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on Business Economics |
| By: | Mihnea Constantinescu (Bank of Lithuania); Aurelija Proskute (Bank of Lithuania) |
| Abstract: | In this paper we offer a unique firm-level view of the empirical regularities underlying the evolution of the Lithuanian economy over the period of 2000 to 2014. Employing a novel data-set, we investigate key distributional moments of both the financial and real characteristics of Lithuanian firms. We focus in particular on the issues related to productivity, firm birth and death and the associated employment creation and destruction across industries, firm sizes and trade status (exporting vs. non-exporting). We refrain from any structural modeling attempt in order to map out the key economic processes across industries and selected firm characteristics. We uncover similar empirical regularities as already highlighted in the literature: trade participation has substantial benefits on firm productivity, the 2008 recession has had a cleansing effect on the non-tradable sector, firm birth and death are highly pro-cyclical. The richness of the dataset allows us to produce additional insights such as the change in the composition of assets and liabilities over the business cycles (tilting both liabilities and assets towards the short-term) or the increasing share of exporting firms but the constant share of importing ones since 2000. |
| Keywords: | productivity, firm dynamism, job creation and destruction, firm heterogeneity, Lithuanian economy |
| JEL: | D22 D24 E30 J21 J24 J30 L11 L25 |
| Date: | 2018–05–14 |
| URL: | http://d.repec.org/n?u=RePEc:lie:dpaper:7&r=bec |
| By: | Engin L. Altinoglu |
| Abstract: | I show that inter-firm lending plays an important role in business cycle fluctuations. I first build a tractable network model of the economy in which trade in intermediate goods is financed by supplier credit. In the model, a financial shock to one firm affects its ability to make payments to its suppliers. The credit linkages between firms propagate financial shocks, amplifying their aggregate effects by about 30 percent. To calibrate the model, I construct a proxy of inter-industry credit flows from firm- and industry-level data. I then estimate aggregate and idiosyncratic shocks to industries in the US and find that financial shocks are a prominent driver of cyclical fluctuations, accounting for two-thirds of the drop in industrial production during the Great Recession. Furthermore, idiosyncratic financial shocks to a few key industries can explain a considerable portion of these effects. In contrast, productivity shocks had a negligible impact during the recession. |
| Keywords: | Business cycles ; Credit network ; Financial frictions ; Great recession ; Input-output network ; Trade credit |
| JEL: | C32 C67 E23 E32 G10 |
| Date: | 2018–05–04 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2018-31&r=bec |
| By: | Dewit, Gerda (National University of Ireland, Maynooth); Görg, Holger (Kiel Institute for the World Economy); Temouri, Yama (Aston University) |
| Abstract: | We examine the determinants of the decision to relocate activities abroad for firms located in OECD countries. We argue that particular firm-specific features play a crucial role for the link between employment protection and relocation. Stricter employment protection laws over time in the current production location discourage firms' relocation abroad. While larger, more productive firms and firms with higher labour intensities have, ceteris paribus, higher propensities to relocate, they also face higher exit barriers if the country from which they consider relocating has strict employment protection laws. Our predictions are supported empirically, using firm level panel data for 28 OECD countries over the period 1997-2007. |
| Keywords: | employment protection, relocation, multinational enterprises |
| JEL: | F23 L23 J88 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11500&r=bec |
| By: | Christian K. Darko (University of Birmingham); Giovanni Occhiali (Fondazione Eni Enrico Mattei and Overseas Development Institute); Enrico Vanino (London School of Economics) |
| Abstract: | This study uses firm level data on 19 Sub-Saharan Africa countries between 2004 and 2016 to provide a rigorous analysis on the impact of Chinese import competition on productivity, skills, and performance of firms., We measure import competition and ports accessibility at the city-industry level to identify the relevance of firms’ location in determining the impact of Chinese imports competition. To address endogeneity concerns, a time-varying instrument for Chinese imports based on the interaction between an exogenous geographic characteristic and a shock in transportation technology is developed. The results show that imports competition has a positive impact on firm performance, mainly in terms of productivity catch-up and skills upgrading. Of particular interest is the finding that the effects of import competition from China are stronger for more remote firms that have lower port accessibility, an indication that Chinese imports in remote areas improves productivity of laggard firms, employment, and intensity of skilled workers. Our findings indicate that African firms are improving their performance as a consequence of the higher Chinese import intensity, mainly through direct competition and the use of higher quality inputs of production sourced from China. |
| Keywords: | Import Competition, Productivity Catch-up, Trade Infrastructure, Skills, Employment, Sub-Saharan Africa, China |
| JEL: | F16 R11 J21 J24 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2018.14&r=bec |
| By: | Gugler, Klaus; Weichselbaumer, Michael; Zulehner, Christine |
| Abstract: | To estimate demand for labor, we use a combination of detailed employment data and the outcomes of procurement auctions, and compare the employment of the winner of an auction with the employment of the second ranked firm (i.e. the runner-up firm). Assuming similar ex-ante winning probabilities for both firms, we may view winning an auction as an exogenous shock to a firm's production and its demand for labor. We utilize daily data from almost 900 construction firms and about 3,000 auctions in Austria in the time period 2006 until 2009. Our main results show that the winning firm significantly increases labor demand in the weeks following an auction but only in the years before the recent economic crisis. It employs about 80 workers more after the auction than the runner-up firm. Most of the adjustment takes place within one month after the demand shock. Winners predominantly fire fewer workers after winning than runner-up firms. In the crisis, however, firms do not employ more workers than their competitors after winning an auction. We discuss explanations like labor hoarding and productivity improvements induced by the crisis as well discuss implications for fiscal and stimulus policy in the crisis. |
| Keywords: | labor demand,labor hoarding,construction procurement,first-price auctions,recent economic crisis,regression discontinuity design |
| JEL: | D44 L10 L13 |
| Date: | 2018 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:213&r=bec |
| By: | Lionel Nesta (Observatoire français des conjonctures économiques); Stefano Schiavo (Observatoire français des conjonctures économiques) |
| Abstract: | The paper investigates the impact of import competition on rent-sharing between firms and employees. First, by applying recent advances in the estimation of price-costs margins to a large panel of French manufacturing firms for the period 1993–2007,we are able to classify each firm into labor- and product-market regimes based on the presence/absence of market power. Second, we concentrate on firms that operate in an efficient bargaining framework to study the effect of import penetration on workers’ bargaining power. We find that French imports from other OECD countries have a negative effect on bargaining power, whereas the impact of imports from low wage countries is more muted. By providing firm-level evidence on the relationship between international trade and rent sharing, the paper sheds new light on the effect of trade liberalization on the labor market. |
| Keywords: | Firm heterogeneity; Import competition; Mark-up; Wage bargaining |
| JEL: | F14 F16 J50 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/2d13t3kn6v8mop0no1md4bjn1i&r=bec |
| By: | Essl, Andrea (University of Bern); von Bieberstein, Frauke (University of Bern); Kosfeld, Michael (Goethe University Frankfurt); Kröll, Markus |
| Abstract: | We use an incentivized experimental game to uncover heterogeneity in otherregarding preferences among salespeople in a large Austrian retail chain. Our results show that the majority of agents take the welfare of others into account but a significant fraction reveals self-regarding behavior. Matching individual behavior in the game with firm data on sales performance shows that higher concern for others is significantly associated with higher revenue per customer. At the same time, it is also associated with fewer sales per day. Both effects offset each other, so that the overall association with total sales revenue becomes insignificant. Our findings highlight the nuanced role of self- vs. other-regarding concerns in sales contexts with important implications for management and marketing research. |
| Keywords: | other-regarding preferences, sales performance, experimental games |
| JEL: | C91 D91 M31 |
| Date: | 2018–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11505&r=bec |
| By: | Kato, Takao (Colgate University); Kauhanen, Antti (ETLA - The Research Institute of the Finnish Economy) |
| Abstract: | Much of the empirical literature on PRP (Performance Related Pay) focuses on a question of whether the firm can increase firm performance in general and enterprise productivity in particular by introducing PRP and if so, how much. However, not all PRP programs are created equal and PRP programs vary significantly in a variety of attributes. This paper provides novel and rigorous evidence on the productivity effect of varying attributes of PRP and shows that the details of PRP indeed matter. In so doing we exploit the panel nature of our Finnish Linked Employer-Employee Data on the details of PRP. We first establish that the omitted variable bias is serious, makes the cross-sectional estimates on the productivity effect of the details of PRP biased upward substantially. Relying on the fixed effect estimates that account for such bias, we find: (i) group incentive PRP is more potent in boosting enterprise productivity than individual incentive PRP; (ii) group incentive PRP with profitability as a performance measure is especially powerful in raising firm productivity; (iii) when a narrow measure (such as cost reduction) is already used, adding another narrow measure (such as quality improvement) yields no additional productivity gain; and (iv) PRP with greater Power of incentives (the share of PRP in total compensation) results in greater productivity gains, and returns to Power of incentives diminishes very slowly. |
| Keywords: | performance pay and productivity |
| JEL: | M52 J33 J24 J53 O53 |
| Date: | 2018–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp11523&r=bec |
| By: | Hvide, Hans K. (University of Bergen); Oyer, Paul (Stanford University) |
| Abstract: | We document three new facts about entrepreneurship. First, a majority of male entrepreneurs start a firm in the same or a closely related industry as their fathers' industry of employment. Second, this tendency is correlated with intelligence: higher-IQ entrepreneurs are less likely to follow their fathers. Third, an entrepreneur that starts a firm in the same 5-digit industry as where his father was employed tends to outperform entrepreneurs in the same industry whose fathers did not work in that industry. We consider various explanations for these facts and conclude that "dinner table human capital", where children obtain industry knowledge through their parents, is an important factor behind what type of firm is started and how well it performs. |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:repec:ecl:stabus:3658&r=bec |
| By: | Ronald W. Anderson (London School of Economics and Political Science); Cecilia Bustamante (London School of Economics and Political Science); Stéphane Guibaud (Département d'économie); Mihail Zervos (London School of Economics and Political Science (LSE)) |
| Abstract: | We study managerial incentive provision under moral hazard in a firm subject to stochastic growth opportunities. In our model, managers are dismissed after poor performance, but also when an alternative manager is better able to grow the firm. The optimal contract may involve managerial entrenchment, such that growth opportunities are foregone after good performance. Firms with better growth prospects have higher managerial turnover and more front-loaded compensation. The use of golden parachutes is suboptimal, unless the firm needs to incentivize its managers to truthfully report the arrival of growth opportunities. By ignoring the externality of the dismissal policy onto future managers, the optimal contract may imply excessive retention. |
| Keywords: | Agency; Firm growth; Managerial turnover |
| Date: | 2018–02 |
| URL: | http://d.repec.org/n?u=RePEc:spo:wpmain:info:hdl:2441/2iclr3ojhv9ko9ord4mpg9odaj&r=bec |
| By: | Oxana Babecka Kucharcukova; Renata Pasalicova |
| Abstract: | This project investigates the effect of financial constraints and monetary policy on firms' investment behaviour using Czech firm-level data. The empirical specification is based on the dynamic neoclassical investment model, which explains investment by sales and cash flow. In addition, it includes financial constraints and other factors. We differentiate firms according to their size and type of economic activity. We find that indebtedness and availability of liquidity have significant effects on investment. In the post-crisis period firms obtained less additional credit due to greater riskiness and tended to accumulate more liquidity. Expectations about future GDP growth and business sentiment are positively related to investment. At the same time, we observe considerable heterogeneity of the results across sectors. The impact of the short-term real interest rate is highly significant for firms of all sizes and in all important sectors of the Czech economy, reflecting monetary policy effectiveness. |
| Keywords: | Financial constraints, firms, indebtedness, investment, liquidity, monetary policy |
| JEL: | D22 E5 E22 G3 G32 |
| Date: | 2017–12 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2017/16&r=bec |
| By: | Holtemöller, Oliver (Asian Development Bank Institute); Scherer, Jan-Christopher (Asian Development Bank Institute) |
| Abstract: | We investigate to what extent sovereign stress and banking stress have contributed to the increase in the level and in the heterogeneity of nonfinancial firms’ financing costs in the Euro area during the European debt crisis and how both have affected the monetary transmission mechanism. Employing a large firm-level data set containing 2 million observations, we are able to identify the effect of government bond yield spreads (sovereign stress) and the share of non-performing loans (banking stress) on firms' financing costs in a panel model by assuming that idiosyncratic shocks to individual firms are uncorrelated with country-specific variables. We find that the two sources of stress have increased firms’ financing costs controlling for country and firm-specific factors. Moreover, we estimate both to have significantly impaired the monetary transmission mechanism. |
| Keywords: | banking stress; firms’ financing conditions; government bond yields; interest rate channel; monetary policy transmission; sovereign stress |
| JEL: | E43 E44 E52 |
| Date: | 2018–02–19 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0811&r=bec |