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on Business Economics |
| By: | Salomé Baslandze; Zachary Edwards; John Graham; Ty McClure; Brent H. Meyer; Michael Sparks; Sonya R. Waddell; Daniel Weitz |
| Abstract: | We use novel data from a survey of nearly 750 corporate executives to study the effects of artificial intelligence (AI) on productivity and the workforce. We document substantial heterogeneity in AI adoption across firms, with more than half having already invested, though many smaller firms are only beginning to do so. Labor productivity gains are positive, vary across sectors, and are expected to strengthen in 2026, with the largest effects concentrated in high-skill services and finance. These gains are not primarily driven by firms' capital deepening but instead reflect increases in revenue-based total factor productivity, closely associated with innovation-and demand-oriented channels. We document a productivity paradox, in which perceived productivity gains are larger than measured productivity gains, likely reflecting a delay in revenue realizations. In labor markets, we find little evidence of near-term aggregate employment declines due to AI, though larger companies anticipate AI-driven workforce reductions, while smaller firms expect modest gains. We also find evidence of compositional reallocation of labor both within and across firms, with routine clerical roles declining and a relative demand for skilled technical roles increasing. We develop an index that ranks job functions most negatively affected by AI. |
| JEL: | D22 D24 G0 J01 J24 M15 O33 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34984 |
| By: | Michael Amior; Shmuel San |
| Abstract: | Firms face significant constraints in their ability to differentiate pay by worker productivity. We show how these internal equity constraints generate a quantity-quality trade-off in hiring: firms which offer higher wages attract higher skilled workers, but cannot profitably employ lower skilled workers. In equilibrium, this results in workplace segregation and pay dispersion even among ex-ante identical firms. Our framework provides a novel interpretation of the (empirically successful) log additive AKM wage model, and shows how log additivity can be reconciled with sorting of high-skilled workers to high-paying firms. It can also rationalize a hump-shaped relationship between firm size and firm pay, and provides new insights into aggregate-level, regional and sectoral variation in earnings inequality - which we explore using Israeli administrative data. |
| Keywords: | wages, productivity, labour, labor, skills |
| Date: | 2026–03–16 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2161 |
| By: | Geng, Heng (Griffin); Hau, Harald; Liu, Pengfei |
| Abstract: | Corporate Opportunity Waiver (COW) laws permit firms to suspend fiduciary duties related to corporate opportunities. Fich, Harford, and Tran (2023) argue that these laws reduced firm innovation and lowered corporate valuation for research-intensive firms. However, we find that over 90% of the regressions we re-examine are non-replicable using correct samples and specifications. We further show that the reported decline in Tobin's q is confounded by the effects of the dot-com bubble burst. Moreover, public firms subject to COWs reduce takeover defenses, contradicting their argument that COW laws weaken corporate governance. Overall, their conclusion that COW laws foster managerial disloyalty and harm shareholder value is not supported by the data. |
| Keywords: | COW laws, fiduciary duties, shareholder value, innovation |
| JEL: | G34 G38 O34 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:i4rdps:285 |
| By: | Simon Cordes; Max Müller |
| Abstract: | Labor supply depends on wages and amenities, and standard models implicitly assume that firms hold accurate beliefs about workers’ amenity valuations. In a survey with firms and workers in Germany, we measure workers’ valuations of amenities and firms’ beliefs about workers’ valuations. We find that firms systematically underestimate workers’ valuations of all amenities. These misperceptions are driven by interpersonal projection: managers project their own preferences—they value amenities less—onto workers. Through the lens of a simple model of imperfect competition, we show that firm misperceptions result in (i) labor shortages and (ii) excess labor costs for biased firms, and increase the market power of unbiased firms. Empirical tests confirm these predictions: a simple calibration suggests that non-providing firms could reduce their labor costs by 5% by providing amenities. |
| Keywords: | Amenities, Behavioral Firms, Labor Shortages, Work from Home, Beliefs |
| JEL: | J32 J42 J81 D2 D83 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2025_739 |
| By: | Gonzalo E. Basante Pereira; Ina Simonovska |
| Abstract: | We develop a framework to measure the severity of financial constraints for young firms across countries. Using ORBIS balance-sheet data for 23 economies, we show that short-term leverage rises while long-term leverage falls early in firms’ life cycles, with this pattern persisting longer where contract enforcement is weaker. We build a model of optimal financing under limited enforcement with endogenous debt maturity and blueprint capacity that matches these patterns and enables structural measurement of financial constraints. The framework decomposes the funding gap into within-firm borrowing constraints that ease with repayment history and a scale distortion identifiable through cross-country comparisons. |
| JEL: | F34 G15 G3 G33 O43 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34985 |
| By: | Cristina Gualdani; Elena Pastorino; Áureo de Paula; Sergio Salgado |
| Abstract: | We examine the empirical content of a large class of dynamic matching models of the labor market with ex-ante heterogeneous firms and workers, symmetric uncertainty and learning about workers’ productivity, and firms’ monopsony power. We allow workers’ human capital, acquired before and after entry into the labor market, to be general across firms to varying degrees. Such a framework nests and extends known models of worker turnover across firms, occupational choice, wage growth, wage differentials across occupations, firms, and industries, and wage dispersion across workers and over the life cycle. We establish intuitive conditions under which the model primitives are semiparametrically identified solely from data on workers’ wages and jobs, despite the dynamics of these models giving rise to complex patterns of selection based on endogenously time-varying observable and unobservable characteristics of workers and firms. By relying on this identification argument, we develop a constructive estimator of the model primitives, which builds on common methods for mixture and extremal quantile regression models and displays standard properties. Through the lens of this framework, we investigate how well typical empirical wage measures of matching assortativeness and firms’ wage-setting power detect the degrees of sorting and monopsony power in the labor market, respectively. We show that usual measures of sorting severely understate its importance because they ignore the option value of worker human capital and the information about worker productivity acquired through employment, in terms of higher future wages and improved future sorting, which is priced into current wages thus depressing them. We also demonstrate how the markdown of wages relative to output largely overstates firms’ labor market power by ignoring that this option value, which captures future returns from acquired human capital and information, generally lowers wages. We find evidence of both of these features in U.S. data by documenting a strong degree of labor market sorting once appropriately measured and, correspondingly, a lower degree of firm monopsony power than typically documented. |
| JEL: | E20 H0 J31 J42 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34973 |
| By: | Sarah Flèche (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEP - LSE - Centre for Economic Performance - LSE - London School of Economics and Political Science); Eva Moreno‐galbis (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique); Ariell Reshef (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Claudia Senik (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris) |
| Abstract: | We study how the widespread diffusion of ICT affects wages, working conditions, and job satisfaction. We frame our empirical investigation with a model in which ICT can improve both wages and working conditions by increasing firms' output. Using French matched employer-employee data and an instrumental variable approach that is motivated by the model, we find that ICT diffusion in 2013-2019 has been beneficial to workers, who experienced both higher wages and better working conditions, particularly through greater flexibility, physical comfort, and safety. In contrast, ICT use has also increased psychological stress and work intensity. These effects vary across workers, firms, occupations and sectors, depending on their characteristics. Despite overall improvements in wages and working conditions, we estimate only modest positive effects of ICT use on job satisfaction. We discuss potential explanations for this finding. |
| Keywords: | ICT diffusion, Wages, Working conditions, Job satisfaction |
| Date: | 2026–03–07 |
| URL: | https://d.repec.org/n?u=RePEc:hal:cesptp:hal-05538315 |
| By: | Antoine Mandel; Vipin P. Veetil |
| Abstract: | We study how idiosyncratic firm-level shocks generate aggregate volatility and tail risk when they propagate through a production network under overlapping adjustment: new productivity draws arrive before the economy reaches the static equilibrium associated with earlier draws. Each innovation generates a `productivity wave' that mixes and dissipates over time as it travels through the production network. Macroeconomic fluctuations emerge from the interference between these waves of different vintages. The interference between these waves is governed by the dominant transient eigenvalue of the production network, and therefore so is the macroeconomic fluctuations they generate. In such a dynamic regime, the tail of the degree distribution is a markedly weaker determinant of macro fluctuations than in the fully adjusted static benchmark. And the macroeconomic significance of the degree-heterogeneity of production networks cannot be known without knowing the rate at which the economy converges to equilibrium or equivalently the spectral properties of the production network. More concretely, once we permit the time-averaging of shocks, granular shocks may account for only a small fraction of the empirically observed aggregate volatility. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2603.05367 |
| By: | Masataka Eguchi; Takayuki Tsuruga; Mai Yamada |
| Abstract: | In the photo film market of the 2000s, Kodak's failure to sufficiently reduce production in response to market shrinkage has become a canonical example of how firms fail to adjust to market shrinkage. This seemingly optimistic response contrasts sharply with Fujifilm's response, which ultimately led it to exit the market successfully. To account for these contrasting cases, we incorporate the sparsity-based model of \citet{gabaix2014sparsity} into a textbook Cournot model in which firms are inattentive to changes in market size. We show that such inattention leads firms to respond optimistically to market shrinkage relative to the full-attention benchmark. We also show that a firm may respond pessimistically when its competitor is substantially inattentive. These results help explain Kodak's slow response and Fujifilm's relatively rapid adjustment to market shrinkage. Finally, we develop a model with endogenous attention choice, in which heterogeneity in forecast horizons and/or production cost structures generates heterogeneity in attention, a key driver of our results. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:dpr:wpaper:1307 |
| By: | Dubey, Rohan (National Institute of Public Finance and Policy); Chakraborty, Lekha (National Institute of Public Finance and Policy) |
| Abstract: | The rapid diffusion of artificial intelligence (AI) has generated widespread expectations of substantial productivity gains, yet empirical evidence on its macroeconomic effects remains limited. This paper provides across-country empirical assessment of the relationship between AI adoption and labour productivity using a newly constructed panel dataset covering G20 over the period 2012–2023. We develop two composite indices of AI adoption that capture both relative cross-country positioning and within-country evolution overtime, drawing on indicators of investment, innovation, computational capacity, and scientific output. Employing panel regressions with country and time fixed effects and a rich set of macroeconomic controls, we find evidence of a statistically significant short-run effect of AI diffusion on aggregate labour productivity. These results are robust across alternative index constructions and model specifications. We then extend our analysis to human development indicators and find that AI diffusion is positively associated with UNDP the Human Development Index (HDI). At the sametime, the magnitude and dynamics of the estimated effects suggest that productivity gains from AI are likely to materialize gradually and depend on complementary investments and structural conditions. Beyond the regression results, the indices developed in this paper provide a transparent framework for tracking AI diffusion and identifying areas of AI preparedness and technological lag, offering useful insights for future research and policy design. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:npf:wpaper:26/445 |
| By: | Joel P. Flynn (Yale University); George Nikolakoudis (Yale University); Karthik A. Sastry (Princeton University) |
| Abstract: | Modern theories of the business cycle do not allow for the simultaneous rational choice of both prices and quantities, instead assuming that an Òinvisible handÓ determines one of these variables to clear markets. In this paper, we develop a macroeconomic framework in which both prices and quantities are chosen directly by firms, and exchange is both voluntary and efficient. Because of uncertainty about demand and productivity, individual product markets can be in excess supply or rationed. The absence of market-clearing changes pricing and production in qualitatively important ways: markups are no longer determined solely by the elasticity of demand, and higher uncertainty reduces production and increases markups. |
| Date: | 2026–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2501 |
| By: | Andrew Rhodes (Toulouse School of Economics); Jidong Zhou (Yale University); Junjie Zhou (Tsinghua University) |
| Abstract: | This paper develops a framework in which a multiproduct ecosystem competes with multiple single-product firms in both price and innovation. The ecosystem can use data from one product to improve the quality of its other products. We use the framework to study three regulatory policies aimed at leveling the playing field. Restricting the ecosystem's cross-product data usage, or forcing it to share data with single-product firms, benefits those firms and induces them to innovate more. However, these policies also dampen the ecosystem's incentive to collect data and innovate, potentially raising prices. Consumers are better off only when single-product firms are sufficiently good at innovating. Facilitating data exchange between single-product firms via a data cooperative can backfire and harm them, because it induces the ecosystem to price more aggressively. For both the data-sharing and data-cooperative policies, there exist data-compensation schemes such that consumers are better off compared to no regulation. |
| Date: | 2026–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:cwl:cwldpp:2426r1 |
| By: | Rita Pető (HUN-REN Centre for Economic and Regional Studies) |
| Abstract: | This paper examines how foreign direct investment (FDI) influences the gender wage gap, using matched employer-employee data from Hungary between 2003 and 2017. I find that foreign-owned firms exhibit a 4 percentage points larger within-firm gender wage gap compared to domestic firms, even after accounting for worker- and firm-level selection. This gap persists even after foreign capital withdraws, suggesting a lasting structural imprint. Furthermore, the results highlight the role of cultural norms: subsidiaries of companies from countries with more favorable economic opportunities for women show significantly smaller gender disparities. Greater wage-setting flexibility is also associated with a wider gender wage gap, especially among new hires. Overall, the study demonstrates that foreign ownership not only affects wage structures through economic channels but also transmits cultural norms that shape gender inequality in the labor market. |
| Keywords: | gender inequality, wage inequality, foreign-owned firms |
| JEL: | J16 J31 M52 F23 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:has:discpr:2509 |
| By: | Márta Bisztray (ELTE Centre for Economic and Regional Studies); Gábor Békés (CEU; ELTE Centre for Economic and Regional Studies; CEPR); Alexandros Charos (WIFO); Klaus Friesenbichler (WIFO; ASCII); Miklós Koren (CEU; ELTE Centre for Economic and Regional Studies; CEPR; CESifo); Agnes Kügler (WIFO; ASCII); Balázs Lengyel (ELTE Centre for Economic and Regional Studies; Corvinus University Budapest); Amanda De Pirro (USI); Birgit Meyer (WIFO; ASCII) |
| Abstract: | Recent events have posed considerable challenges to supply chain, as demonstrated by trade data. Yet, firm-level information on the recent challenges remains scarce. The Supply Chain Disruption Survey addresses this gap by generating insights into firms’ experiences and expectations regarding their supplier relationships, with a special focus on the role of intangibles and changes over time. Conducted as part of the RETHINK-GSC Horizon research project, the survey was carried out in Austria, Denmark, Germany, and Hungary between mid-2023 and spring 2024. The survey focused on medium-sized and large firms operating in various manufacturing industries. This paper has two main objectives: first, it provides information about the survey's background, design, questionnaire, and implementation; and second, it presents the key patterns visible in the survey. The results indicate that sourcing remains anchored in Europe but is diversified. Experiencing disruption was nearly universal between 2020 and 2023, mostly due to COVID-19, but also due to the war in Ukraine and trade policy changes. Despite the perception of the disruptions being of temporary nature, the anticipation of risk increased. Firms adopted different risk mitigation strategies, including diversifying their supplier portfolio and information sharing with suppliers. |
| Keywords: | survey, questionnaire, supply chain, empirical research |
| JEL: | F14 D22 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:has:discpr:2517 |
| By: | Wang, Jiayi; Qi, Zhengling; Shi, Chengchun |
| Abstract: | As AI becomes more prevalent throughout society, effective methods of integrating humans and AI systems that leverage their respective strengths and mitigate risk have become an important priority. In this paper, we introduce the paradigm of super policy learning that takes advantage of Human-AI interaction for data driven sequential decision making. This approach utilizes the observed action, either from AI or humans, as input for achieving a stronger oracle in policy learning for the decision maker (humans or AI). In the decision process with unmeasured confounding, the actions taken by past agents can offer valuable insights into undisclosed information. By including this information for the policy search in a novel and legitimate manner, the proposed super policy learning will yield a super-policy that is guaranteed to outperform both the standard optimal policy and the behavior one (e.g., past agents’ actions). We call this stronger oracle a blessing from human-AI interaction. Furthermore, to address the issue of unmeasured confounding in finding super-policies using the batch data, a number of nonparametric and causal identifications are established under the framework of proximal causal inference. Building upon on these novel identification results, we develop several super-policy learning algorithms and systematically study their theoretical properties such as finite-sample regret guarantee. Finally, we illustrate the effectiveness of our proposal through extensive simulations and real-world applications. |
| Keywords: | finite-sample regret bound; Human–AI interaction; nonparametric identification; policy learning; unmeasured confounding |
| JEL: | C1 |
| Date: | 2026–03–16 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:130007 |
| By: | Melecky, Martin; Ruiz Ortega, Claudia; Bizhan, Asset; Jambal, Ganbaatar |
| Abstract: | This paper evaluates the employment and sales effects of two widely used financial support instruments for small and medium-sized enterprises, interest rate subsidies and credit guarantees, using administrative program data from Kazakhstan matched to the universe of firms. Utilizing staggered intervention rollouts and a difference-in-differences design, the analysis reveals significant differences across program designs and local labor market conditions. Interest rate subsidies, despite their large fiscal costs, fail to improve firm performance: beneficiary firms experience a 10 percent decline in employment and no significant increase in sales. Fully subsidized credit guarantees show no discernible effects on sales or employment. By contrast, a market-aligned, fee-based partial credit guarantee that ensures lender and borrower risk-sharing increases employment by 24 percent and sales by 21 percent, with particularly stronger effects among women-led and formally incorporated businesses. These employment gains are substantially larger in regions with higher pre-program unemployment, suggesting that well-designed credit guarantees are more likely to generate net job creation in labor markets with greater slack, rather than merely reallocating workers across firms. Overall, the findings underscore the pivotal role of incentive-compatible program design and local labor market condit ions in determining the effectiveness of financial policies for small and medium-sized enterprises. |
| Date: | 2026–03–23 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11344 |
| By: | Maria Cecilia Bustamante; Bruno Pellegrino |
| Abstract: | We present a new dynamic model of corporate investment in imperfectly-competitive product markets, extending the neoclassical (Q) theory of capital to a multi-firm, multi-product, fully-structural model. Our model embeds a state-of-the-art hedonic demand system, endogenizes firms' markups and generalizes Tobin's Q to a matrix (or network) of product market spillovers, which captures how each firm's investment affects that of its rivals. We provide existence and uniqueness results along with exact, global analytical solutions for the Markov Perfect Equilibrium investment policies. We then take our model to the data for the universe of U.S. public companies and obtain five novel insights: 1) product market competition is a key force driving aggregate investment and capital allocation; 2) the persistence of firm's capital stocks increased over the past 25 years (i.e. capital became “stickier”); 3) monopoly rents account for a large, rising share of firms' value; 4) positive shocks to firms' cost of capital increase markups and concentration; 5) mergers consummated since 1995 have led to a modest decline in aggregate capital formation; at the firm-level the resulting increases in markups are highly heterogeneous. |
| Keywords: | networks, investment, product market |
| JEL: | C7 D2 E2 G3 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12548 |
| By: | Drydakis, Nick |
| Abstract: | Artificial intelligence (AI) is increasingly recognised as a key driver of business innovation, yet its adoption among small and medium-sized enterprises (SMEs) varies considerably. This study examines whether AI Capital, defined as AI-related knowledge, skills and capabilities, is associated with business innovation among SMEs in England. Using a two-wave longitudinal panel dataset comprising 504 observations from SMEs collected in 2024 and 2025, the study develops and validates a 45-item AI Capital of Business scale. Business innovation is measured across five dimensions: product and service innovation, process innovation, technology adoption, market and customer engagement, and organisational culture and strategy. Regression models, including pooled OLS, Random Effects, and Fixed Effects specifications, are employed. The findings reveal a robust positive association between AI Capital and business innovation across all model specifications. This association holds across all business innovation dimensions and remains consistent for SMEs with differing levels of financial performance, size, and operational maturity. Each component of AI Capital independently exhibits a positive association with business innovation outcomes. The results highlight the central role of AI Capital in enabling SMEs to translate AI adoption into tangible business innovation. From a policy perspective, the findings indicate the value of targeted interventions that prioritise AI upskilling, organisational capability development, and accessible support mechanisms to promote inclusive and sustainable AI-driven business innovation among SMEs. |
| Keywords: | Artificial Intelligence, Artificial Intelligence Capital, Business Innovation, Innovation, SMEs |
| JEL: | O31 O33 O32 L26 L25 M15 D83 J24 O14 O39 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1723 |
| By: | Cook, Elizabeth A.J.; Ambler, Kate; Hoffmann, Vivian; Otoigo, Lilian Kwamboka; Kiarie, Alice Njoki; Wagner, Julia |
| Abstract: | Weak enforcement of regulatory standards is widespread in low- and middle-income countries. Low firm capacity and standards inappropriate to local contexts imply that traditional punitive enforcement approaches may be counterproductive. We test the impact of a regulatory oversight intervention leveraging the soft power of meat inspectors in the context of 140 rural slaughterhouses in western Kenya. The intervention focused meat inspector attention on hygiene practices and was combined with training of workers and provision of basic equipment and supplies. Practices improved significantly relative to control facilities, but microbial contamination of meat did not. Outcomes were similar in a subset of treatment facilities where workers were additionally given a hygiene performance incentive. Higher volume of business in treatment facilities, which customers perceived as cleaner, suggests that retailers value less contaminated meat, but may counteract the effects of improved practices through cross-contamination and crowding. |
| Keywords: | training; regulations; food safety; monitoring; livestock; meat; abattoirs; workers; meat inspection; meat hygiene; vocational training; Kenya; Africa; Sub-Saharan Africa; Eastern Africa |
| Date: | 2025–12–19 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:gsspwp:179188 |
| By: | Tadashi ITO; Kiyoyasu TANAKA |
| Abstract: | This paper examines whether the EU’s 2022 embargo on Russian crude and refined oil unintentionally encouraged “oil laundering” through third‑country refiners. After the ban, Russian crude prices fell, creating strong incentives for countries such as China, India, Turkey, Singapore, and the UAE to purchase discounted Russian oil, refine it, and legally re‑export the resulting petroleum products to the EU. Using a gravity‑model framework and event‑study analysis, we show sharp and synchronized shifts in trade flows: Russian crude exports to laundromat countries surged dramatically after 2022, while EU imports of refined products from these same countries rose significantly in 2023 and 2024. These patterns suggest that Russian oil entered the EU indirectly through third‑country refining. China and India appear to be the primary intermediaries. In contrast, other sanctioning countries such as the U.S., Canada, Australia, and Japan show no similar increase, and EU members exempt from the embargo also display no laundering‑related import changes. |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:26024 |
| By: | Panle Jia Barwick; Hongyuan Xia; Tianli Xia |
| Abstract: | This paper examines China’s transition from pharmaceutical “free rider” to global innovator over the last decade. In 2010, China accounted for less than 8% of global clinical trials; by 2020, it had surpassed the US in annual registered clinical trial volume. To study this transformation, we compile a comprehensive, synchronized database spanning the pharmaceutical drug development supply chain, covering scientific publications, clinical trials, drug development milestones for China, the U.S., and Europe, alongside drug sales and government policies over the same period. We provide strong evidence that China’s rise was primarily driven by the National Reimbursement Drug List (NRDL) reform, which dramatically expanded the effective market size for innovative drugs. We document a sharp rise in both the quantity (86% increase) and novelty of drug trials post reform, with growth concentrated in reform-exposed disease categories, first- or best-in-class drugs, and among domestic firms. A decomposition exercise reveals that the NRDL reform accounts for 43% of the growth in oncology trial activity, nearly doubling the combined contribution of upstream knowledge accumulation and talent flows (24%), while other government policies play a minor role. Finally, dynamic gains from induced innovation exceed the reform’s static gains in consumer access to innovative drugs by threefold, underscoring the importance of accounting for the reform’s long-run effects on innovation incentives in addition to near-term improvements in drug affordability. |
| JEL: | I18 L65 O31 O38 |
| Date: | 2026–03 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34977 |
| By: | Lerner, Josh (Harvard University and NBER); Liu, Junxi (University of Warwick); Moscona, Jacob (MIT); Yang, David Y. (Harvard University, BREAD, J-PAL and NBER.) |
| Abstract: | Global innovation and entrepreneurship have traditionally been dominated by a handful of high-income countries, especially the US. This paper investigates the international consequences of the rise of a new hub for innovation, focusing on the dramatic ascent of high-potential entrepreneurship and venture capital in China. First, using comprehensive global data, we show that as the Chinese venture industry rose in importance in certain sectors, entrepreneurship increased substantially in other emerging markets. Using a broad set of country-level economic indicators, we find that this effect was driven by country-sector pairs most similar to their counterparts in China. The estimates are similar when exploiting Chinese sector-specific policies that affected the likelihood of entrepreneurship. Second, turning to mechanisms, we show that the baseline findings are driven by local investors and by new firms that more closely resemble existing Chinese companies. Third, we find that this growth in emerging market investment had wide-ranging economic consequences, including a rise in serial entrepreneurship, cross-sector spillovers, innovation, and broader measures of socioeconomic well-being. Together, our findings suggest that many developing countries benefited from the more “appropriate” businesses and technology that resulted from a rise of an innovation hub in an emerging economy. |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:warwec:1608 |