The Economics of Firm Productivity
Carlo Altomonte, Filippo di Mauro
Cambridge University Press,
April
2022
Abstract
Productivity varies widely between industries and countries, but even more so across individual firms within the same sectors. The challenge for governments is to strike the right balance between policies designed to increase overall productivity and policies designed to promote the reallocation of resources towards firms that could use them more effectively. The aim of this book is to provide the empirical evidence necessary in order to strike this policy balance. The authors do so by using a micro-aggregated dataset for 20 EU economies produced by CompNet, the Competitiveness Research Network, established some 10 years ago among major European institutions and a number of EU productivity boards, National Central Banks, National Statistical institutes, as well as academic Institutions. They call for pan-EU initiatives involving statistical offices and scholars to achieve a truly complete EU market for firm-level information on which to build solidly founded economic policies.
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The Impact of Financial Transaction Taxes on Stock Markets: Short-run Effects, Long-run Effects, and Reallocation of Trading Activity
Sebastian Eichfelder, Mona Noack, Felix Noth
Abstract
We investigate the impact of the French 2012 financial transaction tax on trading activity, volatility, and price efficiency measured by first-order autocorrelation. We extend empirical research by analysing anticipation and reallocation effects. In addition, we consider measures for long-run volatility and first-order autocorrelation that have not been explored yet. We find robust evidence for anticipation effects before the effective date of the French FTT. Controlling for short-run effects, we only find weak evidence for a long-run reduction of trading activity due to the French FTT. Thus, the main impact of the French FTT on trading activity is short-run. We find stronger reactions of low-liquidity treated stocks and a reallocation of trading activity to high-liquidity stocks participating in the Supplemental Liquidity Provider Programme, which is both in line with liquidity clientele effects. Finally, we find weak evidence for a persistent volatility reduction but no indication for a significant FTT impact on price efficiency measured by first-order autocorrelation.
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The (Heterogenous) Economic Effects of Private Equity Buyouts
Steven J. Davis, John Haltiwanger, Kyle Handley, Josh Lerner, Ben Lipsius, Javier Miranda
Abstract
The effects of private equity buyouts on employment, productivity, and job reallocation vary tremendously with macroeconomic and credit conditions, across private equity groups, and by type of buyout. We reach this conclusion by examining the most extensive database of U.S. buyouts ever compiled, encompassing thousands of buyout targets from 1980 to 2013 and millions of control firms. Employment shrinks 13% over two years after buyouts of publicly listed firms – on average, and relative to control firms – but expands 13% after buyouts of privately held firms. Post-buyout productivity gains at target firms are large on average and much larger yet for deals executed amidst tight credit conditions. A post-buyout tightening of credit conditions or slowing of GDP growth curtails employment growth and intra-firm job reallocation at target firms. We also show that buyout effects differ across the private equity groups that sponsor buyouts, and these differences persist over time at the group level. Rapid upscaling in deal flow at the group level brings lower employment growth at target firms.
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European Firm Concentration and Aggregate Productivity
Tommaso Bighelli, Filippo di Mauro, Marc Melitz, Matthias Mertens
Abstract
This article derives a European Herfindahl-Hirschman concentration index from 15 micro-aggregated country datasets. In the last decade, European concentration rose due to a reallocation of economic activity towards large and concentrated industries. Over the same period, productivity gains from reallocation accounted for 50% of European productivity growth and markups stayed constant. Using country-industry variation, we show that changes in concentration are positively associated with changes in productivity and allocative efficiency. This holds across most sectors and countries and supports the notion that rising concentration in Europe reflects a more efficient market environment rather than weak competition and rising market power.
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European Firm Concentration and Aggregate Productivity
Tommaso Bighelli, Filippo di Mauro, Marc Melitz, Matthias Mertens
Abstract
This article derives a European Herfindahl-Hirschman concentration index from 15 micro-aggregated country datasets. In the last decade, European concentration rose due to a reallocation of economic activity towards large and concentrated industries. Over the same period, productivity gains from reallocation accounted for 50% of European productivity growth and markups stayed constant. Using country-industry variation, we show that changes in concentration are positively associated with changes in productivity and allocative efficiency. This holds across most sectors and countries and supports the notion that rising concentration in Europe reflects a more efficient market environment rather than weak competition and rising market power.
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Changing Business Dynamism and Productivity: Shocks versus Responsiveness
Ryan A. Decker, John Haltiwanger, Ron S. Jarmin, Javier Miranda
American Economic Review,
No. 12,
2020
Abstract
The pace of job reallocation has declined in the United States in recent decades. We draw insight from canonical models of business dynamics in which reallocation can decline due to (i) lower dispersion of idiosyncratic shocks faced by businesses, or (ii) weaker marginal responsiveness of businesses to shocks. We show that shock dispersion has actually risen, while the responsiveness of business-level employment to productivity has weakened. Moreover, declining responsiveness can account for a significant fraction of the decline in the pace of job reallocation, and we find suggestive evidence this has been a drag on aggregate productivity.
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Promoting Higher Productivity in China — Does Innovation Expenditure Really Matter?
Hoang Minh Duy, Filippo di Mauro, Jo Van Biesebroeck
Singapore Economic Review,
No. 5,
2020
Abstract
The slowing down of the global economy adds additional challenges to China? economic policies as the country orchestrates its transition to lower resource dependency and higher technology intensity of output. Are policies aimed at technologically advanced sectors the right answer? Drawing from a newly created dataset of firms? balance sheets over the period 1998?2013, matched with patents data until 2009, we uncover that expenditure in innovation had limited effect on boosting productivity, without generating a clear gain in overall productivity for the high-tech sector. As a matter of fact, there is a much higher dispersion in productivity outcomes in firms belonging to the low-technology sectors, which derives from a bunch of champions in those sectors scoring higher productivity dynamics than in the High-technology sectors. The paper finds those barriers to entry and in general, market power of incumbents in the high-tech generate less than optimal resource reallocation, which hampers the overall productivity. Policies should presumably aim at removing such obstacles rather than solely promote innovation expenditure.
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Trade Shocks, Credit Reallocation and the Role of Specialisation: Evidence from Syndicated Lending
Isabella Müller
IWH Discussion Papers,
No. 15,
2020
Abstract
This paper provides evidence that banks cut lending to US borrowers as a consequence of a trade shock. This adverse reaction is stronger for banks with higher ex-ante lending to US industries hit by the trade shock. Importantly, I document large heterogeneity in banks‘ reaction depending on their sectoral specialisation. Banks shield industries in which they are specialised in and at the same time reduce the availability of credit to industries they are not specialised in. The latter is driven by low-capital banks and lending to firms that are themselves hit by the trade shock. Banks‘ adjustments have adverse real effects.
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Birds, Birds, Birds: Co-worker Similarity, Workplace Diversity and Job Switches
Boris Hirsch, Elke J. Jahn, Thomas Zwick
British Journal of Industrial Relations,
No. 3,
2020
Abstract
We investigate how the demographic composition of the workforce along the sex, nationality, education, age and tenure dimensions affects job switches. Fitting duration models for workers’ job‐to‐job turnover rate that control for workplace fixed effects in a representative sample of large manufacturing plants in Germany during 1975–2016, we find that larger co‐worker similarity in all five dimensions substantially depresses job‐to‐job moves, whereas workplace diversity is of limited importance. In line with conventional wisdom, which has that birds of a feather flock together, our interpretation of the results is that workers prefer having co‐workers of their kind and place less value on diverse workplaces.
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Stress Tests and Small Business Lending
Kristle R. Cortés, Yuliya Demyanyk, Lei Li, Elena Loutskina, Philip E. Strahan
Journal of Financial Economics,
No. 1,
2020
Abstract
Post-crisis stress tests have altered banks’ credit supply to small business. Banks most affected by stress tests reallocate credit away from riskier markets and toward safer ones. They also raise interest rates on small loans. Quantities fall most in high-risk markets where stress-tested banks own no branches, and prices rise mainly where they do. The results suggest that banks price the stress-test induced increase in capital requirements where they have local knowledge, and exit where they do not. Stress tests do not, however, reduce aggregate credit. Small banks seem to increase their share in geographies formerly reliant on stress-tested lenders.
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