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on Business Economics |
| By: | Pierre Cahuc; Pauline Carry; Franck Malherbet; Pedro Martins |
| Abstract: | Employment protection legislation often varies with firm or establishment size and age, and many evaluations of EPL reforms exploit these thresholds. This paper develops a search-and-matching model with multi-establishment firms to disentangle direct effects from general-equilibrium spillovers. We combine the model with quasi-experimental evidence from a 2009 Portuguese reform that restricted fixed-term contracts in young establishments of large firms. Spillovers barely distort the reduced-form estimate, yet they overturn the aggregate conclusion: extrapolating the reduced-form estimate implies a 1.51% employment decline, compared with a 0.11% increase in general equilibrium. Counterfactuals show that conditioning EPL on size versus age can yield opposite welfare effects, even when employment effects are similar, and that fixed-term contract and firing restrictions must be evaluated jointly. |
| Keywords: | Employment protection legislation; general-equilibrium spillovers; fixed-term contracts; contingent regulation; directed search; structural estimation. |
| JEL: | E24 J41 J63 J68 C54 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26238 |
| By: | Baghdadi, Leila; Gatti, Roberta V.; Islam, Asif M.; Coronado, Jesica Torres; Zaveri, Esha Dilip |
| Abstract: | Tunisia is among the Mediterranean’s most climate-exposed countries facing acute water scarcity. Although a growing literature has documented the effects of extreme weather on firms, few studies have used longitudinal administrative data to track how business performance evolves over time. This paper draws on about two decades of firm-level records from Tunisia’s formal business registry (Répertoire National des Entreprises), linking firm locations to satellite-based precipitation measures at the delegation level, which is Tunisia’s second-level administrative unit. Using more than 1 million firm-year observations, the study finds that droughts—defined as negative precipitation shocks—reduce total revenues and revenues per worker by approximately 12 and 11 percent, respectively. Large formal firms, non-exporting firms, and domestic firms are disproportionately vulnerable. The results are robust across a range of sensitivity analyses. |
| Date: | 2026–09–28 |
| URL: | https://d.repec.org/n?u=RePEc:wbk:wbrwps:11472 |
| By: | Maria Garcia-Osipenko; Nicholas Vreugdenhil; Nahim B. Zahur |
| Abstract: | We investigate how endogenous rigidities inhibit physical capital reallocation. We focus on the role of contract duration - a classic example of an adjustment rigidity. We argue that when agents sign longer contracts in booms when markets are thin, they generate a contracting externality which further amplifies thinness and impedes the adjustment of markets to shocks. We develop a dynamic spatial framework with booms and busts where agents search and choose match duration. Applying the framework to the containership leasing market, we find substantial misallocation from endogenous rigidities, particularly in the transition after a crash. |
| JEL: | D22 D23 L14 L22 L91 R40 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35821 |
| By: | Michel Beine; Giovanni Peri; Morgan Raux; Lilie Timricht |
| Abstract: | We provide the first global empirical evidence on the relationship between international master’s education and entrepreneurship. Using large-scale longitudinal data from LinkedIn/Revelio, we document that international master’s graduates are systematically more likely than domestic graduates to create firms across the world’s leading destinations for international students. We further show how this entrepreneurial advantage varies across fields of study, gender, origin and destination countries. In addition, we document the geography of post-graduation firm creation, highlighting the international mobility of entrepreneurial activity among former international students. Taken together, the results offer a new global perspective on the economic impact of international student mobility and the contribution of international master’s graduates to entrepreneurship, innovation, and business dynamism worldwide. |
| Keywords: | foreign students, entrepreneurship, master’s programs, STEM |
| JEL: | F22 I23 M13 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13014 |
| By: | Holzheu, Kerstin (Sciences Po, Paris); Muñoz-Morales, Juan (IÉSEG School of Management) |
| Abstract: | Life-cycle wage growth varies substantially across countries. We examine the role of the firm productivity distribution by introducing a random-search model that disentangles firm heterogeneity, on-the-job learning, and labor-market frictions. Estimates for Brazil, Colombia, and the United States reveal two distinct disadvantages: a long left tail of low-paying firms in Brazil and a highly compressed firm ladder in Colombia. Counterfactuals show that equating each country's firm distribution to that of the United States closes most of the cross-country gap in life-cycle wage growth: Brazil's wage growth rises from 73 to 103 percent of the U.S. value, and Colombia's from 52 to 115 percent. These results are robust to alternative distributional assumptions, education residualization, and external discipline on the productivity tail. |
| Keywords: | labor markets, income profiles, developing countries |
| JEL: | J24 J31 J63 J64 E24 O11 O12 O15 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18970 |
| By: | Grillitsch, Markus (CIRCLE, Lund University); Tavassoli, Sam (Deakin University); Obschonka, Martin (University of Amsterdam) |
| Abstract: | Firms in peripheral and less knowledge endowed regions often struggle with innovation, as it is deeply rooted in and influenced by local characteristics. Although recent research highlights the significant, yet complex and hard-to-quantify role of local 'soft factors' such as culture and macro-psychology (e.g., local psychological openness) for firm innovation, we know relatively little about its specific role for firms located in the knowledge periphery. This study examines the hypothesis that favorable local soft factors, such as psychological openness, can compensate for unfavorable local hard factors for innovation of firms located in the knowledge periphery. Drawing upon Schmookler's scissor metaphor, we theoretically elaborate how local psychological openness impacts firm innovation by shaping both the demand and supply sides of the innovation process. In our arguments, we also incorporated the contingent impact of both regional (external) and firm (internal) factors on the relationship between local psychological openness and firm innovation. Our empirical investigation of a large and longitudinal sample of Swedish firms across 2004 to 2018 revealed a compensatory effect of local psychological openness for local 'structural knowledge gaps' in less endowed peripheral regions. Implications for research and policymaking addressing innovation in firms and regions are discussed. |
| Keywords: | firm innovation; local psychological openness; knowledge spillovers; peripheral regions |
| JEL: | O31 O33 R11 |
| Date: | 2026–09–25 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:lucirc:2025_007 |
| By: | Xiaoming Cai (Peking University HSBC Business School); Pieter Gautier (Vrije Universiteit Amsterdam) |
| Abstract: | Search frictions normally raise the bar for sorting: both random and directed search require complementarities strictly stronger than the supermodularity that suffices in Becker's (1973) frictionless model. We introduce private information into this setting: firms post wages without observing worker productivity, while better workers have better outside options, creating a market for lemons (Akerlof 1970). We show that this information friction pushes sorting the other way: attracting high-productivity workers without attracting low-productivity ones requires a higher wage paired with a lower job-finding probability, so vacancies fill faster. This strict ranking of vacancy filling rates sorts the market positively whenever output is complementary in worker and firm quality. Becker's condition therefore suffices once more, and private information makes positive sorting easier to sustain than complete information does. |
| Keywords: | Competitive search, adverse selection, screening, sorting, positive assortative matching |
| Date: | 2026–10–05 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20260081 |
| By: | Gert Bijnens; Anders Humlum; Stijn Vanormelingen |
| Abstract: | New machinery has long been argued to raise the relative demand for skilled labor, yet firm-level evidence finds no such shift at investing firms. We resolve this puzzle by looking beyond firm boundaries. Linking Belgian data on capital investments, buyer–supplier transactions, and worker skills, we show that the skill bias of new machinery arises entirely at external suppliers. Following machinery investment spikes, purchases from suppliers raise firms’ total demand for high-STEM workers by 45%, three times the rise for other skill groups, while in-house hiring raises it by less than 5%, evenly across skill groups. This external demand comes first from machine integrators and later from complementary services such as software, and is stronger for smaller firms, lumpier investments, and rapidly advancing capital, consistent with fixed and adjustment costs of hiring high-STEM workers in-house. In a general-equilibrium model estimated on our event studies, the rise in machinery per worker from 2003 to 2021 raises relative demand for high-STEM workers by 8.8 log points and their wage premium by 3.1. Measured on payrolls alone, both would fall. |
| Keywords: | capital–skill complementarity, firm boundaries, outsourcing, investment spikes, production networks, automation |
| JEL: | E22 J23 J24 J31 L24 O33 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13019 |
| By: | Albrecht Glitz; Adrian Lerche; Lukas Mergele |
| Abstract: | Economic espionage is a pervasive global phenomenon. We study how knowledge acquired through this clandestine activity affects firms' economic performance. Exploiting historical data from East Germany that trace the flow of scientific-technical information from its sources in the West to its recipients in the East, we show that economic espionage increased firms' productivity and reshaped their production structure and input choices. We further find that the resulting technical change was labor-augmenting and that the associated productivity gains propagated through the production network via input-output linkages. In the long run, firms receiving larger inflows of espionage information were significantly more likely to survive the transition to a market economy following German reunification. |
| Keywords: | Espionage, Knowledge Flows, Firm Adjustments, Productivity |
| JEL: | L2 N4 O3 P2 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26255 |
| By: | Coyle, Diane; Nguyen, Nghi; Poquiz, John Lourenze; Riley, Rebecca |
| Abstract: | This paper provides early evidence that AI adoption by firms is linked to management practices in unique ways. Using panel data from the UK Management and Expectations Survey (MES), we find that firms with higher baseline management scores are significantly more likely to adopt AI. This relationship is specific to AI: the same management practices show no relationship with the adoption of other technologies such as robotics, specialized equipment, or specialized software. We also find that management capabilities related to performance measurement appear strongly related to AI adoption. These results suggest that organisational complementarities are specific to different technologies, with implications for policies to encourage AI adoption by firms. |
| Keywords: | AI; technology adoption; management practices; technology diffusion; organisational capital; decentralisation; ICT |
| JEL: | D24 L23 O31 O33 |
| Date: | 2026–09–28 |
| URL: | https://d.repec.org/n?u=RePEc:eoe:escoed:escoe-dp-2026-13 |
| By: | Giupponi, Giulia; Machin, Stephen |
| Abstract: | We study how firms set wages for their employees when they can legally age discriminate across workers. We exploit an age-specific minimum wage change in the UK, which raised the minimum applying to workers aged 25 and over, leaving unchanged the minima for younger workers. Using matched employer-employee data on a low-paying sector, we show large, positive wage spillovers on workers aged under 25, which arise within firms from company wage policy. Pay equity norms offer the most parsimonious explanation for the emergence of spillovers. The effects that we document also operate in other low-paying sectors of the UK labor market. |
| Keywords: | pay equity;wage setting;minimum wage |
| JEL: | J31 J38 D63 M52 |
| Date: | 2026–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:137784 |
| By: | Nava Ashraf (STICERD and Department of Economics, LSE); Oriana Bandiera (STICERD and Department of Economics, LSE); Víctor Quintas-Martínez (Amazon); Virginia Minni (University of Chicago, Booth School of Business, CEPR, IZA, and J-PAL and NBER) |
| Abstract: | We ask whether the gendered division of work affects firm productivity across the spectrum of economic development. Personnel records of over 100, 000 individuals hired by a global firm that operates in 100 countries reveal that the performance of female employees is higher where women are underrepresented in the candidate pool. This implies productivity gains from hiring more women, but realizing them would require increasing women’s pay relative to men. The findings highlight how unequal gender norms in local labor markets create an equity-efficiency trade-off inside the firm, particularly in low-income countries with conservative gender norms. |
| JEL: | O12 O15 M5 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:bfi:wpaper:2026-124 |
| By: | Anton Cheremukhin; Paulina Restrepo-Echavarria |
| Abstract: | We develop a search model of international trade where buyers allocate costly cognitive attention across suppliers. Suppliers exploit the cost of shifting attention to extract markups, giving dominant firms the cushion to absorb cost shocks while marginal suppliers pass them on. Validating this mechanism with U.S. tariff data, we estimate a highly concentrated U.S. domestic market. Consequently, while targeted tariffs spur offshore substitution, blanket tariffs force buyers toward captive domestic monopolies. Incumbents’ growing market power raises markups and halves the aggregate macro elasticity relative to micro estimates. Integrating endogenous market-power-dependent elasticity along the path to autarky more than doubles the U.S. gains from trade compared with standard constant-elasticity predictions. |
| Keywords: | trade elasticity; targeted search; rational inattention; gravity; market power; pass-through; gains from trade |
| JEL: | F10 F11 F13 D83 L13 |
| Date: | 2026–09–21 |
| URL: | https://d.repec.org/n?u=RePEc:fip:feddwp:103847 |
| By: | Masao Fukui; Emi Nakamura; Jón Steinsson |
| Abstract: | Technical change often simplifies jobs. This increases productivity, but it also makes workers more substitutable–or more "commoditized." Commoditization of labor drives down worker bargaining power: anyone can do the job, implying workers are disposable, which improves the outside option of firms and can lower worker wages. We develop a model that captures both the productivity enhancing and wage depressing effects of commoditizing technical change. Commoditizing technical change involves firms standardizing tasks. This reduces the sensitivity of output to worker quality. Firms benefit because they can more easily fill vacancies for their durable jobs. We show that our model can help explain the divergence between productivity and wages in the service sector, increasing wage markdowns despite falling local concentration, and the decline of the large-firm wage premium. |
| JEL: | E11 J42 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35815 |
| By: | Fernando E. Alvarez; David Argente; Alberto Cavallo; Francesco Lippi |
| Abstract: | We use the euro cash changeover, a large-scale and purely nominal reform that requires all firms to redenominate posted prices, to distinguish among theories of price rigidity. We develop a nonstationary menu-cost model in which firms anticipate the changeover date and may combine currency adoption with real price adjustment. The announcement makes the firm’s inaction region time-varying, a singular control problem with a moving boundary for which closed-form characterizations are rarely available. We solve this problem analytically by perturbation, recovering the whole path of the boundary, the date at which firms begin adopting the new currency, and the implied pricing moments. The model predicts that, as the changeover approaches, firms adjust more frequently but by smaller amounts, compressing the distribution of price changes. We test these predictions using historical CPI micro data from Austria, Finland, Greece, and Slovakia, a UK benchmark, and daily price data from the recent changeovers in Croatia and Bulgaria. Across changeovers, adjustment frequency rises while the size and dispersion of price changes fall. The model adds a single parameter to the standard menu-cost setup, the cost of pricing in the wrong currency. Calibrating it to the observed rise in adjustment frequency, the model reproduces the decline in the size of price changes and its subsequent recovery, neither of which is targeted. The evidence supports state-dependent price-setting models over models in which nominal redenomination leaves real pricing behavior unchanged. |
| JEL: | D40 E31 E42 F33 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35790 |
| By: | Christian Bustamante; Xing Guo; Lu Han; Soyoung Lee; Gaelan MacKenzie; Mariel Yacolca Maguiña; Jacob Short |
| Abstract: | We develop a framework to quantify how tariff changes on imported goods affect sectoral and aggregate consumption prices through direct and production-network channels. Using Canada's input-output matrix and administrative firm-good import data for the universe of Canadian firms, we estimate price elasticities for tariffs on U.S.-imported goods. Tariffs on machinery and equipment and transport equipment generate the largest effects on final prices, reflecting their widespread use as intermediate inputs. On average, two-thirds of the total price response stems from higher intermediate input costs passing through domestic supply chains. Applying the framework to Canada's 2025 counter-tariffs, we estimate consumption price increases of 1.56 and 0.72 percentage points for the pre- and post-September 2025 phases, respectively; alternative packages of equal import value could reduce aggregate price effects by three to seven times. A hypothetical CUSMA breakdown reverting to MFN tariffs would raise final-good prices by 0.64 percentage points. |
| Keywords: | Monetary policy; Inflation dynamics and pressures; Structural challenges; International trade, finance and competitiveness |
| JEL: | D D5 D57 E E3 E31 F F1 F13 F14 |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocawp:26-35 |
| By: | Jonathan Becker; Corina Boar; Virgiliu Midrigan |
| Abstract: | Importers are few and large, have higher labor productivity and pass through cost changes to prices incompletely. We study optimal tariffs in a model consistent with these facts. Firms pay a fixed cost to import and charge markups that increase with size. Market power implies that importers are too few and too small relative to the efficient allocations. Tariffs amplify this distortion. We derive a formula that relates the optimal tariff not only to the foreign export supply elasticity but also to how much distortions amplify the effect of trade costs on welfare. In our calibrated economy the optimal tariff is negative and decreases with country size. |
| JEL: | E10 F12 F13 L11 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35829 |
| By: | Pinelopi Goldberg; Reka Juhasz; Giulia Lo Forte; Jeff Thurk |
| Abstract: | We show that cross-border learning is an important feature of modern semiconductor manufacturing and that several important channels – such as knowledge sharing along global supply chains, the movement of engineers within multinational firms, and foreign direct investment – operate through market mechanisms rather than anonymous technological spillovers. These findings have significant policy implications. When cross-border learning is mediated by purposeful economic relationships, access to frontier knowledge is neither automatic nor guaranteed. Firms and governments can facilitate – or restrict – the international diffusion of technology, implying that policies to foster domestic technological upgrading are likely to be most effective when coupled with continued access to global sources of frontier knowledge. |
| Keywords: | semiconductors, international knowledge diffusion, learning-by-doing, cross-border learning |
| JEL: | F50 F61 L63 N60 O30 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_13029 |
| By: | Antoine B. Levy; Mathilde Muñoz |
| Abstract: | This paper studies whether and how distressed regions can recover from industrial decline. We exploit differences in access to an increasingly thriving Luxembourg labor market for neighboring residents of the French “Rust Belt.” We document a three-phase expansion of treated local labor markets, driven by an initial workplace substitution of incumbent residents towards cross-border job opportunities, a medium-term rise in local labor force utilization, and a long-run sustained increase in population via net domestic in-migration. A broader process of local revitalization follows, with higher incomes, reduced reliance on transfers, and resilience to social dislocation, although it is partially offset by rising housing costs and unequal congestion. This leads to a net decrease in far-right and anti- EU vote shares, muting the rise of populism visible elsewhere in former industrial regions of France. Our findings suggest that former industrial regions are not inherently rigid nor doomed to fall to anti-globalization backlash, but can and do adjust – given sufficiently large-scale reversals in local labor demand. |
| JEL: | F15 J61 R23 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35814 |
| By: | Yannis Kastis; Hillary Vipond |
| Abstract: | This paper studies how the organization of production shapes the adoption of new technologies. We examine a shift in production organization in English tailoring induced by the arrival of Jewish tailors fleeing pogroms in the Russian Empire between 1881 and 1905. When Jewish immigrant tailors arrived in England, native tailors were mostly self-employed and used sewing machines, introduced in the 1860s, to raise individual productivity. In Russia, where sewing machines were largely unavailable to them, Jewish tailors worked in ready-to-wear production, which involved a modular approach and greater collaboration within workshops. Upon arriving in England, they combined the sewing machines with their organizational practice to introduce the so-called "Jewish task system", which relied on an extensive division of labor and enabled clothing production to scale. Combining original data on production tasks with firm-level data, and using immigrant settlement patterns predating the introduction of the sewing machine as an instrument, we show that immigrant arrivals induced native tailors to reorganize production toward this system, accelerating both the diffusion of the sewing machine and England's transition to mass-produced clothing. Our findings show that organizing production efficiently around a new technology is a prerequisite for its diffusion. |
| Keywords: | organization of production, technology adoption, immigration |
| JEL: | L23 O33 J61 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:crm:wpaper:26253 |