|
on Business Economics |
| By: | Rafael Machado Parente; Sandra Baquie; Yueling Huang; Ms. Florence Jaumotte; Jaden Kim; Samuel Pienknagura |
| Abstract: | This paper empirically studies the relationship between industrial policies (IPs) and firm performance, showing it varies by instrument, firm and industry characteristics, value chain position, and time horizon. Consistent with the trade literature, IPs reducing trade barriers are linked to medium term improvements in firm performance. Subsidies discriminating against foreign interests are linked to short term improvements in value added (VA), productivity and payroll, which fade or turn negative in the medium term. Export incentives are linked to short term declines in firm performance followed by medium term gains. These relationships are stronger for young and financially constrained firms compared to older and less financially constrained firms. Industry distortions also matter—IPs are linked to stronger improvements in VA, capital and payroll in the short term when distortions are high. Finally, we find cross-sectoral spillovers: protective IPs targeting upstream sectors are associated with improved outcomes in downstream firms, while those targeting downstream sectors correlate with weaker upstream performance. Cross-sectoral spillovers from trade liberalizing policies are consistently positive and larger in magnitude, regardless of value chain position. |
| Keywords: | Industrial Policies; Firm Performance; Subsidies; Export Incentives; Productivity |
| Date: | 2025–07–18 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/143 |
| By: | Arellano-Bover, Jaime (Yale University, IZA, CESifo); San, Shmuel (Hebrew University of Jerusalem) |
| Abstract: | We study how job mobility, firms, and firm-ladder climbing can shape immigrants’ labor market success. Our context is the mass migration of former Soviet Union Jews to Israel during the 1990s. Once in Israel, these immigrants faced none of the legal barriers that are typically posed by migration regulations around the world, offering a unique backdrop to study undistorted immigrants’ job mobility and resulting unconstrained assimilation. Rich administrative data allows us to follow immigrants for up to three decades after arrival. Differential sorting across firms and differential paysetting within firms both explain important shares of the initial immigrant-native wage gap and subsequent convergence dynamics. Moreover, immigrants are more mobile than natives and faster at climbing the firm ladder, even in the long term. As such, firm-to-firm mobility is a key driver of these immigrants’ long-run prosperity. Lastly, we quantify a previously undocumented job utility gap when accounting for non-wage amenities, which exacerbates immigrant-native disparities based on pay alone. |
| Keywords: | JEL Classification: |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:cge:wacage:764 |
| By: | Heather Tookes; Emmanuel Yimfor |
| Abstract: | Do corporate control transactions discipline the labor force? Consistent with synergies, new disclosures of employee misconduct in the investment advisory industry drop by between 17 and 22 percent following mergers. Both targets and acquirers have better pre-merger misconduct records than the industry’s average firm and, within the subsample of merging firms, there is assortative matching on misconduct. Merger events facilitate further reductions in misconduct through separations of target firm employees with high misconduct. Many of these employees remain in the industry, suggesting that consolidation plays an important role in the redistribution of misconduct across firms. |
| JEL: | G20 G34 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34045 |
| By: | Felipe Saffie; Liliana Varela; Kei-Mu Yi |
| Abstract: | We study empirically and theoretically the effects of international financial flows on resource allocation. Using the universe of firms in Hungary, we show that removing capital controls lowers firms’ cost of capital and increases household consumption, with the latter playing a dominant role. The consumption channel leads to reallocation of resources toward high expenditure elasticity activities—such as services—promoting both the expansion of incumbents and firm entry. A multi-sector heterogeneous firm model replicates these dynamics. Our model shows that non-homotheticity in consumption can quantitatively account for the reallocation of resources towards services and successfully replicates the dynamics of aggregate productivity following episodes of financial openness. |
| Keywords: | firm dynamics; financial liberalization; reallocation; capital flows; TFP; non-homothetic preferences |
| JEL: | F15 F41 F43 F63 |
| Date: | 2025–08–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:feddwp:101404 |
| By: | Stefan Sauer; Klaus Wohlrabe |
| Abstract: | The ifo Business Climate Index is one of the most important leading indicators for the German economy. It is based on a monthly survey of approximately 9, 000 firms and reflects responses to two core questions: the assessment of the firms' current business situation and their expectations for the next six months. These questions are deliberately formulated without precise definitions, allowing each respondent to draw on its own relevant factors. This paper investigates which factors firms actually consider, whether they differ across sectors and firm types, and how their importance has changed over time. To this end, we conducted a dedicated meta-survey in 2019 and repeated it as part of the regular ifo Business Survey in 2025. Our results show that internal factors - such as profit situation, demand, and turnover - are the primary drivers of firms' assessments. However, external influences, particularly the economic policy framework and general economic sentiment, have gained importance in recent years. These findings enhance the interpretability of the index and contribute to understanding its strong forecasting performance. The identified factors may also prove valuable for applied business cycle analysis. |
| Keywords: | business climate, economic sentiment, expectation formation, firm survey, ifo Business Survey |
| JEL: | C53 C83 L20 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12007 |
| By: | Blaufus, Kay; Bock, Julian; Peuthert, Benjamin |
| Abstract: | Using unique tax audit data of 499 German firms, we analyze whether family firms, public firms, financially constrained firms, and those firms with managers with low tax morale substitute two tax strategies, book-tax conforming and nonconforming tax avoidance strategies, and examine the effect on overall tax avoidance. The empirical results are in line with family firms and those firms with low tax morale managers substituting conforming for nonconforming tax avoidance strategies, whereas public and financially constrained firms do the opposite. Moreover, we find that family firms differ from nonfamily firms only in their strategic implementation but not in the overall amount of tax avoidance. With respect to public, financially constrained firms and those firms with low tax morale managers, we find a positive association with the total level of tax avoidance. |
| Keywords: | conforming tax avoidance, tax planning, nontax costs, book-tax conformity |
| JEL: | H26 M41 G32 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:arqudp:323205 |
| By: | Rachel Cho; Christoph Görtz; Danny McGowan; Max Schröder |
| Abstract: | We propose a new approach to identify firm-level financial constraints by applying artificial intelligence to text of 10-K filings by U.S. public firms from 1993 to 2021. Leveraging transformer-based natural language processing, our model captures contextual and semantic nuances often missed by traditional text classification techniques, enabling more accurate detection of financial constraints. A key contribution is to differentiate between constraints that affect firms presently and those anticipated in the future. These two types of constraints are associated with distinctly different financial profiles: while firms expecting future constraints tend to accumulate cash preemptively, currently constrained firms exhibit reduced liquidity and higher leverage. We show that only firms anticipating financial constraints exhibit significant cash flow sensitivity of cash, whereas currently constrained and unconstrained firms do not. This calls for a narrower interpretation of this widely used cash-based constraints measure, as it may conflate distinct firm types – unconstrained and currently constrained – and fail to capture all financially constrained firms. Our findings underscore the critical role of constraint timing in shaping corporate financial behavior. |
| Keywords: | financial constraints, artificial intelligence, expectations, cash, cash flow, corporate finance behavior |
| JEL: | G31 G32 D92 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12054 |
| By: | Caggese, Andrea; Chiavari, Andrea; Goraya, Sampreet Singh; Villegas‑Sanchez, Carolina |
| Abstract: | This paper uses a general equilibrium framework to examine the effects of temperature on firm-level demand, productivity, and input allocation efficiency, deriving an aggregate damage function for climate change. Using data from Italian firms and detailed climate data, it uncovers a sizable negative effect of extreme temperatures on firm-level productivity and revenue-based marginal product of capital. Based on these estimates, the model generates aggregate productivity losses from local temperature fluctuations that are higher than previously thought, ranging from 0.60 to 6.82 percent depending on the scenario and the extent of adaptation. Notably, these losses are approximately four times greater than those estimated by averaging firm-level losses in a representative firm model, which does not capture frictions that alter allocative efficiency in a heterogeneous firm setting. Therefore, incorporating our framework into Integrated Assessment Models is likely to revise upwards the estimated economic costs of climate change. JEL Classification: Q54, D24, D22, O44 |
| Keywords: | aggregate productivity, allocative efficiency, climate change, firms |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253084 |
| By: | Nandwani, Bharti; Roychowdhury, Punarjit; Shankar, Binay |
| Abstract: | This paper examines the impact of a large-scale rural road construction program-the Pradhan Mantri Gram Sadak Yojana (PMGSY)-on the performance of rural manufacturing firms in India. While these firms provide vital non-farm employment in rural areas, their growth is often thought to be constrained by inadequate infrastructure. Leveraging administrative data and the quasi-random rollout of the program, we estimate effects using a two-way fixed effects framework. We find no evidence that improved road connectivity affects turnover, profits, or employment for formal enterprises. In contrast, informal firms experience significant gains in turnover, expenditure, profits, employment, and wage bills. These effects appear to be driven by reductions in infrastructure-related constraints: treated firms report fewer operational problems and less competition from larger firms, particularly in marketing and distribution. Our findings highlight the heterogeneous effects of rural infrastructure expansion and the greater responsiveness of informal enterprises. |
| Keywords: | Firms, India, Infrastructure, Roads, Rural |
| JEL: | D22 O12 O18 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1650 |
| By: | Uwe Jirjahn; Jens Mohrenweiser |
| Abstract: | Since the emergence of personnel economics, economists have been increasingly aware that the management practices used by firms are an important determinant of productivity. However, it is an open question of whether the impact of management practices on the productivity of firms depends on workplace health promotion activities (alternatively called workplace wellness programs). Using a widely recognized management index developed by Bloom and Van Reenen (2007), this study provides evidence that workplace health promotion moderates the link between management practices and productivity. Our panel data estimates show that the positive impact of management practices on productivity is stronger if a firm engages in workplace health promotion. This finding fits the notion that workplace health promotion mitigates adverse side effects of management practices on employees' health. However, our estimates also provide evidence of a negative direct influence of workplace promotion on productivity. The positive moderating influence of workplace health promotion only dominates the negative direct influence if a firm uses Bloom and Van Reenen's management practices (targets, monitoring and incentives) at a high intensity. |
| Keywords: | Targets, Monitoring, Incentives, Employee Health, Workplace Wellness Programs, Firm Performance |
| JEL: | I10 J24 J28 J81 M50 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:trr:wpaper:202505 |
| By: | Zach Y. Brown; Alexander MacKay |
| Abstract: | We examine a model in which one firm uses a pricing algorithm that enables faster pricing and multi-period commitment. We characterize a coercive equilibrium in which the algorithmic firm maximizes its profits subject to the incentive compatibility constraint of its rival. By adopting an algorithm that enables faster pricing and (imperfect) commitment, a firm can unilaterally induce substantially higher equilibrium prices even when its rival maximizes short-run profits and cannot collude. The algorithmic firm can earn profits that exceed its share of collusive profits, and coercive equilibrium outcomes can be worse for consumers than collusive outcomes. In extensions, we incorporate simple learning by the rival, and we explore the implications for platform design. |
| JEL: | D43 L13 L40 L81 L86 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34070 |
| By: | Mitchell Hoffman (University of Toronto); Christopher Stanton (Harvard Business Schoo) |
| Abstract: | This chapter surveys recent advances in personnel economics. We discuss new research on incentives and compensation; hiring practices; the influence of managers and peers; and time use, technology, and training. Two main themes emerge from this survey. First, we illustrate the interplay between these topics and productivity differences between people and work units. We discuss evidence showing substantial and persistent productivity variation among workers in the same roles, and we examine the extent to which personnel economics research can explain this variation. Second, personnel economics has benefited from exploration – the willingness to use new data and methods to shed light on existing questions and raise new ones. Since the last handbook chapter, personnel economics has evolved from focusing primarily on compensation and incentives to embracing a broader research agenda that examines various HR practices and their impact on worker and firm outcomes. As many personnel studies use data from individual firms, we discuss external validity and provide concrete guidance on improving discussions of generalizability from specific contexts. |
| Keywords: | Incentives, hiring, managers, peer effects, time use, technology at work, training |
| JEL: | M50 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2521 |
| By: | Adam Bloomfield; Lucas Goodman; Shanthi Ramnath; Sita Slavov |
| Abstract: | In recent years, policy makers have adopted many measures to incentivize the establishment of employer-sponsored retirement plans (ESRPs). One such measure – implemented in the early 2000s and made more generous in recent years – allows smaller firms that establish an ESRP to claim a tax credit to offset part of their costs during the initial years. We examine firm take-up of this credit. We find that only 1 percent (pre-policy expansion) to 5.5 percent (post-policy expansion) of apparently eligible firms claim the credit. We document heterogeneity in credit take-up rates by industry, firm owner education, and use of tax preparation services. We also document evidence of “tax preparer learning, ” whereby take-up among a tax preparer’s clients increases after that preparer files their first credit. Finally, we document that most firms only claim the credit for one year despite being eligible to do so for up to three years. |
| JEL: | H32 J32 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34043 |
| By: | Simon Luechinger; Mark Schelker; Lukas Schmid |
| Abstract: | We document an overrepresentation of politicians on corporate boards using data for Swiss federal legislators in 1931-2015. However, a close-election regression discontinuity design shows that electoral success explains at most a small part of this overrepresentation. We find small and mostly statistically insignificant causal effects on the probability of having at least one directorship and no effect on the number of directorships. Our results imply that the prevalence of politicians on corporate boards stems from a positive selection of talented individuals in both business and politics, rather than firms hiring politicians to gain political access. |
| Keywords: | political connections, politicians, corporate directors, regression discontinuity design |
| JEL: | D72 D73 J45 H11 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12019 |
| By: | Diego R. Känzig; Maximilian Konradt; Lixing Wang; Donghai Zhang |
| Abstract: | This paper examines the relationship between green innovation and the business cycle, revealing that while non-green innovation is procyclical, green innovation is countercyclical. This pattern holds unconditionally over the business cycle and conditional on economic shocks. Motivated by these findings, we develop a business cycle model with endogenous green and non-green innovation to explain their distinct cyclical behavior. The key mechanism operates through a ‘green is in the future’ channel: green patents are expected to generate higher profits in the future, making green patenting less sensitive to short-term economic fluctuations. In general equilibrium, this channel is reinforced, making green and non-green innovation effective substitutes. We provide direct evidence supporting the model mechanism using data on market-implied values of green and non-green patents. |
| JEL: | E32 O31 Q55 Q58 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34041 |
| By: | Tomaso Duso; Joseph E., Jr. Harrington; Carl Kreuzberg; Geza Sapi |
| Abstract: | Competition authorities increasingly rely on economic screening tools to identify markets where firms deviate from competitive norms. Traditional screening methods assume that collusion occurs through secret agreements. However, recent research highlights that firms can use public announcements to coordinate decisions, reducing competition while avoiding detection. We propose a novel approach to screening for collusion in public corporate statements. Using natural language processing, we analyze more than 300, 000 earnings call transcripts issued worldwide between 2004 and 2022. By identifying expressions commonly associated with collusion, our method provides competition authorities with a tool to detect potentially anticompetitive behavior in public communications. Our approach can extend beyond earnings calls to other sources, such as news articles, trade press, and industry reports. Our method informed the European Commission’s 2024 unannounced inspections in the car tire sector, prompted by concerns over price coordination through public communication. |
| Keywords: | communication, collusion, NLP, screening, text analysis |
| JEL: | C23 D22 L1 L4 L64 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12029 |
| By: | Timothy F. Bresnahan; Shane Greenstein; Pai-Ling Yin |
| Abstract: | Advances in a general-purpose technology (GPT) enable many firms to invent complementary inventions, or co-inventions, making the GPT more valuable. This study examines the empirical implications of a straightforward model in which firms choose either incremental or novel co-invention. Incremental co-inventors aspire to small gains at low costs and with less uncertainty. Novel co-inventors introduce new products or services with the potential for large returns, but do so at high costs and with uncertain outcomes. Similar firms investing in incremental co-invention will create value proportional to their existing business, a benchmark we illustrate with the experiences at local radio and newspapers. The study then examines the value of co-inventions for the World Wide Web and mobile ecosystems, focusing on success in 2013, using data from many sources. This data supports analysis comparing the incremental and novel regimes. The latter should display a distinctly different upper tail of the distribution of returns. We show that the value distributions for incremental and novel co-invention are far apart. Incremental co-invention is more widely distributed across regions, industries, and firms. Success from novel co-invention is rare, challenging, and the source of the largest value. In the aggregate, novel co-invention creates the most value, so the overall value distribution remains concentrated in a few industries, regions, and firms. |
| JEL: | L80 L86 M15 O31 O33 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34090 |
| By: | Juan Dolado (Universidad Carlos III de Madrid); Alvaro Janez (Stockholm School of Economics); Felix Wellschmied (Universidad Carlos III de Madrid) |
| Abstract: | Online food delivery platforms typically operate through a controversial business model that relies on subcontracting self-employed workers, known as riders. Using a search and matching model, we quantify the labor-market effects of the Spanish Riders’ Law in 2021 that establishes the presumption of dependent employment for riders. Riders with heterogeneous preferences for leisure trade off work flexibility and easier employability as self-employed against enjoying higher wages as employees. Our main finding is that the reform succeeded in increasing the share of employees but failed to fully absorb the large outflows from self-employment and decreased riders’ wages, resulting in welfare losses. However, complementing the reform with a payroll tax cut for platforms hiring employees preserves employment levels and increases substantially riders’ welfare. |
| Keywords: | Riders, Food delivery platforms, Self-employed, Employees |
| JEL: | J21 J60 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:2527 |
| By: | Romano, Roberta; Bolton, Brain; Bhagat, Sanjai |
| Abstract: | In recent years, financial economists and commercial providers of governance services have created measures of corporate governance quality that collapse into one number (a governance rating or index) the multiple dimensions of a company's governance, measures which commercial providers market to institutional investors as aids for portfolio and proxy voting decisions. The aim of this Article is twofold: to analyze the effectiveness of corporate governance indices in predicting corporate performance and to consider the implications for public policy that follow from that assessment. We highlight methodological shortcomings of the extant research that claims to have identified a relation between particular governance measures and corporate performance. Our core conclusion is that there is no consistent relation between governance indices and measures of corporate performance. |
| Date: | 2025–08–05 |
| URL: | https://d.repec.org/n?u=RePEc:osf:lawarc:tafqp_v1 |
| By: | F. Nguyen |
| Abstract: | The "free trial" followed by automatic renewal is a dominant business model in the digital economy. Standard models explain trials as a mechanism for consumers to learn their valuation for a product. We propose a complementary theory based on the rational inattention framework. Consumers know their valuation but face a cognitive cost to remember to cancel an unwanted subscription. We model this using a Shannon entropy-based cost of information processing, where a consumer's baseline attention level decays with the length of the trial period. This creates a novel trade-off for a monopolist firm: a longer trial increases "inattentive revenue" from consumers who fail to cancel, but it also lowers ex-ante consumer utility, making the initial offer less attractive. We show that this trade-off leads to an interior optimal trial length, even for products where value-learning is instantaneous. Our model, under standard assumptions about demand elasticity and the distribution of consumer valuations, generates sharp, testable predictions about the relationship between contract terms. We find that the optimal renewal price and trial length are complements: firms offering longer trials will also set higher post-trial prices. We analyze the impact of policies aimed at curbing consumer exploitation, such as "click-to-cancel" regulations. We show that such policies, by making attention effectively cheaper, lead firms to reduce trial lengths. The effect on price depends directly on the elasticity of demand from loyal subscribers. We also extend the model to include paid trials, showing that introductory prices and trial lengths act as strategic substitutes. Our framework provides a micro-founded explanation for common features of subscription contracts and offers a new lens through which to evaluate consumer protection policies in digital markets. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.06422 |
| By: | Ricardo B. Ang III (Department of Economics, Tulane University); Giseong Kim (Department of Economics, Georgia State University); Soojin Kim (Department of Economics, Georgia State University); Michael F. Pesko (Department of Economics, University of Missouri) |
| Abstract: | We examine the impact of automation on workers' health risks in the United States. We first document that automation leads to a divergence in the severity of occupational health risks: while automation reduces nonfatal occupational injury incidence, it increases fatal injury incidence. Secondly, the disparity of health risks across age groups has widened due to automation. The overall hospitalizations have declined in commuting zones with higher automation exposure. Yet, the benefits are concentrated among young workers, while middle-aged workers experience increased hospitalizations, particularly due to despair-related conditions. Combining the occupational injury estimates, a back-of-the-envelope calculation suggests that workplace automation provides significant, health-driven economic benefits. |
| Keywords: | Automation, Workplace injury, Health Risks, Fatalities, Mental health |
| JEL: | I1 O3 J1 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:umc:wpaper:2508 |
| By: | Colin J. Hottman; Ryan Monarch |
| Abstract: | Consumers are differentially exposed to trade based on their expenditures, but there is little data on how such trade exposure differs across consumer groups and over time. In this paper, we construct “home trade shares” that vary by age, race, marital status, education, and urban status, and use these to analyze differences in inflation and welfare gains from trade for U.S. demographic groups over the years 1996–2018. We show that over this time period, import prices (inclusive of the effects of taste change) held down overall inflation for all groups. For the typical group, more than a quarter of the gains from trade relative to autarky accrued in our time period. Welfare gains from trade over our time period are largest for rural households, and smallest for Black households. Adding taste change to the typical welfare gains from trade formula boosts the gains for every group relative to the standard formula. |
| Keywords: | import price inflation, gains from trade, inequality |
| JEL: | D12 E31 F14 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:25-47 |
| By: | David G. Blanchflower; Alex Bryson |
| Abstract: | Between the early 1990s and 2015 the relationship between mental despair and age was hump-shaped in the United States: it rose to middle-age, then declined later in life. That relationship has now changed: mental despair declines monotonically with age due to a rise in despair among the young. However, the relationship between age and mental despair differs by labor market status. The hump-shape in age still exists for those who are unable to work and the unemployed. The relation between mental despair and age is broadly flat, and has remained so, for homemakers, students and the retired. The change in the age-despair profile over time is due to increasing despair among young workers. Whilst the relationship between mental despair and age has always been downward sloping among workers, this relationship has become more pronounced due to a rise in mental despair among young workers. We find broad-based evidence for this finding in the Behavioral Risk Factor Surveillance System (BRFSS) of 1993-2023, the National Survey on Drug Use and Health (NSDUH), 2008-2023, and in surveys by Pew, the Conference Board and Johns Hopkins University. |
| JEL: | I31 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34071 |