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on Business Economics |
| By: | Mohammad Zeqi Yasin |
| Abstract: | Do industrial "superstars" help others up or crowd them out? We examine the relationship between the spillovers of superstar firms (those with the top market share in their industry) and the productivity dynamics in Indonesia. Employing data on Indonesian manufacturing firms from 2001 to 2015, we find that superstar exposures in the market raise both the productivity level and the growth of non-superstar firms through horizontal (within a sector-province) and vertical (across sectors) channels. When we distinguish by ownership, foreign superstars consistently encourage productivity except through the horizontal channel. In contrast, domestic superstars generate positive spillovers through both horizontal and vertical linkages, indicating that foreign firms do not solely drive positive externalities. Furthermore, despite overall productivity growth being positive in 2001-2015, the source of negative growth is mainly driven by within-group reallocation, evidence of misallocation among surviving firms, notably by domestic superstars. Although Indonesian superstar firms are more efficient in their operations, their relatively modest growth rates suggest a potential stagnation, which can be plausibly attributed to limited innovation activity or a slow pace of adopting new technologies. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.11139 |
| By: | Paul S. Koh (Yonsei University); Devesh Raval (Yonsei University) |
| Abstract: | The prevailing explanation for large, multi-product firms is economies of scope from inputs shared across production lines. Using the Federal Trade Commission's Line of Business Surveys, we show that manufacturers report substantial shared inputs for both capital and management/marketing expenses that are correlated with firm size and scope. We estimate a nested CES production function between line-specific and shared inputs, which are substitutes with a substitution elasticity of 2.6. For the average firm, reducing shared inputs by 50% decreases revenue by 3.4%. Finally, synergies from greater scope economies generated by pooling shared inputs in merger simulations are small. |
| Keywords: | Economies of scope, shared inputs, multiproduct firms, production function, productivity |
| JEL: | D24 L23 L40 L60 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2025rwp-264 |
| By: | Arenas Díaz, Guillermo (Università Cattolica del Sacro Cuore); Piva, Mariacristina (Università Cattolica del Sacro Cuore); Vivarelli, Marco (Università Cattolica del Sacro Cuore) |
| 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. Furtheremore, 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. |
| Keywords: | innovation inputs, R&D, method of invention, Artificial Intelligence, innovative complementarities |
| JEL: | O31 O32 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18175 |
| By: | von Graevenitz, Kathrine; Krug, Joscha; Rottner, Elisa |
| Abstract: | Governments around the world are under pressure to reduce industrial energy use and emissions without losing out to international competition. For this reason, climate policies often come with exemptions or additional support for large energyintensive firms, increasing the heterogeneity in energy prices. We document such a rising dispersion in industrial energy prices in the German manufacturing sector that coincides with rising average energy prices. Surprisingly, we observe an increase in industrial energy intensity, while at the same time, manufacturing firms have shifted toward producing less energy intensive products. We develop a model of multi-product firms with heterogeneous energy prices and heterogeneous products that can partially explain this puzzle via a 'reshuffling' among producers: If energy prices rise only for a share of firms, those firms will drop energy-intensive products. But the remaining low energy price firms will increase their market share of these products and produce them in a less energy-efficient way. Empirical analyses based on German administrative firm data suggest that such a 'reshuffling' is indeed taking place. We show in a simple quantification that reshuffling can have sizable effects on aggregate energy intensity. |
| Keywords: | Product choice, Energy intensity, Carbon emissions, Manufacturing |
| JEL: | Q41 D21 D22 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:328244 |
| By: | Nicolás de Roux (Universidad de los Andes); Luis R. Martínez (Emory University); Camilo Tovar (International Monetary Fund); Jorge Tovar (Universidad de los Andes) |
| Abstract: | How do exporting firms navigate the loss of a major foreign market? This study examines the response of Colombian manufacturing firms to the collapse of trade with Venezuela, Colombia’s second largest trade partner. Trade disruptions began in 2009 when Venezuela restricted imports from Colombia and worsened with Venezuela’s protracted economic crisis after 2014, leading to a fall in trade of more than 90% by 2018. Using transaction-level customs data linked at the firm level to the Colombian manufacturing census, we use a difference-in-difference design based on previous exports to Venezuela to estimate the effect of the loss of this market on firm performance over a ten-year period. Our analysis yields four main findings: (i) affected firms experience a sharp and persistent decline in exports; (ii) while they survive, these firms significantly reduce their scale, lowering production, input use, investment, employment, and wages; (iii) however, traditional measures of total factor productivity remain unchanged, suggesting that firms retain their technical capabilities; (iv) affected firms adapt by increasing exports to familiar markets but fail to expand into new markets or boost domestic sales. These results highlight the resilience of exporting firms but also underscore the persistent difficulties in substituting a major trade partner. |
| Keywords: | Exports, Firm Performance, Manufacturing, Trade Collapse, Total Factor Productivity |
| JEL: | F13 F14 F61 O12 D22 D24 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:col:000089:021687 |
| By: | Michael R. Richards; Jonathan Seward; Christopher M. Whaley |
| Abstract: | Human capital formation enhances worker productivity and firm performance. However, firms may not fully internalize the financial benefits from investing in employee skill-building, which can disincentivize worker training and suggest roles for government support. We examine such tradeoffs in the context of physician training (i.e., “residency” programs). Using the universe of Medicare inpatient and outpatient records from 2014-2019 and differences-in-differences analyses, we show that hospitals’ productivity and revenues grow by 10-20% after underwriting a procedure-oriented residency––though heterogeneity exists. The hospitals benefiting from trainee labor conservatively net over $2 million in steady-state, revealing substantive private incentives to finance physician training. |
| JEL: | I11 I18 J24 J44 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34365 |
| By: | Rieder, André (University of Erlangen-Nuremberg); Schnabel, Claus (University of Erlangen-Nuremberg) |
| Abstract: | Representative establishment data reveal that over 60 percent of German plants covered by collective agreements pay wages above the level stipulated in the agreements, creating a wage cushion between actual and contractual wages. While collective bargaining coverage has fallen over time, the prevalence of wage cushions has increased, particularly in eastern Germany. Cross-sectional and fixed-effects analyses for 2008-2023 indicate that in western Germany the presence of a wage cushion is mainly related to plant profitability, unemployment, vacancies, and the business cycle. Plants which apply collective agreements at the firm rather than the sectoral level are less likely to have wage cushions since firm-level agreements make it easier to explicitly take firm-specific conditions into account. In eastern Germany, however, the explanatory power of these variables is considerably lower. Against the backdrop of falling bargaining coverage, the increasing prevalence of wage cushions suggests that the traditionally rigid German system of wage determination has become more flexible and differentiated. |
| Keywords: | wage cushion, collective bargaining, wage determination, Germany |
| JEL: | J30 J31 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18153 |
| By: | Corina Boar; Denis Gorea; Virgiliu Midrigan |
| Abstract: | We use firm-level data to document that private businesses experience large fluctuations in their profit shares. These are due to large, fat-tailed and transitory changes in output that are not fully accompanied by changes in their inputs. We interpret this evidence using a model of entrepreneurial dynamics. Because firms can limit their exposure to risk by operating at a smaller scale, our model predicts large macroeconomic losses from uninsurable business risk, much larger than those stemming from credit constraints. While self-financing allows entrepreneurs to quickly overcome credit constraints, even wealthy entrepreneurs remain considerably exposed to risk. |
| Keywords: | entrepreneurship, risk, credit constraints, misallocation |
| JEL: | E2 E44 G32 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1300 |
| By: | Barreto, Cesar (OECD, Paris); Merkl, Christian (University of Erlangen-Nuremberg) |
| Abstract: | Our paper documents the importance of ex ante worker heterogeneity for labor market dynamics and for the composition of the unemployment pool over the business cycle. In recessions, the unemployment pool shifts toward workers with higher wages in their previous jobs. Based on administrative data for Germany and two-way worker and firm wage fixed effects, we show that this shift is mainly connected to worker heterogeneity, not to firm heterogeneity. We calibrate a search and matching model with ex ante worker heterogeneity to the estimated relative residual wage dispersion across worker fixed-effect groups. We show that a lower idiosyncratic match-specific shock dispersion for high-wage workers is key for the larger relative fluctuations of their separation rate as well as for the positive co-movement between prior wages and fixed effects of unemployed workers with aggregate unemployment. We argue that firm-based explanations, such as cyclical financial frictions, are unlikely to be key drivers for the documented empirical patterns. |
| Keywords: | labor market flows, separations, fixed effects, labor market dynamics |
| JEL: | E24 J16 J31 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18162 |
| By: | Mauri Kotamaki (Turku School of Economics, University of Turku, Finland) |
| Abstract: | This paper estimates the causal effect of financial constraints on the short-term performance of Finnish SMEs using survey data from 2016-2024 and propensity score matching (PSM). We examine six outcomes: turnover, employment, investment, profitability, solvency, and innovation, and report effects on both odds and probability scales. Financial constraints significantly increase the likelihood of adverse outcomes: constrained firms face 10-30\% higher odds of reporting deterioration in core indicators, with the largest effects on solvency (29\% higher odds) and profitability, followed by investment and turnover; employment effects are smaller, and innovation effects modest. Marginal effects indicate up to a 4 percentage point reduction in the probability of improvement for key outcomes. Results are robust to multiple-testing adjustments, and alternative specifications. Heterogeneity analysis reveals that the effects vary by firm size, pointing to a dual mechanism: turnover and profitability effects are strongest for micro and small firms, reflecting immediate liquidity stress, while employment and investment effects intensify with firm size, suggesting real adjustments (growth obstacles) are more pronounced in mid-sized SMEs. Policy implications and directions for future research are discussed. |
| Keywords: | credit constraints, financing, impact analysis, propensity score matching |
| JEL: | G32 D22 L25 C21 O16 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:tkk:dpaper:dp172 |
| By: | Esteban Jaimovich; Boryana Madzharova; Vincenzo Merella |
| Abstract: | The paper investigates firms' rollout strategies for quality-differentiated products across geographically dispersed markets. Using a theoretical framework that integrates nonhomo- thetic preferences, we show that premium goods are more likely to enter wealthier markets first, allowing firms to capture higher markups. We find that the main factors influencing the selection of follow-up markets differ by product quality: for premium goods, income levels are the primary determinant of expansion paths, whereas geographic proximity is the main driver for lower-quality products. Using micro-level data from the refrigera- tion industry, we confirm a significant positive association between market-entry order and income for higher-quality products. Furthermore, we observe that follow-up markets tend to be geographically more dispersed for premium goods, reflecting a shift away from proximity-based expansion strategies. |
| Keywords: | Market entry; Gravity; Nonhomothetic preferences; Quality differentiated products. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:cca:wpaper:749 |
| By: | David C. Macdonald; Jerry Montonen; Emily E. Nix |
| Abstract: | Romantic relationships in the workplace are common, but those between managers and subordinates have increasingly drawn scrutiny. Using administrative data on the universe of cohabiting couples in Finland, we examine the career implications of starting or ending a personal relationship with a workplace manager and the spillovers of these relationships on the broader workforce. An event study design reveals that entering a relationship with a manager increases the subordinate's earnings by 6%, but breaking up triggers an abrupt 18% earnings decline. We also find that these relationships generate spillovers: retention of other workers declines by six percentage points, with effects concentrated in workplaces where subordinates experience greater earnings gains. Our findings highlight both the private benefits and organizational costs of hierarchical workplace relationships. |
| JEL: | J12 J15 M12 M14 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34346 |
| By: | Martinez Cillero Maria (European Commission - JRC); Napolitano Lorenzo (European Commission - JRC); Rentocchini Francesco (European Commission - JRC); Seri Cecilia; Zaurino Elena (European Commission - JRC) |
| Abstract: | "Rising market concentration and the dominance of `superstar' firms have sparked concerns about declining competition and innovation. While technological change and globalisation are key drivers, mergers and acquisitions (M&As) may also play a role. This paper investigates whether firms use technological M&As — acquisitions of innovative subsidiaries with patent portfolios — to enhance market power. Using a global panel of 8, 314 publicly listed firms from 2008 to 2020 and a staggered difference-in-differences approach, we find that such acquisitions increase acquiring firms’ markups by 2% on average. Effects are stronger among top R&D investors, US-based firms, and those in high-tech manufacturing. The main mechanism appears to be greater insulation from competitors via acquired patents, which limit knowledge spillovers and raise entry barriers. These findings highlight the need for antitrust policies that balance innovation incentives with the risks of growing market power." |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:wpaper:202503 |
| By: | Arunima Paul; John Chung |
| Abstract: | Credit access plays a pivotal role in enabling firms to participate in global markets and support broader economic growth. While large firms benefit from steady revenue streams and easier financing options, small and medium-sized enterprises (SMEs) frequently encounter substantial challenges in securing credit. This paper analyzes U.S. metropolitan area–level data to assess how local expansions in credit supply, particularly via Community Reinvestment Act (CRA) loans, influence export performance. Using the geographic dispersion of bank headquarters as an instrumental variable, we estimate that a 10% increase in credit availability results in a 4.5% increase in export volumes. Extending the analysis to a heterogeneous firm framework with credit frictions, we show that a 10% reduction in trade costs produces welfare gains from trade that are 18.75% larger when firms are unconstrained by credit. |
| Keywords: | Credit access; Exports; SMEs; Community Reinvestment Act; Financial constraints; Trade; Welfare |
| JEL: | G21 F41 E44 F14 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:abn:wpaper:auwp2025-09 |
| By: | Qu Feng; Shang-Jin Wei; Guiying Laura Wu; Mengying Yuan |
| Abstract: | Capital controls and other policy distortions in the capital market are costly to entrepreneurs. We propose a structural estimation approach to quantify the effect using IPO locational choices. We estimate the willingness-to-pay to bypass these distortions by the Chinese entrepreneurs with overseas listed firms to be a haircut in firm value by 50-60%. We infer that the welfare for the entrepreneurs could rise by 22% from the relevant capital market reforms. |
| JEL: | F30 O16 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34341 |
| By: | Friederike Fourné; Lara Zarges |
| Abstract: | We leverage micro-data to identify macro shocks in time series settings. We exploit firm-level forecast errors on prices and production along with information on production impediments to construct a shock series capturing input material constraints. Our approach allows to separately identify periods of tightening and easing material supply shocks. We find that both types of shocks have different implications for economic activity: tightening shocks instantaneously push prices up whereas an easing of material constraints instantaneously boosts production and triggers a more sluggish response of prices. Decomposing the instrument into its individual components allows to contrast the response to input material shocks to any other generic supply shock. We also show that the construction of the instrument is robust to variations in the underlying identification assumptions at the micro-level. |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ifowps:_418 |
| By: | Trevor Incerti |
| Abstract: | A growing literature finds high returns to firms with legislative connections. Less attention has been paid to returns from bureaucratic connections and to organizations beyond for-profit firms. Using data recording the first post-bureaucracy position occupied by all former civil servants in Japan, I reveal a bifurcated job market for former bureaucrats. High-ranking officials from elite economic ministries are more likely to join for-profit firms, where they generate returns such as increased government loans and positive stock market reactions. Lower-ranking officials are more likely to join nonprofits linked to government ministries, which receive higher-value contracts when former bureaucrats are in leadership roles. These patterns suggest that while firms wish to hire bureaucrats who can deliver tangible benefits, ministries also shape revolving door pathways by directing benefits to ensure long-term career value for civil servants. These findings reframe revolving door dynamics as the result of both firm-driven demand and bureaucratic incentives. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.22173 |
| By: | Leila Agha; Na'ama Shenhav; Myles Wagner |
| Abstract: | Work disruptions among women are common and costly for workers and firms, but do consumers also shoulder some of these costs? We study the impact of physicians’ births—a large, temporary shock to women’s labor supply—on their patients’ access to care, using administrative Medicaid claims data from California. Female physicians reduce their office visits by 85% in the quarter after giving birth, but return nearly to pre-birth levels within two years. These supply disruptions generate persistent effects on child patients: those whose primary care physician gives birth are less likely to see their usual physician for up to two years and receive less preventative care, including a 50% reduction in vaccination claims and a 42% reduction in lead testing. In contrast, we find little impact on adult patients. The lasting effects on children coincide with fewer pediatrician encounters overall, consistent with limited availability of substitute providers and the central role of pediatricians in monitoring children’s preventative care. Our findings demonstrate how shocks to women’s labor supply can generate persistent consumer welfare losses. |
| JEL: | I10 I30 J16 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34360 |
| By: | Sahab Zandi; Kamesh Korangi; Juan C. Moreno-Paredes; Mar\'ia \'Oskarsd\'ottir; Christophe Mues; Cristi\'an Bravo |
| Abstract: | Small and Medium-sized Enterprises (SMEs) are known to play a vital role in economic growth, employment, and innovation. However, they tend to face significant challenges in accessing credit due to limited financial histories, collateral constraints, and exposure to macroeconomic shocks. These challenges make an accurate credit risk assessment by lenders crucial, particularly since SMEs frequently operate within interconnected firm networks through which default risk can propagate. This paper presents and tests a novel approach for modelling the risk of SME credit, using a unique large data set of SME loans provided by a prominent financial institution. Specifically, our approach employs Graph Neural Networks to predict SME default using multilayer network data derived from common ownership and financial transactions between firms. We show that combining this information with traditional structured data not only improves application scoring performance, but also explicitly models contagion risk between companies. Further analysis shows how the directionality and intensity of these connections influence financial risk contagion, offering a deeper understanding of the underlying processes. Our findings highlight the predictive power of network data, as well as the role of supply chain networks in exposing SMEs to correlated default risk. |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2510.09407 |
| By: | Gabriele Ciminelli (Asian Development Bank); Guido Franco (Centro Studi Confindustria) |
| Abstract: | This paper investigates the impact of job protection deregulation on firms’ productivity, leveraging a size-based cutoff in the eligibility criteria of a pivotal 2014 labor market reform in Italy. The reform replaced reinstatement requirements with a progressive compensation system for unjust dismissals of new hires in firms with more than 15 employees, while leaving smaller firms unaffected. We find that total factor productivity increased by 1% in treated firms relative to control firms, on average, in each of the 5 years following the reform’s implementation. Labor productivity gains were slightly larger, also driven by capital deepening. Next, we extend the analysis to uncover how the productivity gains were distributed between employers and workers. Capital owners benefited more, as the reform led to a gradual decline in the labor share of value added, reaching 0.7 percentage points after 5 years. |
| Keywords: | employment protection legislation;job protection deregulation;total factor productivity;capital deepening;income distribution;labor share of income |
| JEL: | D22 D24 J08 J41 O43 |
| Date: | 2025–10–13 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:021674 |
| By: | Treb Allen; Winston Chen; Suresh Naidu |
| Abstract: | What would the antebellum American economy have looked like without slavery? Using new micro-data on the U.S. economy in 1860, we document that where free and enslaved workers live and how much they earn correlates strongly—but differently—with geographic proxies for agricultural productivity, disease, and ease of slave escape. To explain these patterns, we build a quantitative spatial model of slavery, where slaveholders coerce enslaved workers into supplying more labor, capture the proceeds of their labor, and assign them to sectors and occupations that maximize owner profits rather than worker welfare. Combining theory and data, we then quantify how dismantling the institution of slavery affected the spatial economy. We find that the economic impacts of emancipation are substantial, generating welfare gains for the enslaved of roughly 1, 200%, while reducing welfare of free workers by 0.7% and eliminating slaveholder profit. Aggregate GDP rises by 9.1%, with a contraction in agricultural productivity counteracted by an expansion in manufacturing and services driven by an exodus of formerly enslaved workers out of agriculture and into the U.S. North. |
| JEL: | J47 N51 O17 R1 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34356 |