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on Business Economics |
| By: | Hanna Onyshchenko (Bank of England); Andriy Tsapin (National Bank of Ukraine); Vitaliia Yaremko (Trinity College Dublin) |
| Abstract: | This paper examines the effect of military occupation on firm performance during Russia's full‐scale invasion of Ukraine. Combining official data on territorial control with firm‐level balance‐sheet data from Orbis, we exploit quasi‐random variation in occupation status across postal areas in 2022‐2023 using an event‐study design. We document strongly asymmetric effects by occupation duration: firms in short‐term occupied areas experienced a temporary and largely insignificant decline in sales and employment followed by recovery after liberation, whereas firms under prolonged occupation suffered large, persistent losses in sales and employment. Capital dynamics do not differ significantly between occupied and never‐occupied firms, suggesting that occupation operates primarily through channels other than direct capital destruction. Heterogeneity across sectors and firm characteristics is consistent with local demand shortages, supply‐chain disruptions, and institutional uncertainty as the main transmission channels. Overall, these findings highlight that prolonged military occupation entails lasting and sizable economic losses that compound over time, with little evidence of recovery until liberation. |
| Keywords: | military occupation, firm performance, local economic activity, event study, war, Ukraine |
| JEL: | D22 F51 L25 P48 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:tcd:tcduee:tep1126 |
| By: | Björn Thor Arnarson; Magnus Tolum Buus; Andreas Moxnes; Jakob Roland Munch; Chong Xiang |
| Abstract: | We study how firm growth reorganizes the division of labor across firms in global value chains. Using a novel dataset linking cross-border firm-to-firm transactions to matched employer–employee data, we show that demand shocks increase trade between firms while reducing occupational similarity, implying greater specialization. We develop and estimate a model of task outsourcing in which firms expand by reallocating tasks to suppliers. The model matches the data and implies endogenous scale economies. Eliminating outsourcing reduces average labor productivity by 25 percent and increases input costs by 10 percent, highlighting the central role of specialization in shaping firm performance. |
| Keywords: | supply chains, global value chains, outsourcing, scale economies, labor specialization, labor productivity, production networks |
| JEL: | F10 F12 F16 D24 L11 L25 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12710 |
| By: | Cauê Dobbin; Daniel Fernandez; Tom Zohar |
| Abstract: | We challenge the view that the negative correlation between firm quality and separation rates reflects efficient separations. Using Brazilian administrative data, we show that this correlation is driven by lower layoff rates at high-quality firms, not differences in quits. We develop a job search model where wage rigidity and productivity uncertainty generate inefficient layoffs. The model predicts that higher-quality firms have larger markdowns and, consequently, fewer layoffs. Empirically, we validate this by showing that firms facing stronger wage rigidity have higher layoffs and a steeper quality-layoff correlation, and that markdowns are higher in better firms and negatively correlated with layoffs. |
| Keywords: | layoffs, quits, separations, firm quality, wage rigidity, monopsony, markdowns, job search, Brazil |
| JEL: | J63 J31 J41 E24 J64 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12685 |
| By: | Andrea Bacchiocchi (Department of Economics, Society and Politics, University of Urbino Carlo Bo); Germana Giombini (Department of Economics, Society and Politics, University of Urbino Carlo Bo); Ludovica Segneri (Department of Economics, Society and Politics, University of Urbino Carlo Bo); Francesco Venturini (Department of Economics, Society and Politics, University of Urbino Carlo Bo) |
| Abstract: | Does financial risk affect the firm decision to develop a new technology? We study this issue in the context of the take-off of Artificial Intelligence (AI). Using data on 28, 000 Italian firms (2012–2019) matched with patent records, we find that companies handling higher cash-flow volatility are significantly more likely to innovate in AI. The role of financial risk is weaker for relatively more mature technologies, suggesting that firms more subject to financial uncertainty are more willing to undertake innovation in high-uncertainty, high-reward domains and drive frontier technological change. |
| Keywords: | Artificial Intelligence, Financial risk, Cash-flow volatility, Technological uncertainty. |
| JEL: | O31 G32 L25 C23 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:anc:wmofir:199 |
| By: | Merve Betul Gokce; Enver Sait Kurtaran; Zeynep Yilmaz |
| Abstract: | This paper examines how extreme heat affects firm-level labor productivity using comprehensive administrative data covering all registered non-financial firms in Türkiye from 2009 to 2023.Türkiye offers an informative setting as a middle-income economy characterized by high climate exposure, substantial regional heterogeneity, and uneven capacity to adapt. We link firm records to high-resolution district-level weather data and estimate panel models that exploit within-firm variation in annual heat exposure. We find that extreme heat significantly reduces productivity. Ten additional days per year with maximum temperatures above 35°C are associated with a 0.4 percent decline in labor productivity; at 37–38°C, the effect rises to 0.7 percent. The effects are heterogeneous: low-technology manufacturing, customer-facing services, micro firms, and financially constrained firms are most vulnerable, while high-technology firms and large enterprises show little or no impact. We distinguish between supply- and demand-side mechanisms using complementary data on worker attendance, electricity consumption, commercial traffic, firm sales, and tourism arrivals. On the supply side, extreme heat reduces days worked, increases absenteeism, raises electricity costs, and disrupts goods transport. On the demand side, hot days reduce tourist arrivals and depress sales in accommodation and food services. |
| Keywords: | Temperature, Labor productivity, Firm performance, Developing economies |
| JEL: | Q54 D22 J24 O13 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:wpaper:2611 |
| By: | Mintrapan Chaeng-lum; Nuwat Nookhwun; Jettawat Pattararangrong |
| Abstract: | This paper examines factors behind the persistence of dominant currency pricing and the effectiveness of de-dollarization policies in the context of emerging market economies. Using a transaction-level customs dataset of Thailand spanning 2007–2024, we document the dominance of dollar invoicing in Thai export transactions, despite a gradual rise in baht invoicing. Such dollar dominance is largely explained by firm and industry characteristics, including imported input exposure, strategic complementarities and inertia in invoicing currency choice. Meanwhile, the introduction of the Local Currency Settlement Framework (LCSF) between Thailand and partner countries including Malaysia and Indonesia moderately reduces dollar reliance, with effects being heterogeneous across firms and industries. Notably, we find that dollar-denominated liabilities do not influence invoicing choice, suggesting some disconnection between operational and financial hedging. |
| Keywords: | Invoicing currency choice; Dollar dominance; Dollar-denominated debt; Local currency settlement framework; Firm-level trade; Thai exports |
| JEL: | F14 F3 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:pui:dpaper:250 |
| By: | Tanisa Tawichsri; Suppawong Tuarob; Nuwat Nookhwun; Chinjuta Sangasaeng |
| Abstract: | We develop a news-based inflation expectations index for Thailand using a scalable workflow that integrates topic modeling, LLM-assisted labeling, and fine-tuned BERT classification. Based on 1.1 million Thai-language news articles from 2015–2024, the index leads both headline inflation and firm inflation expectations. Given that inflation narratives in news are inherently subjective and often ambiguous, we show that prompt design can materially affect downstream economic inference. In out-ofsample forecasting, augmenting autoregressive benchmarks with the news index reduces RMSE by up to 32% for headline inflation and 30% for firm inflation expectations, with gains increasing at longer horizons. SHAP-based decomposition reveals a horizon-dependent information structure: price-specific topics drive short-term forecasts, while macroeconomic narratives dominate at longer horizons. Our findings demonstrate that LLM-assisted text analysis can generate economically meaningful inflation indicators in non-English, emerging-economy settings. The index also performs particularly strong during periods of elevated inflation uncertainty. |
| Keywords: | Inflation expectations; Text-based indicators; Online news data; Large language models (LLMs); Machine learning; Sentiment analysis; Nowcasting and forecasting; Emerging economies |
| JEL: | E31 E37 D84 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:pui:dpaper:252 |
| By: | Justinas Markauskas (University College London); Morten O. Ravn (University College London & CEPR); Jose-Victor Rios-Rull (University of Pennsylvania, University College London, CAERP, CEPR, NBER) |
| Abstract: | We study whether firms in medium-scale New Keynesian models would voluntarily satisfy demand at their posted prices, or whether nominal rigidities may push prices below marginal costs. In the Altig et al (2011) framework, which features full indexation of non-adjusting prices and wages to steady-state inflation and near constant returns to scale at the firm level, we find that violations of firms’ willingness-to-supply condition are negligible: fewer than one percent of firms are ever constrained, and the associated output losses are tiny. Two features of the model drive this result: marginal costs that are nearly unresponsive to output, and prices that adjust more frequently than wages. When the short-run marginal-cost schedule is sufficiently steep, willingness-to-supply violations become quantitatively relevant. Our findings thus characterize the conditions under which the standard demand-determination assumption is a reliable approximation and those under which it may not be. |
| Keywords: | Willingness-to-supply, New Keynesian macro. |
| JEL: | E32 E52 E62 E63 |
| Date: | 2026–05–28 |
| URL: | https://d.repec.org/n?u=RePEc:pen:papers:26-007 |
| By: | Alfaro, Laura; Chen, Maggie; Javorcik, Beata S. |
| Abstract: | Multinational corporations (MNCs) are the dominant institutions for creating and distributing knowledge across borders. Their activities generate geopolitical externalities when cross-border knowledge spillovers enhance a rival states strategic capabilities in ways neither internalized by firms nor priced by markets. This review examines MNC-mediated knowledge creation and diffusion and the governance regime that has emerged in response. We distinguish three types of knowledge codified, tacit, and organizational that differ in their transmission channels and governability, and trace how each is created within MNC networks, diffused within and across firm boundaries, and targeted by policy instruments. Evidence shows that controls induce compensating responses, including redirected innovation, supply-chain reconfiguration, and organizational restructuring, with uncertain net effects. Linking the theory of the multinational firm to the economics of geopolitical rivalry, the review highlights the trade-offs that knowledge governance imposes on the global economy. |
| Keywords: | Multinational;Diffusion;Geopolitical externality |
| JEL: | F20 F52 O30 L23 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14608 |
| By: | Giordano Mion; Joana Silva |
| Abstract: | We examine how firms adjust production and technology in response to exogenous trade shocks. We develop a model that distinguishes revenue TFP from quantity TFP and embeds skill upgrading in technology choices. Firms respond to trade shocks by adjusting their quantity-quality trade-off and skill composition. These decisions impact firms’ quantity and revenue TFP, marginal costs, prices, and markups. Using detailed worker-firm-product data from Brazil, we show how trade shocks, instrumented by exogenous changes in exchange rates, GDP, and tariffs, affect margins. Results suggest fundamentally different firm responses to export and import changes: exports primarily induce upgrading in skills and product quality, whereas imports drive stronger efficiency and quantity-productivity gains. |
| Keywords: | exports, imports, shocks, skill upgrading, quality, technology, quantity TFP, revenue TFP, markups |
| JEL: | F61 F14 D24 L11 L25 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12702 |
| By: | Xian Jiang; Hannah Rubinton |
| Abstract: | Custom software is distinct from other types of capital in that it is non-rival—once a firm makes an investment in custom software, it can be used simultaneously across its many establishments. Using confidential U.S. Census data, we document that while firms with more establishments are more likely to invest in custom software, they spend less on it as a share of total capital expenditure. We explain these empirical patterns by developing a model that incorporates the non-rivalry of custom software. In the model, firms choose whether to adopt custom software, the intensity of their investment, and their scope, balancing the cost of managing multiple establishments with the increasing returns to scope from the nonrivalrous custom software investment. Using the calibrated model, we assess the extent to which the decline in the rental rate of custom software over the past 40 years can account for a number of macroeconomic trends, including increases in firm scope and concentration. |
| Keywords: | Technology adoption, Non-rivalry, Concentration, Firm scope |
| JEL: | D24 E22 O33 |
| Date: | 2026–04 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:26-28 |
| By: | Shuichiro NISHIOKA; Toshihiro OKUBO; Mari TANAKA |
| Abstract: | This paper examines the causal effects of population aging on manufacturing activity using municipality- and establishment-level data from Japan. Combining the Census of Manufacture with Population Census data for the 1980-2010 period, we exploit predetermined demographic structure to identify the impact of aging on local manufacturing outcomes. We find that population aging leads to large and statistically significant declines in total manufacturing employment, sales, and value added. These effects operate through both extensive and intensive margins: aging reduces the number of manufacturing establishments and lowers employment and output per establishment. We also document increases in manufacturing labor productivity and wages, driven primarily by the rapid exit of less productive plants in aging regions, with little evidence of changes in entry dynamics. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:eti:dpaper:26042 |
| By: | Bingyao Liu; Yao Luo |
| Abstract: | Capacity constraints are central to oligopoly competition in many industries, yet existing multiproduct Bertrand theory does not characterize equilibrium when capacity binds across markets. We establish existence and uniqueness of Bertrand–Nash equilibrium in a multimarket, multiproduct oligopoly under multinomial logit demand, with both linear and convex costs. Capacity creates cross-market spillovers: pricing in one market affects the shadow value of capacity in others. Methodologically, we extend the aggregative-games framework to a nested fixed-point structure separating across-market capacity allocation from within-market pricing, using tools from nonsmooth analysis to handle kinks from binding constraints. The framework yields new insights for merger analysis: binding capacity dampens merger-induced price increases through shadow-cost relief, while post-merger reallocation of scarce capacity can raise consumer surplus. However, the merged firm's privately optimal reallocation generally differs from the social optimum, creating a role for merger remedies. |
| Keywords: | Differentiated Products; Capacity Constraints; Mergers; Aggregative Games; Cross-Market Spillovers; Equilibrium Uniqueness |
| JEL: | L13 D24 |
| Date: | 2026–05–22 |
| URL: | https://d.repec.org/n?u=RePEc:tor:tecipa:tecipa-821 |
| By: | Samuel Antill; Aymeric Bellon |
| Abstract: | Many non-Delaware firms strategically file for bankruptcy in Delaware. Should this "forum shopping" be allowed? This question has motivated nine proposed congressional bills over decades of policy debate. Using a novel natural experiment and Census-Bureau microdata, we inform this debate. Comparing similar firms within a Delaware-adjacent state, we show that proximity to Delaware predicts forum shopping. Instrumenting with proximity, we find that forum shopping causally: (i) prevents closures and liquidations, (ii) shortens bankruptcies, (iii) boosts creditor recovery, and (iv) increases post-bankruptcy employment by 24.8%. Proximity to Delaware is uncorrelated with growth for not-yet-bankrupt or never-bankrupt firms, validating the exclusion restriction. |
| Keywords: | corporate bankruptcy, law and finance, forum shopping, venue selection, financial distress |
| JEL: | G33 G34 K22 G38 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:cen:wpaper:26-29 |
| By: | Alfaro, Laura; Chen, Maggie; Chor, Davin |
| Abstract: | Amid public skepticism toward trade, we investigate whether evidence-based information - concise statements of research findings - can shape trade policy preferences. In survey experiments conducted on U.S. general population samples from 2018-2022, we consistently uncover a “backfire effect”: information highlighting the benefits of trade, such as job gains in productive sectors or lower prices for consumers, induces protectionist preferences. We interpret this effect as stemming from prior-biased belief updating, whereby the information activates pre-existing concerns about competition for jobs and trade relations with China. These associations are evoked particularly among limited-attention respondents, as well as politically-engaged Republicans. |
| Keywords: | Information;Trade policy preferences;Protectionism |
| JEL: | D80 F10 F60 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14597 |