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on Business Economics |
| By: | Luca Fontanelli; Mauro Napoletano; Angelo Secchi |
| Abstract: | We revisit the size-volatility relationship in firm growth using administrative data on French manufacturing firms. Departing from the log-log linear decay commonly reported by other studies, we find a two-regime pattern: volatility declines steeply with size for small firms, but flattens for larger ones. We relate this new fact to the presence of resources misallocation as captured by imperfect correlation between size and productivity at the firm level. To explain the nexus between these two facts, we develop a stochastic model where firms face a number of risky business opportunities for which they compete. Two key features characterize this competition process. First, larger firms are more intensively exposed to competition dynamics. Second, firms with higher productivity are more likely to see business opportunities turning into positive, rather than negative, growth episodes. We analytically show that only when the correlation between firm size and productivity is lower than 1 the model is able to reproduce the volatility scaling we observed in the data. Simulations suggest that finite sample approximations of our asymptotic result are satisfactory in a reasonable portion of the parameter space. We conclude showing that in France industries populated by firms with higher correlation between size and productivity are associated with steeper average size-volatility decays consistent with the model's main prediction. Our findings suggest that the existence of resources misallocation, shaping the size-volatility relation, affects the relevance of the granularity channel in explaining aggregate fluctuations (Gabaix, 2011). |
| Keywords: | volatility scaling, granularity, resource allocation |
| Date: | 2025–09–02 |
| URL: | https://d.repec.org/n?u=RePEc:ssa:lemwps:2025/27 |
| By: | Marc-Andreas Muendler; James E. Rauch; Sergio Mikio Koyama |
| Abstract: | We consider founders of limited liability firms who previously held jobs in the formal sector of Brazil. Managers are five percent of former job holders but their startups account for 27 percent of new firm employment. Relatively little of their overrepresentation as founders or the larger size of their startups is explained by their previous wages or other standard human capital variables. Among non-managerial former occupations we examined those clearly connected to demand (sales) and to supply (technology, purchasing). Only purchasing was comparable to managerial occupations in entrepreneurship and new firm size. Further examination suggests that a key to greater entrepreneurship and larger initial firm size is that workers’ former jobs entailed building relationships with other businesses: in demand-side occupations, they sold to other businesses; in supply-side occupations, they bought from other businesses. |
| JEL: | J62 L25 L26 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34158 |
| By: | David Argente; Sara Moreira; Ezra Oberfield; Venky Venkateswaran |
| Abstract: | We develop and test a theory of firm size and scope centered on standardization: the extent to which a firm’s products are similar. Heterogeneous firms choose the number, quality and standardization of their products. Standardizing makes expanding scope less costly, which then increases the return to standardization. Standardized firms have endogenously higher marginal returns to scale—their marginal costs rise less sharply with scale—implying greater responsiveness to demand shifts. We construct a novel measure of standardization using detailed product characteristics and show support for the theory’s main predictions. We show that new product features from standardized firms diffuse more quickly. |
| JEL: | D2 L25 O3 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34160 |
| By: | Agrawal, Sonakshi; Liu, Lisa Yao; Rajgopal, Shivaram; Sridharan, Suhas A.; Yan, Yifan; Yohn, Teri Lombardi |
| Abstract: | We explore the role of ESG raters' business models in the production of their ratings, noting that increasingly ESG raters not only produce ESG ratings but also construct and sell index products based on their ESG ratings. We examine whether deriving revenue from ESG rating-based indices is associated with inflated ESG ratings for firms with higher stock returns. Consistent with this notion, we find that raters with strong index licensing incentives issue higher ESG ratings for firms with better stock return performance and those added to their ESG indices, compared to raters with weaker licensing incentives. By comparing ESG ratings for a firm across raters with high versus low index licensing incentives, we control for the firm's fundamental ESG performance. We find that the results hold after accounting for different rating methodologies. Overall, our findings suggest that ESG ratings are associated with index construction incentives, highlighting the need for greater transparency in the incentives of producers of ESG ratings. |
| Keywords: | ESG, index providers, rating agencies, sustainability, disclosure |
| JEL: | G24 M14 M40 M41 M48 Q56 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:324653 |
| By: | Salome Baslandze; Simon Fuchs |
| Abstract: | We study the role of supply chain disruptions in shaping consumer prices, focusing on both firms’ own import shocks and strategic responses to competitors’ disruptions. Using a newly constructed micro-level dataset that links transaction-level U.S. import data from Bills of Lading with high-frequency consumer prices and sales from a consumer panel, we develop a novel approach to estimate the price effects of cost shocks and product availability. Motivated by a model of delivery delays, cost shocks, and firm pricing, we implement a shift-share identification strategy based on delivery shortfalls, port congestion, and freight and import costs. We find sizable pass-through elasticities: firms raise prices in response to higher import costs and delivery delays, especially when disruptions persist. We also identify strategic pricing: firms—including non-importers—increase prices in response to competitors’ supply chain disruptions. Using our estimates and back-of-the-envelope calculations from the model, we show that strategic interactions significantly amplified the direct effects of supply chain shocks on consumer prices during the pandemic. |
| Keywords: | supply chains, inflation, delivery delays, strategic interactions, pass-through, inventory |
| JEL: | E31 F14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12079 |
| By: | Kaoru HOSONO; Masaki HOTEI |
| Abstract: | Expanding the coverage of employees’ social insurance leads to higher social insurance premiums paid by firms, potentially affecting employment and firm revenue. We examine these effects using the reform of Japan’s social insurance in 2016, which extended the social insurance coverage of part-time workers from those working at least 30 hours per week to those working 20 hours or more per week, as a quasi-natural experiment. Employing a difference-in-differences approach in which we compare firms with a higher share of part-time workers in the pre-reform year and those with a lower share, we obtain the following findings. First, firms substituted significant amounts of part-time workers with regular workers, but not with capital. Second, total labor costs including social insurance premiums paid by firms increased. Third, firms saw a significant increase in sales revenues but a reduction in profit ratios, suggesting that the increased labor costs were primarily absorbed by firms and buyers due to a partial pass-through of labor costs to output prices. Fourth, high-growth firms were more likely to substitute part-time workers with regular workers and to pass the higher labor costs through to output prices. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25080 |
| By: | Ginger Zhe Jin; Mario Leccese; Liad Wagman; Yunfei Wang |
| Abstract: | We examine serial acquisitions in the technology sector from 2010 to 2023. Defining serial acquisitions based on a granular S&P industry taxonomy, we find that they account for 24–37% of majority-control tech M&A, with over half completed by public firms. Followon targets in a series are generally larger and older than the initial acquisition, and among public acquirers, starting a series is associated with higher market value and greater innovation value, but not with significant changes in market competitiveness. Among deals with valid transaction values, over half of serial deals exceed the reporting threshold of the U.S. Hart–Scott–Rodino (HSR) Act. However, in below-threshold acquisitions, acquirers primarily target their core business category. Accounting for the cumulative value of a series would, in most cases, keep the timing of HSR review unchanged or modestly accelerate it, but when it does accelerate it, review could occur several deals or years earlier, potentially yielding important benefits in markets with long acquisition sequences. Finally, while Google/Alphabet, Amazon, Facebook/Meta, Apple and Microsoft (GAFAM) stand out from the rest of the sample for more frequent serial acquisitions, some other large acquirers display similar patterns. |
| JEL: | G34 L10 L40 O38 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34178 |
| By: | Mark Bils; Barış Kaymak; Kai-Jie Wu |
| Abstract: | We provide a number of insights into the nature and consequences of monopsony power through the lens of comparative advantage, where employers' power in wage setting stems from match-specific rents. Chief among them is that employers will apply larger wage markdowns to workers with greater comparative advantage at their firm. This leads to stronger monopsony power over more productive workers, provided the workers' comparative advantage aligns with their absolute advantage. Using Brazilian administrative data, we confirm this prediction: monopsony disproportionately affects high-wage workers within firms and workers at high-paying firms. The model, calibrated to our estimates for Brazil, predicts that minimum wages increase both wages and formal employment for more productive workers while pushing less productive workers out of formal employment. |
| Keywords: | oligopsony; comparative advantage; wages; markdowns; Roy model |
| JEL: | E2 J4 |
| Date: | 2025–08–26 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedcwq:101477 |
| By: | Sajid Anwar; Sizhong Sun |
| Abstract: | This paper examines how adverse supply-side shocks in domestic input markets influence firms' vertical outward foreign direct investment (OFDI) decisions. While the theoretical basis for cost-driven OFDI is well established, empirical evidence on the causal mechanisms remains limited. We develop a framework in which input cost shocks raise unit production costs, but firms undertake vertical OFDI only when shocks are sufficiently severe or when baseline costs are already high. Firm heterogeneity leads to a sorting pattern, whereby more productive firms are more likely to invest abroad. To test this mechanism, we exploit China's 2017 waste paper import ban as an exogenous shock and leverage a distinctive feature of the paper product industry's supply chain. Using a difference-in-differences strategy and firm-level data from 2000 to 2023, we find that the policy shock increased the probability of vertical OFDI by approximately 16% in the post-policy period relative to a control group. These results provide robust evidence that firms respond to domestic input shocks by reallocating production across borders, highlighting vertical OFDI as a strategic response to supply-side disruptions. The findings contribute to understanding the micro-foundations of global production decisions in the face of input market volatility. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.21291 |
| By: | Caunedo, Julieta; Felix, Mayara; Manysheva, Kristina |
| Abstract: | The study examines how labor market shocks originating in non-agriculture affect the organization of agricultural production. Using data from Brazil between 1986 and 2017, it shows that the entry of large non-agricultural firms leads to persistent increases in local wages, declines in agricultural employment, and a shift toward more capital-intensive farming. Farms consolidate, the number of small operations declines, and mechanization increases. To study the magnitude of this reorganization, we develop a general equilibrium model which predicts that a reduction in entry costs in non-agriculture leads to labor reallocation out of agriculture, farm exit, and capital deepening. When we hold mechanization fixed, these adjustments are substantially attenuated, highlighting the role of endogenous technology adoption as an important amplification mechanism. |
| Keywords: | Agricultura, Economía, |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:dbl:dblwop:2516 |
| By: | David Atkin; Baptiste Bernadac; Dave Donaldson; Tishara Garg; Federico Huneeus |
| Abstract: | Economic distortions—such as market power, taxes, credit constraints, etc.— are fundamental in understanding income differences across countries. Recent work has documented the pervasive extent of economic distortions and how they lead to sub-stantial aggregate productivity loss. Far less well understood is how these phenomena affect members of society differently. In this paper we combine unique datasets from Chile, linking workers and owners to firms, firms to each other, firms to consumers, and firms and consumers to the government, in order to quantify the incidence of distortions for the first time. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:chb:bcchwp:1026 |
| By: | David Gstrein; Florian Neumeier; Andreas Peichl; Pascal Zamorski |
| Abstract: | This paper presents novel estimates of the incidence of corporate taxes by measuring the effect of local business taxes on the welfare of commercial landowners, residential landowners, firm owners, and workers. We use unique data on real estate prices in Germany covering over 32 million properties offered for sale or rent between 2008 and 2019 in combination with administrative data on wages and firm profits. Empirically, we exploit the German institutional setting with over 17, 000 municipal tax changes using an event study design. The estimates suggest that a one percentage point business tax increase reduces commercial real estate prices by three percent after four years on average, while commercial rents decline by one percent. Wages decline by about one percent, profits by two percent. These results are robust to the inclusion of a large set of controls and to estimators that account for heterogeneous treatment effects. We use the reduced-form estimates to update current incidence measures and find that commercial landowners bear a significant share of the tax burden (≈ 16%) in the medium-run, while workers (≈ 10%) and residential landowners (≈ 10%) are likely to bear a smaller burden. Firm owners bear the largest share of the burden (≈ 64%). |
| Keywords: | corporate taxation, tax incidence, real estate markets |
| JEL: | H22 H25 H71 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12062 |
| By: | Youngjin Hong; In Kyung Kim; Kyoo il Kim |
| Abstract: | This paper empirically examines the extent to which a favorable view of a firm, shaped by its social contributions, influences consumer choices and firm sales. Using a favorability rating that reflects media exposure of each firm's corporate social responsibility (CSR) activities in the Korean instant noodles market during the 2010s, we find evidence that improvements in the corporate image of Ottogi - one of the country's largest instant noodle producers - positively affected consumer utility for the firm's products. Notably, Ottogi's annual sales of its major brands increased by an average of 23.7 million packages, or 6.7%, as a result of CSR activities and the associated rise in consumer favorability. This effect is comparable in magnitude to that of a nearly 60% increase in advertising spending. Our findings suggest that CSR can foster firm growth by boosting product sales. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.05782 |
| By: | Bagger, Jesper (University of Edinburgh); Fontaine, Francois (Paris School of Economics); Galenianos, Manolis (University of London); Trapeznikova, Ija (Royal Holloway, University of London) |
| Abstract: | This paper examines the relationship between output fluctuations and firms’ recruitment efforts using Danish data that link online job ads with high-frequency firm-level revenue and value-added. While overall output growth is weakly correlated with advertisement rates, decomposing output into permanent and transitory components reveals a strong link between persistent shocks and recruitment effort. A one standard deviation permanent shock raises advertisement rates by 10-16% of a standard deviation, whereas transitory shocks show no significant effect. These results highlight the importance of shock persistence in labor demand and offer empirical support for dynamic search-and-matching models of the labor market. |
| Keywords: | value-added growth, revenue growth, output growth, online job advertisements, vacancies, permanent and transitory shocks |
| JEL: | J23 J63 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18068 |
| By: | Ken Miyahara |
| Abstract: | Building on canonical asset pricing and portfolio choice frameworks with illiquid durable goods (Grossman and Laroque (1990), Flavin and Nakagawa (2008), Stokey (2009)), I propose a heterogeneous agent portfolio choice model to assess the cyclicality of aggregate durable consumption responses. The model features idiosyncratic utility switching costs that allow it to match the distribution of durable adjustments sizes in PSID data. By leveraging a structural mapping between adjustment hazards and the cross-sectional distribution of wealth, the framework provides a robust method for estimating fundamental adjustment frictions directly from observed behavior. We find that the model predicts procyclical and non-linear durable demand responses and a disproportionate decline in upward adjustments during recessions. The main result demonstrates that policy, such as fiscal stimulus payments, is significantly more potent during economic booms than in recessions. This asymmetry highlights the state-dependent nature of stabilization policies and their varying effectiveness across the business cycle. |
| Keywords: | Lumpy adjustment, portfolio choice, generalized hazard function |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:apc:wpaper:210 |
| By: | Kazuki Onji (The University of Osaka); Roger H. Gordon (University of California, San Diego); Tue Gørgens (Australian National University) |
| Abstract: | In assessing the influence of taxes on corporate takeovers, sorting among firms poses complications. We employ a recently developed matching model that explicitly accounts for sorting behaviors, applying it for the first time to analyze tax implications in corporate takeover markets. Examining Japanese M&A transactions (1999–2018) between publiclytraded corporations, our estimates reveal heterogeneous effects, where the role of acquirer information and control perceptibly moderates the value of loss carryforwards across different transaction types. However, the estimated value generated from loss carryforwards is modest, indicating the stringency of Japan’s anti-avoidance rules. |
| Keywords: | Corporate tax, corporate reorganization, M&As, matching estimator |
| JEL: | H25 H32 G34 L20 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:osk:wpaper:2510 |
| By: | Schmöller, Michaela; Goldfayn-Frank, Olga; Schmidt, Tobias |
| Abstract: | This paper provides novel empirical evidence on the impact of monetary policy on innovation investment using unique firm-level data. First, we document the ef- fect of a large, systematic monetary tightening (ECB rate increases from 0% to 4.5% during 2022-23), with average firm-level innovation cuts of 20%. These cuts persist over the medium term, indicating a sustained innovation slowdown. Second, we use the survey to identify elasticities of innovation expenditure to exogenous policy rate changes. Responses to hikes and cuts are significant and largely symmetric at the baseline rate (4.5%), though we detect potential state-dependent asymmetry due to the extensive margin. The financing channel emerges as one of the trans- mission channels, with more pronounced effects in firms with higher shares of bank loans and variable-rate loans. Crucially, we show that monetary policy transmits via aggregate demand, with stronger responses in firms with pessimistic demand expectations. Forward guidance provides substantial additional stimulus by re- ducing uncertainty about future rates, suggesting long-term, supply-side effects of announcements. These results challenge monetary long-run neutrality and are sug- gestive of policy endogeneity of R∗ operating through innovation-driven technology growth. |
| Keywords: | Monetary Policy Transmission, R&D, Endogenous Growth, ForwardGuidance, R∗ |
| JEL: | E52 E22 E24 O30 D22 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:324662 |