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on Business Economics |
| By: | De Loecker, Jan; Obermeier, Tim; Van Reenen, John |
| Abstract: | We review the existing literature on falling business dynamism and present a new analysis using comprehensive UK firm-level panel data. Since the mid-1990s, there has been a large increase in UK firm-level inequality (especially in the upper tails) of productivity, wages, markups and labour shares, similarly to the USA. We suggest a simple theoretical framework for understanding some of these trends and quantitatively analyse why, despite increasing markups, the UK labour share has not fallen as sharply as that in the USA. Finally, we suggest some policy options in response to these worrying trends, including modernizing competition rules to deal with the growth of superstar firms and strengthening worker bargaining power. |
| Keywords: | OUP deal |
| JEL: | J1 |
| Date: | 2024–07–17 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:121234 |
| By: | Braunschweig, Luisa (Institute for Employment Research (IAB), Nuremberg); Dauth, Wolfgang (Institut für Arbeitsmarkt- und Berufsforschung); Roth, Duncan H.W. (Institute for Employment Research (IAB), Nuremberg) |
| Abstract: | We examine the development of worker-firm matching over the career due to job mobility. Using administrative employer-employee data covering the universe of German employees, we measure the degree of assortative matching as the correlation of worker and firm quality measures obtained from an AKM wage decomposition. We also introduce a novel measure based on the distance between the estimates of worker and firm quality. Both measures indicate that the degree of assortative matching, on average, increases with each job move. For high-quality workers, this can be explained by job ladder models as these workers move to higher-quality firms. Low-quality workers are matched less assortatively at the beginning of their careers, but also manage to climb the job ladder at first. For this group, the increase in assortative matching increases after the third job, when they fall down the job ladder. Changes in worker-firm matching are also relevant for the extent of life cycle inequality. We estimate that the increase in assortative matching accounts for around 25% of the increase in wage inequality over the life cycle. |
| Keywords: | assortative matching, wage decomposition, job mobility, life cycle, wage inequality, firms |
| JEL: | J23 J24 J31 J62 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17207 |
| By: | Ferreira, Daniel; Nikolowa, Radoslawa |
| Abstract: | We develop a model of the market for knowledge workers in which talent is discovered on the job. In the model, asymmetric information and firm-specific human capital combine to generate several predictions relating firm heterogeneity to talent discovery and poaching. We show that high-quality (i.e., large and high-productivity) firms are more likely to become talent poachers, while lower-quality firms are more likely to invest in talent discovery. Job-to-job flows are adversely selected, which implies that internally promoted managers are more productive than those who are externally promoted. The model generates several additional predictions linking firm heterogeneity to the distribution of managerial talent, productivity, compensation and promotions. |
| Keywords: | adverse selection; poaching; talent discovery; OUP deal |
| JEL: | D82 |
| Date: | 2023–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:116044 |
| By: | Silliman, Mikko (Aalto University); Willén, Alexander (Norwegian School of Economics) |
| Abstract: | This paper combines two of the most central features of modern labor markets —immigrants and unions — to examine the role of worker power in shaping immigrant sorting across firms, and how that subsequently influences the performance of firms and the careers of incumbent workers. First, unions push immigrants to enter lower-paying and lower-quality firms with weaker union representation. Second, these firms with weaker union representation are able to use the cheaper immigrant labor to scale up production, thereby out-competing firms with stronger union representation and capturing market share. Third, incumbent workers in firms with weaker union representation benefit by shifting into management positions and capturing some of the firm's increased rents. Fourth, despite benefiting incumbent workers in firms with weaker union representation, these workers are more likely to become union members themselves in response to greater contact with new immigrants. Broadly, our results cut across nearly all sectors but are considerably more muted in competitive markets. |
| Keywords: | immigration, worker power, unions, firms |
| JEL: | J2 J3 J5 J6 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17208 |
| By: | Ivan Yotzov (Bank of England); Nicholas Bloom (Stanford University); Philip Bunn (Bank of England); Paul Mizen (King’s College London); Gregory Thwaites (University of Nottingham) |
| Abstract: | This paper analyses the response of firms to monthly CPI inflation releases using high-frequency data from a large economy-wide business survey. CPI inflation perceptions respond very quickly, in a matter of hours after the release. We also find that firms’ expected own-price growth has a strong positive correlation with changes in CPI inflation, particularly for increases in inflation. This sensitivity is stronger when inflation is high. Firms are also more responsive when inflation coverage in the media is elevated and appear to have had a supply-side view of the economy since 2022: higher aggregate inflation leads to lower expected sales volume growth and higher expected cost growth. Firms also seem to anticipate the monetary policy response, as positive inflation changes are associated with higher expected borrowing rates. |
| Keywords: | inflation, inflation expectations, survey data, firms |
| JEL: | C83 D22 D84 E31 |
| Date: | 2024–05 |
| URL: | https://d.repec.org/n?u=RePEc:cfm:wpaper:2425 |
| By: | Kiet Duong (University of York.); Toan Huynh (Queen Mary University of London); Anh Phan (University of Liverpool); Nam Vu (Miami University) |
| Abstract: | We propose a novel explanation for why sanctions on Russian firms might not work as intended: these firms' ability to diversify sanction risks via partner countries friendly with Russia. Using indirect links with partner firms as a plausibly exogenous proxy for this risk-sharing channel, we show that exposed Russian firms were able to leverage these links to alleviate the negative impacts of sanctions in 2014. |
| Keywords: | International risk-sharing, sanction, Russia, firm-level |
| JEL: | F31 F41 F42 F51 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:cgs:wpaper:119 |
| By: | Krieger, Bastian; Trottner, Fabian |
| Abstract: | We study the implications of services trade for firm innovation. Using a quasi-experimental shift-share design, we find that access to foreign knowledge-related services improves the innovativeness of domestic firms and complements their indigenously sourced R&D. To confront this evidence, we develop a theoretical model. It demonstrates outsourcing can foster firms' innovation efficiency by mitigating decreasing economies of scale in in-house innovation efforts. As a result, firms become more likely to outsource innovation efforts as they become more innovative, whereas the prevalence of offshoring depends on its associated trade costs. |
| Keywords: | International integration, Service trade, Firm innovation |
| JEL: | F14 F15 F23 O31 O32 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:301867 |