Long-run Competitive Spillovers of the Credit Crunch
William McShane
IWH Discussion Papers,
Nr. 10,
2023
Abstract
Competition in the U.S. appears to have declined. One contributing factor may have been heterogeneity in the availability of credit during the financial crisis. I examine the impact of product market peer credit constraints on long-run competitive outcomes and behavior among non-financial firms. I use measures of lender exposure to the financial crisis to create a plausibly exogenous instrument for product market credit availability. I find that credit constraints of product market peers positively predict growth in sales, market share, profitability, and markups. This is consistent with the notion that firms gained at the expense of their credit constrained peers. The relationship is robust to accounting for other sources of inter-firm spillovers, namely credit access of technology network and supply chain peers. Further, I find evidence of strategic investment, i.e. the idea that firms increase investment in response to peer credit constraints to commit to deter entry mobility. This behavior may explain why temporary heterogeneity in the availability of credit appears to have resulted in a persistent redistribution of output across firms.
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Productivity, Managers’ Social Connections and the Financial Crisis
Iftekhar Hasan, Stefano Manfredonia
Journal of Banking and Finance,
August
2022
Abstract
This paper investigates whether managers’ personal connections help corporate productivity to recover after a negative economic shock. Leveraging the heterogeneity in the severity of the financial crisis across different sectors, the paper reports that (i) the financial crisis had a negative effect on within-firm productivity, (ii) the effect was long-lasting and persistent, supporting a productivity-hysteresis hypothesis, and (iii) managers’ personal connections allowed corporations to recover from this productivity slowdown. Among the possible mechanisms, we show that connected managers operating in affected sectors foster productivity recovery through higher input cost efficiency and better access to the credit market, as well as more efficient use of labour and capital.
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Offshoring, Domestic Employment and Production. Evidence from the German International Sourcing Survey
Wolfhard Kaus, Markus Zimmermann
IWH Discussion Papers,
Nr. 14,
2022
Abstract
This paper analyses the effect of offshoring (i.e., the relocation of activities previously performed in-house to foreign countries) on various firm outcomes (domestic employment, production, and productivity). It uses data from the International Sourcing Survey (ISS) 2017 for Germany, linked to other firm level data such as business register and ITGS data. First, we find that offshoring is a rare event: In the sample of firms with 50 or more persons employed, only about 3% of manufacturing firms and 1% of business service firms have performed offshoring in the period 2014-2016. Second, difference-in-differences propensity score matching estimates reveal a negative effect of offshoring on domestic employment and production. Most of this negative effect is not because the offshoring firms shrink, but rather because they don’t grow as fast as the non-offshoring firms. We further decompose the underlying employment dynamics by using direct survey evidence on how many jobs the firms destroyed/created due to offshoring. Moreover, we do not find an effect on labour productivity, since the negative effect on domestic employment and production are more or less of the same size. Third, the German data confirm previous findings for Denmark that offshoring is associated with an increase in the share of ‘produced goods imports’, i.e. offshoring firms increase their imports for the same goods they continue to produce domestically. In contrast, it is not the case that offshoring firms increase the share of intermediate goods imports (a commonly used proxy for offshoring), as defined by the BEC Rev. 5 classification.
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30 Jahre nach der Wiedervereinigung hat das Bruttoinlandsprodukt als Indikator ausgedient
Oliver Holtemöller
Wirtschaftsdienst,
Konferenzband "30 Jahre Deutsche Einheit", März
2021
Abstract
Der Vergleich der Lebensverhältnisse in Ost- und Westdeutschland orientiert sich häufig am Bruttoinlandsprodukt je Einwohner:in. Dieses Maß ist jedoch für sich genommen kein guter Wohlfahrtsindikator. Es ist davon auszugehen, dass gemessen am Bruttoinlandsprodukt je Einwohner:in in absehbarer Zukunft keine wesentliche weitere Angleichung der Wirtschaftskraft in Ost- und Westdeutschland mehr stattfinden wird. Denn die Altersstruktur Ostdeutschlands, d. h. das Verhältnis von Erwerbstätigenzahl zu Einwohnerzahl, ist ungünstiger als im Westen. Betrachtet man hingegen wichtige Wohlfahrtsindikatoren wie Konsummöglichkeiten, Lebenserwartung, Freizeit und Einkommensungleichheit, so sind die Lebensverhältnisse in Ost- und Westdeutschland ähnlicher als das Bruttoinlandsprodukt je Einwohner:in suggeriert. In den Debatten über den Aufholprozess Ostdeutschlands sollte daher stärker auf die Arbeitsproduktivität als Maß für die Wirtschaftskraft und auf andere Wohlfahrtsindikatoren als Maß für die Angleichung der Lebensverhältnisse abgestellt werden.
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To Rent or not to Rent: A Household Finance Perspective on Berlin's Short-term Rental Regulation
Antonios Mavropoulos
IWH Discussion Papers,
Nr. 1,
2021
Abstract
With the increasing concerns that accompany the rising trends of house sharing economies, regulators impose new laws to counteract housing supply scarcity. In this paper, I investigate whether the ban on short-term entire house listings activated in Berlin in May 2016 had any adverse effects from a household finance perspective. More specifically, I derive short-term rental income and counter-factually compare it with long-term rental income to find that the ban, by decreasing the supply of short-term housing, accelerated short-term rental income but did not have any direct effect on long-term rental income. Commercial home-owners therefore would find renting on the short-term market to be financially advantageous.
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Involuntary Unemployment and the Business Cycle
Lawrence J. Christiano, Mathias Trabandt, Karl Walentin
Review of Economic Dynamics,
January
2021
Abstract
Can a model with limited labor market insurance explain standard macro and labor market data jointly? We construct a monetary model in which: i) the unemployed are worse off than the employed, i.e. unemployment is involuntary and ii) the labor force participation rate varies with the business cycle. To illustrate key features of our model, we start with the simplest possible framework. We then integrate the model into a medium-sized DSGE model and show that the resulting model does as well as existing models at accounting for the response of standard macroeconomic variables to monetary policy shocks and two technology shocks. In addition, the model does well at accounting for the response of the labor force and unemployment rate to these three shocks.
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Decentralisation of Collective Bargaining: A Path to Productivity?
Daniele Aglio, Filippo di Mauro
IWH-CompNet Discussion Papers,
Nr. 3,
2020
Abstract
Productivity developments have been rather divergent across EU countries and particularly between Central Eastern Europe (CEE) and elsewhere in the continent (non-CEE). How is such phenomenon related to wage bargaining institutions? Starting from the Great Financial Crisis (GFC) shock, we analyse whether the specific set-up of wage bargaining prevailing in non-CEE may have helped their respective firms to sustain productivity in the aftermath of the crisis. To tackle the issue, we merge the CompNet dataset – of firm-level based productivity indicators – with the Wage Dynamics Network (WDN) survey on wage bargaining institutions. We show that there is a substantial difference in the institutional set-up between the two above groups of countries. First, in CEE countries the bulk of the wage bargaining (some 60%) takes place outside collective bargaining schemes. Second, when a collective bargaining system is adopted in CEE countries, it is prevalently in the form of firm-level bargaining (i. e. the strongest form of decentralisation), while in non-CEE countries is mostly subject to multi-level bargaining (i. e. an intermediate regime, only moderately decentralised). On productivity impacts, we show that firms’ TFP in the non-CEE region appears to have benefitted from the chosen form of decentralisation, while no such effects are detectable in CEE countries. On the channels of transmission, we show that decentralisation in non-CEE countries is also negatively correlated with dismissals and with unit labour costs, suggesting that such collective bargaining structure may have helped to better match workers with firms’ needs.
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Dynamic Equity Slope
Matthijs Breugem, Stefano Colonnello, Roberto Marfè, Francesca Zucchi
University of Venice Ca' Foscari Department of Economics Working Papers,
Nr. 21,
2020
Abstract
The term structure of equity and its cyclicality are key to understand the risks drivingequilibrium asset prices. We propose a general equilibrium model that jointly explainsfour important features of the term structure of equity: (i) a negative unconditionalterm premium, (ii) countercyclical term premia, (iii) procyclical equity yields, and (iv)premia to value and growth claims respectively increasing and decreasing with thehorizon. The economic mechanism hinges on the interaction between heteroskedasticlong-run growth — which helps price long-term cash flows and leads to countercyclicalrisk premia — and homoskedastic short-term shocks in the presence of limited marketparticipation — which produce sizeable risk premia to short-term cash flows. The slopedynamics hold irrespective of the sign of its unconditional average. We provide empirical support to our model assumptions and predictions.
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