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on Business Economics |
| By: | Aslund, Olof (Uppsala University); Bratu, Cristina (Aalto University); Lombardi, Stefano (VATT, Helsinki); Thoresson, Anna (IFAU) |
| Abstract: | We study the role of firm productivity in explaining earnings disparities between immigrants and natives using population-wide matched employer-employee data from Sweden. We find substantial earnings returns to working in firms with higher persistent productivity, with greater gains for immigrants from non-Western countries. Moreover, the pass-through of within-firm productivity variation to earnings is stronger for immigrants in low-productive, immigrant-dense firms. But immigrant workers are underrepresented in high-productive firms and less likely to move up the productivity distribution. Thus, sorting into less productive firms decreases earnings in poor-performing immigrant groups that would gain the most from working in high-productive firms. |
| Keywords: | firm productivity, immigrant-native earnings gaps, wage inequality |
| JEL: | J15 J31 J62 |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14960&r= |
| By: | Engbom, Niklas (New York University); Moser, Christian (Columbia University); Sauermann, Jan (IFAU) |
| Abstract: | We study the nature of firm pay dynamics. To this end, we propose a statistical model that extends the seminal framework by Abowd, Kramarz and Margolis (1999) to allow for idiosyncratically time-varying firm pay policies. We estimate the model using linked employer-employee data for Sweden from 1985 to 2016. By drawing on detailed firm financials data, we show that firms that become more productive and accumulate capital raise pay, whereas firms lower pay as they add workers. A secular increase in firm-year pay dispersion in Sweden since 1985 is accounted for by greater persistence of firm pay among incumbent firms as well as greater dispersion in firm pay among entrant firms, as opposed to more volatile firm pay. |
| Keywords: | earnings inequality, worker and firm heterogeneity, firm dynamics, linked employer-employee data, two-way fixed effects model, akm |
| JEL: | J31 D22 D31 E24 M13 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp15014&r= |
| By: | Labanca, Claudio (Monash University); Pozzoli, Dario (Copenhagen Business School) |
| Abstract: | Although constraints on hours worked at the firm-level are viewed as an important determinant of firm wages, little direct evidence exists to support this view. In this paper, we use linked employer-employee data on hours worked in Denmark to measure hours constraints and to investigate how these constraints relate to firm wages. We show that firms with stricter constraints pay higher firm-specific wages and that these premiums are concentrated in more productive firms. Starting from these findings we discuss a framework in which hours constraints are motivated by the productivity gains derived from having a more cooperative production process, leading more productive firms to constrain hours and to pay compensating wage differentials. |
| Keywords: | wage differentials, hours constraints, cooperation |
| JEL: | J31 J33 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14992&r= |
| By: | Décamps, Jean-Paul; Villeneuve, Stéphane |
| Abstract: | We study a dynamic model of a rm whose shareholders learn about its profitability, face costs of external nancing and costs of holding cash. The shareholders' problem involves a notoriously challenging singular stochastic control problem with a two-dimensional degenerate diffusion process. We solve it by means of an explicit construction of its value function, and derive a corporate life-cycle with two stages: a "probation stage" where it is never optimal for the firm to issue new shares, and a "mature stage" where the firm resorts to the market whenever needed. The cash target level is non-monotonic in the belief about the profitability and reaches its highest value on the edge between the two stages. It follows new insights on the firm's volatility and its payout ratio which depend on the firm's stage in its life cycle. |
| Keywords: | Corporate cash management; Corporate life cycle; Learning; Singular control |
| JEL: | C02 C11 C61 G32 G33 G35 |
| Date: | 2022–02 |
| URL: | http://d.repec.org/n?u=RePEc:tse:wpaper:126577&r= |
| By: | Kabinet Kaba (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne); Mahamat Moustapha (Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres, LEDa - Laboratoire d'Economie de Dauphine - CNRS - Centre National de la Recherche Scientifique - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris sciences et lettres) |
| Abstract: | Sub-Saharan African firms face enormous obstacles to their development. The main constraints to business performance identified are poor access to finance and a weak domestic market. In this paper, we examine how international remittances affect firms' performance. Specifically, we investigate the role of remittances on capital accumulation, sales, and employment in 34,010 firms operating in 42 Sub-Saharan African countries between 2006 and 2020. Using a fixed-effect instrumental variable approach to control for the endogeneity of remittances, we find that international remittances positively affect the share of capital held by nationals in manufacturing firms. Moreover, international remittances positively affect sales in non-manufacturing firms, while a negative effect on the sales of manufacturing firms is observed. Regarding the effect of remittances on employment, we find a positive impact on both manufacturing and non-manufacturing firms. Heterogeneity tests suggest that the effect of remittances on firms' performance is larger in less financially developed and non-resource-rich countries. As for the negative impact of remittances on sales in manufacturing firms, the results show that it is entirely due to small firms. Finally, using remittances per capita instead of remittances relative to GDP, similar result are found. |
| Keywords: | Remittances,Firm Performance,Entrepreneurship,Saving and Capital Investment,Firm Employment,Africa |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03515100&r= |
| By: | Joel Rabinovich (City University London) |
| Abstract: | This article presents new insights on the evolving contribution of different types of investments to the growth in sales of US nonfinancial listed firms during the 1979-2018 period. By means of quantile regressions it is observed an increasing contribution over time of intangible investment vis-à-vis a decline in capital expenditure both for high-growth and slow-growth firms. However, the impact of different types of intangible investment differs depending on the kind of firm. Whereas research and development (R&D) has a positive contribution for high-growth firms, only advertising has a positive effect for their slow-growth peers. |
| Keywords: | Firm growth,Fast-growth firms,Quantile Regression,Intangibles |
| Date: | 2022–01–21 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03539656&r= |
| By: | Banerjee, Suman; Estrin, Saul; Pal, Sarmistha |
| Abstract: | Does the introduction of corporate transparency and disclosure rules in emerging economies affect compliance, and therefore earnings quality and firm performance? We explore these questions for an important emerging economy, Russia, using a natural experiment, the 2002 introduction of Russian corporate governance code. We exploit the exogenous variation in voluntary disclosure and find a significant increase in corporate disclosure among the domestic Russian firms over the period 2003–2007 when firms gradually adopted some but not all disclosure rules. The immediate effect of the introduction was a drop in reported earnings. Market valuation, however, only improved for domestic firms after 2007, when all domestic firms had complied. However, cross-listed firms, which were already satisfying international standards, remained largely unaffected. Though average compliance by domestic firms was only 53%, average firm value of treated domestic firms, relative to cross-listed ones, went up by about 10%. Results are robust, confirm external validity and offer important policy implications for other emerging/ transition economies. |
| Keywords: | increased disclosure; processing cost of information; market valuation; reported earnings; cost of capital; domestic vs. cross-listed firms; 2002 Russian corporate governance code; differnence-in-difference model; Russia |
| JEL: | G30 K29 O38 |
| Date: | 2021–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:112580&r= |
| By: | Jonathan Eaton; Samuel S. Kortum; Francis Kramarz |
| Abstract: | Customs data reveal heterogeneity and granularity of relationships among buyers and sellers. A key insight is how more exports to a destination break down into more firms selling there and more buyers per exporter. We develop a quantitative general equilibrium model of firm-to-firm matching that builds on this insight to separate the roles of iceberg costs and matching frictions in gravity. In the cross section, we find matching frictions as important as iceberg costs in impeding trade, and more sensitive to distance. Because domestic and imported intermediates compete directly with labor in performing production tasks, our model also fits the heterogeneity of labor shares across French producers. Applying the framework to the 2004 expansion of the European Union, reduced iceberg costs and reduced matching frictions contributed equally to the increase in French exports to the new members. While workers benefitted overall, those competing most directly with imports gained less, even losing in some countries entering the EU. |
| JEL: | F12 F14 F16 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29685&r= |
| By: | Bäck, Asta (VTT); Hajikhani, Arash (VTT); Jäger, Angela (Fraunhofer Institute for Systems and Innovation Research ISI); Schubert, Torben (CIRCLE, Lund University); Suominen, Arho (VTT) |
| Abstract: | AI-related technologies have become ubiquitous in many business contexts. However, to date empirical accounts of the productivity effects of AI-adoption by firms are scarce. Using Finnish data on job advertisements between 2013 and 2019, we identify job advertisements referring to AI-related skills. Matching this data to productivity data from ORBIS, we estimate the productivity effects of AI related activities in our sample. Our results indicate that AI-adoption increases productivity, with three important qualifications. Firstly, effects are only observable for large firms with more than 499 employees. Secondly, there is evidence that early adopters did not experience productivity increases. This may be interpreted as technological immaturity.Thirdly, we find evidence of delays of least three years between the adoption of AI and ensuing productivity effects (investment delay effect). We argue that our findings on the technological immaturity and the investment delay effect may help explain the so-called AI-related return of the Solow-paradox: I.e. that AI is everywhere except in the productivity statistics. |
| Keywords: | Recruiting personnel; AI related jobs; Artificial Intelligence; Job Market; Text Mining; Firm performance; Productivity |
| JEL: | D22 D24 O31 O32 |
| Date: | 2022–02–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:lucirc:2022_001&r= |
| By: | Frederiksen, Anders (Aarhus University); Hansen, Daniel Baltzer Schjødt (Aarhus University); Flaherty Manchester, Colleen (University of Minnesota) |
| Abstract: | Group-based incentive pay is attractive in contexts where production is complex and interdependent, yet freeriding is a paramount concern. We assess the introduction of group-based performance pay in a modern industrial production setting using difference-in-difference estimation. Performance increased by 19 percent, with three quarters coming from increased performance of existing workers and the remaining from selection; workers became more efficient and were absent less often. We find little evidence of freeriding; quantile regressions show increased performance throughout the distribution of workers. Features of the design and implementation process created trust, a common goal, and a shared identity, which limited freeriding. |
| Keywords: | difference-in-differences, performance pay, group-based incentive, freeriding, incentive effects, selection effects, absenteeism, efficiency, performance, productivity, trust |
| JEL: | M5 J33 L23 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp14986&r= |
| By: | Sen, Neelanjan; Minocha, Priyansh; Dutta, Arghya |
| Abstract: | This paper considers the possibility of technology licensing and tacit collusion between firms that produce homogeneous goods under asymmetric cost structures and compete in quantities. We discuss the possibility of collusion under Grim-Trigger strategies when technology may be licensed via fixed fee or royalty or two-part tariff. Irrespective of the type of licensing contract, the possibility that a stable cartel is formed is the same. In the no-licensing stage, the cartel formation is more likely if the cost difference between the firms is higher. In contrast to Lin (1996), all forms of licensing facilitate (obstruct) collusion, if the initial cost difference between the firms is less (more). Technology will always be licensed in the first stage and the optimal form of licensing is either fixed-fee or royalty or two-part tariff. The cartel will be formed if the firms are relatively patient and welfare either increases or decreases in the post-licensing stage. |
| Keywords: | Technology licensing; Oligopoly; Cartel; Grim-Trigger Strategy; Cournot Competition |
| JEL: | D24 L13 L24 |
| Date: | 2022–02–23 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111639&r= |