|
on Business Economics |
| By: | Hyejin Ku; Uta Schönberg; Ragnhild C. Schreiner |
| Abstract: | This paper provides new micro-level evidence on how labor taxation shapes firm behavior, exploiting an EU-mandated payroll tax reform in Norway. Combining administrative and survey data, we find that firms facing larger tax increases sharply cut employment but also increased R&D spending, implemented labor cost-saving innovations, and adopted more automation. While these responses led to improvements in labor and total factor productivity within the firm, the firm's labor share fell. These effects persisted even after the tax hike was unexpectedly reversed three years later, suggesting a lasting shift toward more capital-intensive production in response to higher labor costs. |
| Keywords: | payroll taxes, labor costs, firm behavior, technology adoption, inequality |
| JEL: | J23 J32 H25 H32 O31 O32 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26192 |
| By: | Tarsia, Romano |
| Abstract: | This paper provides novel firm-level estimates of the economic damages caused by temperature shocks to European firms. I rely on a panel data analysis to show wide heterogeneities in the impact of temperature shocks, which depend on firm characteristics. This paper reveals the importance of micro-level data for quantifying climate damage estimates, as the average relationship between temperature and economic outcomes masks firms’ different susceptibilities to weather shocks. These create both winners and losers, harming less productive firms, particularly those in warmer regions, while benefiting more productive ones. Compared with the pooled marginal effect, the least-productive firms experience negative effects roughly ten times as large, while the most-productive firms experience positive effects roughly three times as large. Additionally, higher temperatures increase exit probability among the least productive firms in warmer regions. I highlight the distributional effects of climate change, and offer insights for adaptation policies. |
| Keywords: | climate change;firms;climate damages;economic performance |
| JEL: | D24 O13 O52 Q54 R11 |
| Date: | 2026–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:140233 |
| By: | Horng Chern Wong; Sampreet Goraya; Anders Akerman |
| Abstract: | Does skill-biased technological change benefit less-skilled workers? This paper shows that who gains or loses from SBTC depends on where it occurs across firms and how widely it diffuses across markets. Using Swedish administrative microdata, we document that large firms became increasingly important in the market for skilled labor between 1997 and 2018. Relative to smaller firms, they grew more skill intensive and paid rising skill premia; this steepening reflected a rising large-firm wage premium for college workers but not for non-college workers. We interpret these facts through a model of heterogeneous firms with wage- and price-setting power. The quantified model infers that SBTC became increasingly concentrated among large firms. This concentration raises productivity, but widens wage inequality within and between firms. It can also lower low-skill wages and employment at the firms where SBTC occurs, with negative spillovers to low-skilled workers at competitors. The mechanism is that large firms have weaker scale responses to skill-biased shocks, limiting the expansion that would otherwise offset substitution away from low-skilled labor. Removing firm market power mitigates these losses, but does not overturn them. By contrast, broader diffusion of SBTC across industries can turn those losses into gains for low-skilled workers. |
| Keywords: | Skill-biased technological change, skill premium, wage inequality, large firms |
| JEL: | J31 J24 O33 D24 D43 J42 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26183 |
| By: | Chanya Chawla; Crystal Arnburg |
| Abstract: | This paper examines the adoption of artificial intelligence (AI) among firms in Canada and its expected effects on employment and capital spending. The analysis relies on special questions included in the December 2025 Business Leaders’ Pulse (BLP). The results show that while personal use of AI among business leaders is widespread, adoption for production purposes remains limited. On balance, firms anticipate AI to have a positive impact on their capital expenditures over the next 12 months and a slightly more positive impact over the next 3 years. Firms anticipate limited impacts to employment over the next year but expect modest net negative impacts on employment over the next 3 years. Overall, the findings suggest that AI adoption among Canadian firms remains at an early stage, with more material economic impacts expected to emerge over time. |
| Keywords: | Structural challenges; Digitalization and productivity |
| JEL: | E22 E24 O33 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocsap:26-22 |
| By: | Hamid Firooz; Sylvain Leduc; Zheng Liu |
| Abstract: | We study how AI affects market competition based on a general equilibrium framework with heterogeneous firms facing idiosyncratic productivity and variable markups. Firms choose the AI technology subject to fixed costs, where AI production requires data and energy inputs. Our model predicts a non-monotonic relation of AI diffusion with industry concentration. As AI usage rises from an initially low level, large incumbent users gain market share. When AI usage is sufficiently diffused, entry of new and smaller adopters erodes the market share of incumbents, reducing industry concentration. The non-monotonic relations are robust when firms can complement AI with their own data. Our calibrated model predicts that industry concentration is likely to fall if AI adoption increases relative to the current level. In comparison, the relation of AI with the average markup depends on whether increased AI usage is driven by demand or supply factors. Our model also predicts that a modest subsidy of about 3 percent for AI adopter revenues maximizes social welfare, reflecting a tradeoff between aggregate productivity and the average markup associated with AI usage. |
| Keywords: | artificial intelligence; data; heterogeneous firms; industry concentration; markup; productivity; welfare |
| JEL: | E24 L11 O33 |
| Date: | 2026–08–10 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedfwp:103630 |
| By: | Aaron Chatterji; David Holtz; Neel Rakholia; Prasanna Tambe; Gawesha Weeratunga |
| Abstract: | We study how organizations use frontier generative AI by linking ChatGPT Enterprise account records to usage, worker roles, task classifications, and public-company financial data through March 2026. These linked data enable a privacy-preserving analysis of adoption, worker roles, and message-level tasks at scale: for instance, the worker-level sample we analyze at the six-month adoption horizon includes over 1, 500 organizations and over 17 million messages. We document four facts about enterprise AI adoption and use. First, ChatGPT Enterprise usage has grown rapidly due to a combination of new firm adoption and growing intensity among existing adopters. Second, U.S.-based public company adoption is concentrated among larger, more valuable, and more R&D- and SG&A-intensive firms. Third, active use within adopting firms spans job functions and seniority levels, with especially high usage intensity among early-career workers. Fourth, ChatGPT Enterprise usage encompasses a broad range of knowledge work tasks, including writing, technical work, communication, and information synthesis. In aggregate, these results suggest that firms differ widely in the speed, breadth and purpose of their enterprise AI adoption, and that they are still actively learning how to integrate AI into organizational workflows. |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2608.12236 |
| By: | Thomas Peeters (Erasmus University Rotterdam); Jan C. van Ours (Erasmus University Rotterdam) |
| Abstract: | We examine worker-to-firm matching in a high-wage international labor market encompassing nine European countries. Employment matches are ranked along two key dimensions: worker productivity, defined by contributions to physical output, and firm productivity, measured by the ability to generate revenue from that physical output. We find a strong and significant positive rank correlation between these two measures, both within and across countries. This evidence of `positive assortative matching' suggests that labor market frictions do not prevent high-productivity workers from matching with high-productivity firms across Europe. Both workers' initial job placements and their subsequent mobility within countries and across countries reinforce this pattern. |
| JEL: | J24 J63 Z22 |
| Date: | 2026–08–06 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20260054 |
| By: | Emanuele Brancati; Qingqing Cao; Raoul Minetti; Nicholas Jaehyun Yi |
| Abstract: | This paper studies how integration between the financial sector and production networks shapes business cycle transmission. We develop a dynamic model in which banks provide asset-based financing to firms embedded in supply chains. The model highlights two margins of bank–supply chain integration with opposite macroeconomic implications. Extensive-margin integration—captured by firms’ access to banks specializing in different supply chain segments—amplifies negative banking shocks. By contrast, intensive-margin integration—captured by the diffusion of factoring and invoice discounting—attenuates banking disruptions. The model reveals that the stabilizing effects of integration dominate when firm production linkages are tight. The predictions are consistent with matched bank–firm data from Italy. |
| Keywords: | banks; financial integration; production networks; factoring |
| JEL: | E23 E32 E44 |
| Date: | 2026–08–03 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedcwq:103624 |
| By: | Cevat Giray Aksoy; Nicholas Bloom; Steven Davis; Victoria Marino; Cem Özgüzel |
| Abstract: | Remote work has expanded rapidly, but the value of regular in-person contact remains unclear. We report a randomized controlled trial in which a large multinational randomly assigned 248 customer-service employees to remain fully remote or to work at the office together one day a month. Monthly office days gradually increased productivity, with treated employees handling 7.8% more calls per hour in the post-intervention period. Office days also strengthened workplace communication: treated employees spent 36 additional minutes communicating with colleagues in the week after an office visit, were more likely to report receiving manager feedback, and employee pairs randomly assigned as desk neighbors were 11 percentage points more likely to communicate afterward. In addition, monthly office days reduced attrition by a third. The resulting gains in productivity and retention generated a benefit-cost ratio of about 5:1. These findings show that limited, coordinated in-person contact can improve communication, performance, and retention in remote teams. |
| Keywords: | remote work, productivity, retention |
| JEL: | M54 J24 J63 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26177 |
| By: | Luca Lorenzini |
| Abstract: | I develop a general-equilibrium oligopsony model in which firms differ in their demand for worker ability, generating worker-specific monopsony power. Taking the model to matched employer–employee data for Italy and Germany reveals ability segregation that localizes competition: firms compete most intensely with similar firms targeting the same ability segment. In the calibrated model, monopsony power and welfare losses are largest for low- and high- ability workers, who face fewer effective employers. Output losses are modest relative to standard quantitative benchmarks. Labor-market power amplifies wage inequality because wider between-market wage dispersion outweighs compressed assortative matching and top wages. |
| Keywords: | labor-market power, worker-firm sorting, misallocation |
| JEL: | J42 J31 D43 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12858 |
| By: | Martin Brown (Study Center Gerzensee and University of St. Gallen); Mohamed Hamoud (University of Zurich and Swiss Finance Institute); Jan Toczynski (Queen Mary University London) |
| Abstract: | We examine the recovery of U.S. consumer spending following the COVID-19 recession using monthly transaction data for over 34, 000 individuals. We find limited evidence that cutbacks in spending on in-person services or durables during the recession generated pent-up demand. Instead, spending dynamics are largely consistent with hand-to-mouth behavior: expenditures during and after the recession are correlated with income changes, even more so among households with low liquidity buffers and lower income levels. These results underscore the central role of income and liquidity, rather than sentiment or forced savings, in driving the post-recession dynamics of consumer spending. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:szg:worpap:2601 |
| By: | Baumgartner, Erick (Bocconi University); Corbi, Raphael (University of Sao Paulo); Narita, Renata (PUC-Rio) |
| Abstract: | How much employment can be generated by decreasing payroll taxes? We examine this question by exploring the staggered rollout of a large payroll tax reform in Brazil. Using administrative matched employer-employee data, we find an increase of 5 percent on employment due to both firm growth and firm entry, no impact on wages and a significant increase in profits. Moreover, employment effects are driven by less concentrated labor markets, consistent with predictions from an oligopsony model. |
| Keywords: | payroll tax, employment, wages, profits, oligopsony |
| JEL: | H2 J3 J6 J42 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18838 |
| By: | Marcel Schlepper; Timo Wochner |
| Abstract: | This paper provides causal evidence that the mere risk of war — absent actual conflict — imposes substantial economic costs. Our setting exploits NATO's Cold War defense line against a potential Soviet invasion, which created a geographic discontinuity in war risk within West Germany. A leak of classified defense plans in 1977 made this discontinuity salient to the public. We show that war risk distorted firm behavior on the exposed side of the defense line: firm entry declined, and incumbent firms reduced investment. These responses caused persistent regional divergence. Decades after the Cold War ended, incomes remain significantly lower in areas once exposed to higher war risk. |
| Keywords: | war risk, conflict, economic growth, firm decisions |
| JEL: | D74 R11 O12 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12915 |
| By: | Matthew T. Cole (Department of Economics, California Polytechnic State University); Michael P. McCullough (Agribusiness Department, California Polytechnic State University); Nathan H. Miller (Georgetown University and NBER) |
| Abstract: | We study business-to-business price adjustment around the 2025 U.S. aluminum tariffs, using California wholesale beer filings that date each price change. Posted prices rise commensurate with the increase in the cost of aluminum cans. Adjustment is delayed, selective, and bundled: new filings surge four months after implementation without raising prices, and the increases arrive at six and seven months, in filings that reset long-unrevised prices and span more of the product line. Surges recur in other years, at other dates, without the selection or bundling. Frictions that contribute to price rigidity between firms operate even around salient, dated cost events. |
| Keywords: | price adjustment, menu costs, wholesale markets, posted prices, tariffs, beer |
| JEL: | E31 F13 L11 L13 L66 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:cpl:wpaper:2602 |
| By: | Hernaes, Øystein (Ragnar Frisch Centre for Economic Research); Kostøl, Andreas (BI Norwegian Business School) |
| Abstract: | This paper uses data on the universe of private-sector employment in Norway up to February 2026 to examine whether AI exposure has contributed to a widening employment gap across occupations with varying AI exposure. Since October 2022, the month before ChatGPT's release, employment in the most exposed occupations has grown by 0.1 percent, against 0.3 percent in the least exposed occupations. We track this number on a monthly basis on the public dashboard \emph{kiindeksen.no}. The dashboard updates the full-distribution comparison each month as new administrative data arrives, allowing differential employment growth by AI exposure to be tracked over time. We also show that when we compare young workers by complete occupation quintiles of exposure, the relative decline of the most exposed quintile is estimated as an imprecise zero. |
| Keywords: | artificial intelligence, labor market, employment, AI exposure, Norway |
| JEL: | J23 O33 J21 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18767 |
| By: | Bishop, Menna (University of Warwick); Moneke, Niclas (University of Oxford); Zipfel, Céline (House of Sustainable Society (HoSS)) |
| Abstract: | Towns and cities create jobs and income. Can the arrival of new jobs also create a town? We study large agro-industrial labour demand shocks in rural sub-Saharan Africa: flower farms in Kenya. Rising production costs in Europe generate a boom in Kenyan cut-flower export production, providing stable wage jobs for mostly low-skilled women. We exploit the specific requirements of cut-flower production to track the arrival and growth of greenhouses over the last two decades. We find large increases in wage employment and home-to-market transformation within agriculture, especially for women. Urbanisation unfolds: population growth and in-migration are flanked by an emerging private rental market for housing. Housing quality and infrastructure access improve, wealth accumulates. Educational investments increase while fertility decreases. Suggestive evidence highlights that the resulting towns initiate occupational change, motivate forward-looking investment and even survive flower farm closures – indicating towns that can sustain themselves as centres of economic activity. |
| Keywords: | Town formation; wage employment; agro-industry; Kenya |
| JEL: | J21 O14 O18 Q13 R11 |
| Date: | 2026–08–16 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:hamisu:2026_004 |
| By: | Akerlof, Robert; Ashraf, Anik; Macchiavello, Rocco; Rabbani, Atonu |
| Abstract: | Conflicts between management and workers are common in newly industrializing countries. Combining ethnographic, survey and administrative records from a Bangladeshi sweater factory, we study how workers responded when management laid off a quarter of the workers following a period of labor unrest. After the unrest, the factory experienced a substantial drop in productivity. Among surviving workers, those who likely had strong social connections – friends – among fired co-workers suffered relatively larger declines in productivity. Additional evidence on potential mechanism indicates a deliberate shading of effort to punish the factory’s management. |
| Keywords: | layoffs;productivity;morale;relational contracts |
| JEL: | J50 M50 O12 |
| Date: | 2026–07–17 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129978 |
| By: | Huffman, David (University of Pittsburgh); Pierce, Lamar (Washington University in St. Louis); Rees-Jones, Alex (University of Pennsylvania, Wharton School and NBER); Reyes, Germán (Middlebury College) |
| Abstract: | We examine a choice between bonus contracts offered to dealers of a U.S. auto manufacturer. In our data, dealers select the non-profit-maximizing option in 20 percent of observations, costing the mistaken dealers $18, 453 per year on average. We examine how the propensity to make this mistake varies with competition, identified both cross-sectionally and within dealers over time. Both analyses show that greater competition substantially lowers the rate of mistakes. However, even in the most competitive markets, consequential mistakes persist. Our results suggest that competition disciplines mainly through within-dealer changes in behavior rather than entry and exit. |
| Keywords: | behavioral economics, market competition, anomalies, non-profit-maximizing behavior, behavioral firms, incentive contracts, automobile dealers |
| JEL: | D22 D91 L13 M52 L62 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18766 |
| By: | Gyöngyi Lóránth (University of Vienna & CEPR); Alan D. Morrison (Saïd Business School, University of Oxford, CEPR, & ECGI); Jing Zeng (University of Bonn & CEPR) |
| Abstract: | We study how firms can design their organizational structures to overcome dynamic commitment problems when entering new markets or technologies. A manager must exert costly effort to first develop and subsequently manage an investment opportunity. Ex post, the firm underinvests in projects that generate high management rents. However, the prospect of those rents helps offset the manager’s initial project development cost, making ex ante commitment to invest optimal. Levered subsidiaries mitigate this time-consistency problem by introducing risk-shifting incentives that counteract underinvestment. Subsidiaries are most valuable for projects that are costly to develop, have moderate management costs, and yield returns uncorrelated with existing business. |
| Keywords: | Organizational structure, investment strategy, branch, subsidiary |
| JEL: | G32 G34 L22 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:ajk:ajkdps:423 |
| By: | Ziegler, Lennart (Central European University) |
| Abstract: | How strongly do employer age preferences restrict the hiring of older workers? I study Austrian job postings, in which employers could openly state age limits until the practice was banned in 2004. Age limits were both widespread and strict: more than 30 percent of vacancies stated an upper age limit, and most caps were set between age 40 and 55. To assess the impact of the ban, I link the vacancies to administrative data on applicants and hired workers, predict each job's age requirement from pre-ban postings of the same firm and occupation and compare jobs with stronger and weaker predicted restrictions over time. After the ban, previously restrictive jobs attracted older applicants and hired older workers, with larger effects at the application stage than at the hiring stage. Wages, job duration, sickness absence and vacancy filling duration remained unaffected. In the ad texts, employers replaced direct references to young workers with attributes commonly associated with youth. Taken together, these results suggest that employers hold overly pessimistic beliefs about older workers and partially revise them once a broader pool of applicants emerges. |
| Keywords: | vacancies, age discrimination, screening and hiring |
| JEL: | J63 J14 J23 J24 J68 J71 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18866 |
| By: | Hiroyuki Yamada (Keio University); Linda Agnes Kursim (Keio University); Midori Matsushima (University of Tsukuba); Atsushi Nakagomi (Chiba University); Takahiro Tabuchi (Tohoku University) |
| Abstract: | This study investigates the causal impact of subjective AI-induced job replacement anxiety on work motivation, turnover intentions, and mental well-being among Japanese workers. Integrating task-based theory, efficiency wage theory, and health capital models, we formalize the fear of future replacement as a microeconomic friction. To address endogeneity, we employ a simultaneous ordered probit framework using the ILO’s Global Index of Occupational Exposure and Japan’s Automation Risk Index as instrumental variables. Results reveal that AI anxiety significantly erodes work engagement and meaningfulness. Critically, AI anxiety heightens turnover intentions for the full sample, strictly aligning with theoretical predictions. However, we identify a non-monotonic generational pattern: middle-aged workers exhibit a defensive “lock-in†effect, whereas younger and older cohorts show increased mobility. Furthermore, mental health deterioration is concentrated among younger and self-employed individuals. These anticipatory psychological frictions distort labor incentives long before actual displacement, highlighting the need for human-centered AI policies. |
| Keywords: | Generative AI, Work Motivation, Turnover Intention, Mental Well-being, Japan |
| JEL: | D80 J24 J63 I31 C36 |
| Date: | 2026–07–22 |
| URL: | https://d.repec.org/n?u=RePEc:keo:dpaper:dp2026-015 |