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on International Activities of Firms |
| By: | Dibiasi, Andreas; Erhardt, Katharina |
| Abstract: | This paper studies heterogeneous firm responses to a sudden trade-induced profitability shock - the 2015 Swiss franc appreciation. Using firm-level investment data and a novel measure of exposure, we document that this trade shock causes large and persistent investment declines among affected firms. Examining heterogeneous responses among firms with similar exposure, we find that differences in responsiveness are not explained by economic fundamentals but are strongly linked to firm age and managerial experience. Younger firms and those led by less experienced managers react substantially more strongly. We argue that these empirical patterns are consistent with a model of Bayesian learning, in which firms update their beliefs about profitability over time. The results provide important insights into the long-lasting effects of trade shocks on business dynamism, capital investment, and local employment. |
| Keywords: | Trade shocks, Firm-level investment, Exchange rate shocks |
| JEL: | F14 D22 G31 L25 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:dicedp:324872 |
| By: | Gert Bijnens (National Bank of Belgium, Research Department) |
| Abstract: | This paper provides the first systematic and comprehensive empirical study of management and strategy consulting. We unveil the workings of this opaque industry by drawing on universal administrative business-to-business transaction data based on value-added tax links from Belgium (2002-2023). These data permit us to document the nature of consulting engagements, take-up patterns, and the effects on client firms. We document that consulting take-up is concentrated among large, high-labor-productivity firms. For TFP and profitability, we find a U-shaped pattern: both high and low performers hire consultants. New clients spend on average 3 % of payroll on consulting, typically in episodic engagements lasting less than one year. Using difference-in-differences designs exploiting these sharp consulting events, we find positive effects on labor productivity of 3.6% over five years, driven by modest employment reductions alongside stable or growing revenue. Average wages rise by 2.7% with no decline in labor’s share of value added, suggesting productivity gains do not come at workers’ expense through rent-shifting. We do observe organizational restructuring with small increases in dismissal rates, and higher services procurement but reduced labor outsourcing. Our heterogeneity analysis reveals larger productivity gains for initially less productive firms, suggesting improvements in allocative efficiency. Our findings broadly align with ex-ante predictions from surveyed academic economists and consulting professionals, validating the productivity- enhancing view of consulting endorsed by most practitioners though only half of academics, while lending less support to a rent-shifting view favored by many economists. |
| Keywords: | Management Consulting, Productivity, Firm Performance, Network Data, Organizational Change, Allocative Efficiency |
| JEL: | E20 E22 E23 J0 L2 M0 O4 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbb:reswpp:202508-480 |
| By: | Alonso Alfaro-Ureña (Economic Division, Central Bank of Costa Rica); Juanma Castro-Vincenzi (Harvard University); Sebastián Fanelli (CEMFI); Eduardo Morales (Princeton University) |
| Abstract: | We estimate a model of firm export dynamics featuring cross-country complementarities. The firm decides where to export by solving a dynamic combinatorial discrete choice problem, for which we develop a solution algorithm that overcomes the computational challenges inherent to the large dimensionality of its state space and choice set. According to our estimated model, firms enjoy cost reductions when exporting to countries geographically or linguistically close to each other, or that share deep trade agreements; and countries, especially small ones, sharing these traits with attractive destinations receive significantly more exports than in the absence of complementarities. ***Resumen: Estimamos un modelo de la dinámica de exportación de empresas que incluye complementariedades entre países. La firma decide a dónde exportar resolviendo un problema de elección discreta combinatoria dinámica, para el cual desarrollamos un algoritmo de solución que supera los desafíos computacionales inherentes a la gran dimensionalidad de su espacio de estados y conjunto de opciones. Según la estimación de nuestro modelo, las empresas experimentan reducciones de costos al exportar a países que están geográfica o lingüísticamente cercanos entre sí, o que comparten acuerdos comerciales profundos; y los países, especialmente los pequeños, que comparten estas características con destinos atractivos, reciben significativamente más exportaciones que en ausencia de complementariedades. |
| Keywords: | Export Dynamics, Integer Programming Problem, Deep Free Trade Agreements, Dinámica de exportación, Problema de programación integral, Acuerdos comerciales profundos |
| JEL: | F12 F13 F14 |
| Date: | 2023–10 |
| URL: | https://d.repec.org/n?u=RePEc:apk:doctra:2306 |
| By: | Costa, Stefano; Sallusti, Federico; Vicarelli, Claudio; Zurlo, Davide |
| Abstract: | Adopting a firm-level perspective, this paper delves into the dependence and vulnerability of Italian production system to foreign demand and supply. It introduces a novel, dual indicator of vulnerability, both to imports and exports, identifying the most vulnerable production segments, the specific countries, the relevant products and sectors involved. Consistently with the current literature, this paper evaluates vulnerability focusing on the degree of (product and geographical) concentration of firms' international transactions and their level of engagement in international trade, measured by export propensity (firm’s export-to-turnover ratio) and incidence (firm’s import-to-intermediate costs ratio). Regarding import vulnerability, also the type of imported products, identifying "Foreign Dependent Products" (FDPs), is considered. Finally, some estimates measure the relative role of these components in determining firm vulnerability, by sector and country of destination and origin. Our findings show that in 2022, a relatively small number of Italian firms were vulnerable to foreign demand, although they accounted for a significant share of value added and total exports. They are smaller and more export-oriented than their non-vulnerable counterparts, focusing on fewer products but exporting to a more diversified range of countries. Sectoral analysis highlights specific manufacturing industries with a higher incidence of export-vulnerable firms. United States and Germany emerge as the countries towards whose demand the largest number of Italian firms are vulnerable. On the import side, while the number of import-vulnerable firms is considerably lower than export-vulnerable ones, they are typically larger, more productive, and often part of multinational groups, accounting for a substantial portion of total imports. The primary origin countries for FDPs imports for the Italian production system are identified, with Germany being the leading supplier. Notably, the geographical distribution of FDPs imports has shown a trend towards greater concentration within EU countries. |
| Keywords: | Trade vulnerability, Foreign dependent products, HH index |
| JEL: | D22 F14 F61 |
| Date: | 2025–07–27 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:125911 |
| By: | Okan Akarsu; Mehmet Selman Colak; Hatice Karahan; Huzeyfe Torun |
| Abstract: | This study examines the impact of monetary policy surprises on credit usage, borrowing costs, default probabilities, and foreign-currency (FX) trading behavior, emphasizing heterogeneity by firm size, leverage, export orientation, and sector. Using a comprehensive administrative dataset linking firm-level balance sheets, employment, firm–bank credit records, and FX transactions, we document four main results: (1) unexpected tightening reduces borrowing, raises loan rates, and increases default risk, with markedly stronger effects for SMEs and highly leveraged firms than for large and less-leveraged firms; (2) export-oriented firms are relatively resilient, consistent with diversified foreign-currency revenues and broader funding options; (3) sectoral responses are uneven—construction is most responsive, services are intermediate, and industry is least affected; and (4) policy surprises reallocate FX flows—following unexpected tightening, firms (especially SMEs and non-exporters) reduce FX purchases and increase FX sales, while exporters adjust less. Collectively, the findings underscore systematic variation in firms’ responses to monetary policy shaped by size, financial structure, export orientation, and sectoral characteristics. |
| Keywords: | Monetary policy transmission, Monetary policy surprises, Credit, Firm heterogeneity |
| JEL: | E12 E24 E52 E58 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tcb:wpaper:2514 |
| By: | Alonso Alfaro-Ureña (Department of Economic Research, Central Bank of Costa Rica); Benjamin Faber (University of California, Berkely); Cecile Gaubert (University of California, Berkely); Isabela Manelici (London School of Economics); José Pablo Vásquez-Carvajal (London School of Economics) |
| Abstract: | Multinational enterprises (MNEs) increasingly impose “Responsible Sourcing” (RS) standards on their suppliers worldwide, including requirements on worker compensation, benefits and working conditions. Are these policies just “hot air” or do they impact exposed suppliers and their workers? What is the welfare incidence of RS in sourcing countries? To answer these questions, we develop a quantitative general equilibrium (GE) model of RS and combine it with a unique new database. In the theory, we show that the welfare implications of RS are ambiguous, depending on an interplay between what is akin to an export tax (+) and a labor market distortion (−). Empirically, we combine the near-universe of RS rollouts by MNE subsidiaries in Costa Rica since 2009 with firm-to-firm transactions and matched employeremployee microdata. We find that RS rollouts lead to significant reductions in firm sales and employment at exposed suppliers, an increase in their salaries to initially low-wage workers and a reduction in their low-wage employment share. We then use the estimated effects and the microdata to calibrate the model and quantify GE counterfactuals. We find that while MNE RS policies have led to significant gains among the roughly one third of low-wage workers employed at exposed suppliers ex ante, the majority of low-wage workers lose due to adverse indirect effects on their wages and the domestic price index.. ***Resumen: Cada vez es más común que empresas multinacionales (CMNs) imponganestándares de "Abastecimiento Responsable" (AR) a sus proveedores en todo el mundo, tales como requisitos sobre la retribución de los trabajadores, los beneficios y las condiciones laborales que le proporcionan a sus trabajadores. ¿Estas políticas son simplemente "palabras vacías" o tienen un impacto en los proveedores expuestos y sus trabajadores? ¿Cuál es la incidencia en el bienestar de AR en los países de abastecimiento? Para responder a estas preguntas, desarrollamos un modelo cuantitativo de equilibrio general de AR y lo combinamos con una base de datos única y reciente. En la teoría, mostramos que las implicaciones para el bienestar de AR son ambiguas, dependiendo de una interacción entre lo que es similar a un impuesto a la exportación (+) y una distorsión en el mercado laboral (-). Empíricamente, combinamos la casi totalidad de despliegue de códigos de AR por parte de filiales de CMNs en Costa Rica, del 2009 al 2019, con transacciones de empresa a empresa y con los microdatos de las empresas con sus respectivos empleados. Descubrimos que la implementación de AR conduce a reducciones significativas en las ventas de las empresas y en el empleo en los proveedores expuestos, un aumento en los salarios de los trabajadores inicialmente de bajos ingresos y una disminución en la proporción de empleo de bajos salarios. Luego, utilizamos los efectos estimados y los microdatos para calibrar el modelo y cuantificar contrafactuales de equilibrio general. Descubrimos que si bien las políticas de AR de las CMNs han generado ex ante ganancias significativas entre aproximadamente un tercio de los trabajadores de bajos salarios empleados en los proveedores expuestos, la mayoría de los trabajadores de bajos salarios pierden debido a efectos indirectos adversos en sus salarios y en el índice de precios domésticos. |
| Keywords: | Multinationals, Welfare Incidence, Inequality, Labor Market, Multinacionales, Incidencia de bienestar, Inequidad, Mercado laboral. |
| JEL: | F15 F63 O24 |
| Date: | 2023–10 |
| URL: | https://d.repec.org/n?u=RePEc:apk:doctra:2305 |
| By: | Neave O'Clery; Ben Radcliffe-Brown; Thomas Spencer; Daniel Tarling-Hunter |
| Abstract: | Critical for policy-making and business operations, the study of global supply chains has been severely hampered by a lack of detailed data. Here we harness global firm-level transaction data covering 20m global firms, and 1 billion cross-border transactions, to infer key inputs for over 1200 products. Transforming this data to a directed network, we find that products are clustered into three large groups including textiles, chemicals and food, and machinery and metals. European industrial nations and China dominate critical intermediate products in the network such as metals, common components and tools, while industrial complexity is correlated with embeddedness in densely connected supply chains. To validate the network, we find structural similarities with two alternative product networks, one generated via LLM queries and the other derived by NAFTA to track product origins. We further detect linkages between products identified in manually mapped single sector supply chains, including electric vehicle batteries and semi-conductors. Finally, metrics derived from network structure capturing both forward and backward linkages are able to predict country-product diversification patterns with high accuracy. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2508.12315 |
| By: | Dyck, Daniel; Kourouxous, Thomas; Lorenz, Johannes |
| Abstract: | We investigate how tax authorities use joint tax audits as a coordinated enforcement tool in cross-border transactions of a multinational firm. Joint tax audits aim to resolve potential tax disputes early, before such disputes escalate into costly and time-consuming resolution procedures that may not fully eliminate double taxation. Employing a game-theoretic model, we identify settings in which we expect joint audits to occur and investigate their effect on the firm's expected tax payments and tax audit efficiency. We find that the occurrence of joint audits critically depends on the double taxation risk in the absence of joint audits. Unless tax rules are consistently applied, joint audits can occur more often when this risk is higher. The reason is that the firm changes its income-shifting strategy to reduce its expected tax payments, and thereby also enables tax authorities to better target tax disputes via joint audits that would otherwise escalate. However, we identify conditions under which joint audits are then detrimental to tax audit efficiency, particularly when the firm prefers them most. Our results imply that cost-sharing arrangements for joint audits should be tailored to the level of double taxation risk, with firm involvement having the potential to improve efficiency when this risk is high. |
| Keywords: | joint tax audits, double taxation, dispute prevention, income shifting |
| JEL: | H26 H87 F23 M42 C72 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:arqudp:324870 |
| By: | Anna Mancini; Bal\'azs Lengyel; Riccardo Di Clemente; Giulio Cimini |
| Abstract: | Recent crises like the COVID-19 pandemic and geopolitical tensions have exposed vulnerabilities and caused disruptions of supply chains, leading to product shortages, increased costs, and economic instability. This has prompted increasing efforts to assess systemic risk, namely the effects of firm disruptions on entire economies. However, the ability of firms to react to crises by rewiring their supply links has been largely overlooked, limiting our understanding of production networks resilience. Here we study dynamics and determinants of firm-level systemic risk in the Hungarian production network from 2015 to 2022. We use as benchmark a heuristic maximum entropy null model that generates an ensemble of production networks at equilibrium, by preserving the total input (demand) and output (supply) of each firm at the sector level. We show that the fairly stable set of firms with highest systemic risk undergoes a structural change during COVID-19, as those enabling economic exchanges become key players in the economy -- a result which is not reproduced by the null model. Although the empirical systemic risk aligns well with the null value until the onset of the pandemic, it becomes significantly smaller afterwards as the adaptive behavior of firms leads to a more resilient economy. Furthermore, firms' international trade volume (being a subject of disruption) becomes a significant predictor of their systemic risk. However, international links cannot provide an unequivocal explanation for the observed trends, as imports and exports have opposing effects on local systemic risk through the supply and demand channels. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2506.21426 |
| By: | Thierry Warin |
| Abstract: | This paper examines the often-invoked principle that diversifying international trade partners reduces economic risk, and argues that an uncritical application of this concept at the country level can be misleading. Using historical context and a simple theoretical model, we show that while spreading trade across many countries – akin to portfolio diversification – can mitigate idiosyncratic shocks, it provides little protection against systemic shocks and can mask dangerous concentrations at the firm and supply chain levels. Key insights include: (1) Countries do not trade; firms do – and export flows are often dominated by a small number of firms or commodities, so national diversification statistics may conceal micro-level vulnerabilities. (2) Simply increasing the number of trade partners yields diminishing returns in risk reduction, especially when partners’ economies are correlated; more partners do not automatically mean less exposure. (3) A diversified macro-level trade profile does not ensure that individual firms or industries are diversified or resilient. We formalize these ideas in a mean–variance portfolio framework and illustrate how true risk reduction depends on having independent streams of trade (not merely multiple streams). Policymakers are cautioned to look beyond aggregate metrics: without examining who trades what with whom, efforts to diversify trade can create a false sense of security – a phenomenon akin to “diworsification” in finance. The paper concludes by suggesting a multi-level approach to trade diversification that emphasizes firm-level and supply-chain considerations for genuine economic resilience. Cet article examine le principe souvent invoqué selon lequel la diversification des partenaires commerciaux internationaux réduit le risque économique, et soutient qu'une application non critique de ce concept à l'échelle nationale peut être trompeuse. En utilisant le contexte historique et un modèle théorique simple, nous montrons que si la répartition des échanges commerciaux entre de nombreux pays – comparable à la diversification de portefeuille – peut atténuer les chocs idiosyncratiques, elle offre peu de protection contre les chocs systémiques et peut masquer des concentrations dangereuses au niveau des entreprises et de la chaîne d'approvisionnement. Les principaux enseignements sont les suivants : (1) Les pays ne commercent pas ; ce sont les entreprises qui le font ; et les flux d'exportation sont souvent dominés par un petit nombre d'entreprises ou de matières premières, de sorte que les statistiques nationales de diversification peuvent masquer des vulnérabilités au niveau microéconomique. (2) La simple augmentation du nombre de partenaires commerciaux produit des rendements décroissants en termes de réduction du risque, en particulier lorsque les économies des partenaires sont corrélées ; un plus grand nombre de partenaires ne signifie pas automatiquement une exposition moindre. (3) Un profil commercial diversifié au niveau macroéconomique ne garantit pas la diversification ou la résilience des entreprises ou des secteurs individuels. Nous formalisons ces idées dans un cadre de portefeuille moyenne-variance et illustrons comment une véritable réduction du risque dépend de l'existence de flux commerciaux indépendants (et non pas simplement de flux multiples). Les décideurs politiques sont invités à regarder au-delà des indicateurs agrégés : sans examiner qui échange quoi avec qui, les efforts de diversification des échanges peuvent créer un faux sentiment de sécurité – un phénomène comparable à la « diworsification » en finance. L’article conclut en suggérant une approche multi-niveaux de la diversification des échanges, qui met l’accent sur les considérations au niveau de l’entreprise et de la chaîne d’approvisionnement pour une véritable résilience économique. |
| Keywords: | trade diversification, firm-level risk, global value chains, supply chain resilience, Herfindahl-Hirschman index, diversification des échanges commerciaux, risque au niveau des entreprises, chaînes de valeur mondiales, résilience de la chaîne d’approvisionnement, indice de Herfindahl-Hirschman |
| Date: | 2025–09–02 |
| URL: | https://d.repec.org/n?u=RePEc:cir:cirwor:2025s-24 |
| By: | Akira Sasahara (Keio University and Policy Research Institute); Fumiharu Ito (Policy Research Institute); Shintaro Negishi (Policy Research Institute); Takanori Otsuka (Policy Research Institute); Kayo Takama (Policy Research Institute) |
| Abstract: | Japan Customs introduced the Flexible Declaration Scheme in 2017, allowing exporters and importers to declare transactions at customs offices other than where their shipments are stored. This study examines how its use changed after two major typhoons: Typhoon Jebi, which struck Kansai Airport in 2018, and Typhoon Faxai, which hit Narita Airport in 2019. Using transaction-level data, we find that utilization increased for both exports and imports following Kansai Airport’s closure, suggesting temporary adoption. After Faxai caused a power outage at Narita’s storage area, export utilization rose and remained high, albeit to a lesser extent than at Kansai Airport, indicating a more permanent shift. |
| Keywords: | Japan’s flexible declaration scheme, customs, international trade, natural disasters |
| JEL: | F14 R41 N75 |
| Date: | 2025–06–30 |
| URL: | https://d.repec.org/n?u=RePEc:keo:dpaper:dp2025-013 |
| By: | Philippe Andrade; Alexander Dietrich; Sophie Handley; John Leer; Raphael Schoenle; Jenny Tang; Egon Zakrajšek |
| Abstract: | A large body of research demonstrates that uncertainty affects many dimensions of firms’ decisions, from investment and hiring to pricing and profitability. To gain a better understanding of how uncertainty induced by shifting trade policy shapes the behavior of small and medium-sized businesses (SMBs) the authors surveyed decision-makers at SMBs. The survey, administered by Morning Consult, was conducted in three waves: in December 2024, February 2025, and late April 2025. Each wave contained a nationally representative sample of about 600 SMBs. |
| Keywords: | business expectations; surveys; tariffs; uncertainty |
| JEL: | F13 F40 D22 D81 C83 |
| Date: | 2025–09–05 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedbcq:101698 |
| By: | Linn, Joshua (Resources for the Future); Spiller, Beia (Resources for the Future) |
| Abstract: | Vehicle import tariffs can have measurable impacts on the market for vehicles. Depending on how they are structured, tariffs increase the cost of importing vehicles and vehicle parts, affecting how manufacturers price their vehicles across their entire fleet. Price changes affect consumer choices, but the extent depends on consumer price sensitivity and the substitutability of tariff-affected vehicles and other options. In 2025, the Trump administration levied 25 percent tariffs on vehicles and vehicle parts imported from outside North America. In this report, we leverage a structural econometric model of the vehicle market to quantify the impact of these tariffs on outcomes including vehicle prices, demand, domestic manufacturing, tariff revenues, manufacturer profits, and consumer well-being. These tariffs distort the market, increasing vehicle prices and reducing demand for new vehicles. Moreover, the tariffs would reduce manufacturer profits, though depending on the structure of the tariffs, US-based manufacturers may profit to some extent. However, the costs to consumers far exceed the benefits to domestic manufacturers and the revenues collected by the government. |
| Date: | 2025–05–02 |
| URL: | https://d.repec.org/n?u=RePEc:rff:report:rp-25-10 |