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on Business Economics |
| By: | Daisuke MIYAKAWA; Koki OIKAWA; Kozo UEDA |
| Abstract: | This paper studies how population aging shapes firm dynamics and macroeconomic outcomes through business succession. Using large-scale Japanese firm-level panel data, we document systematic age transition patterns in successions, an inverted U-shape in performance with respect to managerial age, and the causal effects of succession on firm outcomes. Building on these facts, we develop a general equilibrium model with heterogeneous firms and life-cycle managerial ability. The model shows that declining population growth reduces succession but raises average managerial ability and strengthens firm selection. Quantitative analysis suggests that despite lower aggregate output, per capita output increases under demographic decline. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:25096 |
| By: | Gustavo de Souza; Gabriel Garber |
| Abstract: | We study the effect of an innovation subsidy on the long-run growth of firms in a developing country. Using administrative microdata from Brazil and a quasi-experimental design that compares near-winners to near-losers of R&D subsidy applications, we find that the program had a persistent effect on firm size: fourteen years after receiving the subsidy, subsidized firms were 59% larger. The effect is strongest among small and young firms facing high borrowing costs, which is consistent with the subsidy alleviating financial constraints. This growth, however, did not come from firms developing frontier innovations. Instead, firms used the subsidy to expand their product lines into high-tariff markets, producing local versions of foreign goods. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bcb:wpaper:631 |
| By: | Petre Caraiani; Nazli Karamollaoglu; Cihan Yalcin |
| Abstract: | Using a novel and comprehensive database of Turkish firms that combines the Business Tendency Survey (BTS) with the Company Accounts Statistics, we analyze the determinants of expectation errors of Turkish manufacturing firms. We examine firm expectation errors for various variables, including those related to sales, exports, consumer and producer prices inflation rates. We investigate the impact of various firm characteristics and macroeconomic factors reflecting uncertainty (exchange rate volatility and Chicago Board Options Exchange Volatility Index- CBOE VIX) and monetary policy stance on firms’ absolute expectation errors. Using a fixed effects panel technique, we estimate that macro variables that control for uncertainty or volatility explain expectation errors better than firm-level variables. The rise in the exchange rate volatility and VIX is estimated to be associated with the worsening of the accuracy of expectations. The accuracy of expectations of sales improves with firm size while the accuracy of expectations errors for inflation rates declines with the share of short-term liabilities and liquidity ratio. |
| Keywords: | Expectation errors of firms, Firm heterogeneity, Sales, Exports and inflation rates, Macroeconomic uncertainty and volatility |
| JEL: | E31 D84 E37 G32 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:wpaper:2515 |
| By: | Arenas Díaz, Guillermo; Piva, Mariacristina; Vivarelli, Marco |
| Abstract: | This study investigates the relationship between Artificial Intelligence (AI) and innovation inputs in Spanish manufacturing firms. While AI is increasingly recognized as a driver of productivity and economic growth, its role in shaping firms’ innovation strategies remains underexplored. Using firm-level data, our analysis focuses on whether AI complements innovation inputs - specifically R&D and Embodied Technological Change (ETC) - and whether AI can be considered as a Method of Invention, able to trigger subsequent innovation investments. Results show a positive association between AI adoption and both internal R&D and ETC, in a static and a dynamic framework. Furthermore, empirical evidence also highlights heterogeneity, with important peculiarities affecting large vs small firms and high-tech vs low-tech companies. These findings suggest that AI may act as both a complement and a catalyst, depending on firm characteristics. |
| JEL: | O31 O32 |
| Date: | 2025–10–03 |
| URL: | https://d.repec.org/n?u=RePEc:unm:unumer:2025022 |
| By: | Anmol Bhandari; Paolo Martellini; Ellen McGrattan |
| Abstract: | We develop a theory of firm dynamics and capital reallocation in private firms and use it to study the taxation of business income, capital, and capital gains. Intangible assets—such as customer bases and trade names—are created using owners' time and are infrequently traded in bilateral meetings. We discipline the model with U.S. administrative data, which report purchase prices and counterparties in asset transfers, allowing us to calibrate the investment technology and output elasticity for otherwise unobservable intangible capital. The equilibrium features dispersion in marginal product of capital, transferable share of firm value, and return on business wealth. Introducing taxation, we find that capital gains taxes are most distortionary, primarily by discouraging entry and reallocation of capital, whereas income taxes are least distortionary. |
| JEL: | E22 E6 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34319 |
| By: | Holger Görg, Toshihiro Okubo, Eric Strobl, Maximilian von Ehrlich |
| Abstract: | In this paper we use comprehensive historic firm level data for 1925 to 1938 to estimate productivity spillovers from Japanese textile companies’ affiliates in China (Zaikabo) to local cotton producers in China. We geo-localized firms in order to capture the important role of distance in facilitating productivity spillovers. Our results provide clear evidence for positive productivity spillovers from Zaikabo to local Chinese firms. This goes hand-in-hand with a change in production technology towards greater use of capital (spindles). We also find that spillovers are very localised, being strongest within a radius of up to 10km around the Zaikabo. Furthermore, evidence for spillovers is particularly strong for firms in Shanghai. Our paper is the first to provide evidence for such spillovers from foreign firms in a historical context. |
| JEL: | F23 N65 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:ube:dpvwib:dp2506 |
| By: | Hanna Brosch; Philipp Lergetporer; Florian Schoner |
| Abstract: | Firm training is key to meeting changing skill demands, yet little is known about the role of workers’ beliefs in shaping training participation. In a survey of 3, 701 workers in Germany, we document that they expect substantial returns to firm training – both in terms of earnings and non-pecuniary outcomes such as promotion chances, job task complexity, or enjoyment. These beliefs predict actual and intended training participation. Lower-skilled workers anticipate smaller non-pecuniary returns, partly explaining their lower uptake. An information treatment addressing return beliefs significantly increases training intentions among lower-skilled workers, suggesting that targeting beliefs may help narrow participation gaps between lower- and higher-skilled workers. |
| Keywords: | beliefs, firm training, skill mismatch, human capital, survey |
| JEL: | J24 J31 D83 I21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12183 |
| By: | Yumin Hu; Luca Macedoni; Mingzhi (Jimmy) Xu |
| Abstract: | Using barcode-level data from the NielsenIQ Homescan Consumer Panel, we study how income inequality affects the prices of identical goods across US counties. We find that higher inequality reduces prices for products with low market shares but increases prices for products with high market shares. With higher inequality, larger firms, which sell more high-market-share goods, tend to raise prices, while smaller firms lower them. We find a similar pattern using Chinese export data across countries. To interpret these findings, we develop a model where a mean-preserving spread in income affects pricing through the convexity of demand and the convexity of the price derivative of demand with respect to income. We derive conditions under which inequality raises the price elasticity for low-market-share products and lowers it for high-market-share products, matching our empirical results. |
| Keywords: | consumer heterogeneity, income inequality, prices, markups |
| JEL: | L11 D31 D43 F14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12181 |
| By: | Mensah, Justice Tei; Wankuru, Peter Chacha; Kirui, Benard K. |
| Abstract: | How important is government business to the private sector in developing economies? This paper uses administrative tax data on firm-to-firm transactions in Kenya to examine the effects of becoming a government contractor on firm performance. Using an event study design, the paper documents significant gains from becoming a supplier to a government entity. Four years later, beneficiary firms experience a 27 percent increase in productivity and employ 10 percent more. These effects are somewhat comparable to the gains from joining a multinational supply chain. Beneficiary firms also expand their trading networks to other private firms. Relaxing credit constraints and improving resilience to shocks are likely operative channels of impact. These findings highlight the potential welfare gains from improving efficiency in public procurement. |
| Date: | 2025–10–06 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11227 |
| By: | Giuseppe Pagano Giorgianni |
| Abstract: | This paper examines how natural gas price shocks affect Italian firms' pricing decisions and inflation expectations using quarterly survey data from the Bank of Italy's Survey on Inflation and Growth Expectations (SIGE) spanning 1999Q4-2025Q2. We identify natural gas price shocks through a Bayesian VAR with sign and zero restrictions. Our findings reveal that these shocks are a primary driver of firms' inflation expectations, particularly during the post-COVID period (2021-2023) when supply disruptions following Russia's invasion of Ukraine generated unprecedented price pressures. We then estimate a larger BVAR incorporating firm-level price setting variables and macro aggregates, documenting that gas price shocks generate persistent increases in both firms' current and expected prices, alongside elevated inflation uncertainty. We uncover substantial non-linearities using state-dependent local projections: under high uncertainty, firms successfully pass through cost increases to consumers, maintaining elevated prices; under low uncertainty, recessionary effects dominate, causing firms to reduce prices below baseline. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.03792 |
| By: | Okan Akarsu; Emrehan Aktug; Altan Aldan; Unal Seven |
| Abstract: | This paper leverages a rare quasi-experiment—the unexpected September 2021 interest rate cut by the Central Bank of the Republic of Türkiye—to examine how inflation expectations shape firm behavior in a high-inflation environment. Drawing on a rich dataset that combines monthly survey responses with administrative records, we exploit the heterogeneous revisions in firms’ inflation expectations triggered by the policy shock. Firms that significantly increased their inflation forecasts (treated) subsequently became more pessimistic about economic conditions, reduced employment, and curbed domestic sales. At the same time, they strategically raised procurement, acquired more foreign currency assets, and boosted borrowing in local currency—even at higher costs—in anticipation of debt erosion. These patterns suggest that firms’ heightened inflation expectations drive both defensive and opportunistic behaviors, ranging from hedging against currency depreciation to locking in lower financing costs. Overall, the findings highlight the critical role of inflation expectations in guiding firm-level decisions and document the importance of policy credibility in volatile macroeconomic settings. |
| Keywords: | Inflation expectations, Firm behaviors, High inflation, Experimental macroeconomics |
| JEL: | E12 E24 E31 E52 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:wpaper:2516 |
| By: | Agustina Colonna; Lorenzo Aldeco Leo |
| Abstract: | This paper studies the use of domestic outsourcing to circumvent labor benefits and its consequences for firms and workers. Drawing on longitudinal establishment data and employer-employee data from Mexico, we provide evidence that many firms were outsourcing their entire workforce to avoid mandatory profit-sharing. A model shows that the incentive for this practice arises when firms face a labor supply curve that is less elastic to profit-sharing than to wages. We then leverage a reform that restricted outsourcing to assess the model predictions. The reform caused previously-outsourcing establishments to insource their workers and comply with profit-sharing, with no evidence of an effect on total employment. Treated plants partially offset the profit-sharing increase through lower wage growth, yet total worker compensation increased, consistent with our model. Self-collected survey evidence suggests that inelasticity to profit-sharing is partly explained by information frictions among workers, implying that they benefited from the reform. |
| Keywords: | Outsourcing;Profit-sharing;Labor Market;Market Power |
| JEL: | J08 J41 O12 O14 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bdm:wpaper:2025-15 |
| By: | Erkko Autio (Imperial College London); Kun Fu (Loughborough University London); Donghyun Park (Asian Development Bank); Shu Tian (Asian Development Bank) |
| Abstract: | Using Global Entrepreneurship Monitor and World Bank data, we produce a novel estimation for the prevalence of informal entrepreneurship in 60 countries in the period 2006– 2022. Using a real option framework, we test the effect of business regulation, property rights protection, and the rule of law on formal and informal entrepreneurship prevalence. Finally, we test the influence of a country’s informal entrepreneurship rate on entrepreneurial growth aspirations by individuals. We find that burdensome business regulations increase informal entry relative to formal entry. We also find that stronger property rights and rule of law encourage formal entrepreneurship and discourage informal entrepreneurship. Further, the analysis finds that a high rate of informal entrepreneurship discourages entrepreneurs’ growth aspirations and negatively moderates the relationship between the entrepreneur’s gender and growth aspirations. |
| Keywords: | informal entrepreneurship;institutions;business regulation;rule of law;property rights;entrepreneurial growth aspirations;multilevel |
| JEL: | L26 E26 O43 |
| Date: | 2025–10–06 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:021669 |
| By: | Emily A. Beam; Lasse Brune; Narayan Das; Stefan Dercon; Nathanael Goldberg; Rozina Haque; Dean Karlan; Maliha Khan; Doug Parkerson; Ashley Pople; Yasuyuki Sawada; Christopher Udry; Rocco Zizzamia |
| Abstract: | Multifaceted social protection programs in low-income countries often include both capital grants and informational and behavioral support on the premise that households face simultaneous and multiple frictions. To tackle informational and behavioral constraints, programs typically deploy either individual or group coaching visits from field agents. The relative efficacy of individual versus group coaching could provide insights into the underlying mechanism through which information and behavioral support change household decisions. However, in three similar randomized evaluations in Uganda, the Philippines, and Bangladesh, we find no differences in efficacy. Given its 15–20% lower costs, group coaching is more cost-effective. |
| JEL: | D22 I38 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34309 |
| By: | Alberto Galasso; El Hadi Caoui |
| Abstract: | Creative content is often the product of collaboration, which may lead to fractional ownership of intellectual property. We study the effect of fractional ownership on the licensing of copyrighted material and its reuse. To do so, we compile new data on the copyright ownership structure of songs and their licensing for use in movies. We document that fractional song ownership has increased substantially: the mean number of songwriters and publishers per song has tripled between 1958 and 2021. We show that, conditional on a rich set of controls, greater fractionalization is associated with lower likelihood of licensing. We leverage the Sony-led acquisition of EMI Music Publishing in 2012 to obtain within-song variation in ownership and find that consolidating ownership rights significantly increases licensing, beyond any standalone effects of the merger. |
| JEL: | K11 L8 O32 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34336 |
| By: | Jesse LaBelle; Fernando M. Martin; Ana Maria Santacreu |
| Abstract: | We study how international tax regimes and intellectual property (IP) rights shape the global allocation of intangible assets. Using a new dataset of cross-border patent transactions, we find that tax differentials are a key determinant of intra-firm transfers within multinational companies. Stronger IP rights play a bigger role in inter-firm transactions. To interpret these patterns, we develop a model in which firms choose to license, sell, or profit-shift patents depending on tax wedges and differences in IP protection. The theory rationalizes these findings and highlights how differences in global taxation and IP rights jointly determine the movement of intangible assets across borders. |
| Keywords: | intangibles; cross-border patent sales; licensing; profit shifting; taxation; intellectual property rights |
| JEL: | F12 O33 O41 O47 |
| Date: | 2025–09–29 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedlwp:101822 |
| By: | Celine Bonnet; Fabrice Etile; Sebastien Lecocq |
| Abstract: | Reforming alcohol price regulations in wine-producing countries is challenging, as current price regulations reflect the alignment of cultural preferences with economic interests rather than public health concerns. We evaluate and compare the impact of counterfactual alcohol pricing policies on consumer behaviors, firms, and markets in France. We develop a micro-founded partial equilibrium model that accounts for consumer preferences over purchase volumes across alcohol categories and over product quality within categories, and for firms' strategic price-setting. After calibration on household scanner data, we compare the impacts of replacing current taxes by ethanol-based volumetric taxes with a minimum unit price (MUP) policy of 0.50 Euro per standard drink. The results show that the MUP in addition to the current tax outperforms a tax reform in reducing ethanol purchases (-15% vs. -10% for progressive taxation), especially among heavy drinking households (-17%). The MUP increases the profits of small and medium wine firms (+39%) while decreasing the profits of large manufacturers and retailers (-39%) and maintaining tax revenues stable. The results support the MUP as a targeted strategy to reduce harmful consumption while benefiting small and medium wine producers. This study provides ex-ante evidence that is crucial for alcohol pricing policies in wine-producing countries. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.14116 |
| By: | Anh Do; Sharat Ganapati; Woan Foong Wong; Oren Ziv |
| Abstract: | The majority of global trade moves by sea through hub-and-spoke shipping networks. We investigate the returns to being a hub country by analyzing how transshipment activity shapes trade and supply chains. We show that most US imports especially from smaller origin countries are transshipped via key hubs, and transshipment is positively correlated with the hubs product-level trade. Leveraging the indirect shipping network structure to construct an instrument, we find that transshipment increases hubs imports from origins for which they facilitate trade and exports of downstream goods, highlighting their central role in shaping modern global trade and supply chain dynamics. |
| Keywords: | trade costs, scale, hubs, transport costs, transportation networks, international trade, shipping |
| JEL: | F10 F13 F14 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12187 |