Which firms benefit from robot adoption? Evidence from China

This paper investigates which firms benefit from robot adoption in a developing open economy such as China. First, we construct a unique comprehensive dataset to identify robot adoption in Chinese industrial firms. Second, we adopt difference-in-differences to provide empirical analysis after conducting the common trends tests. Third, we find that adopting robots significantly increases a series of firm performance indicators in robot adoption firms. Compared with adopting firms in the labor-intensive sector, firms in the capital-intensive sector significantly benefit from robot adoption in a series of firm performance indicators, e.g., employment, capital stock, output, total factor productivity, capital returns, and exports. Finally, we check the robustness, investigate the dynamic effects, and find persistent positive effects. Our findings shed some light on the impacts of robot adoption in developing and transition countries.     

Do Chinese domestic firms benefit from FDI inflow?: Evidence of horizontal and vertical spillovers

Using a large panel dataset covering all manufacturing firms (above a minimum scale) in China from 1998 to 2005, this paper examines whether there exist productivity spillovers from foreign direct investment (FDI) to domestic firms. In estimating productivity, we control for a possible simultaneity bias by using semi-parametric estimation techniques. We find that Hong Kong, Macao and Taiwan (HMT) invested firms generate negative horizontal spillovers, while Non-HMT foreign invested firms (mostly from OECD countries) tend to bring positive horizontal spillovers in China. These two opposing horizontal effects seem to cancel out at the aggregate level. We also find strong and robust vertical spillover effects on both state-owned firms and non-state firms. However, vertical spillover effects from export-oriented FDI are weaker than those from domestic-market-oriented FDI.     

Do small firms compete with large firms?

Despite the pervasive phenomenon of scale economies, the majority of firms have always been small firms. The emergence of small firms as a means of economic development on both sides of the Atlantic has been one of the major new topics of economic policy since the 1980s. This has drawn renewed attention to the question: How are small firms able to exist? The theories of strategic niches and dynamic complementarity imply that small firms seek out markets where they are able to avoid competition with their larger counterparts. This paper tests the validity of these theories by examining the extent to which small-firm profitability is set by large-firm profitability. Considerable evidence shows that the price-cost margins of small firms do not tend to follow those of large firms. This supports the theory that small firms pursue a strategy of producing in distinct product niches.     

Do local firms employ political activities to respond to political uncertainty?

Using hand-collected data in China from 2001 to 2019, we examine how political uncertainty affects corporate political activities, including corporate corruption and corporate charitable donations, and whether the anti-corruption campaign moderates the relationship between political uncertainty and corporate political activities. First, we find that when city government officials change, local firms significantly increase corporate charitable donations while reducing corporate corruption. Second, the anti-corruption campaign strengthens the effects of political uncertainty on corporate political activities. Third, our results also show that political uncertainty has stronger effects 1) when new government officials come from external appointments, and 2) when former government officials experience abnormal turnover. In addition, the effects of political uncertainty on corporate charitable donations are stronger in non-state-owned enterprises and firms belonging to regulated industries. Finally, political uncertainty increases firms’ government subsidies through corporate political activities. It’s clear that political activities have mediating effects.     

How do firms respond to minimum wage regulation in China? Evidence from Chinese private firms

To study how firms respond to minimum wage regulation in China, this paper empirically explores a number of dimensions along which firms adjust in response to minimum wage differences, using three waves of a national survey of Chinese private firms. Consistent with the predictions of economic theory, we find that private firms in China respond to minimum wage increases by cutting various fringe benefits such as pension and insurance, and by laying off low-skilled workers and short-term workers. Despite these adjustments, firms cannot fully mitigate the detrimental effects on firm profitability when faced with adverse demand shocks because of the wage rigidity introduced by minimum wage regulation. These findings highlight the unintended consequences of minimum wage regulation on the private sector in China.     

Which firms benefit the most from agglomeration? New evidence from an emerging country with consistent measure of productivity

Productivity influences of agglomeration for developed countries has been well documented so far, however, the studies are still rare for emerging and developing countries, especially ones focusing on firm heterogeneity. This article empirically investigates the effects of agglomeration on productivity using firm-level data from Vietnam – a typical emerging country. Firstly, the consistent productivity measure of each individual firm is yielded using the control function approach along with the instrumental variable procedure. Next, it is regressed on proxies of agglomeration, controlling firm and regional characteristics. Potential issues of self-selection and endogeneity are dealt with using the fixed effects technique and taking advantage of micro data. Findings show the productivity-enhancing influences of employment density and industrial diversity but no clear evidence on the productivity gains from specialization for a general firm. In addition, the most advantaged firms in highly agglomerated regions are proved to be foreign-owned, small-sized, or young. Finally, several sensitivity checks demonstrate that the estimated results are robust across various productivity measures, industrial levels, and samples.     

Foreign direct investment and technology spillovers: Which firms really benefit?

Foreign direct investment is thought to contribute to host economies by increasing their efficiency either directly or through technology diffusion. Such efficiency benefits are neither equally produced by foreign firms nor equally distributed to all domestic firms. The special question addressed in this study is related to how differentiated such effects are depending on size and degree of (foreign) ownership. Based on a sample of 3,742 manufacturing firms operating in Greece in 1997, it is found that, while it is large, majority-held foreign firms that exhibit higher productivity, spillovers are important for small domestic firms and stem mostly from small joint ventures where the foreign partner owns a minor part of equity. JEL no. F23, O30     

A springboard into politics: Do Chinese entrepreneurs benefit from joining the government-controlled business associations?

Business associations in authoritarian regimes behave systematically different from their counterparts in democratic regimes. Using a unique dataset of Chinese private firms, this paper examines the impacts of joining the most prominent business association in China, the All-China Federation of Industry and Commerce (ACFIC) which was initiated and strongly controlled by the government. We find that ACFIC members have much higher chances to obtain formal political identities, that is, the deputy of People's Congress (PC) or the People's Political Consultative Conference (PPCC). However, ACFIC membership itself cannot help entrepreneurs acquire scarce resources that are controlled by the government. Rather, ACFIC members bear heavier tax burdens and make more informal payments to government officials. These findings suggest that the ACFIC act as a springboard into politics, rather than an effective collective action committee that can bring common benefits to its members or protect members from government predation.     

Does Fintech benefit financial disintermediation? Evidence based on provinces in China from 2013 to 2018

Financing for small and medium-sized enterprises (SME) is a challenge worldwide. Thus, it is worth considering how SME overcome the financing dilemma to use financial technology (Fintech). Using data from 31 provinces in China from 2013 to 2018, we construct a regional Fintech evaluation index system and examine the effects of Fintech on enterprise financing based on China's provincial panel data. The results show that Fintech can promote direct financing and form robust technology-driven disintermediation. Compared with capital-driven disintermediation, technology-driven disintermediation is more inclusive. We also conclude that more shadow banks and private enterprises, or higher digitalization, marketization, and securitization levels, will improve the efficiency of technology-driven disintermediation.     

What hinders digital communication? Evidence from foreign firms in Japan

Digital technology such as virtual meetings is key to communication and collaboration. However, a firm-level survey in Japan during the COVID-19 pandemic shows that foreign firms regarded digital communication as a key business obstacle. This paper estimates the determinants of the likelihood that foreign firms regard digital communication as an obstacle. The results show that digital communication is hindered by language differences, employees’ nationality differences, employment size, and time differences from foreign headquarters. Contrary to common assertions, digital communication is regarded as an obstacle in remote-work feasible sectors, but not so in in-person service sectors. Thus, digital communication does not completely eliminate barriers to face-to-face communication.     

Norway's recovery from the Great Depression – an act of balancing?

Abstract

This paper addresses the question of how Norway recovered from the Great Depression and tries to show that a monocausal Schumpeterian explanation is flawed. Three elements of such an explanation are being discussed and dismissed: the shift in employment structure; the spread of electric power; and the changes in household consumption. The paper comes to a more balanced conclusion. Mainly for chronological reasons, supply-side factors can't independently explain the recovery. Not before 1934–35, when recovery had been underway for roughly two years, did supply-side factors start to have a real impact. Only by viewing these forces in interaction with the demand side, in particular export demand generating an investment boom, can a more plausible explanation of Norway's recovery from the Great Depression be presented.     

Does religion enhance firm performance? Evidence from private firms in China

We study the impact of religiosity on firm performance in China. We find that entrepreneurs with religious beliefs have higher accounting performance. Firms are more likely to obtain bank credit if entrepreneurs have religious beliefs as religiosity stimulate them to invest more in networking, which further enhance the access to bank credit. Religious entrepreneurs have more trust towards external people, which incentivizes them to adopt a shareholding reform and employ external professional CEOs instead of family members, and thus enhances the corporate governance of these firms. In contrast, religious entrepreneurs also prefer family members as shareholders and inheritance of the firm by family members. The preference of inheritance of the firm by family members undermines the enhancing effect of external CEOs on firm performance. Religious entrepreneurs are more likely to spend more on safety insurance for employees, which is driven by the altruism originated from religious doctrines and also the risk aversion channel. The impact of religiosity complements market institutions, and political and social status of the entrepreneurs, which shows the interaction between religion and formal market institutions. We find that it's mainly Buddhism that drives our results, while other religions have limited impact on business activities in the country.     

Do Migrants Rob Jobs? New Evidence from Australia

This study contributes to the recent debate on immigration and unemployment in Australia by investigating the causal linkage between immigration and unemployment. The question of whether 'immigrants rob jobs' is examined by identifying the sources of unemployment through causal linkages between unemployment and other key variables such as immigration. The research finds no Granger causality between immigration and unemployment, but does run from industrial structural change to the high unemployment rate in Australia. This research also finds that both GDP growth and immigration inflow reinforce each other in the course of economic development in Australia.     

Is R&D cash flow sensitive? Evidence from Chinese industrial firms

We hypothesize that research and development (R&D) is sensitive to cash flow fluctuations due to asymmetric information and agency problems in the credit market. We adopt a variant of the Q model for R&D investment using the value of the firm, physical capital and employment to capture firm fundamentals as proxies for investment opportunities. We add cash flow to this specification, and estimate the augmented model separately for R&D participation and spending decisions using data on Chinese industrial firms for the period 2001–2006. We find that R&D participation and spending are sensitive to cash flow fluctuations, conditional on firm fundamentals. We also find that the cash flow sensitivity of R&D varies across firms depending on ownership.     

Do CO2 emissions impact energy use? An assessment of China evidence from 1953 to 2017

Bidirectional causality between energy use and carbon emissions has widely been explored, but the results in the existing research are still controversial. Focusing on China, we reveal the bidirectional causality between energy use and carbon emissions, and then take carbon emissions as a factor influencing energy use into decomposition analysis by the Logarithmic Mean Index (LMDI) approach. The study span 1953–2017 is divided into two main developing stages based on multiple breakpoint tests, stage one: 1953–2001, before entering World Trade Organization (WTO); and stage two: 2001–2017, after entering WTO. The results show that emission effect and per capita emission effect indeed promoted energy use and even surpassed output effect at the beginning of stage two (2001–2005). The changes in energy use followed those in output effect at stage one, emission effect and per capita emission effect at the beginning of stage two, and energy intensity effect at the latter period of stage two. It indicates that energy efficiency has gradually been becoming a dominate role in energy use changes. The impact of energy mix effect was comparatively small.     

Do Remittances Induce Inflation? Fresh Evidence from Developing Countries

The goal of this article is to examine the determinants of inflation in both the short run and the long run for 54 developing countries using a panel data set covering the 1995–2004 period. Apart from the commonly used economic determinants of inflation, we model the impact of remittances and institutional variables on inflation. Using the Arellano and Bond panel dynamic estimator and the Arellano and Bover and the Blundell and Bond system generalized method of moments estimator, we find evidence that in developing countries remittances generate inflation. The effect of remittances on inflation is more pronounced in the long run. Moreover, we find that openness, debt, current account deficits, the agricultural sector, and the short‐term U.S. interest rate have a positive effect on inflation. We also find that improvements in democracy reduce inflation.     

Do shocks to animal spirits cause output fluctuations?

We evaluate whether shocks to “animal spirits” affect real outcomes at business cycle frequencies, using data on consumer confidence and region- and state-level coincident activity indexes in a vector autoregression (VAR) with long run restrictions. We assume that animal spirits shocks do not affect the long run level of activity. Innovations in fundamentals explain most variation in the level of activity, but animal spirits have economically significant effects at business cycle frequencies. A positive innovation in animal spirits causes real activity to rise by between 0.2 and 0.6% in the medium term, and animal spirits may explain up to about half of real fluctuations in the medium run.     

Is downsizing a good strategy during the downturn? Evidence from Taiwanese manufacturing firms

In response to a crisis, while retrenchments are considered to be an important part of a firm’s long-term recovery, research has indicated that downsizing strategies, reducing employment and shrinking the R&D budget, may lead to an erosion of a firm’s valuable core competence. Drawing from the literature of organizational turnaround strategies, this study advances the downsizing research by explaining how downsizing strategies affect a firm’s long-term performance. Using a uniquely compiled dataset of 2559 Taiwanese manufacturing firms, our research shows that increasing labor employment during a financial crisis can significantly improve a firm’s long-term total factor productivity and sales. In other words, employment downsizing may not be the best solution when encountering an economic downturn.