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on Business Economics |
| By: | Alex Chernoff; Allen Head; Beverly Lapham |
| Abstract: | We study the determination of market power at the firm and industry levels when heterogeneous firms compete for sales to ex ante homogeneous buyers in a market with both directed and random search and free entry of firms that differ in productivity. Search and the distribution of productivity across active firms generate distributions of equilibrium prices and markups that we relate to variation in the elasticity of demand at the firm level. With directed search at the outset, a shock that raises the matching rate for buyers improves conditions for them and tends to lower markups. Random matching follows sequentially, and the same shock can lower the productivity threshold for operation, pushing up prices and markups for all firms. The net effect on market power can be ambiguous depending on the forces driving matching rates. The distributions of prices and markups respond in equilibrium to changes in common and firm-specific costs, consumption utility, and fixed costs of both entry and operation. We characterize the differential pass-through of these changes to prices and markups at both the firm and market levels. |
| Keywords: | Inflation and prices; Service sector |
| JEL: | D21 D43 E31 L11 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocawp:25-7 |
| By: | Bruno Merlevede (-) |
| Abstract: | This paper builds a large pan-European panel dataset of firm-level senior management gender composition. We focus the dataset on firms in the business economy that file unconsolidated accounts and report both total assets and strict positive employment throughout their existence. We have management information for 9 million firms for the period 2005-2020 resulting in 60 million firm-year observations. Overall 40% of observations concerns firms with at least one female manager and 60% are led only by male managers. For (predominantly micro) firms with a single manager that account for 53.5% of observations, we find that only 23% are female-managed. 59.5% of firms with two or more managers have at least one female manager. Across countries between 14% and 66% of observations refer to firms where at least half of the managers are female, across industries variation is more limited and ranges between 20% and 53%. We find that within tight countryindustry- year cells women-led SMEs are smaller and less productive and show lower leverage. Real performance differences are sustained in an event study analysis of switching firms, financial performance differences are not. Female-managed firms show lower short and medium-run growth rates. These effects are small and remain unchanged (also in magnitude) when controlling for leverage. Female-managed firms do not differ in terms of exporting behaviour and responses to import shocks. We find indications that female-managed firms show lower future growth in very uncertain environments, but higher growth in environments characterized by low uncertainty. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:rug:rugwps:25/1110 |
| By: | John Bonney; Luigi Pistaferri; Alessandra Voena |
| Abstract: | Using multiple administrative data sources from Norway, we examine how firm performance changes after entrepreneurs become parents. Female-owned businesses experience a substantial decline in profits, steadily decreasing to 30% below baseline ten years post-childbirth. In contrast, male-owned businesses show no decline, often growing in revenues and costs after childbirth. The profit decline for female-owned firms is most pronounced among highly capable entrepreneurs, women who are majority owners, and those with working spouses. Entrepreneurial effort is key to performance, and our findings suggest that time demands from childbirth and childcare are a significant determinant of the decline in firm profits. |
| JEL: | J13 J16 L25 L26 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33448 |
| By: | Oyun Erdene Adilbish; Mr. Diego A. Cerdeiro; Mr. Romain A Duval; Mr. Gee Hee Hong; Luca Mazzone; Lorenzo Rotunno; Hasan H Toprak; Maryam Vaziri |
| Abstract: | Europe faces a well-known productivity malaise, with a large and widening aggregate productivity gap relative to the U.S. In this paper, we provide a novel diagnosis of the firm-level roots of Europe’s productivity growth slowdown through an analysis of data covering the universe of firms in Europe and the U.S over their life cycles. Compared to their U.S. counterparts, we identify critical performance gaps among both Europe’s frontier firms and young high-growth firms. Our firm-level analyses reveal that smaller markets and limited market-based financing are key bottlenecks for frontier European firms, while skill shortages and insufficient risk capital, such as venture capital, hinder the formation and subsequent growth of young firms in Europe. These findings suggest that removing remaining intra-Europe barriers to accelerate factor and product markets integration, alongside national reforms to facilitate swifter resource reallocation and enhance human capital, could help revive Europe’s productivity growth. |
| Keywords: | Firm-level productivity; business dynamism.; EU accession; productivity weakness; productivity problem; frontier firm; trade Barries; firm Size; Productivity; Trade balance; Trade barriers; Total factor productivity; Europe |
| Date: | 2025–02–14 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/040 |
| By: | Astudillo-Estévez, Pablo; Bacilieri, Andrea |
| Abstract: | There is a large consensus on the fundamental role of firm-level supply chain networks in macroeconomics. However, data on supply chains at the fine-grained, firm level are scarce and frequently incomplete. For listed firms, some commercial datasets exist but only contain information about the existence of a trade relationship between two companies, not the value of the monetary transaction. We use a recently developed maximum entropy method to reconstruct the values of the transactions based on information about their existence and aggregate information disclosed by firms in financial statements. We test the method on the administrative dataset of Ecuador and reconstruct a commercial dataset (FactSet). We test the method's performance on the weights, the technical and allocation coecients (microscale quantities), two measures of firms' systemic importance and GDP volatility. The method reconstructs the distribution of microscale quantities reasonably well but shows diverging results for the measures of firms' systemic importance. Due to the network structure of supply chains and the sampling process of firms and links, quantities relying on the number of customers firms have (out-degrees) are harder to reconstruct. We also reconstruct the input-output table of globally listed firms and merge it with a global input-output table at the sector level (the WIOD). Differences in accounting standards between national accounts and firms' financial statements significantly reduce the quality of the reconstruction. |
| Keywords: | Network reconstruction, supply chain, production network, input-output table, maximum entropy, missing information |
| JEL: | C80 D57 E32 L14 F12 |
| Date: | 2023–05 |
| URL: | https://d.repec.org/n?u=RePEc:amz:wpaper:2023-05 |
| By: | Peter H. Egger; Yulong Wang |
| Abstract: | This paper develops a novel method to estimate firm-specific market-entry thresholds in international economics, allowing fixed costs to vary across firms alongside productivity. Our framework models market entry as an interaction between productivity and observable fixed-cost measures, extending traditional single-threshold models to ones with set-valued thresholds. Applying this approach to Chinese firm data, we estimate export-market entry thresholds as functions of domestic sales and surrogate variables for fixed costs. The results reveal substantial heterogeneity and threshold contours, challenging conventional single-threshold-point assumptions. These findings offer new insights into firm behavior and provide a foundation for further theoretical and empirical advancements in trade research. |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2502.03406 |
| By: | Jackie M.L. Chan; Michael Irlacher; Michael Koch; Luca Macedoni |
| Abstract: | This paper reveals a new determinant of wage markdowns at the firm level, namely, the product scope. Using matched employer-employee data on Danish manufacturing firms, we document a negative elasticity between wages and firm scope, which is of a similar magnitude but opposite sign as the firm-size wage premium. We rationalize the wage discount using a theory where workers value the opportunity to switch product lines as an amenity. Multiproduct firms exercise their monopsony power to offer lower wages. Our findings have important implications for understanding labor market dynamics in times of rising concentration from the contribution of large multiproduct firms. |
| Keywords: | multiproduct firms, monopsony power, wages, amenities, labor share |
| JEL: | J31 J42 L25 D21 F10 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11674 |
| By: | Koetter, Michael; Nguyen, Huyen; Uzonwanne, Sochima |
| Abstract: | This paper examines how firms' exposure to supply chain disruptions (SCD) affects firm outcomes in the European Union (EU). Exploiting heterogeneous responses to workplace closures imposed by sourcing countries during the pandemic as a shock to SCD, we provide empirical evidence that firms in industries relying more heavily on foreign inputs experience a significant decline in sales compared to other firms. We document that external finance, particularly bank financing, plays a critical role in mitigating the effects of SCD. Furthermore, we highlight the unique importance of bank loans for small and solvent firms. Our findings also indicate that highly diversified firms and those sourcing inputs from less distant partners are less vulnerable to SCD. |
| Keywords: | bank debt, external finance, firm sales, supply chains, supply chain disruptions |
| JEL: | D22 F14 G21 L14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwhdps:311193 |
| By: | Bruno Merlevede; Annelies Van Maele (-) |
| Abstract: | This paper documents how the composition of value added per worker in Europe is distributed over manufacturing, services, and other industries based on a large panel of firmlevel data. We show that a non-negligible part of value added is accounted for by services industries. We then explore how micro-data at the firm level can be used to analyse this important component of aggregate productivity growth. We further discuss and explore using our data whether semi-parametric estimators of total factor productivity that are commonly found in the literature and typically tailored towards manufacturing are fit for analysing firms services sectors. |
| Keywords: | Productivity slowdown, firm-level data, services industries |
| JEL: | E24 J24 |
| Date: | 2025–02 |
| URL: | https://d.repec.org/n?u=RePEc:rug:rugwps:25/1109 |
| By: | Matthias Fauth; Benjamin Jung; Wilhelm Kohler |
| Abstract: | We investigate the systematic complementarities between import and export activities of firms using a novel firm-level data set for Germany. Specifically, we examine whether firms that import more are also inclined to export more, decomposing this relationship into extensive country and product as well as intensive margins of trade, with separate analyses for goods and services. By analyzing conditional correlations, the paper quantifies the role of imports in explaining exports. This complements prior studies that largely focused on either exporting or importing activities in isolation, or on specific trade liberalization episodes. We find robust evidence of import-export complementarities. Such complementarities exist for both, goods trade and, though to a lesser extent, between services trade and goods trade. |
| Keywords: | firm-level trade, margin decomposition, import-export complementarity, goods and services trade, Germany |
| JEL: | F23 F14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11673 |
| By: | Salomé Baslandze; Leo Liu; Elvira Sojli; Wing Wah Tham |
| Abstract: | This paper studies the interaction between process and product innovations and their distinct role in firm growth dynamics. We differentiate empirically and theoretically two types of process innovations: foundational processes that advance production technology and cost-reducing processes that enhance existing production efficiency. We develop an innovation model of product varieties with quality heterogeneity to illustrate how these innovations affect firm growth differently and highlight how process innovation induces product innovation. By analyzing millions of patent texts from 1900 to 2020, we classify innovations into product, cost-reducing process, and foundational process innovations. We find that foundational processes lead to sustained firm growth, especially through their effect on subsequent product creation. R&D-intensive firms focused on “deep-tech” innovations have an advantage in creating foundational processes, resulting in superior product quality. Using patents linked to FDA-approved drugs, we show that firms with a comparative advantage in creating foundational processes, due to greater knowledge and technological stock, tend to produce higher-value products. |
| Keywords: | foundational process innovation; process innovation; product innovation; process-driven products; firm growth; technological possibility frontier |
| JEL: | O3 O4 |
| Date: | 2025–02–19 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedawp:99586 |
| By: | Guillermo Javier Vuletin; James Sampi; J.T. Araujo |
| Abstract: | This paper examines how the concentration of large firms influences the fiscal multiplier effects of public investment in transport infrastructure. Using data from 1, 891 Peruvian municipalities and firm-level information, the analysis exploits a quasi-experimental setting stemming from an exogenous change in the Municipality Compensation Fund in 2010, Peru's primary fiscal transfer mechanism from the central government to subnational authorities. The findings show that public investment generates a positive fiscal multiplier four years after implementation, with a temporary adjustment occurring two years earlier. The multiplier is significantly higher in municipalities with a greater concentration of large firms, highlighting the role of firm concentration in amplifying fiscal shocks. These results suggest that fiscal resources may be more effectively targeted to municipalities with a higher concentration of large firms, where the impact of public investment is stronger, and that policies promoting firm growth can enhance the effectiveness of fiscal policy by increasing the multiplier. |
| Date: | 2024–12–11 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10997 |
| By: | Brancati, Emanuele; Di Maio, Michele; Roberta V. Gatti; Asif M Islam |
| Abstract: | This study provides a global analysis of the effect of conflict exposure on firms’ performance, combining geolocalized longitudinal firm-level data and information on political violence events from 91 countries between 2006 and 2019. Higher conflict exposure does not affect firm profits, as it reduces both sales and total costs. Sales decline due to the conflict-induced reduction in the availability of production inputs and the increase in informal competition. Firms react to lower sales by reducing labor costs and expenditure on other production inputs. The effect of conflict is more detrimental for firms in countries with low-quality bureaucracy and that are initially at peace. |
| Date: | 2024–09–05 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:10898 |