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on Business Economics |
| By: | Pedro Bento; Diego Restuccia |
| Abstract: | The well-documented decline in business dynamism, measured by the net entry rate of employer firms, has been proposed as an explanation for the productivity growth slowdown in the United States. We examine the role of nonemployers, firms without paid employees, in business dynamism and aggregate productivity. Between 1982 and 2014, the total number of firms per worker including nonemployers increased by 41\%, whereas employer firms per worker declined by -8.7%. Using a standard model of firm dynamics, we derive the implications for aggregate productivity associated with changes in firms per worker and relative size distributions. We find that firm dynamics imply an increase in aggregate productivity of 15.6%, about half the growth observed in the data, that is equally shared by the changes in firms per worker and relative sizes. These results contrast markedly with the much weaker 2.1% growth in aggregate productivity from firm dynamics when abstracting from nonemployer firms. Our results suggest the productivity growth slowdown is not due to changes in net firm entry, and highlight the quantitative importance of comprehensive measures of business dynamism in the U.S. data. |
| Keywords: | nonemployers, employer firms, business dynamism, productivity, TFP. |
| JEL: | O4 O51 E1 |
| Date: | 2024–07–20 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-780 |
| By: | Cristiana Bendetti-Fasil; Giammario Impullitti; Omar Licandro; Petr Sedlacek; Adam Hal Spencer |
| Abstract: | R&D is procyclical and a crucial driver of growth. Evidence indicates that innovation activity varies widely across firms. Is there heterogeneity in innovation cyclicality? Does innovation heterogeneity matter for business cycle propagation? We provide empirical evidence that more productive firms are less procyclical in innovation. We develop a model replicating this observation, with selection as the driver of heterogeneous innovation cyclicality. We then examine how heterogeneous innovation and growth influence business cycle propagation. Dynamics of firm entry and exit, coupled with heterogeneous cyclicality, significantly amplify TFP shock propagation. Business cycle fluctuations give substantial welfare losses, with firm heterogeneity contributing significantly. |
| Keywords: | Growth, Business Cycles, Innovation, Heterogeneous Firms |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:not:notcfc:2024/03 |
| By: | Joyce P. Jacobsen (Hobart and William Smith Colleges, and Wesleyan University); Sooyoung A. Lee (Department of Economics, Hobart and William Smith Colleges) |
| Abstract: | A literature has developed in labor economics regarding employer discrimination and how it may be detrimental to firms, particularly firms operating in more competitive sectors. A second literature in international trade considers the effects of import competition and export orientation on gender employment and earnings gaps. Finally, factors affecting firm survival have been increasingly studied as more panel data have become available for firms. We unite these diverse literatures and test several pertinent hypotheses from them using a 2005-2018 panel of Vietnamese firms. We find that firms with higher proportions of female labor are more likely to survive, controlling for other firm-level and industry-level characteristics, and that exporting and foreign- owned firms have higher proportions of female labor. We also examine earnings and women-run firms to consider other dimensions of firm gendering and their effects on firm survival. |
| Keywords: | Vietnam, gender discrimination, trade competition |
| JEL: | D22 F16 J16 |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:wes:weswpa:2024-009 |
| By: | Stephen Ayerst; Duc Nguyen; Diego Restuccia |
| Abstract: | We examine aggregate productivity differences across nations using cross-country firm-level data and a quantitative model of production heterogeneity with distortions featuring operation decisions (selection) and productivity-enhancing investments (technology). Empirically, less developed countries feature higher distortions and larger dispersion in firm-level productivity, mostly resulting from the higher prevalence of unproductive firms. Quantitatively, measured cross-country differences in the elasticity of distortions with respect to firm productivity generate the bulk of empirical patterns and over two-thirds of cross-country labor productivity differences. Both selection and technology channels are important. Variation in static misallocation also plays an important role, albeit smaller. |
| Keywords: | Firms, productivity, size, distortions, misallocation, selection, technology. |
| JEL: | O11 O14 O4 |
| Date: | 2024–07–18 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-779 |
| By: | Hanwei Huang; Kalina Manova; Oscar Perello; Frank Pisch |
| Abstract: | We study the role of firm heterogeneity and imperfect competition for global production networks and the gains from trade. We develop a quantifiable trade model with two-sided firm heterogeneity, matching frictions, and oligopolistic competition upstream. More productive buyers endogenously match with more suppliers, thereby inducing tougher competition among them to enjoy lower input costs and superior performance. Transaction-level customs data confirms that downstream French and Chilean firms import higher values and quantities at lower prices as upstream Chinese markets become more competitive over time, with stronger responses by larger firms. Moreover, suppliers charge more diversified buyers lower mark-ups. Counterfactual analysis indicates that entry upstream benefits high-productivity buyers, while lower matching or trade costs benefit all buyers, with the biggest boost to mid-productivity buyers. All three shocks generate sizeable welfare gains, especially under package reforms. Global production networks thus mediate bigger effects and cross-border spillovers from industrial and trade policies. |
| Keywords: | production networks, global value chains, matching frictions, imperfect competition, gains from trade |
| Date: | 2024–07–24 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2020 |
| By: | Getahun, Tigabu D.; Fetene, Gebeyehu M.; Baumüller, Heike; Kubik, Zaneta |
| Keywords: | Agribusiness, Industrial Organization, Labor and Human Capital |
| Date: | 2024–07–12 |
| URL: | https://d.repec.org/n?u=RePEc:ags:ubzefd:344125 |
| By: | Karam Jo; Seula Kim |
| Abstract: | We study how friction in learning others’ technology, termed “imperfect technology spillovers, ” incentivizes firms to use different types of innovation and impacts the implications of competition through changes in innovation composition. We build an endogenous growth model in which multi-product firms enhance their products via internal innovation and enter new product markets through external innovation. When learning others’ technology takes time due to this friction, increased competitive pressure leads firms with technological advantages to intensify internal innovation to protect their markets, thereby reducing others’ external innovation. Using the U.S. administrative firm-level data, we provide regression results supporting the model predictions. Our findings highlight the importance of strategic firm innovation choices and changes in their composition in shaping the aggregate implications of competition. |
| Keywords: | competition, innovation, technology spillover, endogenous growth |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:24-40 |
| By: | Patrick Mellacher (University of Graz, Austria) |
| Abstract: | I develop a simple Schumpeterian agent-based model where the entry and exit of firms, their productivity and markup, the birth of new industries and the social structure of the population are endogenous and use it to study the causes of rising inequality and declining “business dynamism†since the 1980s. My hybrid model combines features of i) the so-called Schumpeter Mark I (centering around the entrepreneur), ii) the Mark II model (emphasizing the innovative capacities of firms), and iii) Cournot competition, with firms using OLS learning to estimate the market environment and the behavior of their competitors. A scenario which is quantitatively calibrated to US data on growth and inequality replicates a large number of stylized facts regarding the industry life-cycle, growth, inequality and all ten stylized facts on “declining business dynamism†proposed by Akcigit and Ates (AEJ:Macro, 2021). Counterfactual simulations show that antitrust policy is highly effective at combatting inequality and increasing business dynamism and growth, but is subject to a conflict of interest between workers and firm owners, as GDP and wages grow at the expense of profits. Technological factors, on the other hand, are much less effective in combatting declining business dynamism in my model. |
| Keywords: | Agent-based economics, Joseph Schumpeter, Evolutionary economics, Innovation. |
| JEL: | B25 C63 D33 L11 O11 O33 O41 |
| Date: | 2023–05 |
| URL: | https://d.repec.org/n?u=RePEc:grz:wpaper:2023-04 |
| By: | Andreas Baur; Lisandra Flach |
| Abstract: | In February 2024, the ifo Institute conducted a representative firm survey on import relations with China. The survey results suggest significant changes compared to a previous survey conducted immediately before the outbreak of the war in February 2022. The share of German manufacturing firms that rely on important inputs from China has fallen from 46 percent in February 2022 to 37 percent in February 2024. Similar declines can be observed in wholesale (2024: 35 percent, 2022: 44 percent) and retail trade (2024: 36 percent, 2022: 43 percent) The share of firms that plan to reduce their imports from China has also fallen considerably and is at 38 percent in manufacturing (2022: 45 percent) Increasing political uncertainty has become one of the main reasons for plans to reduce imports from China (65 percent), alongside firms’ general diversification efforts (80 percent) |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:econpb:_57 |
| By: | Thibaut Lamadon (University of Chicago); Jeremy Lise (Cornell University); Costas Meghir (Yale University); Jean-Marc Robin (Sciences Po) |
| Abstract: | This paper develops the nonparametric identification of models with production complementarities, worker-firm specific disutility of labor and search frictions. Mobility in the model is subject to preference shocks, and we assume that firms can write wage contracts. We develop a constructive proof for the nonparametric identification of the model primitives from matched employer-employee data. We use the estimated model to decompose the sources of wage dispersion into worker heterogeneity, compensating differentials, and search frictions that generate between-firm and within-firm dispersion. We find that compensating differentials are substantial on average, but the contribution differs greatly between the lowest and highest types of workers. Finally, we use the model to provide an economic interpretation of several empirical regularities. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2396 |
| By: | Silliman, Mikko (Dept. of Economics, Norwegian School of Economics and Business Administration); Willén, Alexander (Dept. of Economics, Norwegian School of Economics and Business Administration) |
| Abstract: | This paper examines how worker power shapes the allocation of immigrants across firms, and the subsequent consequences of such sorting on firm performance and the careers of incumbent workers. Our analysis highlights several key results. First, unions push immigrants to enter less unionized, lower-paying, and lower-quality firms. Second, the less unionized firms are able to utilize the access to cheaper immigrant labor to scale up production, thereby outcompeting the more unionized firms and capturing market share. Third, incumbent workers in less unionized firms benefit by shifting into management positions and capturing some of the firm’s increased rents. Fourth, despite benefiting incumbent workers in less unionized firms, these workers are more likely to become union members themselves in response to greater contact with new immigrants. Broadly, our results cut across nearly all sectors, but are heightened in labor intensive firms, and muted in competitive markets. |
| Keywords: | Immigration; Worker Power; Unions; Firms |
| JEL: | J12 J13 J15 J16 |
| Date: | 2024–07–05 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:nhheco:2024_013 |
| By: | Lenza, Michele (ECB); Savoia, Ettore (Research Department, Central Bank of Sweden) |
| Abstract: | We study the role of heterogeneity in the revenues of individual firms for euro area macroecconomic dynamics. To this end, we specify two models: a standard aggregate vector autoregressive model (VAR) and an “heterogeneous VAR” (HVAR). The VAR model includes only aggregate data, while the HVAR model also incorporates the feedback loop between firms’ revenue distribution and aggregate variables. Our results demonstrate that the behavior of firms’ revenue distribution plays a significant role in explaining the dynamics of key euro area macroeconomic variables. |
| Keywords: | Firm-level revenues; Functional Vector Autoregressions; Heterogeneous Agent Models; Business Cycle fluctuations |
| JEL: | C11 C32 C52 C54 E22 E32 |
| Date: | 2024–07–01 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:rbnkwp:0438 |
| By: | Brändle, Tobias |
| Abstract: | Unions and collective bargaining play a central role in shaping wages and influencing firms' employment decisions and firm survival, especially in industrialised countries, and where they are traditionally strong. Their impact depends on the institutional role unions (can) play in different countries, on the economic conditions, and it varies strongly between industries. Overall, the literature has analysed union wage effects quite extensively, and to a lesser degree also their effects on employment. Unions typically increase wages and other working conditions for their members and often all employees working in firms where collective bargaining applies. There is strong evidence for a union-non-union wage premium, even for individuals working similar jobs. At the same time, wages are higher in firms under collective bargaining, even in similar firms in the same industry. The size of these premiums can vary widely, however, between countries, time periods, and context. The union wage premium is typically stronger at the lower end of the wage distribution, such that strong unions are associated with lower wage inequality. This result is more or less undisputed in the literature. The union effect on employment is theoretically more ambiguous, but empirically labelled as 'the one constant' among the effects of unions: employment growth is two to four percent lower in firms with union bargaining. There may, however, also be positive effects of union bargaining on the quality of employment or employment duration from an individual perspective. A union effect on firm survival is the least well analysed among the three effects presented here. If unions redistribute rents to employees and if 'the one constant' holds, then firm survival might be negatively affected by union bargaining. The empirical evidence is, however, inconclusive. |
| Keywords: | collective bargaining, trade unions, wages, employment, firm survival |
| JEL: | J31 J51 J23 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1457 |
| By: | Huseyin Ince (Department of Economics, Gebze Technical University); Salih Zeki Imamoglu (Department of Science and Technology Studies, Gebze Technical University); Mehmet Ali Karaköse (Department of Management, Gebze Technical University); Ufuk Cebeci (Department of Industrial Engineering, Istanbul Technical University); Murat Sagbas (National Defense University) |
| Abstract: | The concept of resilience, which has been studied extensively in different disciplines and has recently gained an increasing interest in organisational science, has rarely been studied in the absorptive capacity and innovation literature. In this study, we empirically tested the relationships between organisational resilience capacity, organisational absorptive capacity, and firm innovativeness. By studying 211 firms in Turkey, we found that: (1.a) competence orientation and broad resource networks are positively related to all absorptive capacity variables, (1.b) conceptual orientation is positively related to all absorptive capacity variables except knowledge transformation, (1.c) behavioural preparedness is positively related to knowledge assimilation, (1.d) deep social capital is positively related to knowledge transformation and (2) knowledge assimilation and knowledge exploitation are positively related to firm innovativeness. Also, we found that absorptive capacity mediates the relationship between resilience capacity and firm innovativeness. |
| Keywords: | Organisational resilience capacity, absorptive capacity, firm innovativeness. |
| JEL: | L20 L29 |
| Date: | 2024–07–12 |
| URL: | https://d.repec.org/n?u=RePEc:geb:wpaper:2024-02 |
| By: | DI PIETRO Giorgio (European Commission - JRC) |
| Abstract: | There is a relatively large body of evidence suggesting that skill shortages have an adverse effect on firm performance. We use data from a recent Eurobarometer survey in an attempt to identify strategies that firms can implement to mitigate the negative effects of skill shortages. Our results indicate that the use of temporary work contracts, increased reliance on automation, and the abandonment of certain product lines are all successful measures that help companies prevent the detrimental effect of skill shortages on their turnover. On the other hand, we find that upskilling and reskilling current staff is a less successful measure to respond to skill shortages, though this result only holds for SMEs. |
| Date: | 2024–07 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc138816 |