban areas, boosting services productivity and services exports, but also land prices.
    Keywords: Agglomeration, Cities, Export, Firm Sorting, Manufacturing, Productivity, Services, Trade Costs JEL Classification: F15, F61, R12, R14
    Date: 2023
  11. By: Rottner, Elisa
    Abstract: Rising energy prices might lead to adjustments along the supply chain and make firms outsource energy-intensive processes. This could lead to carbon leakage. I provide empirical evidence whether energy price-induced offshoring occurs using firm-level data on energy use, imports, and material purchases. I document that import shares in German industry have increased between 2009 and 2013, and that energy prices correlate positively with imports. Despite this positive correlation, I show in a quasi-experimental setup that a sudden drastic drop in electricity prices has not led firms to significantly reduce their imports or their domestic material purchases relative to an unaffected control group. This holds for very electricityintensive firms; for firms using easily tradable goods; and both for regular importers with a trade network and occasional/non-importers.
    Keywords: Offshoring, Energy Prices, Climate Policy, Manufacturing
    JEL: F14 F18 L60 Q41 Q56
    Date: 2023

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