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on Business Economics |
| By: | Joachim Hubmer (University of Pennsylvania); Mons Chan (Queen’s University); Serdar Ozkan (Federal Reserve Bank of St. Louis, University of Toronto); Sergio Salgado (University of Pennsylvania); Guangbin Hong (University of Chicago) |
| Abstract: | Do larger firms have more productive technologies, are their technologies more scalable, or both? We use administrative data on Canadian and US firms to estimate a joint distribution of output elasticities of capital, labor, and intermediate inputs—thus, returns to scale (RTS)—along with total factor productivity (TFP). We find significant heterogeneity in RTS across firms within industries. Furthermore, larger firms operate technologies with higher RTS, whereas the largest firms do not exhibit the highest TFP. Higher RTS for large firms are entirely driven by higher intermediate input elasticities. Descriptively, these align with higher intermediate input revenue shares. We also show that high-RTS firms grow faster, pay higher wages, and are owned by wealthier households. We then incorporate RTS heterogeneity into the workhorse model of endogenous entrepreneurship that matches the observed heterogeneity in TFP and RTS. We find that the efficiency losses from financial frictions are more than twice as large compared to a conventional calibration that attributes all heterogeneity to TFP and assumes a common RTS parameter. |
| Keywords: | Production function heterogeneity, returns to scale, misallocation |
| JEL: | E22 L11 L25 |
| Date: | 2024–11–21 |
| URL: | https://d.repec.org/n?u=RePEc:pen:papers:24-036 |
| By: | Mertens, Matthias; Schoefer, Benjamin |
| Abstract: | We document and dissect a new stylized fact about firm growth: the shift from labor to intermediate inputs. This shift occurs in input quantities, cost and output shares, and output elasticities. We establish this fact using German firm-level data and replicate it in administrative firm data from 11 additional countries. We also document these patterns in micro-aggregated industry data for 20 European countries (and, with respect to industry cost shares, for the US). We rationalize this novel regularity within a parsimonious model featuring (i) an elasticity of substitution between intermediates and labor that exceeds unity, and (ii) an increasing shadow price of labor relative to intermediates, due to monopsony power over labor or labor adjustment costs. The shift from labor to intermediates accounts for one half to one third of the decline in the labor share in growing firms (the remainder is due to wage markdowns and markups) and rationalizes most of the labor share decline in growing industries. |
| Keywords: | firm growth, labor-intermediate substitution, labor share, monopsony |
| JEL: | D24 E23 J23 J42 L60 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwhdps:307130 |
| By: | Kärnä, Anders (Financial Stability Department, Central Bank of Sweden); Myers, Samantha (Financial Stability Department, Central Bank of Sweden) |
| Abstract: | We study the effects on firms that are acquired by private equity firms in a leveraged buyout, using detailed Swedish registry data covering 1998-2022. Acquired firms see a large increase in their debt and debt related variables, but no significant change in productivity. This suggests that, on average, private equity firms target profitable firms and increase their size through the addition of leverage. |
| Keywords: | Private Equity; LBOs; Firm Performance |
| JEL: | G34 L25 |
| Date: | 2024–11–01 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:rbnkwp:0444 |
| By: | Xiaojun Yu (School of Finance, Capital University of Economics and Business, Beijing, China.); Russell Smyth (Department of Economics, Monash University, Victoria, Australia.); Yao Yao (School of Economics and International Trade, Shanghai Lixin University of Accounting and Finance, Shanghai, China.); Quanda Zhang (Institute of Innovation, Science and Sustainability, Federation University Australia, Victoria, Australia & Department of Economics, Monash University, Victoria, Australia.) |
| Abstract: | We estimate the causal effect of climate change induced water stress on firm-level productivity in China. In contrast with most extant studies that have employed precipitation to proxy firm-level availability of water, we use local water runoff, which we argue is a more appropriate measure of water stress on firms. By matching a panel for half a million formal industrial firms with county-level data on water runoff, we find that shocks to local water runoff, defined as a standard deviation increase or decrease in local water runoff from its long-run average, exert asymmetric effects on firm productivity. A negative shock to water runoff reduces firm productivity by between 1.93 and 5.40 per cent, depending on the magnitude of the shock, while the effect of a positive shock to water runoff on firm productivity is insignificant. These results are robust to numerous sensitivity checks. We show that water runoff outperforms other proxies of water availability across different horserace specifications. We find that the main transmission mechanisms are the adverse effect of negative shocks to water runoff on constraining water inputs in production, disruptions to power generation and, to a lesser extent, higher financing cost. Our study sheds new light on how climate change can impede economic development. |
| Keywords: | Water stress, water runoff, climate change, firm performance, panel model |
| JEL: | L60 O44 O47 Q54 Q25 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:mos:moswps:2024-20 |
| By: | Hadziabdic, Sinisa; Kohl, Sebastian |
| Abstract: | Given the recent reconcentration of the economy in many private industries, the impact of working in firms of different sizes on occupational and political outcomes is of renewed interest. Using micro-level data for the US and Germany, two most dissimilar cases in terms of labor market and political institutions, we show that large firms provide substantially more material and welfare benefits to their workers, while small firms are characterized by the highest job satisfaction and more harmonious relational dynamics. Workers in medium-sized firms appear to be "betwixt and between, " being worst off in many dimensions, thus contradicting utopias of medium-sized-firm capitalism. Within firms of similar size, we also document a significant polarization between employers' and their employees' job experiences and political views. Given the number of waking hours spent in the workplace, the firm, hitherto a neglected locus of social sorting and socialization through which the economy shapes society, should figure more prominently in economic sociology research. |
| Abstract: | Angesichts der jüngsten Re-Konzentration der Wirtschaft in vielen privaten Sektoren rücken die Auswirkungen der Arbeit in Unternehmen unterschiedlicher Größe auf gesellschaftliche Zusammenhänge erneut in den Mittelpunkt des Interesses. Anhand von Mikro- ebene-Daten für die USA und Deutschland, zwei Länder, die sich in Bezug auf den Ar- beitsmarkt und die politischen Institutionen stark unterscheiden, zeigen wir, dass große Unternehmen ihren Arbeitnehmenden wesentlich mehr materielle und soziale Leistungen bieten, während sich kleine Unternehmen durch die höchste Arbeitszufriedenheit und eine harmonischere Beziehungsdynamik auszeichnen. Arbeitnehmende in mittelständischen Unternehmen scheinen hingegen "zwischen den Stühlen zu sitzen" und in vielerlei Hinsicht am schlechtesten gestellt zu sein, was den Verheißungen des Mittelstandskapitalismus widerspricht. In Unternehmen ähnlicher Größe dokumentieren wir auch eine signifikante Polarisierung zwischen den beruflichen Erfahrungen und den politischen Ansichten der Arbeitgebenden und ihrer Arbeitnehmenden. In Anbetracht der am Arbeitsplatz verbrachten Lebenszeit sollte das Unternehmen als Ort der sozialen Selektion und der Sozialisierung, durch den die Wirtschaft die Gesellschaft prägt, stärker in den Blick wirtschaftssoziologischer Forschung genommen werden. |
| Keywords: | company size, Germany, job outcomes, political attitudes, USA, Arbeitsplatzqualität, Deutschland, politische Einstellungen, Unternehmensgröße, USA |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:mpifgd:306355 |
| By: | Mirko Draca; Max Nathan; Viet Nguyen-Tien; Juliana Oliveira-Cunha; Anna Rosso; Anna Valero |
| Abstract: | Which types of human capital influence the adoption of advanced technologies? We study the skill-biased adoption of information and communication technologies (ICT) across two waves in the UK. Specifically, we compare the 'new wave' of cloud and machine learning / AI technologies during the 2010s-pre-LLM-with the previous wave of personal computer adoption in the 1990s and early 2000s. At the area-level we see the emergence of a distinct STEM-biased adoption effect for the second wave of cloud and machine learning / AI technologies (ML/AI), alongside a general skill-biased effect. A one-standard deviation increase in the baseline share of STEM workers in areas is associated with around 0.3 of a standard deviation higher adoption of cloud and ML/AI. We find similar effects at the firm level where we are able to test for the influence of a wide range of skills. In turn, this STEM-biased adoption pattern has encouraged the concentration of these technologies, leading to more acute differences between high-tech and low-tech areas and firms. In contrast with classical technology diffusion, recent cloud and ML/AI adoption in the UK seems more likely to widen inequalities than reduce them. |
| Keywords: | Technology Diffusion, ICT, Human Capital, STEM |
| JEL: | D22 J24 O33 R11 |
| Date: | 2024–10–20 |
| URL: | https://d.repec.org/n?u=RePEc:csl:devewp:495 |