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on Business Economics |
| By: | Errico, Marco (IMF); Pesce, Simone (Central Bank of Ireland); Pollio, Luigi (UMBC) |
| Abstract: | We study how firm heterogeneity shapes the transmission of aggregate shocks. The aggregate response of macroeconomic outcomes to any source of aggregate shocks depends on both the average response across firms and the covariance between firms’ response and their economic weight, which determines whether heterogeneity amplifies or dampens fluctuations. Using U.S. Compustat data from 1990 to 2019 and the Generalized Random Forest estimator, we estimate firm-level responses of sales, investment, and debt issuance to business cycle fluctuations. We uncover substantial heterogeneity driven primarily by non-financial characteristics— particularly industry scope and firm size. Aggregating these responses reveals that firm heterogeneity dampens aggregate fluctuations, especially for investment and debt issuance, as larger firms tend to be less cyclical than the average firm. Our results carry over to exogenously identified shocks and to financial outcomes. |
| Keywords: | Firm Heterogeneity, Firm Sensitivity, Aggregate Fluctuations, Machine Learning. |
| JEL: | D22 E32 C14 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:wpaper:06/rt/26 |
| By: | Namrata Kala; Muhammad Haseeb; James Fenske |
| Abstract: | Effective regulatory design requires an understanding of how regulatory burden affects regulated entities. Using novel data on all applications for environmental permits in five Indian states and a natural experiment, we estimate how regulatory burden of environmental permitting affects firms. Difference-in-difference estimates show that deregulation induces smaller firms to enter and increases entry. Standard data sources would miss these substantial effects, underscoring the importance of collecting data across the firm size distribution. We also use full texts of permit certificates to create novel measures of regulatory burden. Firms in industries with reduced regulations face fewer, less stringent, permit conditions. |
| Date: | 2026–01–30 |
| URL: | https://d.repec.org/n?u=RePEc:bri:uobdis:26/827 |
| By: | Teresa C. Fort; Nathan Goldschlag; Jack Liang; Peter K. Schott; Nikolas Zolas |
| Abstract: | Relatively flat US productivity growth versus rising R&D expenditures is often interpreted as evidence that ideas are getting harder to find. We build a new 45-year panel tracking the universe of US firms' patenting to investigate the micro underpinnings of this conclusion, separately examining the relationships between research inputs and ideas (patents) versus ideas and growth. We find that average patents per R&D input are increasing, the elasticity of patents to R&D inputs is flat or rising, and there is not systematic evidence of a secular decline in patenting after controlling for research inputs. We then document a positive, significant, and fairly steady relationship between firms' patent and labor productivity growth rates. Average firm growth after controlling for patent growth, however, declines. Together, these results suggest that firms' innovative efforts play a key role in sustaining growth that has not diminished over the last four decades. |
| JEL: | E0 O36 O40 O41 O47 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35182 |
| By: | Jaerim Choi (Yonsei University); Seongin Hong (University of Virginia); Jung Hur (Sogang University); Manho Kang (Georgia Institute of Technology) |
| Abstract: | How does China's rise affect exporters’ product scope when they compete with Chinese firms at home and abroad? Using Korean plant-level data, we find that both domestic import penetration and export competition in third markets reduce product scope. Specifically, export competition dampens new product creation, while import penetration accelerates the destruction of existing products. Eventually, both forms of competition lead to resource reallocation toward core products, highlighting distinct mechanisms through which global competition shapes product dynamics. We propose the disproportionate importance of the domestic market, the forward-looking nature of product creation, and creative destruction as potential drivers behind these responses. |
| Keywords: | Creative Destruction; Export Competition; Import Penetration; Multi-Product Exporters; Product Churning; Product Scope |
| JEL: | D22 F14 F61 L10 L25 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2026rwp-288 |
| By: | Elia Benveniste |
| Abstract: | This paper studies the effect of labor management - majority employee ownership of a firm - on firm-level wage distributions and performance. Using matched employer-employee data from Italy, I exploit worker buyouts (WBOs) as sharp transitions from conventional ownership to labor management. I compare WBO firms to observationally similar restructuring firms that remain conventionally owned. Labor management reduces base wages by 9 percent, but (insignificantly) increases total compensation when accounting for profit-based labor dividends. Within-firm wage inequality decreases markedly, and firms become significantly less hierarchical. I find no evidence of lower productivity or reduced investment. Overall, labor management generates substantial within-firm wage compression without reduced operational efficiency. |
| Keywords: | labor management, worker buyouts, wage compression |
| JEL: | G34 J31 J54 M54 P13 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26117 |
| By: | Gábor Kátay; Pálma Mosberger; Francesco Tucci |
| Abstract: | The paper evaluates the impact of the European Commission’s Seventh Framework Pro-gramme (FP7) grants on profit-oriented firms’ post-treatment performance. Using a robust quasi-experimental design and a dataset covering applicants from 46 countries, we find that FP7 grants increase firms’ sales and labour productivity by about 18%. However, there is no significant impact on employment levels, pointing to potential growth barriers that prevent firms from scaling production despite improved productivity. The effectiveness of these grants varies significantly based on factors such as financial constraints, project risk profiles, market structure, and the innovation environment. Smaller, less productive firms with tighter financial constraints in technology-intensive sectors operating in concentrated markets and favourable innovation environments, particularly those undertaking longer and riskier projects, tend to benefit more. |
| JEL: | C31 G28 H57 O31 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:euf:dispap:238 |
| By: | Jaime Arellano-Bover; Marco De Simoni; Luigi Guiso; Rocco Macchiavello; Domenico J. Marchetti; Mounu Prem |
| Abstract: | Organized crime groups (OCGs) are often thought to infiltrate firms to benefit from or support criminal activities, such as corruption, false invoicing, and the provision of illicit goods. We show that much of infiltration-especially among large firms-serves a different purpose: firms are infiltrated not to engage directly in criminal activities, but to access valuable connections in the legal economy and politics. We develop a conceptual framework that distinguishes between the classic contaminated motives and the novel pure motive of infiltration and delivers testable predictions to infer these motives from firms' behavior. We test these predictions using the "Mappatura, " a new and highly confidential dataset assembled by the Financial Intelligence Unit of the Bank of Italy. Consistent with the model, we uncover a systematic pattern across firm size: smaller infiltrated firms display the hallmarks of being set up to be used for criminal activities, medium-sized firms benefit from criminal support, and large firms are predominantly consistent with the pure motive. In these firms, infiltration leaves operations largely unchanged but reduces reliance on bank financing and increases liquidity. At the same time, infiltrated firms and infiltrating individuals are significantly more connected to other firms and to politicians. These findings shift the perspective on infiltration, align with recent high-profile investigations, and provide a rare glimpse into the integration stage of money laundering, linking it to the acquisition of economic and political connections. |
| Keywords: | organized crime, legal economy, firms, infiltration |
| JEL: | G3 L2 K4 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26130 |
| By: | Wulong Gu; Alla Lileeva; Daniel Trefler |
| Abstract: | Conventional wisdom holds that offshoring intermediates to China stimulates innovation. This is not entirely compelling. On the one hand, (a) offshoring lowers marginal costs and expands sales, thereby increasing the returns to innovation, especially for large firms. On the other hand, (b) offshoring low-quality intermediates reduces the costs of older-generation products, thereby reducing the returns to innovating into newer generations. We examine these two opposing forces over 2002-2011 for 6, 024 Canadian firms. Our empirical strategy regresses measures of innovation, such as R&D, on imports of intermediate inputs. To address endogeneity, we construct a model-consistent shift-share instrument whose shocks are the often-dramatic improvements in the quality of HS6 Chinese intermediate inputs. We find that greater offshoring reduced R&D spending over 2002-2011 by 15% as (1) firms engaged in R&D in 2002 reduced their expenditures, and (2) firms not initially engaged in R&D were discouraged from starting up new R&D projects. Our model explains these findings: Rising quality of Chinese intermediates is a positive supply shock (rather than a negative China shock) that raises profits for all offshorers, raises innovation for the largest offshorers (channel a above), and lowers innovation for all other offshorers (channel b). These predictions are confirmed in the data. |
| JEL: | F1 F14 O3 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35167 |
| By: | Brehm, Margaret E.; Brehm, Paul A.; Cassidy, Alecia; Cassidy, Traviss |
| Abstract: | Using a natural experiment in Indonesia, we estimate the separate economic effects of natural resource booms and shared resource revenue. Contrary to Dutch disease concerns, oil and gas booms promote manufacturing growth, and shared revenue does not harm local manufacturing firms. Shared revenue significantly raises local non-oil GDP, but resource booms do not. Supply-side factors help explain the results: shared revenue increases local population and firm entry, while resource booms do not. Oil and gas booms thus benefit local economies largely through shared revenue. Where the revenue is spent matters more for local growth than where the resources are extracted. |
| Keywords: | Growth, resource booms, decentralization, manufacturing firms, Indonesia, Dutch disease |
| JEL: | H77 O13 O14 Q32 Q33 |
| Date: | 2024–07–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:128970 |
| By: | Anton Cheremukhin; Sewon Hur; Ronald R. Mau; Karel Mertens; Alexander W. Richter; Xiaoqing Zhou |
| Abstract: | The U.S. experienced an extraordinary surge in immigration from 2021 to 2024, which triggered widespread discussions about its macroeconomic impact, particularly on inflation. To determine the impact of the immigration surge, we first document the salient features of these new immigrants: they are primarily low-skilled relative to the existing workforce and more likely to be hand-to-mouth consumers. We then incorporate these features into a heterogeneous agent model with capital-skill complementarity. We find that the supply- and demand-side effects of the immigration surge roughly cancel out, causing a negligible response of inflation. |
| JEL: | E21 E22 E31 F22 J11 J15 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35168 |
| By: | Jaerim Choi (Yonsei University); Jakob R. Munch (University of Copenhagen, CESifo and IZA); William W. Olney (Williams College) |
| Abstract: | Offshoring can reduce unionization rates by changing the composition of domestic employment or by eroding the union's bargaining power and thus decreasing the benefits of membership. Using an employeremployee matched data set we measure the exogenous threat of offshoring at the firm-level and union decisions of individual workers. Findings show that the threat of offshoring reduces unionization rates, even within a job-spell. This is not simply due to the changing composition of industries, firms, or workers, but is consistent with a decline in the union's bargaining position. Additional results confirm that the union-wagepremium and the rent-sharing elasticity are both smaller at offshoring firms. |
| Keywords: | Offshoring, Unions, Trade, Globalization, Collective Bargaining |
| JEL: | F66 F16 J50 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2026rwp-286 |
| By: | Jun Chen; Song Ma; Feng Zhang |
| Abstract: | This paper examines how anti-harassment legal reforms that weaken non-disclosure agreements (NDAs) in cases of workplace sexual harassment affect startups' hiring and organizational decisions. Using a staggered difference-in-differences design and LinkedIn data on over 50, 000 U.S. venture-capital-backed startups from 2014–2022, we find that NDA reforms, although intended for employee protection, reduce female hiring by about 8%, with effects concentrated among junior women, who are statistically more prone to sexual harassment, and in small or male-dominated startups. The results apply to both the intensive and extensive margins of female hiring. Treated entrepreneurial firms also witness more departures of male managers, promote more women, and receive less VC funding. These results suggest that while NDA-weakening laws increase firms’ perceived legal risk and reduce female hiring, they also trigger internal restructuring that promotes women's advancement into leadership and may, over time, foster more accountable and inclusive organizational cultures. |
| JEL: | G0 J0 K0 M14 M5 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35187 |
| By: | Jaerim Choi (Yonsei University); Hyoungchul Kim (University of Pennsylvania); Seung Hoon Lee (Yonsei University) |
| Abstract: | Using Korean administrative data spanning nearly two decades and covering the universe of bilateral migration flows across local labor markets, we examine how the China trade shock shapes internal migration. While prior studies rely on net population changes to measure labor adjustment, we exploit bilateral migration flows that separately capture in- and out-migration. We find that trade exposure primarily increases out-migration from adversely affected regions, with limited effects on in-migration, revealing asymmetric spatial adjustment. Decomposing the shock, export expansion reduces out-migration, whereas import competition increases it. Migration responses are strongest among prime working-age individuals and substantially weaker among younger and older cohorts. Single-person households are more responsive than multiperson households. Overall, bilateral data reveal substantial migration responses that conventional net population measures fail to detect, offering new insight into the "missing migration puzzle." |
| Keywords: | China trade shock, Labor adjustment, Internal migration, Korea |
| JEL: | F14 F16 J61 R23 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2026rwp-287 |
| By: | Cristelli, Gabriele; Lissoni, Francesco |
| Abstract: | We study the innovation effects of the Agreement on the Free Movement of Persons, signed by Switzerland and the European Union in 1999. We exploit a quasi-experimental setting created by Switzerland’s implementation of the treaty, which initially eased entry restrictions only for commuters from neighboring countries, thereby inducing a large inflow of “cross-border inventors” in regions close to the border. We find that the treaty increased patenting in such regions relative to comparable ones farther away from the border. We find no evidence indicating the displacement of native inventors or a reduction in the patenting activity of Switzerland’s neighboring countries. We also find that incumbent inventors in regions next to the border increased their productivity, thanks to patents in collaboration with cross-border inventors. We provide evidence suggesting that cross-border inventors contributed to Swiss patenting by enabling R&D laboratories to enlarge, albeit without increasing the productivity of local peers outside direct collaborations. |
| Keywords: | immigration; innovation; patents; inventors; free movement of persons |
| JEL: | F22 J61 O31 |
| Date: | 2026–04–10 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:137441 |
| By: | G. Jacob Blackwood; John Haltiwanger; Zoltan Wolf |
| Abstract: | We explore sources of measured misallocation using establishment data from U.S. manufacturing industries. We decompose standard revenue productivity dispersion statistics into contributions by dispersion in revenue margins over costs and dispersion in input cost shares across plants. We establish a formal link between these components and measured allocative efficiency. The results indicate the components contribute similarly to apparent rising misallocation in US manufacturing. We use the mapping between distortions that influence these distinct components to explore the relationship between inferred distortions and mechanisms that influence one or both sources of revenue productivity dispersion. Finally, we show rising misallocation in the US manufacturing sector in the last several decades is pervasive, and yet a few industries account for over half of the aggregate decline. |
| Keywords: | Misallocation, Productivity Dispersion, Allocative Efficiency |
| JEL: | D24 E23 L16 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:26-26 |
| By: | Mark Hellsten; Giuseppe Pulito; Sarah Schroeder |
| Abstract: | This paper provides new evidence on how automation reshapes firms' demand for skills, not only by changing the occupational composition, but also by reshaping what existing jobs require. Using matched data on firm-level automation investments and detailed job vacancy postings from Denmark, we extract multidimensional skill profiles through natural language processing and decompose changes in skill demand into within- and between-occupation components. Within-occupation adjustment is a quantitatively important margin, accounting for 14-39% of total skill demand change depending on skill type and occupational group. Drawing on a task-based framework that links automation to shifts in multiple skill types within occupations, we estimate the causal effect of automation using a staggered difference-in-differences design. The effects are heterogeneous across the occupational hierarchy: among managers and professionals, automation increases the demand for soft skills, shifting the within-occupation skill mix toward interpersonal and cognitive competencies; among production workers, adjustment operates primarily through reduced hiring rather than changes in skill requirements, while retraining intensity rises by 5 percentage points. Our findings highlight that automation operates through multiple adjustment margins, with implications for training policy and labour market resilience. |
| Keywords: | automation, skills, task content, labour demand, technological change, job vacancies, within-occupation adjustment |
| JEL: | J24 O33 M51 L23 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26122 |