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on Business Economics |
| By: | Sam Desiere (Ghent University, Belgium); Rigas Oikonomou (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Tiziano Toniolo (IZA, Germany); Bruno Van der Linden (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)); Gert Bijnens (National Bank of Belgium) |
| Abstract: | Belgium’s 2016 payroll tax exemption for first-time employers triggered a sharp increase in firms hiring their first worker but little growth among larger firms. To account for this pattern, we develop and estimate a directed search model—with discrete hiring, firm heterogeneity, and endogenous entry—using Belgian microdata. The exemption reduces the high marginal cost of the first hire, enabling many previously non-hiring entrepreneurs to become employers, but most lack the productivity needed to expand beyond one worker. The model matches the post-reform size distribution and identifies the conditions under which size-dependent hiring subsidies can foster sustained firm growth. |
| Keywords: | payroll taxes; size-dependent policies; hiring frictions; wage subsidies; competitive search theory |
| JEL: | H25 J08 J23 J38 L25 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:ctl:louvir:2026003 |
| By: | Haotian Deng; Sam Desiere; Bart Cockx; Gert Bijnens (-) |
| Abstract: | This paper studies how employment subsidies for start-ups shape their performance. We exploit an unexpected policy reform in Belgium that permanently exempted start-ups hiring their first employee from payroll taxes for that employee. Using firm-level administrative data and a regression-discontinuity-in-time design, we find that subsidized post-reform startups employed fewer workers and generated lower output, value added, and profits compared to pre-reform start-ups. However, post-reform start-ups were more likely to survive as employers. These effects emerged within the first year after hiring and remained stable over a medium horizon of three years. Our findings indicate a compositional shift: the subsidy primarily induced low-productivity firms to enter the market. As most firms nowadays are nonemployers, our results meaningfully generalize the theoretical implications of standard neoclassical entrepreneurship models (employee–employer margin) and fill the important gap of the nonemployer–employer margin. |
| Keywords: | entrepreneurship, start-up, employment subsidy, tax reduction, labor demand, small firms |
| JEL: | H25 J23 J24 J38 L25 L26 M51 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:rug:rugwps:26/1135 |
| By: | González, Felipe; Prem, Mounu |
| Abstract: | We study the economic effects of a large nationalization program using newly assembled firmlevel data from Chile under Salvador Allende (1970-73). Using a difference-in-differences design, we show that nationalization substantially reduced firm performance and international business activity relative to comparable private firms. Return on assets fell sharply and importing activity declined, with negative effects concentrated in manufacturing, while firms in strategic and natural resource sectors were largely unaffected. We also document lower electoral support for the incumbent coalition in more exposed municipalities. Overall, nationalization generated sizable and uneven economic costs with significant political consequences. |
| Keywords: | nationalization, state-owned enterprises, firm performance |
| JEL: | L33 D72 N36 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:glodps:1715 |
| By: | Megumi NAOI; Banri ITO; Naoto JINJI |
| Abstract: | We present some of the first evidence on how geopolitics shapes policy preferences of firms from a large-scale firm-level survey and experiment in Japan fielded during Trump’s 2025 tariff negotiations. The experiment varies scenarios of supply-chain disruption of critical goods across different causes (natural disasters vs. geopolitics) and the affected domestic actors (“your firm†vs. “Japanese citizens†) and elicits firms’ preferred policy among diplomatic negotiations, protectionism, and subsidies aimed at promoting diversification and domestic production. We find that geopolitical causes increase support for diplomatic solutions and reduce support for de-risking subsidies relative to the control condition (natural disaster). Contrary to the democratic peace conjecture, businesses support diplomacy regardless of alliance status or whether the disruption originates in the U.S. or China. A small minority (6%) support protectionism, especially when the disruption originates in a non-ally country or China. Overall, Japanese firms are not flag followers. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:26016 |
| By: | Renuka M. Diwan; Paul J. Eliason; Riley League; Jetson Leder-Luis; Ryan C. McDevitt; James W. Roberts |
| Abstract: | Governments rely on private firms to provide public goods and services. Although competition among these firms reduces prices and the costs of procurement, it has an ambiguous effect on fraud: competition can both dissipate the rents that attracted fraudulent firms to the market while at the same time reducing margins to the point where legitimate firms no longer remain viable. We study this tradeoff in the government’s procurement of durable medical equipment. Following Medicare’s switch from regulated prices to competitive bidding, we find that fraudulent firms’ cost advantage allowed them to gain market share as legitimate firms exited the market. |
| JEL: | D22 D73 H41 I18 K42 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34802 |
| By: | De Ridder, Maarten; Grassi, Basile; Morzenti, Giovannie |
| Abstract: | Macroeconomic outcomes depend on the distribution of markups across firms and over time, making firm‐level markup estimates key for macroeconomic analysis. Methods to obtain these estimates require data on the prices that firms charge. Firm‐level data with wide coverage, however, primarily come from financial statements, which lack information on prices. We use an analytical framework to show that trends in markups over time or the dispersion of markups across firms can still be well‐measured with such data. Measuring the average level of the markup does require pricing data, and we propose a consistent estimator for such settings. We validate the analytical results using simulations of a quantitative macroeconomic model and offer supporting evidence from firm‐level administrative production and pricing data. Our analysis supports the use of financial data to measure trends in aggregate markups. |
| Keywords: | production functions; competition; Macroeconomics; markups |
| JEL: | J1 F3 G3 |
| Date: | 2026–02–03 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129556 |
| By: | Cevat Giray Aksoy; Jose Maria Barrero; Nicholas Bloom; Katelyn Cranney; Steven J. Davis; Mathias Dolls; Pablo Zarate |
| Abstract: | We establish three facts about work from home (WFH) in the United States. First, employees WFH more often at younger firms – almost twice as often at firms founded after 2015 than at firms founded before 1990. Second, employees working under younger CEOs have higher levels of WFH. The average WFH rate is 1.4 days per week when the CEO is under 30, compared to 1.1 days when the CEO is 60 or older. Third, the self-employed WFH more than twice as often as wage-and-salary employees. These facts highlight the importance of organizational and managerial attributes for the prevalence of WFH. |
| JEL: | J0 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34795 |
| By: | Traversa, Marina |
| Abstract: | Can a recession have a positive, long-term impact on firm innovation? A downturn represents an opportunity for firms to learn from their peers and try to understand the main drivers of resilience. If they deem R&D capital one of them, they may raise innovation in the following years, in order to be better shielded from future crisis. In this paper, I provide evidence of this effect in the aftermath of the Great Recession. I do so by assuming that firms learned from their best peers and by examining the characteristics of these companies. I first look at their level of R&D capital and find that firms with high-R&D best peers raised intangible investment 5 percent more than others after 2008. I then examine the top competitors' type of R&D capital and show that companies raised innovation only in the case of high-productivity (as opposed to high-product differentiation) best peers. Using alternative tests, I find a positive (negative) relationship between productivity (product differentiation) and company performance during the crisis, which supports the fact that companies learned from their peers and raised innovation only when they deemed it a source of resilience to the downturn. Finally, I examine whether the increase in innovation improved firm resilience and show that it did: companies raised sales growth, profitability and international recognition and were less likely to fail. |
| Keywords: | Corporate Finance, Innovation, Learning, Resilience, Productivity, Product Differentiation |
| JEL: | G30 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:safewp:336815 |
| By: | Masami Imai; Koji Sakai; Michiru Sawada |
| Abstract: | Distortions in credit allocation can slow technological progress by sustaining unproductive firms and generating congestion that crowds out innovation from otherwise healthy firms. We study this mechanism using Japan’s banking crisis of the 1990s, linking firm-level borrowing data to the universe of patent applications with more than fifteen years of historical citation outcomes. Innovation declines more in technology fields facing greater credit distortion, with effects substantially larger for forward citations than for patent counts. Firm-level evidence reveals persistently low innovation by zombie firms and reduced innovation by healthy firms operating in zombie-intensive industries, consistent with congestion effects. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:tcr:wpaper:e220 |
| By: | Martin, David (LPTMC, Sorbonne Université, Paris); Moran, José; Panja, Debabrata; Bouchaud, Jean-Philippe |
| Abstract: | We study the disequilibrium dynamics of a stylised model of production networks in which firms use perishable and non-substitutable intermediate inputs, so that adverse idiosyncratic productivity shocks can trigger downstream shortages and output losses. To protect against such disruptions, firms hold precautionary inventories that act as buffer stocks. We show that, for a given dispersion of firm-level productivity shocks, there exists a critical level of inventories above which the economy remains in a stable stochastic steady state. Below this critical level, the system becomes fragile, i.e., it becomes prone to system-wide crises. As this resilience–fragility boundary is approached from above, aggregate output volatility rises sharply and diverges, even though shocks are purely idiosyncratic. Because inventories are costly, competitive pressures induce firms to economize on buffers. Although we do not explicitly model such costs, we argue that the resulting behaviour of individual firms drives the system close to criticality, generating persistent excess macroeconomic volatility — in other words, "small shocks, large cycles" — in line with other settings where efficiency and resilience are in tension with each other (Hynes et al., 2022; Moran et al., 2025). In the language of phase transitions, the resilient-to-fragile transition is continuous (supercritical): the economy exhibits a well-defined stochastic equilibrium with finite volatility on one side of the boundary, while beyond it the probability of a collapse in finite time tends to one. We characterize this transition primarily through numerical simulations and derive an analytical description in a high-perishability, high-connectivity limit. Finally, we show that the ability to rapidly reallocate demand across alternative suppliers shifts the critical boundary and can eliminate the fragile regime, underscoring the macroeconomic importance of inventory policies and supplier diversification for production network resilience. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:amz:wpaper:2026-05 |
| By: | Konrad Adler; Sebastian Doerr; Sonya Zhu |
| Abstract: | Over the past decades, index funds have amassed substantial ownership stakes in publicly traded firms. Index funds' rapid growth raises questions about their influence on governance and monitoring, as well as the consequences for other stakeholders. This paper examines how banks adjust their loan pricing when firms have a higher share of passive index fund investors as shareholders. Using syndicated loan data, we find that loan spreads increase with passive ownership and provide evidence consistent with higher loan spreads reflecting increased risk due to reduced shareholder oversight. Supporting this interpretation, we find stronger effects among firms in which shareholder oversight has more impact. However, the increase in loan spreads is not fully accounted for by changes in firm risk. Suggestive evidence points towards banks increasing their monitoring efforts in response to changes in shareholder composition, which is costly and reflected in loan spreads. |
| Keywords: | passive ownership, institutional investors, bank monitoring, syndicated loans |
| JEL: | G21 G23 G32 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1330 |
| By: | Emin Dinlersoz; Yueyuan Ma |
| Abstract: | Using administrative data on 17 million U.S. business applications linked to outcomes, we compare potential entrants’ expectations about employer entry and first-year employment with realizations. On average, applicants overestimate employment, mainly because many expect to enter but do not. Among those who expect and achieve entry, employment is typically underestimated. Expected employment predicts entry and realized employment, but conditional on entry realized employment rises less than one-for-one with expectations. Expectation errors are highly heterogeneous and systematically related to application characteristics and local economic conditions, and they predict near-term employment outcomes. A parsimonious model with heterogeneous priors, learning, and pre-entry selection rationalizes these patterns. |
| Keywords: | expectations, expectation error, forecast error, entry, startup size, business formation |
| JEL: | D84 D90 L26 L25 M21 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:26-11 |
| By: | Robert J R ELLIOTT; Wenjing KUAI; Toshihiro OKUBO; Ceren OZGEN |
| Abstract: | This paper examines how international engagements shape heterogeneity in the greenness of Japanese manufacturing firms. Using a new firm-level dataset, we construct intensity-based greenness indicators distinguishing between the greenness of market facing products and the greenness of more governance-driven production processes. Our empirical results are three-fold. First, green activity is widespread across Japanese manufacturing sectors but is predominantly process-oriented, with the greenest firms concentrated in a small subset of industrial activities. Second, greenness is not linked to internationalization in general, but to firms being embedded in global value chains (GVCs), particularly in Western oriented networks, and this association is stronger for green processes. Third, we identify a vulnerability whereby product greening does not attenuate tariff induced sales losses among internationally engaged firms, and green processes do appear to amplify tariff exposure, especially for GVC participants. Overall, the results highlight that going green is multidimensional and that environmental process compliance interacts with GVC integration in shaping firms’ resilience to trade policy shocks under a trend towards further geoeconomic fragmentation. |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:26018 |
| By: | Chloe N. East; Caitlin Patler; Elizabeth Cox |
| Abstract: | Deportation is often framed as a necessary tool to protect public safety by removing people who commit crimes. We use newly available, and externally validated, administrative data containing all US Immigration and Customs Enforcement (ICE) arrests from September 2015-October 2025. Beyond demonstrating national trends in immigration arrests by method and composition over time, we are also able to compare, for the first time, apprehensions spanning the start of the two Trump administrations, both of which focused on mass immigration enforcement. Our results reveal that the reality of immigration enforcement diverges sharply from the public narrative: while arrests spiked at the outset of both Trump presidencies, there were significant declines in the percentage of arrested individuals with criminal convictions, with especially marked declines in 2025. Examining potential mechanisms reveals that this is driven by a change in ICE tactics, but even conditional on tactic, as arrests rose, the percent with a criminal record declined. Moreover, we find substantial heterogeneity over time and across ICE Areas of Responsibility. Taken together, our results highlight a substantial gap between political rhetoric and reality. |
| JEL: | H50 J0 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34794 |
| By: | Andriy Tsapin (National Bank of Ukraine) |
| Abstract: | This study examines the effects of the russia's full-scale invasion on the Ukrainian corporate labor market. We use the DID technique to analyze a panel data set of over 100, 000 firms linked to geolocation and industry data spanning 2021-2024 and show how war harms the corporate labor market in Ukraine. Specifically, our findings evidence that destructive military shocks adversely affected the number of employees hired, productivity, and wages paid in the corporate sector. We emphasize that the war effects are heterogeneous across firm size and labor intensity and depend on external debt and bank financing. The results obtained have considerable policy implications, making them valuable to both researchers and policymakers. |
| Keywords: | Labor market; War; employment; productivity; wages; Ukraine |
| JEL: | H56 J21 J23 J31 O12 |
| Date: | 2026–02–13 |
| URL: | https://d.repec.org/n?u=RePEc:gii:giihei:heidwp03-2026 |
| By: | Nicholas Bloom; Christos Makridis |
| Abstract: | Using new data from the Gallup Workforce Panel, we document a persistent partisan gap in self-reported AI use at work: Democrats are consistently more likely than Republicans to report frequent use. In 2025:Q4, for example, 27.8% of Democrats report using AI weekly or daily, compared with 22.5% of Republicans. Democrats also report deeper task-level integration, using AI in 16% more work activities than Republicans. Consistent with this, Democrats are employed in occupations with higher predicted AI exposure based on task-content measures and report larger perceived differences in AI-related job displacement risk. However, in regression models the partisan gap in AI use disappears once we control for education, industry, and occupation, indicating that observed differences primarily reflect compositional variation rather than political affiliation per se. |
| JEL: | J0 |
| Date: | 2026–02 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34813 |