nep-bec New Economics Papers
on Business Economics
Issue of 2024‒04‒22
nine papers chosen by
Vasileios Bougioukos, London South Bank University

  1. High-Growth Firms in the United States: Key Trends and New Data Opportunities By J. Daniel Kim; Joonkyu Choi; Nathan Goldschlag; John Haltiwanger
  2. Within-Firm Pay Inequality and Productivity By Melanie Wallskog; Nicholas Bloom; Scott W. Ohlmacher; Cristina Tello-Trillo
  3. Nonlinear Firm Dynamics By Davide Melcangi; Silvia Sarpietro
  4. Repeated Innovations and Excessive Spin-Offs By Mella-Barral, P.; Sabourian, H.
  5. Spatial multiproduct competition By Moez Kilani; André de Palma
  6. Technological synergies, heterogeneous firms, and idiosyncratic volatility By Jesús Fernández-Villaverde; Yang Yu; Francesco Zanetti
  7. Quantifying Qualitative Survey Data with Panel Data Structure By Alexandros Botsis; Christoph Görtz; Plutarchos Sakellaris
  8. The Fed Information Effect and Firm-Level Investment: Evidence and Theory By Alex Hsu; Indrajit Mitra; Yu Xu; Linghang Zeng
  9. Women’s Voice at Work and Family-Friendly Firms By Jose Garcia-Louzao; Ruben Perez-Sanz

  1. By: J. Daniel Kim; Joonkyu Choi; Nathan Goldschlag; John Haltiwanger
    Abstract: Using administrative data from the U.S. Census Bureau, we introduce a new public-use database that tracks activities across firm growth distributions over time and by firm and establishment characteristics. With these new data, we uncover several key trends on high-growth firms—critical engines of innovation and economic growth. First, the share of firms that are high-growth has steadily decreased over the past four decades, driven not only by falling firm entry rates but also languishing growth among existing firms. Second, this decline is particularly pronounced among young and small firms, while the share of high-growth firms has been relatively stable among large and old firms. Third, the decline in high-growth firms is found in all sectors, but the information sector has shown a modest rebound beginning in 2010. Fourth, there is significant variation in high-growth firm activity across states, with California, Texas, and Florida having high shares of high-growth firms. We highlight several areas for future research enabled by these new data.
    Keywords: Firm Growth, Business Dynamism, Entrepreneurship, Business Dynamics Statistics
    JEL: L11 L25 L26 O30 O40
    Date: 2024–03
  2. By: Melanie Wallskog; Nicholas Bloom; Scott W. Ohlmacher; Cristina Tello-Trillo
    Abstract: Combining confidential Census worker and firm data, we find three key results. First, employees at more productive firms earn higher pay at all earnings levels. Second, this pay-productivity relationship strengthens with seniority, doubling from an elasticity of 0.07 for pay on productivity for the median-paid employee to 0.15 for the top-paid employee. Consequently, more productive firms have higher within-firm inequality. Our data suggests this is driven by their greater adoption of aggressive performance-pay bonus and management schemes. Finally, the magnitude of this pay-performance slope suggests rising productivity can explain 40% of the rise in within-firm inequality since 1980.
    JEL: J0
    Date: 2024–03
  3. By: Davide Melcangi; Silvia Sarpietro
    Abstract: This paper presents empirical evidence on the nature of idiosyncratic shocks to firms and discusses its role for firm behavior and aggregate fluctuations. We document that firm-level sales and productivity are hit by heavy-tailed shocks and follow a nonlinear stochastic process, thus departing from the canonical linear. We estimate a state-of-the-art model to flexibly capture the rich dynamics uncovered in the data and characterize the drivers of nonlinear persistence and non-Gaussian shocks. We show that these features are crucial to get empirically plausible volatility and persistence of micro-originated (granular) aggregate fluctuations.
    Keywords: firm dynamics; productivity; nonlinearities; non-Gaussian shocks; granular fluctuations
    JEL: D22 E23 E32
    Date: 2024–03–01
  4. By: Mella-Barral, P.; Sabourian, H.
    Abstract: Firms can voluntarily create independent firms to implement their technologically distant innovations and capture their value through capital markets. We argue that when firms repeatedly compete to make innovations, there is inefficient external implementation of innovations and “excessive†creation of such firms. This inefficiency is most exacerbated in the early stages of an industry, when the number of firms is still limited.
    Keywords: Repeated Innovations, Spin-Offs, Voluntary Firm Creation
    JEL: M13 O31 O33
    Date: 2023–06–30
  5. By: Moez Kilani; André de Palma (Université de Cergy-Pontoise, THEMA)
    Abstract: We analyze spatial competition on a circle between firms that have multiple outlets and face quadratic transport costs. The equilibrium is a two-stage Nash game: first, firms decide on their locations and then set their prices. We are able to solve analytically simple multi-outlet cases, but for the general case, we require an algorithm to enumerate all non-isomorphic configurations. While price equilibria are explicit and unique, solving the full two-stage game requires numerical methods. In the location game, we consider two scenarios: either firms cannot jump one outlet over a competitors’ outlet, or firms have the flexibility to locate outlets anywhere on the circle. The solution involves a balance between cannibalization, market protection, and spatial monopoly power. We compare prices, profits, and transport costs for all possible configurations. With flexible locations, the firms’ market areas are contiguous. In this case, surprisingly, each firm acts as a spatial monopoly. If regulations enforce that each firm must set the same price for its outlets, head-to-head competition prevails, leading to decreased profits for the firms but to a better-off situation for consumers.
    Keywords: Spatial competition, circle, multi-product oligopoly, price-location equilibria, coin change problem
    JEL: L13 R32 R53
    Date: 2023
  6. By: Jesús Fernández-Villaverde; Yang Yu; Francesco Zanetti
    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.
    Date: 2024–03–08
  7. By: Alexandros Botsis; Christoph Görtz; Plutarchos Sakellaris
    Abstract: We develop a novel methodology to quantify forecasts based on qualitative survey data. The methodology is generally applicable when quantitative information is available on the realization of the forecasted variable, for example from firm balance sheets. The method can be applied to a wide range of panel datasets, including qualitative surveys on firm-level forecasts or household expectations. As an application, we employ a panel of Greek manufacturing firms and quantify firms’ forecast errors of own sales growth. In this context, we conduct a variety of exercises to demonstrate the methodology’s validity and accuracy.
    Keywords: expectations, firm data, forecast errors, survey data
    JEL: C53 C83 D22 D84 E32
    Date: 2024
  8. By: Alex Hsu; Indrajit Mitra; Yu Xu; Linghang Zeng
    Abstract: We present evidence that the Fed's private information about economic conditions revealed through Federal Open Market Committee announcements affect firm investment. We use firm-level investment data and analyst forecasts of firm fundamentals to document three facts. First, the investment rate sensitivity to Fed information is greater for more cyclical firms. Second, revisions in analyst forecasts of firm fundamentals are greater for more cyclical firms. Third, the investment response is consistent with changes in firm profitability following Fed announcements. We propose a HANK model to explain these patterns. Our model rationalizes the slow decline in inflation in 2022–23 despite aggressive policy rate hikes.
    Keywords: E22; E52; G31
    JEL: E22 E52 G31
    Date: 2023–06–20
  9. By: Jose Garcia-Louzao; Ruben Perez-Sanz
    Abstract: Uneven family responsibilities are at the root of gender gaps. Using a new dataset covering all firm-level agreements signed in Spain between 2010 and 2018, we explore whether the presence of female worker representatives can facilitate the negotiation of family-friendly policies with management. We compare firms that operate under the same set of labor regulations but differ in the presence of women among employee representatives. Our findings suggest that having female representatives at the bargaining table can help transform workplaces to better meet women’s needs and ultimately close the gender gap.
    Keywords: women representation, bargaining, family-friendly firms
    JEL: J16 J32 J53
    Date: 2024

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