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on Business Economics |
| By: | Garbers, Julio (LISER); Gregory, Terry (LISER) |
| Abstract: | We develop a novel firm-level indicator of Artificial Intelligence adoption in Europe (MAP-AI) by extracting information from more than three million firm websites in Belgium, France, Germany, and Luxembourg between 2016 and 2024 using a Large Language Model. The indicator captures realized AI use as publicly signaled by firms, rather than potential exposure, and distinguishes firms by their role in the AI ecosystem and the type of AI technologies employed. Validation against human-coded benchmarks and external data confirms high accuracy. We show that the share of AI-active firms increased from 1% in 2016 to 12% in 2024, with a marked acceleration after 2022. This growth reflects a structural shift toward widespread adoption and more integrated AI use, including generative AI. AI adoption is concentrated among larger, younger, knowledge-intensive firms in urban regions, with workforce skills emerging as a key driver. Foundational data skills are necessary for adoption, while specialized AI skills—such as machine learning and natural language processing—act as strong complements, highlighting the central role of human capital in AI diffusion. |
| Keywords: | Artificial Intelligence, firm-level data, Large Language Models, AI diffusion, human capital, skills |
| JEL: | O33 C81 L25 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18434 |
| By: | Carsten Eckel; Lisandra Flach; Ning Meng |
| Abstract: | Products produced by multiproduct firms can be linked through demand linkages (cannibalization), supply linkages (joint production), or both. We analyze how these within-firm linkages shape the propagation of shocks - such as tariffs - across products and markets and affect firm performance through changes in markups and marginal costs. Exploiting antidumping duties as firm-product-market specific shocks, we provide evidence of both types of linkages and quantify their relative importance. On average, two-thirds of within-firm linkages arise from demand linkages and one-third from supply linkages, with substantial heterogeneity across industries. We further estimate their effects on markups and marginal costs, showing that roughly 80% of the adjustment occurs through marginal costs and 20% through markups. Our findings indicate that disregarding either type of linkage can lead to sizable misestimations of markups and pass-through rates. |
| Keywords: | multiproduct firms, cannibalization effect, joint production, demand linkages, supply linkages, antidumping duties, markups, marginal costs |
| JEL: | D21 D22 D24 F12 F13 F14 L11 L25 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12530 |
| By: | Ignacio Banares-Sanchez; Robin Burgess; Dávid László; Pol Simpson; John Van Reenen; Yifan Wang |
| Abstract: | Do industrial policies that promote clean energy offer a “ray of hope”, increasing a country’s growth and welfare, whilst simultaneously reducing carbon emissions? We study the impact of Chinese solar subsidies whose implementation by city-regions went alongside massive expansion of the sector and a dramatic fall in global solar prices. We construct new city and firm panel data on solar policies, patenting and output. Using synthetic-difference-in-differences 2004-2020, we find production and innovation subsidies were more effective than demand-side (installation) subsidies in generating large and persistent increases in local innovation, net entry, production and exports. Demand policies did, however, reduce local pollution. To examine aggregate effects, we build and structurally estimate a quantitative spatial model with endogenous innovation and heterogeneous productivity across firms and cities, which accounts for business stealing and knowledge spillovers. Counterfactual analysis shows that: (i) local effects remain substantial at the macro level explaining 40%-50% of the aggregate changes in solar innovation, prices and revenues; (ii) social benefits to Chinese citizens exceed subsidy costs by 65% (and double this when environmental benefits are included); and (iii) although all subsidy types increase welfare, innovation subsidies are the most cost-effective. |
| JEL: | H25 L25 L5 L52 N5 O31 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34893 |
| By: | Jongkwan Lee; Giovanni Peri; Hee-Seung Yang |
| Abstract: | As workforces in high-income countries age and shrink, immigrants increasingly fill entry-level, low-skilled jobs. We examine what happens when this labor supply is abruptly reduced, exploiting South Korea’s sudden suspension of its low-skilled guest worker program following the 2020 COVID-19 border closure. Using policy-driven variation in firms’ pre-pandemic reliance on immigrant labor, we show that the collapse in inflows led to a significant increase in firm exit. Among surviving firms, greater pre-pandemic dependence on immigrant workers resulted in production disruptions and operational delays. Firms did not respond by expanding domestic hiring to replace missing guest workers. Instead, they adjusted by reallocating incumbent Korean employees toward lower-skilled tasks, contributing to occupational downgrading and significant wage declines. These findings suggest that low-skilled immigrant workers were not easily substitutable in the short run and that tighter immigration constraints can impose substantial adjustment costs on both firms and native workers. |
| JEL: | J60 J68 L25 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34927 |
| By: | Kavitha Nambiar (Ph.D Student, Madras School of Economics); Ekta Selarka ((Corresponding author), Madras School of Economics, Gandhi Mandapam Road, Behind Government Data Centre, Kotturpuram, Chennai, 600025) |
| Abstract: | This study examines the relationship between network centrality of women directors in Indian boards on their corporate social responsibility (CSR). While existing research primarily focuses on board gender diversity, we argue that the ability of women directors to affect firm decisions also depends on how well connected these directors are. Using the enforcement of mandatory CSR as a natural experiment on a sample of non-financial firms listed on the National Stock Exchange (NSE) in India during 2016-2023 we find that firms with higher women directors centrality exhibit higher CSR spending, stronger compliance with the CSR mandate and a greater likelihood of spending above their industry peers. The effects were stronger among firms that engage in CSR consistently and was also robust across alternative measures of network centrality and alternative specifications to address the endogeneity. Our findings contributed to the literature on gender diversity and CSR, by indicating that the network centrality constitute an important mechanism through which women directors influence CSR outcomes. |
| Keywords: | Women directors, Board networks, Corporate social responsibility, Board diversity |
| JEL: | G34 M14 D85 J16 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:mad:wpaper:2026-296 |
| By: | Burkart, Mike; Lee, Samuel; Petri, Henrik |
| Abstract: | We study the structure of public firm buyouts in a model that features the Berle-Means problem (lack of incentives) and the Grossman-Hart problem (holdout). We find that bootstrapping, debt in excess of funding needs, and upfront fees to bidders are socially optimal and increase buyout premiums. These elements make LBO financing tantamount to a “management contract” arranged by an outside manager to receive cash and incentives to manage a firm—except the cash is funded by excess debt imposed on the firm. Our model also rationalizes why PE firms collect fees from their equity partnerships and directly from target firms. |
| JEL: | G34 G32 |
| Date: | 2026–01–29 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129543 |
| By: | Stéphane Auray; Michael B. Devereux; Aurélien Eyquem |
| Abstract: | Can protectionism revive domestic production, slow automation, and help routine workers? We address this question in a dynamic open-economy model with heterogeneous firms, endogenous entry, and task-based production in which routine tasks can be performed by workers or robots. Import tariffs reallocate demand toward domestic goods, reshape markups and entry incentives, and generate fiscal revenues rebated to households. As a result, tariffs raise GDP and consumption measured at market prices and temporarily slow automation, even though intermediate output at factor prices and trade volumes decline. The gains are unevenly distributed: routine workers benefit robustly through transfers and reduced training, non-routine workers face opposing wage and rebate effects, and firm owners gain in aggregate as higher domestic demand and entry expand total profits despite lower per-firm values. Aggregate welfare gains hinge critically on key assumptions (automation, training, endogenous entry) and on how tariff revenues are rebated. In the baseline with uniform transfers, the welfare-maximizing tariff lies below the classical monopoly formula, while alternative rebate schemes can shift it substantially. Overall, the results caution against viewing tariffs as a simple tool for reindustrialization and highlight the role of technology adoption and fiscal incidence in evaluating protectionist policies. |
| JEL: | F30 F40 F41 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34935 |
| By: | Yan Bai; Dan Lu; Xu Tian; Yajie Wang |
| Abstract: | This paper reassesses the role of financial frictions in capital misallocation through a model disciplined by both firm-level borrowing costs and the average revenue product of capital (ARPK). Using Chinese manufacturing data, we document substantial dispersion in ARPK, alongside a strong positive relationship between ARPK and the borrowing costs firms face---patterns absent in U.S. data. We develop a heterogeneous-firm model with endogenous firm-specific borrowing costs and additional capital distortions modeled as exogenous wedges. In this model, eliminating financial frictions raises total factor productivity (TFP) by 25 percentage points. In contrast, without other capital distortions, removing financial frictions increases TFP by less than 2 percentage points. The stark difference arises from the interaction between financial frictions and permanent firm-level distortions, which generate endogenous financial heterogeneity and selection, making productive firms the most constrained. Our findings suggest that financial frictions can be highly distortionary when other sources of misallocation are present. |
| JEL: | E2 F3 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34930 |
| By: | Jongkwan Lee; Seoyoung Kwon; Joan Monràs |
| Abstract: | High-skilled migration programs exist around the world in the hope that immigrants complement native workers, allow firms to grow, and boost innovation. We study the effect of one such program by exploiting the 2016 extension of the Optional Practical Training (OPT) program, which significantly prolonged the work authorization period for international STEM graduates. Using a synthetic difference-in-differences approach, we find that the policy successfully increased the local supply of high-skilled immigrants in exposed Commuting Zones. This local inflow stimulated firm creation and the demand for native high-skilled workers. The program might have also boosted innovation in certain sectors and startup investment, especially in Commuting Zones hosting top-ranked universities, where, overall, the effects tend to be larger. |
| Keywords: | firm dynamics, high-skilled migration, immigration, Labor demand |
| JEL: | F22 J31 J61 R11 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:bge:wpaper:1564 |
| By: | Francesca de Nicola; Alexandros Ragoussis; Tim Schmidt-Eisenlohr; Trang Thu Tran |
| Abstract: | Letters of credit are a key trade finance instrument that covers more than 10 percent of global trade, with a notably larger role in low-and middle-income economies. Studying detailed trade data from Viet Nam, we document how letter of credit use varies with firm characteristics. We show that the probability of using a letter of credit is systematically lower for younger, smaller, and foreign-owned trading firms. Importers that are less diversified or have less trading experience are more likely to use letters of credit. Firm characteristics have the strongest effects in markets where information is scarce and enforcement is weak. These patterns are consistent with a model in which the ability to screen trading partners and the cost of bank intermediation vary with firm characteristics, and where a firm’s screening ability and country institutions are substitutes. Any policy or intervention that aims at increasing the use of bank-intermediated trade finance will therefore need to take firm heterogeneity into account. |
| Keywords: | international trade, trade finance, letter-of-credit, firms, development |
| JEL: | F14 F34 O16 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12524 |
| By: | Yixuan Liu; Hua Zhang; Eric Zou |
| Abstract: | Prepaid consumption is a common feature of modern consumer markets and is often presented as a mutually beneficial arrangement: consumers receive upfront discounts, and firms secure future sales. We analyze a large-scale Pay Now, Buy Later (PNBL) program in which consumers prepay for restaurant credit with bonuses, and spend the balance later. Using detailed transaction data from over 4 million consumers, we document widespread balance breakage: approximately 40% of prepaid value is never used. Because many consumers underutilize their balances, merchants recover significantly more than the bonus cost. The median firm earns roughly $5.5 in breakage profit for every $1 of bonus credit issued. While PNBL participation does lead to modest increases in consumer spending over time, firms gain substantially more from breakage than from any loyalty-driven revenue. These findings challenge the prevailing win–win narrative: PNBL schemes often result in a significant transfer from consumers to firms. We develop a stylized contract model to illustrate the misaligned incentives firms face, and show through counterfactual analysis that a simple escrow policy with an appropriately chosen deposit requirement can realign firm incentives and generate more consumer-serving outcomes. |
| JEL: | D12 D90 G23 G41 K20 L14 L81 M31 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34918 |
| By: | Masashige HAMANO; Kongphop WONGKAEW; Yuki MURAKAMI; Toshihiro OKUBO |
| Abstract: | This paper studies the link between product-level dynamics and macroeconomic fluctuations using rich census data from Kobe covering the period 1992-2013. The dataset includes two major disruptions—the 1995 Kobe earthquake and the 2008 global financial crisis—and provides annual information for more than 1, 000 six-digit product categories. To isolate the effects of the earthquake, we construct counterfactual cities, such as Nagoya. We estimate a multi-product firm DSGE model using maximum likelihood with a computationally robust estimation strategy. The results reveal substantial heterogeneity in product-level responses to shocks, with important implications for aggregate dynamics, the propagation of large disasters, and the role of product-specific characteristics in shaping macroeconomic resilience. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:26019 |
| By: | Fisman, Raymond; Guriev, Sergei; Ioramashvili, Carolin; Plekhanov, Alexander |
| Abstract: | We empirically investigate the relationship between corruption and growth using a firm-level dataset that is unique in scale, covering almost 88, 000 firms across 141 economies in 2006–20, with wide-ranging corruption experiences. The scale and detail of our data allow us to explore the corruption-growth relationship at a very local level, within industries in a relatively narrow geography. We report three empirical regularities. First, firms that make zero informal payments tend to grow slower than bribers. Second, this result is driven by non-bribers in high-corruption countries. Third, among bribers, growth is decreasing in the amount of informal payments—in both high- and low-corruption countries. We suggest that this set of results may be reconciled with a simple model in which endogenously determined higher bribe rates lead to lower growth, while non-bribers are often excluded entirely from growth opportunities in high-corruption settings. |
| JEL: | D20 O12 |
| Date: | 2024–05–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:123951 |
| 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: | HIGHLIGHTS ‣ Technological mergers and acquisitions (M&As) increase investors' market power by around 2% beyond standard M&As, with stronger effects concentrated among top R&D investors, US-based investors, and high-tech manufacturing investors. ‣ The increase in market power seems primarily driven by the consolidation of control over existing patents, limiting knowledge diffusion and making it harder for competitors to catch up. ‣ These findings support ongoing policy discussions on updating merger review regulations, as traditional concentration metrics may not fully capture competition risks posed by large technology firms. ‣ Technological assets and innovations are often embedded and masked within larger M&A deals. Separating the technology component of patents would allow regulators to assess competition concerns related to innovation while still allowing the acquisition to proceed. ‣ The analysis draws on a newly constructed firm-level dataset to provide a more systematic picture of technological M&As and market power. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc145729 |
| By: | Claudio Agostini; Zareh Asatryan; Laurent Bach; Govindadeva Bernier; Marinho Bertanha; Katarzyna A. Bilicka; Anne Brockmeyer; Jaroslav Bukovina; Guillermo Falcone; Pablo Garriga; Yuxuan He; Petr Janský; Evangelos Koumanakos; Tomáš Lichard; Tomás Martins; Ján Palguta; Elena Patel; João Pereira dos Santos; Louis Perrault; Thomas Schwab; Nathan Seegert; Oliver Škultéty; Kristina Strohmaier; Maximilian Todtenhaupt; Guillermo Vuletin; Branislav Žúdel |
| Abstract: | Do firms respond similarly to corporate tax incentives across countries? We provide globally comparable estimates of the corporate elasticity of taxable income using administrative tax return data from sixteen countries and a unified empirical framework. Exploiting bunching at a common kink, zero taxable income, we estimate elasticities ranging from 0.08 to 1.9, with an average of 0.79. To explain this heterogeneity, we link elasticities to tax policy, firm characteristics, and country fundamentals. These differences imply that identical corporate tax reforms can generate sharply different revenue effects across countries, leading to substantial heterogeneity in the efficiency costs of corporate taxation. |
| JEL: | C14 H25 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34945 |
| By: | Kevin Parra Ramirez (Sciences-Po, Banque de France); Vincent Vicard (CEPII) |
| Abstract: | While multinational enterprises (MNEs) shift hundreds of billions in profits to low-tax jurisdictions annually, how they do remains disputed. Using firm-level data for France in 2018, we provide the first joint quantification of the three main profit-shifting channels: transfer mispricing in goods trade, intangible assets and services traded with tax havens, and intra-firm debt. We find empirical evidence for all three instruments, but transfer mispricing dominates quantitatively (€10 billion, 0.4% of GDP), followed by services (up to €6 billion) and debt (€2 billion). Although significant, these direct estimates account for half of total missing profits in France, as estimated indirectly from the location of MNE profits. We document two key blind spots likely to close this gap: cross-border digital payments by households and understudied debt instruments (e.g., securities). |
| Keywords: | Tax avoidance, Multinational firms, Profit shifting, FDI, Trade |
| JEL: | H26 H25 H32 F14 F23 |
| Date: | 2026–01 |
| URL: | https://d.repec.org/n?u=RePEc:dbp:wpaper:043 |
| By: | Cevat Giray Aksoy; Jose Maria Barrero; Nicholas Bloom; Katelyn Cranney; Steven J. Davis; Mathias Dolls; Pablo Zarate |
| Abstract: | We investigate how fertility relates to work from home (WFH) in the post-pandemic era, drawing on original data from our Global Survey of Working Arrangements and U.S. Survey of Working Arrangements and Attitudes. Realized fertility from 2023 to 2025 and future planned fertility are higher among adults who WFH at least one day a week and, for couples, higher yet when both partners do so. Estimated lifetime fertility is greater by 0.32 children per woman when both partners WFH one or more days per week as compared to the case where neither does. The implications for national fertility rates differ across countries due mainly to large differences in WFH rates. In a complementary analysis using other U.S. data before and after the pandemic, one-year fertility rates rise with WFH opportunities in one’s own occupation and, for couples, in the partner’s occupation. |
| Keywords: | remote work, fertility and fertility intentions, global survey, working arrangements |
| JEL: | J13 J22 D13 C83 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12533 |