Labor Market Power and the Distorting Effects of International Trade
Matthias Mertens
International Journal of Industrial Organization,
January
2020
Abstract
This article examines how final product trade with China shapes and interacts with labor market imperfections that create market power in labor markets and prevent an efficient market outcome. I develop a framework for measuring such labor market power distortions in monetary terms and document large degrees of these distortions in Germany's manufacturing sector. Import competition only exerts labor market disciplining effects if firms, rather than employees, possess labor market power. Otherwise, increasing export demand and import competition both fortify existing distortions, which decreases labor market efficiency. This widens the gap between potential and realized output and thus diminishes classical gains from trade.
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Entrenchment through Corporate Social Responsibility: Evidence from CEO Network Centrality
Salim Chahine, Yiwei Fang, Iftekhar Hasan, Mohamad Mazboudi
International Review of Financial Analysis,
2019
Abstract
This paper investigates whether CEOs with high network centrality entrench themselves when taking CSR decisions and how that affects firm value. Evidence portrays that CSR in firms with more central CEOs is negatively associated with firm-value, and this association is mitigated by better corporate governance mechanisms and by geographic areas of higher social capital. This negative association is lower during disasters which reflect periods of positive exogenous shocks to the societal demand for CSR. Furthermore, CSR by more central CEOs is positively associated with future increases in CEO compensation and future improvement in a CEO's network position. The findings reveal that, in general, central CEOs use CSR to entrench themselves and gain private benefits rather than increase shareholder value.
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Import Competition and Firm Productivity: Evidence from German Manufacturing
Richard Bräuer, Matthias Mertens, Viktor Slavtchev
Abstract
This study analyses empirically the effects of import competition on firm productivity (TFPQ) using administrative firm-level panel data from German manufacturing. We find that only import competition from high-income countries is associated with positive incentives for firms to invest in productivity improvement, whereas import competition from middle- and low-income countries is not. To rationalise these findings, we further look at the characteristics of imports from the two types of countries and the effects on R&D, employment and sales. We provide evidence that imports from high-income countries are relatively capital-intensive and technologically more sophisticated goods, at which German firms tend to be relatively good. Costly investment in productivity appears feasible reaction to such type of competition and we find no evidence for downscaling. Imports from middle- and low-wage countries are relatively labour-intensive and technologically less sophisticated goods, at which German firms tend to generally be at disadvantage. In this case, there are no incentives to invest in innovation and productivity and firms tend to decline in sales and employment.
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What Drives Discretion in Bank Lending? Some Evidence and a Link to Private Information
Gene Ambrocio, Iftekhar Hasan
Journal of Banking and Finance,
2019
Abstract
We assess the extent to which discretion, unexplained variations in the terms of a loan contract, has varied across time and lending institutions and show that part of this discretion is due to private information that lenders have on their borrowers. We find that discretion is lower for secured loans and loans granted by a larger group of lenders, and is larger when the lenders are larger and more profitable. Over time, discretion is also lower around recessions although the private information content is higher. The results suggest that bank discretionary and private information acquisition behavior may be important features of the credit cycle.
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Flight from Safety: How a Change to the Deposit Insurance Limit Affects Households‘ Portfolio Allocation
H. Evren Damar, Reint E. Gropp, Adi Mordel
IWH Discussion Papers,
No. 19,
2019
Abstract
We study how an increase to the deposit insurance limit affects households‘ portfolio allocation by exogenously reducing uninsured deposit balances. Using unique data that identifies insured versus uninsured deposits, along with detailed information on Canadian households‘ portfolio holdings, we show that households respond by drawing down deposits and shifting towards mutual funds and stocks. These outflows amount to 2.8% of outstanding bank deposits. The empirical evidence, consistent with a standard portfolio choice model that is modified to accommodate uninsured deposits, indicates that more generous deposit insurance coverage results in nontrivial adjustments to household portfolios.
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Innovation and Top Income Inequality
Philippe Aghion, Ufuk Akcigit, Antonin Bergeaud, Richard Blundell, David Hemous
Review of Economic Studies,
No. 1,
2019
Abstract
In this article, we use cross-state panel and cross-U.S. commuting-zone data to look at the relationship between innovation, top income inequality and social mobility. We find positive correlations between measures of innovation and top income inequality. We also show that the correlations between innovation and broad measures of inequality are not significant. Next, using instrumental variable analysis, we argue that these correlations at least partly reflect a causality from innovation to top income shares. Finally, we show that innovation, particularly by new entrants, is positively associated with social mobility, but less so in local areas with more intense lobbying activities.
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Innovation, Reallocation, and Growth
Daron Acemoglu, Ufuk Akcigit, Harun Alp, Nicholas Bloom, William R. Kerr
American Economic Review,
No. 11,
2018
Abstract
We build a model of firm-level innovation, productivity growth, and reallocation featuring endogenous entry and exit. A new and central economic force is the selection between high- and low-type firms, which differ in terms of their innovative capacity. We estimate the parameters of the model using US Census microdata on firm-level output, R&D, and patenting. The model provides a good fit to the dynamics of firm entry and exit, output, and R&D. Taxing the continued operation of incumbents can lead to sizable gains (of the order of 1.4 percent improvement in welfare) by encouraging exit of less productive firms and freeing up skilled labor to be used for R&D by high-type incumbents. Subsidies to the R&D of incumbents do not achieve this objective because they encourage the survival and expansion of low-type firms.
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Housing Consumption and Macroprudential Policies in Europe: An Ex Ante Evaluation
Antonios Mavropoulos, Qizhou Xiong
IWH Discussion Papers,
No. 17,
2018
Abstract
In this paper, we use the panel of the first two waves of the Household Finance and Consumption Survey by the European Central Bank to study housing demand of European households and evaluate potential housing market regulations in the post-crisis era. We provide a comprehensive account of the housing decisions of European households between 2010 and 2014, and structurally estimate the housing preference of a simple life-cycle housing choice model. We then evaluate the effect of a tighter LTV/LTI regulation via counter-factual simulations. We find that those regulations limit homeownership and wealth accumulation, reduces housing consumption but may be welfare improving for the young households.
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