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on Business Economics |
| By: | Owen Gabourys; Farrukh Suvankulov; Mathieu Utting |
| Abstract: | This paper replicates and extends the work of Altig et al. (2022) on firms’ subjective sales growth expectations using Canadian survey data from the Bank of Canada’s Business Leaders’ Pulse. We examine the formation, uncertainty and predictive validity of firm-level sales growth forecasts using subjective probability distributions from business leaders at a one-year-ahead horizon. The replication work performed here confirms several findings from Altig et al. (2022), including that expected sales growth predicts realized sales growth, subjective uncertainty predicts forecast errors and firms frequently revise their expectations, usually by small amounts. We also find that subjective uncertainty predicts the magnitude of forecast revisions and follows a V-shaped relationship with past sales growth. We extend the original analysis by further demonstrating that firms with weaker recent performance assign greater weight to future weak growth scenarios, and subsequently that these firms are more likely to underperform, suggesting expectations are grounded in real conditions. The results presented in this paper reinforce the value of firm-level survey data for macroeconomic forecasting and policy analysis and help validate the Business Leaders’ Pulse as a reliable source of firm-level expectations data. |
| Keywords: | Firm dynamics Monetary policy and uncertainty |
| JEL: | C8 C83 D D2 D22 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:bca:bocadp:25-15 |
| By: | Fiorella De Fiore; Marco Jacopo Lombardi; Giacomo Mangiante |
| Abstract: | This paper studies the pass-through of input price shocks to firms' expectations and pricing decisions using firm-level data from the Bank of Italy's Survey on Inflation and Growth Expectations. We find a strong and asymmetric pass-through: positive input price shocks significantly raise firms' price expectations, realised prices and short-term inflation expectations, while negative shocks have little impact. The pass-through varies systematically with firm characteristics: it is higher for upstream firms and for firms facing greater uncertainty, adjusting prices more frequently, or operating with thinner profit margins. Macroeconomic conditions also matter: firms' expectations respond more strongly to business-specific signals in periods of low inflation and to aggregate signals in periods of high inflation. Finally, we show that providing firms with information about current inflation dampens the pass-through to inflation expectations, underscoring the importance of central bank communication. |
| Keywords: | pass-through, heterogeneous firm expectations, survey data, inflation |
| JEL: | D22 D84 E31 E50 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1305 |
| By: | Jaimovich, Esteban (University of Turin (ESOMAS Department) and Collegio Carlo Alberto); Madzharova, Boryana (Central Bank of Ireland, Friedrich-Alexander-Universität Erlangen-Nürnberg, and CESIfo); Merella, Vincenzo (University of Cagliari and Prague University of Economics and Busines) |
| Abstract: | The paper investigates firms’ rollout strategies for quality-differentiated products across geographically dispersed markets. Using a theoretical framework that integrates nonhomothetic preferences, we show that premium goods are more likely to enter wealthier markets first, allowing firms to capture higher markups. We find that the main factors influencing the selection of follow-up markets differ by product quality: for premium goods, income levels are the primary determinant of expansion paths, whereas geographic proximity is the main driver for lower-quality products. Using micro-level data from the refrigeration industry, we confirm a significant positive association between market-entry order and income for higherquality products. Furthermore, we observe that follow-up markets tend to be geographically more dispersed for premium goods, reflecting a shift away from proximity-based expansion strategies. |
| Keywords: | market entry, gravity; nonhomothetic preferences, quality differentiated products. |
| JEL: | F1 F14 F23 L68 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:wpaper:18/rt/25 |
| By: | Andrés Erosa; Luisa Fuster; Gueorgui Kambourov; Richard Rogerson |
| Abstract: | Two robust empirical facts are that mean wages and cross-sectional wage dispersion both increase over the life cycle. We study how these two changes vary across occupations and document a strong positive correlation: occupations with high mean wage growth over the life cycle also exhibit greater increases in cross-sectional wage dispersion. We develop a novel dynamic Roy model that features both static and dynamic comparative advantage and show that it can account for the variation in life cycle wage distributions across high and low wage occupations. Dynamic comparative advantage reflects individual heterogeneity in occupation specific learning abilities and is the dominant force that shapes occupation choice in our model. We highlight several important implications of dynamic comparative advantage and show that our model captures the data better than a benchmark model that features persistent shocks. |
| JEL: | E24 J24 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34481 |
| By: | Mahmut Zeki Akarsu (College of Economics and International Trade, Pusan National University, Busan, Korea); Cassidy Hruz (Department of Economics, College of Business Administration, University of Central Florida); Zeynep Yom (Department of Economics, Villanova School of Business, Villanova University) |
| Abstract: | This paper examines how firms adjust their innovative activities during recessions and whether they learn from past downturns. Using COMPUSTAT data linked with patent and citation information, we analyze U.S. firms across four major recessions and test whether R&D expansion in one recession predicts R&D investment in the next. Exploiting recessions as exogenous shocks to the economy for identification, we find that firms performing above the median during the 2001 recession invested substantially more in R&D during the Great Recession. These learning effects are stronger for small firms, firms with high bond ratings, and those in high-technology or high-opportunity sectors, and weaker in concentrated industries. Earlier recessions also have a persistent, though gradually diminishing, effect on later downturns. Instrumental-variables and propensity-score-matching analyses confirm that these patterns reflect a learning mechanism consistent with creative accumulation. |
| Keywords: | R&D, innovation, patents, business cycles, COMPUSTAT |
| JEL: | E32 G30 O32 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:vil:papers:62 |
| By: | Mr. Flavien Moreau; Semih Üslü |
| Abstract: | We develop a search-based theory of mergers and acquisitions with heterogeneous firms and endogenous search complementarities. We use this model to understand how merger incentives and the firm size distribution interact. In equilibrium, search costs and entry rates determine search intensities and shape the distribution of market power. We derive the law of motion of the firm size distribution, provide closed-form solutions, and solve for endogenous search efforts. Finally, we derive the aggregate welfare function and show how our framework can be used to simulate the impact of various antitrust policies. In particular, antitrust policy can have large effects on welfare due to the existence of multiple equilibria. |
| Keywords: | Search; Bargaining; Mergers & acquisitions; Market power |
| Date: | 2025–11–14 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/239 |
| By: | Gabriel M. Ahlfeldt; Hans R. A. Koster; Tu Giang Vu |
| Abstract: | Property transaction prices are widely regarded as the best measure of property value, but are sometimes unavailable. Using data from the Netherlands and New York, we analyze whether list prices and assessed values are reliable substitutes. In the cross-section, both proxies strongly predict sales prices, and estimated hedonic implicit prices resemble those based on sales prices. Over time, there is a sluggish adjustment in both proxies, but much more so in assessed valuesâ€"particularly when they are based on rental incomes. While assessed values are well-suited for cross-sectional hedonic modelling or the quantification of static quantitative spatial models, list prices are better suited for the estimation of hedonic implicit prices from variation over time, although some attenuation bias should be expected. |
| Keywords: | assessed values, list prices, sales prices, transaction prices, hedonic pricing, historic amenities, wind turbines, solar farms, transit accessibility |
| Date: | 2025–11–27 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2137 |
| By: | Storm, Eduard (Institute for Advanced Studies (IHS) and RWI – Leibniz Institute for Economic Research); Gonschor, Myrielle (Kienbaum Consultants); Schmidt, Marc Justin (TU Dortmund, RTG 2484) |
| Abstract: | We study how artificial intelligence (AI) affects workers’ earnings and employment stability, combining German job vacancy data with administrative records from 2017–2023. Identification comes from changes in workers’ exposure to local AI skill demand over time, instrumented with national demand trends. We find no meaningful displacement or productivity effects on average, but notable skill heterogeneity: expert workers with deep domain knowledge gain while non-experts often lose, with returns shaped by occupational task structures. We also document AI-driven reinstatement effects toward analytic and interactive tasks that raise earnings. Overall, our results imply distributional concerns but also job-augmenting potential of early AI technologies. |
| Keywords: | AI, Online Job Vacancies, Skill Demand, Worker-level Analysis, Employment, Earnings, Expertise |
| JEL: | D22 J23 J24 J31 O33 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:ihs:ihswps:number61 |
| By: | Matteo Crosignani; Lina Han; Marco Macchiavelli |
| Abstract: | Firm-level geoeconomic risk can affect even broadly diversified mutual fund portfolios. We study U.S. export controls that restrict sales of cutting-edge technology to selected Chinese firms for national security reasons. The stock prices of affected domestic suppliers drop immediately after the policy introduction. Mutual funds holding these stocks experience increased volatility and lower returns. Fund managers respond by selling stocks of exporters to China, buying lottery-like stocks, and increasing portfolio concentration. While stock-picking and market-timing skills do not help, specialist and high-fee funds are better at navigating geoeconomic risk. |
| Keywords: | mutual funds; Asset allocation; geoeconomic risk; Export controls |
| JEL: | G12 F51 F38 |
| Date: | 2025–11–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednsr:102163 |
| By: | Haucap, Justus; Karacuka, Mehmet; Inke, Hakan |
| Abstract: | Utilizing Connor's International Cartel Database and employing difference-in-differences methodology, we find that market concentration, the number of buyers and cartel duration have significant impacts on cartel overcharges. We also find that the European Commission's 2006 guidelines on the method of setting fines for cartel infringements seems to have decreased cartel overcharges in the EU. In addition, the EU's cartel damages directive of 2014 (2014/104/EU) appear to have increased private damage payments. Overall, we find support that these two changes in EU competition policy have a reversing impact on the otherwise increasing trend of cartel overcharges, as making the infringement more costly at least in the EU. |
| Keywords: | Cartel fines, cartel damages, EU guidelines, competition law, antitrust |
| JEL: | L41 K21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:dicedp:331876 |
| By: | Patrick M. Kline |
| Abstract: | Economists often rely on estimates of linear fixed effects models developed by other teams of researchers. Assessing the uncertainty in these estimates can be challenging. I propose a form of sample splitting for network data that breaks two-way fixed effects estimates into statistically independent branches, each of which provides an unbiased estimate of the parameters of interest. These branches facilitate uncertainty quantification, moment estimation, and shrinkage. Algorithms are developed for efficiently extracting branches from large datasets. I illustrate these techniques using a benchmark dataset from Veneto, Italy that has been widely used to study firm wage effects. |
| JEL: | C01 J30 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34486 |
| By: | Hellsten, Mark (University of Tübingen); Khanna, Shantanu (Northeastern University); Lodefalk, Magnus (Örebro University); Yakymovych, Yaroslav (Uppsala University) |
| Abstract: | Artificial intelligence (AI) is expected to reshape labor markets, yet causal evidence remains scarce. We exploit a novel Swedish subsidy program that encouraged small and mid-sized firms to adopt AI. Using a synthetic difference-in-differences design comparing awarded and non-awarded firms, we find that AI subsidies led to a sustained increase in job postings over five years, but with no statistically detectable change in employment. This pattern reflects hiring signals concentrated in AI occupations and white-collar roles. Our findings align with task-based models of automation, in which AI adoption reconfigures work and spurs demand for new skills, but hiring frictions and the need for complementary investments delay workforce expansion. |
| Keywords: | hiring, labor markets, Artificial Intelligence, task content, technological change |
| JEL: | J23 J24 O33 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp18267 |
| By: | Hiroyuki Asai (Graduate School of Economics, The University of Tokyo,); Makoto Nirei (Graduate School of Economics, The University of Tokyo,) |
| Abstract: | The friend-of-a-friend effect is the idea that when two firms share a common trading partner, a new link between them is likely to form. We quantify this effect in production networks, where the shared partner acts as relational capital facilitating new connections. First, we develop a general equilibrium (GE) model that endogenizes firms’ link formation and incorporates the friend-of-a-friend mechanism. We show that the GE model simplifies to a dyad-level logit specification, enabling us to estimate the friend-of-a-friend effect using a quadruple-based conditional logit that controls for buyer and supplier fixed effects. Analyzing a dynamic panel of Japanese firm-to-firm transactions provides strong evidence of the friend-of-a-friend effect, with a magnitude comparable to other important factors like physical distance and sectoral proximity. Finally, we evaluate the macroeconomic impact through a counterfactual analysis within a calibrated GE model. Results indicate that removing the friend-of-a-friend effect decreases welfare by 0.6% and changes the propagation of firm-level shocks by altering the network structure. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:cfi:fseres:cf608 |
| By: | Martin Geiger; Iacovos Sterghides; Marios Zachariadis |
| Abstract: | Utilizing a very large household-level dataset of inflation expectations for twelve euro-area economies, we attempt to assess the formation and accuracy of inflation expectations following major disruptions of the macroeconomy which we identify during the period from 2004:1 to 2025:02. We find that these adverse events tend to increase the degree of inaccuracy in inflation expectations. We also find that this happens because inflation expectations tend to go up in response to these shocks relative to the 12-month ahead inflation realizations, which offers direct evidence of overestimation of inflation. This is consistent with overreaction of inflation expectations in response to inflationary news and with inflation-as-a-bad behavioral patterns in response to adverse non-inflationary shocks. We infer that such behavioral biases appear to have played an important role in the formation of inflation expectations in the euro-area following adverse shocks during the past two decades. |
| Keywords: | forecast errors, behavioral bias, macroeconomic shocks. |
| JEL: | D84 E31 E70 |
| Date: | 2025–11–18 |
| URL: | https://d.repec.org/n?u=RePEc:ucy:cypeua:04-2025 |
| By: | Mascioli, Lorenzo; Leek, Lauren Caroline (European University Institute) |
| Abstract: | The scholarly literature on development projects primarily focuses on implementation and outcomes, yet little is known about how projects are designed and funded. This study addresses this gap by investigating how local communities initiate development projects. We propose that communities learn from their geographic neighbors and past experiences, with local administrative capacity moderating this learning process. Using data from Italy’s National Recovery and Resilience Plan, we find robust evidence of positive spatial and temporal effects and a significant interaction between temporal effects and administrative capacity. Additional evidence from project descriptions and interviews with beneficiaries elucidates the mechanisms driving these effects. |
| Date: | 2025–11–14 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:k27ax_v1 |
| By: | Zhuokai Huang; Benny Kleinman; Ernest Liu; Stephen J. Redding |
| Abstract: | How has aggregate income and welfare in the United States been affected by globalization and rapid productivity growth in emerging economies? We use the class of constant elasticity trade models to provide quantitative evidence on these questions. We find that reductions in worldwide trade frictions over the period from1960-2020 reduced the share of the United States in global GDP but raised its aggregate welfare. Similarly, productivity growth in Japan and China led to a decline in the relative income of the United States, but brought aggregate welfare gains from the resulting expansion in global production possibilities. Trade integration and foreign productivity growth have relatively modest effects on domestic income and welfare compared to domestic productivity growth. |
| Keywords: | competitiveness, convergence, globalization, globalisation, welfare gains from trade |
| Date: | 2025–11–27 |
| URL: | https://d.repec.org/n?u=RePEc:cep:cepdps:dp2136 |
| By: | Lane, Nathaniel (University of Oxford); Barteska, Philipp; Kim, Oliver; Lee, Seung Joo |
| Abstract: | How did geopolitics shape East Asia’s economic development? We show that U.S. war procurement during the Vietnam War—a fiscal shock which peaked at 2.9 percent of South Korea's GDP, rivaling the Marshall Plan—catalyzed Korea’s export-led industrialization. We construct a new firm-level dataset linking Korean export records with U.S. procurement contracts (1966–1974) to estimate the causal impact of winning a contract on export performance. Winning an initial contract increases a firm’s likelihood of exporting by 46 percentage points and triples its export value. These effects extend beyond sales to the United States: treated firms also expanded into third-country markets. We validate our research design using unique, contemporaneous firm-level export targets, showing that contracts were not anticipated and unrelated to export shocks. The policy had lasting effects. We find that firms treated in the 1960s responded more strongly to South Korea’s heavy and chemical industry drive of the 1970s, indicating that U.S. procurement and domestic industrial policy were complementary. Our findings reveal a neglected channel through which Cold War geopolitics helped shape the East Asian economic miracle. |
| Date: | 2025–11–11 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:vxej4_v1 |
| By: | Juan S. Mora-Sanguinetti; Cristina Peñasco; Rok Spruk |
| Abstract: | This paper analyses the effect of “green regulations” i.e. those aimed at mitigating the effects of climate change and environmental externalities, on innovation, using a novel regulatory database covering the period 2008 – 2022 for Spain. The database identifies regulations at both the national and regional levels through textual analysis. Employing a panel data approach, we assess how different types of environmental regulations—particularly those related to renewable energy—affect firm-level innovation activities. Our findings indicate that national level green regulations have a positive effect on innovation, whereas regional level regulations show mixed or negligible impacts. Importantly, the interaction between national and regional regulations, measuring the simultaneous production of legal texts at both levels can foster innovation but at a reduced pace with respect to the sole production of regulation at the national level. Given the results for regional-level regulation, our results provide evidence in favour of the hypothesis that regulatory fragmentation due to unequal, overlapping, inconsistent or conflicting procedure across jurisdictions may diminish these benefits. |
| Keywords: | Green Regulation, Innovation, Porter Hypothesis, Renewable Energy, Business |
| JEL: | K32 Q5 O44 O13 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:bfr:banfra:1016 |
| By: | Yuta Kuroda; Shinpei Sano |
| Abstract: | This study examines the potential of mobile phone location data for measuring working hours. We compare hourly population estimates from Mobile Spatial Statistics with card-reader attendance records of teachers at Japanese public high schools. The analysis shows a strong correlation between location-based indicators and actual working hours. Mobile data provide more accurate proxies in areas with few residents, where background noise is limited, and in schools with many employees. These results suggest that large-scale mobility data can serve as a valuable resource for labor research when direct administrative records are not accessible. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:toh:dssraa:149 |
| By: | Sukanya Kudva; Anil Aswani |
| Abstract: | We study the problem of auction design in the presence of bidder collusion. Specifically, we consider a multi-unit auction of identical items with single-minded bidders, where a subset of bidders may collude by coordinating bids and transferring payments and items among themselves. While the classical Vickrey-Clarke-Groves (VCG) mechanism achieves efficient and truthful outcomes, it is highly vulnerable to collusion. In contrast, fully collusion-proof mechanisms are limited to posted-price formats, which fail to guarantee even approximate efficiency. This paper aims to bridge this gap by designing auctions that achieve good welfare and revenue guarantees even when some bidders collude. We first characterize the strategic behavior of colluding bidders under VCG and prove that such bidders optimally bid shade: they never overbid or take additional items, but instead reduce the auction price. This characterization enables a Bulow-Klemperer type result: adding colluding bidders can only improve welfare and revenue relative to running VCG on the non-colluding group alone. We then propose a Hybrid VCG (H-VCG) mechanism that combines VCG applied to non-colluding bidders with a posted-price mechanism for colluding bidders, assuming access to a black-box collusion detection algorithm. We show that H-VCG is ex-post dominant-strategy incentive compatible (DSIC) and derive probabilistic guarantees on expected welfare and revenue under both known and unknown valuation distributions. Numerical experiments across several distributions demonstrate that H-VCG consistently outperforms VCG restricted to non-colluding bidders and approaches the performance of the ideal VCG mechanism assuming universal truthfulness. Our results provide a principled framework for incorporating collusion detection into mechanism design, offering a step toward collusion-resistant auctions. |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2511.12456 |
| By: | Nancy Birdsall (Center for Global Development) |
| Abstract: | The 1993 publication of a World Bank book on the East Asian Miracle explained the extraordinarily rapid growth of Japan and seven other economies of East Asia (at 5 percent a year) between 1965 and 1990 as grounded in those economies’ adherence to market “fundamentals”—sound macro management, “shared” growth policies, investment in human capital—combined with an “export push” which fostered the technological learning that drove those countries’ high total factor productivity growth. The World Bank authors dismissed “industrial policy” as central to their growth and cautioned against other developing countries adopting industrial policy in the absence of strong government institutions. Was that caution too much a product of its post-Soviet, neoliberal era? Considering what we know now about the state of governance in developing countries, might industrial policy help boost growth in at least some developing countries? |
| Date: | 2025–11–24 |
| URL: | https://d.repec.org/n?u=RePEc:cgd:wpaper:736 |
| By: | Koller, Julian; Stefanova, Stefani |
| Abstract: | We leverage a novel spatial IV approach to develop a reduced-form estimator that maps local trade shocks into aggregate outcomes, accounting for inter-regional spillovers. For the China shock in the U.S., we find strong evidence for employment spillovers at the local level, which appear to propagate through input-output linkages rather than labor mobility. They shift the shock’s employment ramifications away from the Pacific and North Atlantic towards the South Atlantic region. For aggregate employment, our model rationalizes the 30% difference between Autor et al. (2013) and the structural follow-up literature but implies that it is insignificant from a statistical standpoint. |
| Keywords: | Trade Flows, Local Labor Markets, Import Competition |
| JEL: | F10 F14 F16 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126772 |
| By: | Becker, Sascha O. (University of Warwick and Monash University); Hartmut Egger (University of Bayreuth); Koch, Michael (Aarhus University); Muendler, Marc-Andreas (UC San Diego) |
| Abstract: | This paper links globalization, worker efficiency, and wage inequality within plants to internal labor market organization. Using German plant–worker data and information on the task content of occupations, we document that larger plants (i) use more occupations, (ii) assign fewer tasks per occupation, and (iii) exhibit greater wage dispersion. We develop a model where plants endogenously bundle tasks into occupations, improving worker-task matching at the cost of higher fixed span-ofcontrol costs. Embedding this into a Melitz framework, we show that trade increases worker efficiency and wage inequality in exporting plants, whereas non-exporting plants experience the opposite effects. Structural estimation and simulations confirm the model’s predictions and point to non-monotonic economy-wide effects. |
| Keywords: | Tasks ; specialization ; international trade ; firm-internal labor allocation JEL Codes: F12 ; F16 ; J3 ; L23 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:wrk:warwec:1590 |