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on Business Economics |
| By: | Manuela Magalhâes (Universidad de Málaga); Jesús Rodríguez-López (Universidad Pablo de Olavide) |
| Abstract: | Spanish aggregate productivity was negatively correlated with the business cycle from 2000 to 2014, but this correlation later turned positive between 2015 and 2019. In this paper, we ask if this change is related to financial restrictions and firm creation and destruction in Spain. Using firm- level administrative data, we reach the following conclusions. First, during the 2000–07 expansion, low-productivity firms with access to financial resources were able to continue operating; in turn, this led to a crowding-out of financial resources, and forced high-productivity but financially vulnerable firms to close. We find that on average exiting firms were significantly larger and more productive than entering firms, a situation that entailed productivity losses in this period. Second, following the tightening of credit conditions after 2008, we find a more efficient selection at both exit and entry margins: exiting firms were less productive than entering firms. Both findings help explain, at least in part, the change in the productivity-GDP correlation. Finally, in a counterfactual exercise we quantify the effects of type-I selection errors, i.e., the closure of productive but financially vulnerable firms: had market selection not presented type-I errors, relative total factor productivity at the exit margin would have been 3% to 6.5% higher, while gains in relative labor productivity would have ranged between 27% and 46%. |
| Keywords: | Firm exit and entry, business cycle, cleansing effects, miss-selection, firm survival. |
| JEL: | E23 E32 E44 G32 L11 L25 L60 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pab:wpaper:25.02 |
| By: | Martin, Ralf; Solorzano Mosquera, Jenniffer; Thomas, Catherine; Verhoeven, Dennis |
| Abstract: | We examine the relationship between firms' markups and the economic value of their innovation, including both the private value captured by the innovating firm and the knowledge spillovers that benefit other firms. Using a sample of over 14, 500 EU firms and 2, 400 US firms granted patents between 2005 and 2014, we find that innovation by high-markup firms is more valuable privately and also creates more external value. These associations are robust to controlling for the stock of past innovation and to estimating innovation value in various ways. |
| JEL: | D24 L11 O31 O33 |
| Date: | 2025–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129003 |
| By: | Mertens, Matthias; Mottironi, Bernardo |
| Abstract: | Combining financial statements with firm-level product prices, we find that larger firms exhibit lower markups, although they are overcompensated by substantially higher wage markdowns. We explain our divergence from prior results by highlighting how labor market power affects markup estimates. |
| Keywords: | firm size; markdowns; market power; markups |
| JEL: | L11 L13 L25 J42 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128958 |
| By: | Giorgio Fabbri (Univ. Grenoble Alpes, CNRS, INRA, Grenoble INP, GAEL, Grenoble, France); Davide Fiaschi (Universtiy of Pisa, Dipartimento di Economia e Management, Pisa, Italy); Cristiano Ricci (Universtiy of Pisa, Dipartimento di Economia e Management, Pisa, Italy) |
| Abstract: | We develop a multi-sector competitive economy where firms reallocate across sectors under myopic profit-seeking behaviour and quadratic reallocation costs. The dynamic path, formalised as a gradient flow in Wasserstein space, unfolds as a sequence of short-run competitive equilibria converging to a globally stable long-run competitive equilibrium. Two emergent properties arise: (i) decentralised and uncoordinated decisions of consumers and firms can be interpreted as solving a sequence of optimisation problems on aggregate consumption, which increases monotonically along the path; (ii) the long-run competitive equilibrium is efficient, as the distribution of firms maximises aggregate consumption and profit rates are equalised across sectors. These results are robust to extensions such as asymmetric preferences, labour immobility, and mild intrasectoral externalities, though they may fail under fixed reallocation costs. Using EU firm-level data (2018–2023), we find convergence in sectoral profit rates but not in labour productivity, indicating limited labour mobility. We also document moderate substitutability among goods, small intrasectoral externalities, and no significant fixed reallocation costs. |
| Keywords: | out-of-equilibrium dynamics, positive general equilibrium theory, multi-sector economy, myopic firms, firm heterogeneity, intra-industry reallocation, Wasserstein space, gradient flow |
| JEL: | D50 D92 C62 D24 C61 |
| Date: | 2025–09–08 |
| URL: | https://d.repec.org/n?u=RePEc:ctl:louvir:2025013 |
| By: | Kentaro ASAI; Mitsuhiro HARADA; Katsuyuki KUBO; Daisuke MIYAKAWA; Junichi YAMANOI; Masaki YANAOKA |
| Abstract: | Although private firms are not subject to discipline from capital markets, it remains unclear what factors deter them from engaging in organizational misconduct. Despite their numerical dominance, there is limited empirical evidence on misconduct by private firms and its antecedents. Using a unique dataset of administrative dispositions, representing the occurrence of organizational misconduct among Japanese private small- and medium-sized construction companies from 2010 to 2024, we empirically examine the factors that lead to such misconduct. Our analysis reveals that more mature firms and smaller firms are less likely to engage in organizational misconduct. Furthermore, we find that family firms are more prone to misconduct when they experience strong financial performance. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25086 |
| By: | Jean-Paul L'Huillier; Kirill Shakhnov; Laure Simon |
| Abstract: | The bulk of the news shocks literature focuses on shocks materializing after four or five quarters, with limited evidence on news about longer-run events. We build a new dataset of discovery and production start dates for a wide range of giant commodity discoveries worldwide from 1960 to 2012. Standard open economy models match the empirical responses of short-run news but fail in the case of long-run news. Incorporating financial frictions in the form of collateral constraints is crucial for capturing the dynamics implied by long-run news. We also provide direct evidence on the role of these frictions. |
| Keywords: | Business fluctuations and cycles; International topics |
| JEL: | E23 F3 F4 Q33 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocawp:25-24 |
| By: | Koetter, Michael; Ludolph, Melina; Schub, Hendrik; Wöbbeking, Fabian |
| Abstract: | We exploit an information shock related to the German Supply Chain Due Diligence Act and use detailed customs data to analyze how smaller, non-listed firms respond when expecting accountability for externalities beyond their organizational boundaries. Product-level regressions reveal a substantial reduction in imports from high ESG-risk production sectors. Adjustments occur mainly at the extensive margin, indicating that firms cut ties with high-risk suppliers. The product-level results translate into meaningful changes in overall international procurement for firms with Big Four auditors. Our findings suggest potential limits to mandates requiring firms to integrate broad sustainability considerations into operational decisions. |
| Keywords: | due diligence, firm boundaries, governance, responsible sourcing, supply chain |
| JEL: | F14 F18 G38 M48 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:iwhdps:325497 |
| By: | Kiyoyasu TANAKA |
| Abstract: | Cross-border mergers and acquisitions (M&A) are a prominent mode of foreign direct investment. However, there remains mixed and inconclusive evidence for the impact of foreign acquisition on acquired domestic firms. This paper contributes to the literature by employing a staggered difference-in-differences approach to address the timing variation in foreign acquisitions and constructing a novel panel dataset on Japanese firms that precisely captures the post-acquisition period for acquired firms. The results show statistically insignificant estimates for the aggregate effects of foreign acquisition on the post-acquisition productivity, suggesting neither productivity gains nor adverse effects for acquired firms. Even after accounting for general acquisition effects, foreign ownership changes have no influence on post-acquisition productivity. By contrast, canonical two-way fixed effects regressions yield significantly positive estimates, highlighting the need for methodological refinement in the literature to address heterogeneous treatment effects of foreign acquisition. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25085 |
| By: | Ichiro Iwasaki; Evžen Kočenda |
| Abstract: | We examine the corporate criminal records of 18, 187 firms operating in 17 European emerging markets and empirically analyze the effects of board composition and national institutions on crime deterrence. Our analysis reveals that 872 firms (about 5% of the sample) committed 1, 734 crimes over 2020-2023. We show that firms with larger boards and greater board independence are associated with higher incidences of corporate crime, suggesting that larger or nominally independent boards may not function effectively in emerging market contexts. In contrast, female leadership and board gender diversity do not exhibit significant deterrent effects, implying that gender inclusion alone may not suffice in these environments. In banks with an outside board chairman, the occurrence of corporate crime increases substantially. Importantly, stronger national institutions consistently correlate with lower crime rates, a pattern observed universally across European emerging markets, and boards in countries with stronger institutions appear more effective in deterring crime. |
| Keywords: | corporate crime, board composition, board diversity, corporate governance, national institutions, banks, European emerging markets |
| JEL: | D22 G34 K14 L22 M21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12132 |
| By: | Nils H. Lehr |
| Abstract: | This paper provides evidence that rising misallocation in the R&D sector contributed to the recent slowdown in U.S. productivity growth. I develop a growth accounting framework allowing for misallocation of R&D resources across firms captured by wedges between their marginal cost and benefits of R&D. I show that R&D wedges can be measured from R&D returns and document large and persistent differences in R&D returns across US-listed firms. Combining data and model, I estimate that frictions reduced productivity growth by 18% over 1975–2014 and that rising misallocation in the R&D sector accounts for 25% of the growth slowdown. |
| Keywords: | R&D; productivity growth; growth slowdown |
| Date: | 2025–09–12 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/183 |
| By: | Takafumi KAWAKUBO; Takafumi SUZUKI |
| Abstract: | This study examines how becoming a supplier to a newly established large-scale plant influences the performance of incumbent small plants. Exploiting detailed plant-level data, records of new large-plant openings, and supply chain information, we construct a quasi-experimental setting based on the spatial distribution of new entrants. Our event-study estimates show that while local supplier plants benefit significantly—both statistically and economically—from large-scale plants, non-supplier plants in the same region face negative impacts, likely due to intensified competition spurred by the newly-contracted suppliers. The results underscore that such entries create “winners and losers†not only across different regions but also within the same locality. From a policy perspective, these insights highlight the importance of facilitating effective partnerships between large-scale entrants and local suppliers, as well as offering support to disadvantaged non-supplier firms. Overall, our findings illuminate the nuanced local economic consequences of large-scale plant entries and offer guidance for future industrial and regional policies. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25083 |
| By: | Howell, Sabrina T.; Rathje, Jason; Van Reenen, John; Wong, Jun |
| Abstract: | For governments procuring innovation, one choice is whether to specify desired products (a “Conventional” approach) or allow firms to suggest ideas (an “Open” approach). Using a U.S. Air Force R&D grant program, where Open and Conventional competitions were held simultaneously, we find that Open awards increase both commercial innovation and technology adoption by the military. In contrast, Conventional awards have no positive effects on new technology, but do create more program lock-in. We present evidence that openness matters independently from inducing differential selection, for example of less well-established firms. These results suggest benefits from open approaches to innovation procurement. |
| Keywords: | innovation; defense; R&D; procurement |
| JEL: | O31 O32 O38 H56 H57 |
| Date: | 2025–09–10 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128343 |
| By: | Anderson, Ronald W.; Jõeveer, Karin |
| Abstract: | We consider the determinants of pay in US banks since 1986 using a new structural model in which banking firms are matched in rank order with management teams of varying talent. We calibrate the model to data from US bank holding companies focussing on labor’s share of bank value-added, the level of bankers’ pay and its sensitivity to bank performance. We find that three changes in banking regulation have shaped bankers’ pay in the last three decades: (1) removal of obstacles to interstate banking set off a process of banking consolidation in the 1990s, (2) deregulation at the end of the 1990’s allowing banks to pursue non-interest income has driven a trend toward higher pay and higher incentive pay, (3) tougher regulations following the financial crisis imposing an implicit tax on size and complexity has moderated pay in large banks but in so-doing has allowed smaller banks to take on business outside of standard credit intermediation resulting higher pay in those banks. Taking these structural changes into account we find a tendency over three decades for a decline in labor’s share, in line with superstar effects implied by our structural model. |
| Keywords: | executive compensation; banking industry structure; rent extraction; superstar firms; regulation |
| JEL: | F3 G3 J1 |
| Date: | 2025–11–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129436 |
| By: | Mikko Silliman; Alexander L.P. Willén |
| Abstract: | This paper reconsiders how labor market competition shapes skill development --- integrating the perspectives of both firms and workers. While existing models often predict that firms will underinvestment in training due to a fear of poaching, we show that competition can instead serve as a catalyst for learning. It creates outside opportunities which incentivize workers to invest in their own skills, and it imposes innovation pressure that raises the value of training for firms. Using linked Norwegian survey and administrative data together with vignette experiments, we find that workers in more competitive markets accumulate skills faster than workers in concentrated markets—primarily through informal, self-directed learning—and that these gains are concentrated in higher-order, transferable skills. Firms in competitive environments also invest more in formal training, treating it as a strategic necessity rather than a dispensable cost. Experimental evidence complements these findings by showing that both workers and managers expect greater returns to learning and human capital investments in competitive markets. Together, these results challenge the canonical view of competition as a source of market failure in training, and instead highlight its role in facilitating both worker-led and firm-led investments in human capital. |
| Keywords: | competition, human capital, skills, learning |
| JEL: | J24 J31 J42 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12114 |
| By: | Marcel Preuss (Cornell University); Germán Reyes (Middlebury College and IZA); Jason Somerville (University of California, Santa Barbara); Joy Wu (University of British Columbia) |
| Abstract: | Elites disproportionately influence policymaking, yet little is known about their fairness and efficiency preferences—key determinants of support for redistributive policies. We investigate these preferences in an incentivized lab experiment with a group of future elites—Ivy League MBA students. We find that MBA students implement substantially more unequal earnings distributions than the average American, regardless of whether inequality stems from luck or merit. Their redistributive choices are also highly responsive to efficiency costs, with an elasticity an order of magnitude larger than that found in representative U.S. samples. Analyzing fairness ideals, we find that MBA students are less likely to be strict meritocrats than the broader population. These findings provide novel insights into how elites’ redistributive preferences may shape high levels of inequality in the U.S. |
| JEL: | D63 C91 H23 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:dls:wpaper:0356 |
| By: | Constantin Bürgi; Wanying Deng; Karl Whelan |
| Abstract: | Since 2021, Kalshi has operated as the only federally licensed prediction market in the United States. Using transaction-level data on over 300, 000 contracts, we provide the first systematic evidence on its pricing. Kalshi’s contract prices are informative and improve in accuracy as markets approach closing, but they display a clear favorite–longshot bias: low-price contracts win far less often than required to break even, while high-price contracts win more often and yield small positive returns. We interpret these patterns with a simple framework that reflects Kalshi’s quote-driven microstructure. Makers—relatively well-informed traders who post offers—seek positive expected returns but may be slightly over-optimistic, while Takers accept these offers. The model predicts distinct patterns of favorite–longshot bias for Makers and Takers, and the data confirm these predictions. |
| Keywords: | prediction markets, Kalshi, favorite-longshot bias, market microstructure, bid-ask spreads |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12122 |
| By: | Jiang, Zhengyang; Liu, Hongqi; Peng, Cameron; Yan, Hongjun |
| Abstract: | We survey a large, representative sample of retail investors in China to elicit their memories of stock market investments and their return expectations. We merge these survey data with administrative transaction data to test a model in which investors selectively recall past experiences to form their beliefs. Our analysis uncovers new facts about investor memory and highlights similarity-based recall as a key mechanism of belief formation in financial markets. A rising market prompts investors to recall their past experiences more positively, leading to more optimistic forecasts of future returns. Recalled experiences can explain cross-investor variation in return expectations and, in our setting, dominate actual experiences in their explanatory power. In the transaction data, we confirm that recalled experiences are reflected in investors’ trading decisions through a belief channel. |
| JEL: | D14 D91 |
| Date: | 2025–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:128653 |
| By: | Luna, Luis Aguilar; Winkler, Deborah Elisabeth |
| Abstract: | Using a cross-section of more than 33, 000 services firms in 104 low- and middle-income countries from the World Bank’s Enterprise Surveys, this paper examines whether the female labor share premium of international firms relative to non-international firms in manufacturing also holds for services firms. Unlike the manufacturing sector, the paper finds a negative relationship between exporting and global value chain participation and the female labor share for services firms, while no relationship is found for importing or foreign ownership status, controlling for firm output, productivity, technology intensity, and fixed effects. The female labor share gap for exporters was larger before COVID-19, and the gap for global value chain participants is no longer significant after COVID-19. Controlling for sectoral relative wages between men and women does not change the findings in a smaller subsample of economies. Controlling for female top management and ownership reveals a female labor share gap for exporters, global value chain participants, and importers. Using an alternative estimator and data set confirms the female labor share gap in services firms. This may be attributed to the sectoral segregation between women and men, with women tending to pursue work opportunities in less skill- and export-intensive services sectors compared to men. |
| Date: | 2025–09–03 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11198 |