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on Business Economics |
| By: | Finck, David (Deutsche Bundesbank); Klein, Mathias (Research Department, Central Bank of Sweden); Tillmann, Peter (University of Giessen) |
| Abstract: | We compile a unique dataset linking micro price data underlying the official Swedish producer price index with administrative firm level data and provide new evidence on the inflationary effects of global supply chain shocks. For identification, we interact exogenous shocks to global supply chains, obtained through a VAR model, with firm specific import shares. Shocks to global supply chains lead to a signif icant and persistent increase in producer prices with a peak response after two years. Importantly, average responses mask heterogeneous responses across firms. Relatively larger firms, firms with lower labor costs and a higher market share raise prices more strongly. |
| Keywords: | Global supply chain shocks; producer prices; microdata; firm characteristics; price setting |
| JEL: | E31 F14 F61 |
| Date: | 2026–08–01 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:rbnkwp:0470 |
| By: | Ryan Kim; Bin Ni; Hyunseung Oh; Choongryul Yang |
| Abstract: | We study an income-account channel of exchange-rate transmission using matched data on Japanese multinational parents and their foreign affiliates. During the sharp yen depreciation of 2021–22, we find that (i) foreign affiliates with greater exchange-rate exposure expanded their activity and generated more profits, with larger payments to their Japanese parents, and (ii) more exposed parents increased their average wages and shifted employment toward commercial branches and offices involved in sales, purchasing, and related business functions, with offsetting declines in other employment. A multinational firm model in which scarce parent-side support inputs are allocated between domestic operations and foreign affiliates rationalizes these findings. To study the aggregate implications, we embed this mechanism in a two-country general-equilibrium model with trade and multinational production. The model shows that moving foreign-market activity from exports to affiliate production reduces the domestic real GDP response to depreciation and shifts more of the external adjustment from trade and toward income earned abroad. Depreciation therefore need not generate a large expansion in domestic production. |
| Keywords: | exchange rates; multinational firms; current account; Japan |
| JEL: | F31 F23 F32 F41 |
| Date: | 2026–09–04 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedgif:103753 |
| By: | Mr. Takuji Komatsuzaki; Théodore Renault |
| Abstract: | This paper investigates the drivers of labor productivity growth in the Nordic countries, using both sectoral and firm-level data over the period 2000–2024. The sectoral analysis documents a broad-based slowdown in labor productivity growth, driven primarily by within-industry developments rather than shifts in the sectoral composition of employment. Firm-level evidence shows that productivity growth is increasingly concentrated among frontier firms—the most productive firms within each industry—while the rest of the firm distribution (“laggards”) has experienced weak or stagnant productivity growth. A decomposition of frontier productivity growth reveals that gains among incumbent frontier firms account for most productivity growth at the frontier across countries. The contribution of net firm entry is highly heterogeneous, and is positive mainly in countries where young entering firms exhibit strong productivity momentum upon joining the frontier. The paper finds evidence of productivity diffusion from frontier to laggard firms but shows that the speed of diffusion has declined since the 2010s. The slower diffusion is closely associated with rising persistence at the productivity frontier: when the same firms remain at the frontier for longer periods, opportunities for laggards to catch up are reduced. Overall, the findings highlight that sustaining aggregate productivity growth hinges not only on innovation at the frontier but also on firm dynamism—particularly entry, exit, and turnover at the frontier—to ensure that productivity gains diffuse broadly across the economy. |
| Keywords: | Labor productivity; frontier firms; technology diffusion; Nordic countries; firm dynamics; productivity gap; structural change |
| Date: | 2026–08–28 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/178 |
| By: | Gideon Bornstein; Laura Castillo-Martinez |
| Abstract: | Governments often intervene to prevent firm closures during crises, fearing that financially constrained but viable firms may fail. We develop a firm dynamics model with incomplete financial markets and show how financial frictions generate excessive firm exit. A key statistic governing this dynamic inefficiency is the marginal propensity to exit with debt. Using confidential U.S. Census data, we estimate the relationship between debt and exit and use it to discipline the model. The calibrated model implies that eliminating financial frictions reduces firm exit from 9.3% to 5.0% and generates welfare gains of 3.6% in consumption-equivalent terms. We show that the welfare costs of financial frictions rise sharply during financial crises but change little during standard productivity recessions. Finally, we compare government-guaranteed loans and grants, quantifying the trade-off between fiscal cost and effectiveness in preventing excessive exit. |
| JEL: | E32 E44 G33 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35479 |
| By: | Chirantan Chatterjee; Ying Fan; Debi Prasad Mohapatra |
| Abstract: | This paper studies how spillovers across complementary markets shape product variety and firm entry. We examine the Indian cell phone and wireless service markets during the 4G rollout and estimate a structural model of demand, pricing, carrier network expansion, and phone product choice. The estimation results support the economic forces through which complementarity generates spillovers. Counterfactual simulations show that banning budget Chinese phones slows 4G deployment by roughly five quarters and lowers consumer welfare without raising domestic firms' profits. Similarly, an unrestricted subsidy outperforms a domestic-only subsidy in expanding network coverage, increasing consumer welfare, and raising domestic firms' profits. |
| JEL: | F13 L13 L63 L96 O25 O33 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35522 |
| By: | Darrell Duffie; Chaojun Wang |
| Abstract: | With complete-information bilateral bargaining in network settings, holdup is eliminated when contracts across the network are agreed atomically (all or none) via a smart contract. Applications include over-the-counter asset trading, third-party-financed purchase agreements, and land assembly. Under a novel extensive-form bargaining protocol, a firm can give a “greenlight” to the terms of a contract proposed to that firm, and the protocol automatically converts those terms into a binding contract if the terms proposed to all other firms are likewise given greenlights. In any Perfect Bayesian Equilibrium with Markov strategies, firms immediately agree on socially efficient contracts. |
| JEL: | C70 D47 D60 D70 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35678 |
| By: | M. Cecilia Bustamante; Bruno Pellegrino |
| Abstract: | We present a new dynamic model of corporate investment in imperfectly competitive product markets that extends the neoclassical (Q) theory of capital to accommodate heterogeneous, multi-product firms and a rich hedonic demand system. Our model endogenizes firms' markups and generalizes Tobin's Q to a matrix (or network) of product market spillovers, which captures how each firm's investment affects that of its rivals. We provide equilibrium existence and uniqueness results along with global analytical solutions for the firms' investment policies. We then take our model to the data for the universe of US public companies and obtain four novel insights: 1) product market competition is a key driver of aggregate investment and capital allocation; 2) shocks to firms' cost of capital generate highly heterogeneous investment and markup responses across firms, and thus impact industry concentration; 3) monopoly rents account for a large, rising share of firms' value; 4) mergers consummated since 1995 have led to a modest decline in the aggregate capital formation of merging firms, yet firm-level markup increases have been highly heterogeneous. |
| JEL: | C7 D2 E2 G3 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35707 |
| By: | Vincent Abraham; Florian Ederer; Catarina Marvao |
| Abstract: | We provide the first empirical evidence that common ownership can facilitate explicit collusion. Our unique setting, the population of legal cartels in Sweden, lets us observe cartel formation, duration, and dissolution without the sample-selection bias that plagues studies of detected cartels. Combining hand-collected ownership data with the universe of registered cartels, we compute firm-pair profit weights (κ) that measure how much one firm internalizes a rival's profits. Higher profit weights are associated with a greater likelihood of cartel participation, predict future cartel involvement, and are linked to longer cartel duration. Firms also reduce their profit weights immediately after a cartel dissolves. However, this relationship is concentrated among pairs in which the firm that internalizes the rival firm's profits colludes while the rival does not. Common ownership therefore complements a firm’s own participation in explicit collusion but substitutes for cartel participation by the rival whose profits it internalizes. |
| JEL: | D43 G32 L21 L41 L43 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35565 |
| By: | Tania Babina; Alex X. He; Renhao Jiang |
| Abstract: | Using a new firm-level measure of AI investment based on AI-skilled employment—spanning machine learning through generative and agentic AI—we show that AI investments are associated with productivity growth in recent years, but not over the previous decade. We trace the productivity gains to the accumulation of organization capital that AI helps create: durable firm-specific knowledge acquired through learning-by-doing that enables more efficient production. We build a novel measure of organization capital based on workers’ job descriptions and document that productivity gains are driven by AI-skilled jobs that build organization capital. Overall, our findings suggest that AI investment generates productivity growth by creating organization capital. |
| JEL: | D22 D24 D25 E22 G3 G30 G32 J24 O33 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35684 |
| By: | Bauer, Michael (Federal Reserve Bank of San Francisco and CEPR); Czarnota, Alexander (Monetary Policy Department, Central Bank of Sweden); Klein, Mathias (Research Department, Central Bank of Sweden) |
| Abstract: | Firm heterogeneity in financial constraints is a quantitatively important driver of how monetary policy transmits to inflation. Using detailed microdata on Swedish public and private firms, and high-frequency monetary policy surprises around Riksbank announcements, we document that smaller, financially constrained firms adjust prices significantly less than larger firms in response to changes in monetary policy. This heterogeneous price response materially dampens the aggregate PPI inflation response to monetary policy. Models of customer markets and financial frictions can explain our findings: because the external finance premium rises after a monetary contraction, constrained firms cut prices less to preserve cash flows, sacrificing future market share. Additional evidence on heterogeneous sales, debt, marginal cost, and markup responses further supports this channel. We consider several alternative explanations, including differences in price adjustments, working capital, market share, and export share, but these cannot rationalize our main heterogeneity result. |
| Keywords: | inflation; monetary transmission; firm heterogeneity; financial frictions |
| JEL: | E31 E32 E52 G32 L11 |
| Date: | 2026–08–01 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:rbnkwp:0468 |
| By: | Yi Chen; Zhe Wang; Jing Zhou |
| Abstract: | We study how AI regulation affects firm valuation using the EU Artificial Intelligence Act, the world's first comprehensive AI framework. In an event study around the April 2021 proposal, we find firms combining deeper EU presence with faster AI hiring earned higher announcement returns, suggesting markets value “jurisdictional capital”—experience in the EU regulatory environment helps firms navigate the AI regulation. The effect is stronger for high-risk AI, for firms with stable and concentrated EU presence, or prior compliance experience, unexplained by size, foreign exposure, or lobbying. EU-embedded, AI-expanding firms increase within-firm EU revenue share when peers are less embedded. |
| Keywords: | AI regulation; event study; EU AI Act; jurisdictional capital |
| Date: | 2026–08–28 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2026/180 |
| By: | Kónya, István; Krekó, Judit |
| Abstract: | This paper examines how foreign direct investment affects the labor share through productivity differences between foreign- and domestically owned firms. We develop a search-and-matching model in which more productive foreign firms acquire domestic firms. Foreign ownership raises productivity and wages, but incomplete pass-through of the productivity advantage to workers reduces the labor share. Using European industry-level data, we find that greater foreign employment penetration is associated with lower labor shares and that the foreign productivity premium substantially exceeds the foreign wage premium. Hungarian administrative firm data show the same pattern: foreign-owned firms have higher productivity and labor costs but lower labor shares. Event-study estimates around foreign acquisitions are less precise but are consistent with this mechanism at longer horizons. Our results show how economies with a large foreign-owned sector can combine relatively high wages with relatively low labor shares and highlight persistent foreign–domestic productivity differences as a potential explanation for labor-share differences across Europe. |
| Keywords: | foreign direct investment; foreign ownership; labor share; labor productivity |
| JEL: | E25 F21 F23 J31 J42 |
| Date: | 2026–08–28 |
| URL: | https://d.repec.org/n?u=RePEc:cvh:coecwp:2026/04 |
| By: | Schack, Trine (Department of Economics and Business Economics, Aarhus University); Meekes, Jordy (Leiden University); Barreto, César (OECD, Paris); Carcillo, Stéphane (Sciences Po, Paris); Fluchtmann, Jonas (OECD); Hijzen, Alexander (OECD); Lochner, Benjamin (FAU Erlangen-Nuremberg); Nibloe, Matthew (UCL); Vejlin, Rune (Aarhus University) |
| Abstract: | We study the incidence, sources, and dynamics of low-wage employment using harmonised linked employer-employee administrative data from Denmark, France, Germany, the Netherlands, Portugal, and the United Kingdom. We examine how worker characteristics, firm-specific wage premia, wage progression, and labour market institutions shape outcomes at different parts of the lower wage distribution. Three main findings emerge. First, worker characteristics account for most of the wage gap facing low-wage workers, though firm-specific wage premia matter too, especially at the very bottom. Firm premia reflect both sorting across industries and pay differences across firms within industries. Second, low-wage employment is at least partly transitory, as workers at the bottom see faster subsequent wage growth and change firms more often. Third, minimum wages and marginal effective tax rates show limited systematic association with wage growth or job-to-job mobility, though higher minimum wages are linked to a smaller share of workers below 70 % of the median. These patterns are broadly similar across countries and point to the joint importance of worker skills and access to higher-paying firms for improving low-wage workers' prospects. |
| Keywords: | low-wage employment, cross-country, matched employer-employee data, wage premia, taxes |
| JEL: | J24 J31 J38 J62 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18891 |
| By: | Hui Chen; Winston Wei Dou; Hongye Guo; Yan Ji |
| Abstract: | We document a robust industry-level distress anomaly in which more distressed industries earn significantly lower expected equity returns. The anomaly is distinct from the firm-level distress anomaly (Campbell, Hilscher and Szilagyi, 2008). It remains significant after controlling for firm-level distress but disappears in placebo industries formed by randomly reshuffling firms across actual industries. Both theoretically and empirically, we show that competition-distress feedback amplifies the exposure of industry profit margins and equity returns to discount-rate shocks. Industries with greater idiosyncratic left-tail risk are more distressed but exhibit weaker competition-distress feedback. This effect reduces their exposure to discount-rate shocks and thus lowers their expected equity returns. |
| JEL: | C73 G12 L13 O33 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35513 |
| By: | David Autor; Tanya Rodchenko; Josh Martin; Zanna Iscenko; Scott Strand; David Pearl; Melissa Ferere |
| Abstract: | Whether AI assistance builds or erodes professional expertise is unsettled. In a pre-registered three-month randomized controlled trial, we gave 133 practicing patent lawyers at eleven U.S. intellectual property law firms access to a custom AI drafting assistant and measured both their performance while using AI and their professional judgment afterward without it. All work was scored by blinded expert patent attorneys. Paralleling findings from other white-collar domains, AI access raised the quality of work delivered on benchmark patent drafting tasks at 10 days (0.34 SD, p = 0.03) and 90 days (0.38 SD, p = 0.01), with larger gains among junior lawyers. After three months, all subjects redlined an existing patent application without AI, a core task of patent practice requiring expert judgment. Treated lawyers outperformed controls by 0.32 SD (p = 0.04), but this advantage was concentrated entirely among senior lawyers (0.45 SD, p = 0.02). Junior lawyers showed no average gain; their scores instead bifurcated, with sharply fewer mediocre scores offset by more poor and more good ones. The largest gains from AI thus accrued to the lawyers who retained the least. Foundational expertise may be a prerequisite for extracting durable skill from AI-assisted practice. |
| JEL: | I24 I29 J0 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35720 |
| By: | Brice C. Green; Leonid Kogan; Dimitris Papanikolaou; Lawrence D.W. Schmidt |
| Abstract: | Using U.S. administrative data, we find that technology-driven creative destruction in the product market passes through to worker earnings. The passthrough to incumbent worker earnings is both asymmetric and concentrated: profit drops from rival innovations lead to proportionally greater earnings declines and changes in the likelihood of job destruction than profit gains from their own firm’s innovations, while top workers are significantly more exposed than the average worker. We develop an endogenous-growth model with monopsonistic labor markets and worker heterogeneity that replicates this asymmetry and the distribution of earnings risk. In the model, creative destruction exposes high-income workers to concentrated downside risk while increasing upward mobility for lower-income workers, shaping the welfare consequences of innovation policy. |
| JEL: | E0 O3 O4 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35542 |
| By: | Vivek Bhattacharya; Gastón Illanes; Avner A. Kreps; José D. Salas; David Stillerman |
| Abstract: | Prospective merger simulations are a commonly used tool in industrial organization and antitrust, but evidence about their accuracy and predictive ability is limited. We study 101 mergers in consumer packaged goods and compare the realizations of price changes with predictions from merger simulations. In our sample of consummated mergers, predicted price changes from merger simulations are typically larger than realized ones. Despite the overprediction, we find that full merger simulations are more effective than both structural presumptions and approximations of the merger effect at identifying mergers with large price changes. |
| JEL: | D43 K21 L13 L41 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35473 |
| By: | Joshua S. Gans |
| Abstract: | Can automation harm workers without replacing them? We study jobs in which workers value both producing useful output and knowing that the output depends on their own contribution. A credible machine alternative can weaken that second source of meaning even when the firm retains the worker. Our model shows that this loss raises compensation when wages adjust fully; when they adjust only partly, workers bear some of the loss themselves. It can also make automation more likely. An external developer may profit by publicly demonstrating a machine before licensing it, because the demonstration lowers the value of the human alternative. This "meaning externality" can create demand for the machine and make profitable development socially harmful. Better technical quality and greater public salience have different effects: quality improves output, while salience alone weakens human work. Automation can, therefore, reduce the value of work before it eliminates jobs. |
| JEL: | D62 D91 J24 J31 J32 O33 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35559 |
| By: | Brancati, Emanuele (Sapienza University of Rome); Nucci, Francesco (Sapienza University of Rome); Pietrovito, Filomena (University of Molise); Pozzolo, Alberto (Roma Tre University) |
| Abstract: | This paper explores the interplay between firms' credit constraints, innovation, and export decisions. Using survey data for Italian manufacturing firms, we document strong complementarity between the two activities: innovation raises export participation, while exporting stimulates R&D. Credit rationing significantly reduces both the probability and intensity of exporting and innovation, but its effects are heterogeneous. The negative impact of credit rationing on export participation is substantially attenuated by innovation, whereas exporting provides only limited protection against the effects of financing constraints on innovation. We interpret these findings through a stylized theoretical framework in which exporting and innovation are mutually reinforcing but operate through distinct channels: innovation directly enhances export profitability through cost reductions, whereas exporting stimulates innovation only indirectly by expanding market opportunities. Overall, our findings suggest that policies fostering innovation may generate a double dividend by promoting technological upgrading while simultaneously strengthening firms' ability to sustain export activity under financial constraints. |
| Keywords: | innovation, exporting, financial constraints |
| JEL: | F14 G21 O31 |
| Date: | 2026–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18902 |
| By: | Marvin Amann; Yuriy Gorodnichenko; Oleksandr Talavera |
| Abstract: | Why is war so economically costly? Our answer is that modern war lowers output not only by destroying productive factors, but also by making the surviving economy work less efficiently. Using uniquely comprehensive firm-level data collected during Russia’s full-scale invasion of Ukraine in 2022, we document a dramatic collapse in allocative productivity in Ukraine. To sharpen identification and explore key mechanisms (including the role of war intensity, internal displacement, reallocation, and macroeconomic instability), we exploit spatial heterogeneity across Ukrainian districts and comparisons with Russian aggression in 2014 and the 2008 Global Financial Crisis. Our key policy implication is that restoring allocative efficiency–and preparing institutional arrangements that facilitate rapid reallocation in times of stress–is critical for sustaining economic capacity, defense, and national security. |
| JEL: | D24 D61 F51 F52 H56 O47 O52 R12 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35704 |
| By: | Nicholas Bloom; Gideon Moore; Lisa K. Simon; Caelan Wilkie-Rogers |
| Abstract: | Economists increasingly use professional profile data to reconstruct employment histories and measure skill supply. We show that these records are not fixed historical snapshots, but mutable accounts that workers revise over time. Using monthly vintages of Revelio Labs data from 2020–2026, we document that 19.7 percent of established U.S. LinkedIn users retroactively edit the title or description of a job they have already left. These “time-travel” edits are closely tied to labor market transitions: around such edits, workers are much more likely to change employers as compared to later-editing users. This mutability can bias historical measures of skills, but it also reveals workers’ beliefs about which skills are in demand. Retroactive edits show sharp post-2022 increases in AI-related language and recent reductions in work-from-home and DEI language. Finally, LLM-associated writing markers surge after ChatGPT, especially among less-educated groups and MBAs from lower-ranked programs, revealing heterogeneous AI-assisted profile editing. |
| JEL: | J0 |
| Date: | 2026–07 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35546 |