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on Business Economics |
| By: | Lundberg, Jacob (Research Institute of Industrial Economics (IFN)); Massenz, Gabriella (Research Institute of Industrial Economics (IFN)) |
| Abstract: | We use a natural experiment and administrative data to study the effect of corporate tax cuts on business activity. For identification, we exploit the abolition of municipal corporate income taxation in Sweden in 1985, which created variation in corporate tax changes faced by different municipalities. Our findings indicate an expansion of business activity and employment in large firms following a tax cut. However, we find no significant impact on these outcomes for small firms. In addition, firm entry rates increase in municipalities experiencing the largest tax cuts. |
| Keywords: | Corporate taxation; Business activity; Employment; Firm entry |
| JEL: | G31 G38 H21 H25 |
| Date: | 2025–08–14 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1531 |
| By: | De Sanctis, Alessandro; Kapp, Daniel; Vinci, Francesca; Wojciechowski, Robert |
| Abstract: | This study evaluates the effectiveness of EU Cohesion Policy as an investment programme, employing a novel dataset that links firm-level data from Orbis with project-level information from the Kohesio database. It focuses on two key questions: (1) Which firms receive EU funding? (2) How does receiving EU funding affect firm performance? By applying a logit model and a local projection difference-in-differences approach, we provide new insights into the allocation mechanisms of EU Cohesion Policy funds and their firm-level impact. Our findings show that funding tends to be allocated to firms that already perform relatively well, and that firms receiving EU funding experience a persistent productivity increase of approximately 3% after 4 years, with smaller and more financially constrained firms experiencing relatively greater improvements. Moreover, funding targeting “SME investment” tends to enhance firm performance disproportionately more than other categories, whereas projects directed the “green transition” appear comparatively less beneficial. JEL Classification: E22, D24, H54, O38, O52 |
| Keywords: | corporate investment, European Structural and Investment Funds, fiscal policy, place-based policy, productivity |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20253099 |
| By: | Ferreira, Daniel; Nikolowa, Radoslawa |
| Abstract: | We present a model in which firms compete for workers who value nonpecuniary job attributes, such as purpose, sustainability, political stances, or working conditions. Firms adopt production technologies that enable them to offer jobs with varying levels of these desirable attributes. Firms’ profits are higher when they cater to workers with extreme preferences. In a competitive assignment equilibrium, firms become polarized and not only reflect but also amplify the polarized preferences of the general population. More polarized sectors exhibit higher profits, lower average wages, and a reduced labor share of value added. Sustainable investing amplifies firm polarization. |
| Keywords: | labor markets; job design; compensating differentials; socially responsible investing; polarization |
| JEL: | R14 J01 L81 |
| Date: | 2025–10–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128848 |
| By: | Xing Guo; Pablo Ottonello; Thomas Winberry; Toni Whited |
| Abstract: | We study the macroeconomic consequences of asymmetric information between firms and external investors. To do so, we develop a heterogeneous firm macro model in which firms have private information about their quality. Private information creates a lemons problem in the market for external finance, depressing investment relative to the full information benchmark. We measure the distribution of private information, and therefore the magnitude of this lemons problem, using high-frequency stock price changes when firms raise new funding (revealing their quality to the market). We find that changes in distribution of private information are a quantitatively important determinant of aggregate fluctuations. For example, a spike in private information accounts for 40% of the decline in aggregate investment during the 2007-2009 financial crisis and made monetary stimulus significantly less effective at that time. |
| Keywords: | Business fluctuations and cycles; Financial market; Firm dynamics; Monetary policy |
| JEL: | D82 E22 E32 E52 G30 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocawp:25-20 |
| By: | Amberger, Harald; Stocken, Phillip C. |
| Abstract: | We examine how a CEO develops a reputation for credible financial reporting and how this reputation influences investor reactions to earnings announcements. We find that investors discount earnings news when CEOs have both strong incentives to misreport and weak reporting reputations. Further, we show that the reputation for reporting integrity is CEO-specific- a firm can restore its reputation for credible financial reporting by appointing a new CEO. Disclosures about discretionary accruals, like the allowance for doubtful accounts, play a key role in shaping these reputations. Our findings underscore the importance of ethical reporting. |
| Keywords: | Credible financial reporting, earnings manipulation, reputation |
| JEL: | G14 J63 M40 M41 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:arqudp:323940 |
| By: | Alexander Amundsen; Sophia Chen; Pierre Guérin; Sinem Kiliç Çelik; Masahiro Nishida |
| Abstract: | Medium-term growth prospects of Caribbean countries have weakened in recent years. We examine these trends by providing new estimates of potential GDP growth for the region. Our findings reveal a broad-based decline over time, driven by declining contributions from human capital and total factor productivity. Linking these factors to firm-level data, we identify significant scope for aggregate productivity gains through the efficient reallocation of resources between firms and the removal of firm-level structural obstacles. Addressing issues such as the cost and access to finance, workforce education, tax administration, and business licensing and permits are associated with higher aggregate welfare. |
| Keywords: | Potential Growth; Allocative Efficiency; Firm-level Analysis; Caribbean |
| Date: | 2025–08–08 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/157 |
| By: | Irene Iodice |
| Abstract: | This paper quantifies the value of timely WTO notifications for Technical Barriers to Trade (TBTs). Using French firm-level export data, I find that advance notice halves the negative impact of TBTs on export participation, by reducing temporary exits and supporting entry, particularly among small and medium-sized firms. Exploiting variation in notification delays, I show that this effect operates by reducing uncertainty about compliance costs, rather than by giving firms more time to adjust. A theoretical framework with firm heterogeneity and trade policy uncertainty formalizes this mechanism: notification lowers uncertainty, reducing firms’ incentives to delay or suspend exports. The quantitative importance of this effect is equivalent to avoiding a tariff increase of up to 28 percentage points. |
| JEL: | F13 F14 D84 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12015 |
| By: | Fritz, Sarah (Halle Institute for Economic Research); van der List, Catherine (University of Essex) |
| Abstract: | We study the effects of place-based policies on aggregate productivity using administrative data on projects co-financed by the EU in Italy linked to balance sheet data. We exploit quasi-experimental variation in funding for a large place-based policy stemming from measurement error in regional GDP estimates. Results show that the policy likely decreases productivity. Decompositions reveal that aggregate declines are driven by reallocation of labor to low-productivity firms. Mechanism analysis using firm-level event studies reveals that negative reallocation effects are caused by high-productivity firms taking up the funds and subsequently becoming more liquidity constrained, leading to slowdowns in employment growth. |
| Keywords: | EU cohesion policy, productivity, place-based policy |
| JEL: | R11 R58 J23 Z18 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18036 |
| By: | Tatsuru Kikuchi |
| Abstract: | This paper investigates how executive demographics particularly age and gender influence artificial intelligence (AI) investment decisions and subsequent firm productivity using comprehensive data from over 500 Japanese enterprises spanning from 2018 to 2023. Our central research question addresses the role of executive characteristics in technology adoption, finding that CEO age and technical background significantly predict AI investment propensity. Employing these demographic characteristics as instrumental variables to address endogeneity concerns, we identify a statistically significant 2.4% increase in total factor productivity attributable to AI investment adoption. Our novel mechanism decomposition framework reveals that productivity gains operate through three distinct channels: cost reduction (40% of total effect), revenue enhancement (35%), and innovation acceleration (25%). The results demonstrate that younger executives (below 50 years) are 23% more likely to adopt AI technologies, while firm size significantly moderates this relationship. Aggregate projections suggest potential GDP impacts of 1.15 trillion JPY from widespread AI adoption across the Japanese economy. These findings provide crucial empirical guidance for understanding the human factors driving digital transformation and inform both corporate governance and public policy regarding AI investment incentives. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.03757 |
| By: | Venkat Ram Reddy Ganuthula; Ramesh Kuruva |
| Abstract: | This study explores the structural and performance impacts of artificial intelligence (AI) adoption on Indias knowledge intensive startups, spanning information technology, financial technology, health technology, and educational technology, founded between 2016 and 2025. Using a natural experiment framework with the founding year as an exogenous treatment proxy, it examines firm size, revenue productivity, valuation efficiency, and capital utilization across pre AI and AI era cohorts. Findings reveal larger structures and lower efficiency in AI era firms, supported by a dataset of 914 cleaned firms. The study offers insights into AIs transformative role, suggesting that while AI era firms attract higher funding and achieve higher absolute valuations, their per employee productivity and efficiency ratios are lower, potentially indicating earlystage investments in technology that have yet to yield proportional returns. This informs global entrepreneurial strategies while highlighting the need for longitudinal research on sustainability. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.19775 |
| By: | Choudhury, Prithwiraj; Doran, Kirk; Marinoni, Astrid; Yoon, Chungeun |
| Abstract: | We study how restrictive immigration policies that result in the unexpected loss of coworkers affect the performance of skilled migrants employed in organizations. Specifically, we examine the impact of the loss of team members on their coworkers’ performance in response to the unexpectedly increased denials of extensions of H-1B work visas in the United States beginning in 2017. Losing a team member generally has a positive, albeit economically insignificant, effect on the performance of workers left behind. However, we find that individuals who lost peers of the same ethnic background experience a substantial decrease in their performance. To confirm that our results are not plagued by the presence of unobservable team or individual features that might impact visa denial decisions, we build an instrumental variable that exploits the fixed duration of the H-1B visa. Heterogeneity analyses suggest that our result is driven by workers in small teams, teams working on atypical tasks, and ethnically homogeneous teams. These analyses hint at the fact that ethnic ties may boost individual performance through preferential channels of knowledge and information spillovers. |
| Keywords: | firm performance; geographic labor mobility; human capital; immigrant workers; occupational choice |
| JEL: | R14 J01 |
| Date: | 2024–04–23 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128742 |
| By: | Dube, Arindrajit; Manning, Alan; Naidu, Suresh |
| Abstract: | We show that administrative hourly wage data exhibits considerable bunching at round numbers. We run two experiments, randomizing wages around 10 cents and $1.00, to experimentally measure left-digit bias for identical tasks on Amazon Mechanical Turk, and fail to find any evidence of discontinuity in the labor supply function at round number, despite estimating a considerable degree of monopsony. We replicate these results in administrative worker-firm hourly wage data from Oregon. We can rule out inattention estimates found in the behavioral product market literature. We provide evidence that firms “misoptimize" wage-setting. More monopsony requires less employer misoptimization to explain bunching |
| JEL: | J42 J22 |
| Date: | 2025–08–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128487 |
| By: | Ardito, Chiara (University of Turin); Berton, Fabio (European Commission Joint Research Centre (JRC)); Pacelli, Lia (University of Turin); Zanatta, Marina (University of Torino) |
| Abstract: | We analyse the long-term impact of hiring subsidies on both job and employment security. The subsidy that we examine was introduced in Italy through the 2015 Budget Law, with the goal of promoting open-ended contracts. We employ a non-linear difference-in-differences (NL-DiD) approach within a duration framework, using high-frequency, population-wide linked employer-employee administrative data from a large Italian region. Causal results on job security indicate that the subsidy’s protective effect is short-lived. Excess separations from subsidised jobs peak in the exact same month in which the monetary incentive expires. No long-term protective effect of the subsidy is observed regarding employment security. These results hold across a wide range of worker and firm characteristics, showing surprisingly little heterogeneity. One notable exception concerns firm size. Furthermore, the expiration of subsidies disproportionately affects workers with low human capital. Our findings suggest that hiring subsidies are not effective in promoting either job or employment security for beneficiaries and that this raises questions about the efficacy of this common and costly policy, particularly when offered unconditionally. |
| Keywords: | Italy, job and employment security, hiring subsidies, non-linear DiD, duration model |
| JEL: | H2 J2 J3 J6 L2 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18024 |
| By: | Jonathan Hambur (Reserve Bank of Australia); Owen Freestone (Competition Taskforce Division, Australian Treasury) |
| Abstract: | There is substantial evidence that the degree of competition in the Australian economy has declined over the decade or so leading up to the COVID-19 pandemic. This has the potential to weigh on productivity, and in turn incomes, and so the welfare of the Australian people. In this paper we calibrate the general equilibrium model from Edmond, Midrigan and Xu (2023) to Australian microdata to answer the following question: If the degree of competition in the Australian economy had not declined from mid-2000s levels, how much higher would aggregate productivity and GDP be due to resources being better allocated across firms throughout the economy? The answer, according to this model, is 1–3 per cent. The model also suggests even larger economic costs once we account for other channels through which rising mark-ups affect the economy, though these are less precisely estimated. |
| Keywords: | competition; productivity |
| JEL: | D24 D61 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:rba:rbardp:rdp2025-05 |
| By: | Garnadt, Niklas; Füner, Lena (Centre for European Economic Research (ZEW), TUM, and IAB); Stahl, Konrad (University of Mannheim, CEPR, CESifo and ZEW); Tåg, Joacim (Research Institute of Industrial Economics (IFN)) |
| Abstract: | Identifying high growth startups ex-ante and fostering their success is an important policy challenge. Using Swedish registry data, we show that previous labor market earnings of entrepreneurs is a simple observable that is strongly correlated with entrepreneurship success. Entrepreneurs from the top decile of income from dependent employment are four times more likely to succeed than those from the lowest decile. Their firms are larger and more productive from the outset, and this effect intensifies over time. This correlation is virtually unaffected by variations in the entrepreneurs’ personal traits. It does also not vary across the business cycle. |
| Keywords: | Entrepreneurship; High-growth startups; Labor income; Unemployment |
| JEL: | J24 L26 M13 |
| Date: | 2025–08–05 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1529 |
| By: | Braun, Anna-Sophie; Koch, Reinald; Sureth, Caren |
| Abstract: | This study examines the effect of tax complexity on the market value of publicly traded firms. Using firm-level measures of tax complexity, we find that a one standard deviation increase in tax complexity-comparable in magnitude to the rise following the U.S. Tax Cuts and Jobs Act-is associated with a 2.6% decline in Tobin's Q. The effect is particularly pronounced for complexity arising from anti-avoidance regulations and post-filing procedures. The negative valuation effect is more substantial for firms with limited opportunities for international profit shifting, weak governance, or low internal information quality. Further analyses reveal that tax system complexity is associated with a reduced growth potential of firms and less R&D and thus negative real responses that go beyond negative investment effects. Overall, our findings provide novel evidence of the economic costs of tax complexity and contribute to the debate on the design of efficient and equitable tax systems. |
| Keywords: | tax complexity, tax avoidance, firm value, tax code complexity, tax framework complexity, cost of complexity |
| JEL: | M12 H26 H25 H32 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:arqudp:323938 |
| By: | Yuxiao Jiao; Guofu Zhou; Wu Zhu; Yingzi Zhu |
| Abstract: | We develop a new framework for constructing factors from firm characteristics that balances statistical efficiency and economic interpretability. Instead of using all characteristics equally, our method groups related characteristics and derives one factor per group. The grouping combines economic intuition with data-driven clustering. Applied to the IPCA model by Kelly et al. (2019), our approach yields economically meaningful factors that match or exceed standard IPCA in pricing performance. Using 94 characteristics from Gu et al. (2020), we show that our parsimonious, transparent factors outperform benchmarks in out-of-sample tests, demonstrating the value of embedding economic structure into statistical modeling. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.02253 |
| By: | Tobias Korn (Leibniz Universität Hannover & Heidelberg University); Jean Lacroix (RITM, Université Paris-Saclay & CESifo Münich) |
| Abstract: | Abstract This paper documents a new consequence of market integration: local reallocation, i.e., the exit of some workers from production even though employment increases in the same area and industry. Thanks to new data on over 150, 000 personal bankruptcies com- bined with detailed microcensus data from 19th-century Britain, we estimate the causal impact of railway access on employment growth and personal bankruptcies. Market integration increased both employment and bankruptcy probability solely in the man- ufacturing sector. Studying the mechanisms of local reallocation, we show that market integration increased the number and size of manufacturing firms that employed cheap, task-differentiated labour. Our results extend existing research focused primarily on reallocation either across sectors or across locations. |
| Keywords: | Bankruptcies, Market Integration, Reallocation, Structural Transformation |
| JEL: | N63 L16 O33 R40 K35 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:ost:wpaper:408 |
| By: | Brébion, Clément (Copenhagen Business School); Briole, Simon (Paris School of Economics); Khoury, Laura (PSL Université Paris Dauphine) |
| Abstract: | While extensive research on unemployment insurance (UI) has examined how benefits affect workers’ job search, little is known about how eligibility conditions shape firms’ hiring decisions. These conditions, often requiring a minimum work history, affect the value workers place on contracts meeting the eligibility threshold. Exploiting a French reform that modified these requirements after 2009, we show that firms internalize workers’ preferences and adjust contract durations to align with the new threshold. This reveals an overlooked ex-ante mechanism, where firms respond to UI incentives when posting vacancies—before meeting workers—rather than only through ex post adjustments. This response shifts contract duration distributions, also affecting workers already eligible for UI. Our findings have two implications: first, UI shapes firms’ behavior at the vacancy stage, influencing job creation decisions ex ante, not just separation decisions ex post; second, UI eligibility conditions generate significant spillover effects. |
| Keywords: | firm behavior, employment duration, unemployment insurance, temporary employment |
| JEL: | J08 J64 J65 H32 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18014 |
| By: | Amberger, Harald; Gallemore, John; Wilde, Jaron |
| Abstract: | Effective policymakers must balance the demands of formulating a corporate tax system that raises revenue and spurs economic activity (e.g., investment) while promoting a "level playing field" across firms. Balancing these tradeoffs has likely caused tax systems to become more complex over time, increasing firms' difficulty in understanding and complying with tax regulations. We investigate the impact of tax system complexity on the responsiveness of firm-level investment to tax policy changes. Exploiting staggered tax rate changes and variation in tax system complexity across countries, we document two key findings. First, firm-level investment is less sensitive to changes in the corporate tax rate when tax system complexity is higher, suggesting that such complexity can undermine the ability of tax policy to affect economic growth. Second, the impact of tax complexity on the sensitivity of investment to tax rate changes varies significantly across firms, with domestic-owned, smaller, and private firms being more affected. These cross-sectional disparities are consistent with tax system complexity potentially reducing tax system parity. Collectively, our findings suggest that corporate tax system complexity can negatively impact the ability of fiscal policy to affect investment and lead to heterogeneous tax policy responses across firms. |
| Keywords: | tax complexity, tax rates, investment, employment |
| JEL: | D25 F23 H23 H25 G31 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:arqudp:323939 |
| By: | Fang, Tony (Memorial University of Newfoundland); Gunderson, Morley (University of Toronto); Hartley, John (Memorial University of Newfoundland); King, Graham (Memorial University of Newfoundland); Ming, Hui (Sichuan University) |
| Abstract: | Remote work arrangements are compelling examples of an organization’s ability to utilize digital technology. This study analyzes data from a representative survey of Atlantic Canadian employers to evaluate three phenomena: how remote work evolved during the recent COVID-19 pandemic; the factors influencing these changes; and the impact of these changes on business outcomes. Our findings suggest that urban firms, technologically advanced companies in certain highly skilled industries, and firms offering greater flexibility for remote work were most likely to enhance remote work practices during the pandemic. For the average firm, an increase in the share of remote work correlated with higher organizational productivity, improved employee performance, and greater new product/service innovation. The primary downside was heightened management complexity. Variations were observed along industry and provincial lines. |
| Keywords: | COVID-19, Atlantic provinces, Canada, remote work, digital technology usage, technology-organization-environment (TOE) framework |
| JEL: | J22 J24 J28 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18020 |
| By: | Agarwal, Vikas; Cao, Sean Shun; Huang, Shawn; Kim, Min |
| Abstract: | Using a regulation that increased portfolio disclosure frequency of US mutual funds as an exogenous shock shortening funds' investment horizon, we examine whether and how affected funds influence portfolio firms to achieve horizon realignment after the shock. We find that portfolio firms reduce the pay duration of their executives to incentivize them to have shorter investment horizon. We then show that funds affect this change through both voice and exit channels, i.e., voting on compensation-related issues and divesting from portfolio firms. The effect is more pronounced when funds have lower trading costs and are larger (with more reputation/resources) and when fund managers have stronger career incentives and are less distracted. We thus provide novel evidence on how institutional investors achieve incentive realignment dynamically. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cfrwps:323937 |
| By: | Mahdi Ebsim; Miguel Faria-e-Castro; Julian Kozlowski |
| Abstract: | We study how aggregate shocks shape the joint dynamics of credit spreads, debt, and liquid asset holdings for nonfinancial firms, focusing on the Great Financial Crisis (GFC) and COVID-19. Both episodes saw sharp credit spread increases and investment declines, but debt and liquidity fell during the GFC and rose during COVID-19. Cross-sectionally, leverage drove spreads and investment in the GFC, while liquidity dominated during COVID-19. We build a macro-finance model of firm capital structure with a liquidity motive for working capital. Calibrated to data, it attributes the GFC to real and financial shocks, and COVID-19 to an additional liquidity shock. |
| Keywords: | credit spreads; liquidity; Great Recession; COVID-19 |
| JEL: | E6 G2 |
| Date: | 2025–08–14 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedlwp:101435 |
| By: | Michele Aleandri; Francesco Ciardiello; Andrea Di Liddo |
| Abstract: | We introduce and analyze a novel family of power indices tailored for sharing networks in technological markets, where firms operate competitively within, but not across, distinct industrial sectors. In these settings, inter-firm collaboration structures emerge from formal technology licensing agreements. The proposed indices are defined over graphs with a priori unions and combine two key centrality measures - degree-based and rescaled eigenvector centrality - modulated by positive market coefficients that reflect sectoral dynamics. We first explore the monotonicity properties of these indices, highlighting their responsiveness to local changes in network structure. Interestingly, major economic actors exhibit structural stability when inter-sectoral technological spillovers are minimal. Building on these findings, we provide theoretical underpinnings by characterizing the indices as the Shapley values of a family of coherent and economically interpretable transferable utility (TU) games defined over such graphs. However, for a broad class of network structures, the core of these TU games is often empty, signaling inherent instability in technological sharing arrangements. Finally, we offer an axiomatic foundation for this family of indices, proving independence of the proposed axioms. This axiomatization extends naturally to exchange networks, even when stage-propagation coefficients are not positive. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.13272 |
| By: | Gamal Atallah; Aggey Simons (Department of Economics, University of Ottawa, Canada) |
| Abstract: | We analyze innovation incentives under price cap regulation by examining scenarios with endogenous price caps, both with and without regulatory commitment. In a setting without informational imperfections, our analysis reveals two principal conclusions. First, there is no trade-off between static and dynamic efficiency. Strengthening firm incentives by allowing it to charge higher prices, and thus realize greater profits, leads to less innovation because it reduces output. The optimal strategy to boost innovation and maximize welfare is to set a low price (and thus, a low profit) target, as innovation incentives are proportional to output. Second, the benefits of regulatory commitment for innovation and welfare are not unambiguously clear: commitment neither consistently outperforms nor underperforms non-commitment. Under demand uncertainty, when the firm is risk-averse, the static-dynamic efficiency trade-off reappears, and the firm may prefer non-commitment due to risk-shielding. Under asymmetric information about firm demand type, the trade-off between static and dynamic efficiency becomes inherent (due to information rents and contract distortions), and commitment becomes unambiguously crucial for fostering innovation by preventing the ratchet effect. |
| Keywords: | Price cap regulation; Regulation, Innovation, R&D, Dynamic efficiency; Commitment. |
| JEL: | D42 L12 L43 L51 O31 O38 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ott:wpaper:2504e |
| By: | Lundin, Erik (Research Institute of Industrial Economics (IFN)) |
| Abstract: | I examine the pricing behavior of municipal and private firms in the unregulated Swedish district heating market, characterized by geographically bounded local monopoly networks. Conditional on exogenous cost factors, private firms charge on average seven percent higher prices compared to their municipal counterparts. Nearly all firms employ two-part pricing. Consistent with standard monopoly theory, the entire price difference can be explained by the fixed price component. Further, foreign-owned private firms charge an additional price premium relative to domestically owned private firms. A descriptive analysis of financial statements confirms that private firms achieve higher profit margins, despite municipal firms being legally required to operate in a business-like manner. These findings demonstrate that, in this market, private firms exercise more market power than public firms, and that the subsequent upward pressure on prices dominates any downward effects from the potential cost efficiencies associated with privatization. |
| Keywords: | Privatization; Two-part pricing; District heating; Natural monopoly; Market power; Network industries |
| JEL: | L12 L43 L97 P18 Q48 |
| Date: | 2025–08–15 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:iuiwop:1532 |
| By: | Ferreira, Daniel; Kirchmaier, Tom; Metzger, Daniel; Ye, Shiwei |
| Abstract: | Bank board directors are highly independent but possess limited prior banking experience. Using a sample of banks from 90 countries between 2000 and 2020, we find that country-specific characteristics explain most of the cross-sectional variation in bank board independence. In contrast, country characteristics have little explanatory power for boards’ banking experience. While we document evidence of international convergence in bank board independence, U.S. banks lag behind their global counterparts in director banking experience. The data suggest that country-specific laws and regulations primarily shape bank board composition through requirements for director independence. |
| JEL: | F3 G3 J1 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128425 |
| By: | Santiago Alvarez-Blaser; Alberto Cavallo; Alexander MacKay; Paolo Mengano |
| Abstract: | We use a novel dataset of production costs, wholesale prices, and retail prices from a large global manufacturer to study markups and pricing behavior along the supply chain. We document several facts about markups covering the period July 2018 through June 2023, and we propose a model of supply chain pricing behavior that rationalizes key pat-terns in our data. We find substantial dispersion in markups across products at each supply chain level. Manufacturer and retail markups are negatively correlated in the cross section and over time. Despite time-series variation in firm-level markups, total markups—reflecting the relationship between retail prices and production costs—are stable over time, even when prices increased along with inflation in the United States in 2022. We apply our model to quantify factors that determine relative bargaining power between the manufacturer and retailers, leveraging variation across countries, products, and time. Finally, we consider the dynamics of cost pass-through and the mediating role of manufacturer-retailer bargaining in price dynamics, with implications for current policy debates, including trade policy and tariffs. |
| JEL: | D22 D40 E3 L11 L81 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34110 |
| By: | Klaus Gründler; Niklas Potrafke; Timo Wochner |
| Abstract: | Many democracies allow their legislators to engage in private employment, but the consequences for parliamentary priorities are still poorly understood. We collect large-scale longitudinal data on outside employment and biographic characteristics for all members of the 18th German Bundestag, and link this information to all spoken words and voting behavior in parliament. We present novel evidence that outside employment is associated with parliamentary priorities. Legislators address topics of sectors from which they receive private income more often, are more positive about these sectors, and take a generally more pro-industry stance in legislation. Our results have important implications regarding the independence of legislators. |
| Keywords: | MPs’ outside earnings, payment of politicians, lobbying |
| JEL: | D72 H11 K40 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12016 |
| By: | Caliendo, Marco (University of Potsdam); Cobb-Clark, Deborah A. (University of Sydney); Huber, Katrin (University of Potsdam); Pfeifer, Harald (BIBB); Uhlendorff, Arne (CREST); Wagner, Sophie (University of Potsdam) |
| Abstract: | We examine how gender shapes managers' decisions regarding on-the-job training using a discrete choice experiment embedded in a representative survey of German firms. While previous research has focused on employees' demand for it, we make a contribution by studying firms' supply of training. In our vignette study, 1, 144 managers evaluate hypothetical candidate profiles that differ by gender, age, competence, job mobility, and training characteristics. We find that women are somewhat more likely than men to receive training offers. The exceptions are that female managers are more reluctant to choose young women for training, while male managers favor male candidates for fully employer-funded training. These patterns persist across various model specifications and remain robust when controlling for observable manager characteristics. Heterogeneity analyses reveal that female managers are more reluctant to offer training to women when they operate in competitive product markets, male-dominated industries, and firms without collective bargaining agreements. More broadly, our results highlight that managers influence not only how much training is undertaken, but also how training opportunities are distributed among employees. |
| Keywords: | human capital investment, manager decisions, gender differences, training |
| JEL: | J24 J16 M53 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18019 |
| By: | Shirsho Biswas; Hema Yoganarasimhan; Haonan Zhang |
| Abstract: | The rapid growth of digital shopping channels has prompted many traditional retailers to invest in e-commerce websites and mobile apps. While prior literature shows that multichannel customers tend to be more valuable, it overlooks how the reason for adopting a new channel may shape post-adoption behavior. Using transaction-level data from a major Brazilian pet supplies retailer, we examine how adoption of online shopping - by previously offline-only customers - affects post-adoption spend, profitability, and channel usage. We study four distinct adoption pathways: organic adoption, adoption due to the COVID-19 pandemic, Black Friday promotions, and a newly launched loyalty program. We find that although all adopter groups increase their spending relative to offline-only customers, post-adoption behavior differs based on the reason for adoption. COVID-19 adopters behave similarly to organic adopters in terms of spending, but show greater offline stickiness consistent with consumer inertia and habit theory, yielding higher profits due to higher offline margins. In contrast, promotion-driven adopters spend less post-adoption due to forward buying and exhibit lower profitability. Our findings caution against treating all multichannel customers as equal and highlight the importance of incorporating behavioral theories into forecasting and targeting strategies. Firms should account for adoption motives when evaluating channel and promotional investments. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.00208 |
| By: | Éva Komlósi (University of Pécs); Hanga Bilicz (University of Pécs); Erkko Autio (Imperial College London); Donghyun Park (Asian Development Bank); Shu Tian (Asian Development Bank) |
| Abstract: | This study examines the impact of digitalization on the context shaping male and female entrepreneurial potential across 78 economies, utilizing the Female Entrepreneurship Index (FEI) and the Male Entrepreneurship Index (MEI). By analyzing the effects of digital transformation, the study aims to understand whether digital tools can reduce gender disparities in entrepreneurship or if they primarily benefit one gender. Findings indicate a positive effect of digitalization on both FEI and MEI, affirming that digital readiness enhances entrepreneurial opportunities for all. However, in economies where MEI surpasses FEI, digitalization tends to widen the gender gap, with male entrepreneurs gaining a disproportionate advantage. Conversely, in contexts where female entrepreneurship dominates, digitalization does not significantly impact the MEI–FEI gap. Additional analyses reveal that factors like economic development (gross domestic product per capita) and gender inequalities (political empowerment of women) interact with digitalization to support both genders, though competitive environments are notably more influential on female entrepreneurial potential. These insights highlight the nuanced role of digitalization in fostering entrepreneurship, suggesting policies must consider these dynamics to effectively support gender-balanced growth in entrepreneurial ecosystems. |
| Keywords: | entrepreneurship;female entrepreneurship;male entrepreneurship;gender;Female Entrepreneurship Index |
| JEL: | L26 O33 J16 |
| Date: | 2025–08–15 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:021495 |
| By: | Basaglia, Piero; Isaksen, Elisabeth; Sato, Misato |
| Abstract: | Carbon pricing is often paired with compensation to carbon-intensive firms to mitigate the risk of carbon leakage. This paper empirically examines the effects of indirect carbon cost compensation on UK manufacturing firms. Using administrative microdata, we combine difference-in-differences and fuzzy regression discontinuity designs to exploit firm-level eligibility criteria and identify the causal impact of compensation. We find that compensation reduces output contraction but also increases electricity consumption and emissions. These findings highlight a key policy trade-off – while compensation can help protect firms’ competitiveness and reduce leakage risks, it may also delay industrial decarbonization and increase the overall cost of achieving national emission targets. |
| Keywords: | carbon pricing; compensation; competitiveness; electricity consumption |
| JEL: | Q52 Q58 Q40 Q41 H23 |
| Date: | 2025–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128813 |
| By: | Jakub Karnowski; Przemys{\l}aw Szufel |
| Abstract: | Oligarchic control exerts significant distortions on economic efficiency. Ukraine exemplifies this phenomenon, where oligarchs dominate key sectors and achieve economies of scale through vertical integration of coal mines, steel mills, and power plants while controlling critical infrastructure (e.g. access to transportation networks) to stifle competition. Their Soviet-era production chain monopolization strategies, coupled with political patronage networks (including both local and national governments), reinforce systemic inefficiencies and barriers to market entry. Although existing studies highlight the developmental benefits of de-oligarchization, this work advances the literature through computational modeling. We develop an agent-based model of a partially oligarch-controlled economy, where firms with heterogeneous production functions interact within a value-added network. Through numerical simulations, we quantify how different de-oligarchization policies affect aggregate GDP growth. The results indicate that the optimal de-oligarchization strategies are determined by the position of the oligarch in the production chain. Depending on the oligarch's position, dismantling oligarchic structures should either focus on removing oligarchs' access to raw materials or on breaking oligarchs' influence on other transactions in the production chain. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.02949 |