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on Business Economics |
| By: | Carioli, Paolo (KU Leuven, Dept. of Management, Strategy and Innovation); Czarnitzki, Dirk (KU Leuven, Dept. of Management, Strategy and Innovation; Center for R&D Monitoring (ECOOM) at KU Leuven, and Leibniz Centre for European Economic Research (ZEW), Mannheim); Fernández, Gastón P. (Luxembourg Institute of Socio-Economic Research (LISER)) |
| Abstract: | Artificial Intelligence (AI) is considered to be the next general-purpose technology, with the potential of performing tasks commonly requiring human capabilities. While it is commonly feared that AI replaces labor and disrupts jobs, we instead investigate the potential of AI for overcoming increasingly alarming skills shortages in firms. We exploit unique German survey data from the Mannheim Innovation Panel on both the adoption of AI and the extent to which firms experience scarcity of skills. We measure skills shortage by the number of job vacancies that could not be filled as planned by firms, distinguishing among different types of skills. To account for the potential endogeneity of skills shortage, we also implement instrumental variable estimators. Overall, we find a positive and significant effect of skills shortage on AI adoption, the breadth of AI methods, and the breadth of areas of application of AI. In addition, we find evidence that shortage on academic qualifications and STEM skills relates to firms adopting AI. |
| Keywords: | Artificial Intelligence, skills shortage, CIS data |
| JEL: | J23 J24 O33 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18793 |
| By: | Carvalho, V. M.; Freund, L. B. |
| Abstract: | We develop a theory of growth in which firms forage in idea space. A firm exploits a patch of related ideas, gradually exhausting opportunities for quality improvement, and then searches for a new patch. We cast this explore-exploit tradeoff as a tractable optimal-stopping problem and embed it in an endogenous-growth model. The composition of innovation—improving existing ideas versus discovering new ground—emerges as an equilibrium object. To construct an empirical representation of the idea space, we apply natural language processing to patent text data. The data support the theory’s central premises: returns to local exploitation diminish; firms stay longer on richer patches; and entry into new patches yields more and better patents. We calibrate the model to U.S. data and establish two results, on the composition of growth and on its pace. First, at a twenty-year horizon, patenting in new clusters accounts for over half of growth from quality improvements: sustained growth rests on firms continually entering new territory. Second, the model sign-identifies the origins of the productivity slowdown of the last four decades: exploitation spells have not shortened, weighing against worsening exploitation and tentatively pointing to harder exploration. |
| Keywords: | Innovation, Growth, Firm Dynamics, Foraging, Exploration and Exploitation, Patents, Natural Language Processing, Artificial Intelligence |
| JEL: | O31 O41 O33 O40 O47 |
| Date: | 2026–06–15 |
| URL: | https://d.repec.org/n?u=RePEc:cam:camdae:2659 |
| By: | Josh Feng; Xavier Jaravel |
| Abstract: | What are the implications of unequal access to entrepreneurial careers for labor markets? Using data from the U.S. Census and LinkedIn profiles, we document that entrepreneurs are significantly more likely to hire workers from similar social backgrounds (gender, race, age, education, etc.). These effects are quantitatively large across several demographic dimensions. For example, female employee share at female-founded startups is 36.4pp higher after controlling for industry-by-metro area-by-cohort fixed effects, with corresponding estimates of 51.2pp for Blacks, 37.3pp for Hispanics, and 11.3pp for non-college individuals. Large effects are present in high-growth startups, across industries and occupations, and remain stable across new firm cohorts. In addition, we find that these differences persist out to at least 20 years. We use wage data and an AKM research design to untangle whether the relative differences are driven by labor demand or labor supply effects. We find that demand drives the differences: group-specific wage decompositions show that new firms pay higher relative wages to individuals from similar backgrounds to the entrepreneur. Using these estimates, we calibrate a model of entrepreneurship with heterogeneous ability and production functions, and assess the impacts on relative wage from reducing access barriers to entrepreneurship. |
| Keywords: | entrepreneurship, hiring, labor market, production functions |
| JEL: | L26 J31 D24 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:26-45 |
| By: | Omer Majeed; Sarah Davies; Nabeeh Zakariyya; Amee McMillan; Yun Jia |
| Abstract: | Non-compete clauses have become a focal point in debates over fairness and efficiency in modern labour markets. There is growing academic and policy interest in non-competes, yet evidence on wage effects remains largely US-focused. Using new Australian survey data linked to administrative records, we find no systematic evidence of wage compensation for the mobility restrictions associated with non-competes. We test robustness across multiple samples and methodologies. Furthermore, our novel results show that there is substantial heterogeneity: high-productivity firms show a positive association with wages, while low-productivity firms use non-competes widely without clear justification. Smaller firms also appear to adopt non-competes without much justification. We document substantial heterogeneity in non-compete coverage and examine how it varies with firm size, industry, workforce skill composition, and occupational diversity. Our broader findings raise concerns over both efficiency and equity and underscore the case for policy scrutiny. |
| Keywords: | non-competes, employment law, bargaining power, wages, mobility, incomplete markets |
| JEL: | J3 J4 J6 K12 L41 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:een:camaaa:2026-65 |
| By: | Aguilar-Bohorquez, Joseph; Akee, Randall; Mykerezi, Elton |
| Abstract: | American Indian reservations face long-standing barriers to private-sector development. The Indian Gaming Regulatory Act of 1988, which enabled the establishment of casino operations on American Indian tribal lands is one of the most consequential sovereignty-driven, place-based interventions in Native communities. We study its impact on local business revenues and job creation by linking geocoded establishment-level microdata to federally recognized reservation boundaries and a panel of tribal casino openings from 1990 to 2019, using a staggered-adoption event study with never-treated reservation controls. Casino openings lead to economically meaningful and persistent growth in reservation business activity: average establishment sales increase by 47% and employment increases by 50% after opening. Importantly, incumbent establishments also expand, with sales increasing by 17% and employment increasing by 26%, indicating that development benefits extend beyond new entry and beyond the casino itself. When excluding gaming-adjacent industries, employment effects remain positive while sales effects attenuate and are less precisely estimated. Overall, the results provide evidence that tribal casino development leads to sustained private-sector expansion inside reservation boundaries, consistent with local demand, business-to-business spending, and visitor-spending spillovers, and highlight a mechanism through which Indigenous self-determined enterprise can contribute to long-run economic development. |
| Keywords: | Community/Rural/Urban Development |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ags:aaea26:404771 |
| By: | Cowgill, Bo (University of Toronto); Freiberg, Brandon (INSEAD); Starr, Evan (University of Maryland) |
| Abstract: | We study worker noncompete clauses in a large field experiment with two finance firms. Across ~14, 000 job offers to freelance recruiters on short-term contracts, we randomize wages and the presence, salience, and duration of noncompetes (all contracts also included a nondisclosure agreement). Removing a noncompete increases mobility between competing employers by 36--52% and raises workers' total earnings from the two firms by 12--17%. We find no evidence---rejecting even small effects---that removing noncompetes generates secret leakage. We also find no evidence that workers choose noncompete jobs for higher pay. Many workers appear unaware of noncompetes before firms' post-employment communication. The results align with a model of inattention and uncertainty about enforcement. |
| Keywords: | noncompete clauses, earnings, knowledge diffusion, mobility, contracting, inattention, enforcement risk |
| JEL: | J42 M5 J31 J41 K31 L41 C93 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18820 |
| By: | Scott Kaplan; Ryan Raimondi |
| Abstract: | This paper studies the impact of geographic proximity to and utilization of publicly funded advisory services offered to US small businesses on firm take-up and performance. We leverage a novel administrative dataset from the Northern California Small Business Development Center (SBDC) Network covering all firm-center interactions from 2006-23. To address endogeneity in firm engagement with centers, we exploit exogenous variation in center-firm geographic proximity generated by center closures and openings. We instrument for paired center-firm consulting time with changes in distance resulting from these organizational shifts. A one standard deviation reduction in distance between a firm and corresponding center (20 miles) increases expected annual consulting time by 0.15 hours (7.5%); each additional consulting hour raises average firm annual revenue and employment by 3.6-5.2% and 1.6-2.9%, respectively. Back-of-the-envelope calculations suggest advisory services are cost-effective. This study provides novel causal evidence on take-up and effectiveness of small business advisory services in the US using quasi-experimental variation in geographic proximity. Our findings highlight the importance of both physical distance and localized expertise in shaping small business outcomes. |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2607.07849 |
| By: | Campos, Francisco; Safir, Abla; Koffka, Celine; McKenzie, David; Zia, Bilal |
| Abstract: | Business plan competitions aim to identify and spur high-growth entrepreneurs. Two experiments were embedded into in a Kenyan competition to test how intensity of selection and of capital determine entrepreneurial outcomes. Applicants received a US$9, 000 grant after a streamlined process or went through multiple selection stages and were randomly assigned US$9, 000 or US$36, 000. All grants initially generated jobs, but the impacts only persisted over three years under multi-stage selection. The larger grants did not yield greater long-term impacts than the multi-stage US$9, 000 grant, suggesting diminishing returns to capital and limited lumpy investment opportunities. Selection, rather than grant size, determines long-run firm growth. |
| Date: | 2026–07–27 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11432 |
| By: | Arellano, Manuel; Attanasio, Orazio; Borella, Margherita; De Nardi, Mariacristina; Paz-Pardo, Gonzalo |
| Abstract: | We develop a new approach to estimating earnings, job, and employment dynamics using subjective expectations data from the NY Fed Survey of Consumer Expectations. These data provide beliefs about future earnings offers and acceptance probabilities, offering direct information on counterfactual outcomes and enabling identification under weaker assumptions. Our framework avoids biases from selection and unobserved heterogeneity that affect models using realized outcomes. First-step fixed-effects regressions identify risk, persistence, and transition effects; second-step GMM recovers the covariance structure of unobserved heterogeneities such as ability, mobility, and match quality. We find lower risk and persistence of the individual productivity component than in prior work, but greater heterogeneity in ability and match quality. Simulations show that reduced-form estimates overstate persistence and volatility on individual-level productivity due to job transitions and sorting. After accounting for heterogeneity, volatility declines and becomes flat across the earnings distribution. These results underscore the value of expectations data. JEL Classification: C23, C81, D15 |
| Keywords: | earnings dynamics models, subjective expectations |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20263264 |
| By: | Cominetti, Nye; Vieira Marques Da Costa, Rui; Ventura, Guglielmo; Eyles, Andrew; Albagli, Pinjas |
| Abstract: | We study the role of job-to-job transitions in shaping wage dynamics in the UK. We show that job moves have continued to generate substantial wage gains for movers even during a period of real wage stagnation and declining labour market mobility. Using an econometric model that accounts for worker, firm and match heterogeneity, we decompose the job mobility premium, and find a limited role for worker and firm effects, with most of the return explained by match-specific factors. We also examine the determinants of job mobility, and show that much of its recent decline reflects compositional changes in the workforce, particularly ageing and increasing occupational professionalization. We conclude by discussing the policy challenges of promoting job mobility as a driver of wage growth and more efficient labour market reallocation. |
| JEL: | J1 R14 J01 |
| Date: | 2026–08–05 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:140392 |
| By: | Anton Korinek; Patrick McKelvey |
| Abstract: | We construct a macroeconomic estimate of total AI production for the United States, combining inference and R&D/training activities and applying quality adjustments based on the evolution of API prices at fixed performance levels and the pace of algorithmic progress. We estimate that nominal AI compute spending grew over 140% per year each in 2024 and 2025, raw compute capacity grew over 200% per year, and quality-adjusted AI output grew over 2000% per year. These growth rates reflect three compounding forces: expanding data-center capacity, continued improvements in chip efficiency, and rapid algorithmic progress. We then employ our estimates to develop a nascent framework for “AI GDP” that tracks the AI economy as a coherent whole rather than dispersed across standard industry classifications. Quality-adjusted AI GDP grew by more than 2500% each in 2024 and 2025. Our measures complement traditional national accounts by providing visibility into a fast-moving sector whose activity is difficult to isolate in existing statistics, and they may serve as building blocks for satellite accounts that track AI’s growing role in the economy. |
| Keywords: | Models and tools, Econometric, statistical and computational methods, Monetary policy, Real economy and forecasting, Structural challenges, Digitalization and productivity |
| JEL: | C43 E01 E22 E31 O33 O47 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocawp:26-20 |
| By: | Lovenheim, Michael (Cornell University); van Egeraat, Eppie (NHH); Willén, Alexander (Norwegian School of Economics) |
| Abstract: | We use Norwegian register data to examine how social capital is transmitted across generations. We construct a measure of families' social position based on six dimensions: elite education, elite occupation, executive status, corporate elite, elite positions in top firms, and elite tract. Social capital is highly persistent across generations and strongly predicts children’s income and access to elite positions, even conditional on parental income, wealth, education, and ability. Horse-race regressions suggest that social capital is a distinct dimension of advantage that is as important as parental income and cognitive ability in shaping children's outcomes. The influence of social capital grows over the life cycle, and reaching the top of the income distribution requires both high inherited income and social capital. Accounting for social capital also alters conventional estimates of income-based mobility, indicating that part of what is typically attributed to inherited income reflects the transmission of social position. Quasi-experimental evidence from adoptions and parental lottery prizes suggests that these patterns reflect environmental transmission rather than genetic inheritance or direct financial resources. |
| Keywords: | social capital, intergenerational mobility, inequality, elite positions |
| JEL: | J1 J2 J6 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18862 |
| By: | Rashid Mirzaakhmedov (The Central Bank of Uzbekistan) |
| Abstract: | This paper examines how foreign ownership of importing firms shapes exchange rate pass-through (ERPT) to import prices in Uzbekistan across three distinct monetary policy regimes. Using transactionlevel customs data matched with a firm ownership registry, I find that ERPT remained near-complete before inflation targeting but declined sharply following its formal adoption in October 2019. Foreignaffiliated importers exhibit significantly lower pass-through than domestically owned firms under inflation targeting, with the gap most pronounced for capital and intermediate goods. Rolling window estimation reveals that foreign affiliates adjusted more rapidly to the new monetary framework, suggesting that ownership structure and institutional credibility jointly shape import price dynamics. The results provide micro-level evidence that the central bank’s credibility has weakened the exchange rate channel of inflation, while the growing presence of foreign affiliates reduces the effectiveness of exchange rate depreciation as an instrument for correcting the trade balance. |
| Keywords: | Exchange Rate Pass-Through; Import Prices; Foreign Ownership; Inflation Targeting; Transaction-level Customs Data; Uzbekistan |
| JEL: | F31 F14 E31 F23 E52 |
| Date: | 2026–08–07 |
| URL: | https://d.repec.org/n?u=RePEc:gii:giihei:heidwp22-2026 |