How credit-constrained are firms in Turkey? A survey-based analysis

We study the factors related to the financing of firms in Turkey, using the Business Environment and Enterprise Performance Survey (BEEPS). Based on the survey responses of the firms, we calculate the ratio of credit-constrained firms in Turkey and run a logistic regression to investigate the factors explaining the firms’ access to credit. Estimation results show that the likelihood of having access to credit increases with the firm size. Firms are more likely to access credit if they are being independently audited or they are exporters, and they are less likely to access credit if they have overdue payments.     

How do central banks react to wealth composition and asset prices?

We assess the response of monetary policy to developments in asset markets in the euro area, the US and the UK. We estimate the reaction of monetary policy to wealth composition and asset prices using: (i) a linear framework based on a fully simultaneous system approach in a Bayesian environment; and (ii) a nonlinear specification that relies on a smooth transition regression model.     

How does FDI affect domestic firms’ wages? theory and evidence from Vietnam

This paper explores the role of inward foreign direct investment (FDI) as a determinant of domestic firms’ wages, namely wage spillovers. We first construct a theoretical model to demonstrate that the presence of FDI firms affects domestic firms’ expected average wages via productivity spillovers and a cut-off capability. We then estimate FDI-induced wage spillovers by employing IV-GMM estimator with a five-year panel dataset of a growing service industry in Vietnam. Despite FDI firms on average pay 2.25 times that of domestic firms, they put a downward pressure on domestic firms’ wages. A one percent increase in FDI presence causes domestic firms to cut average wages by 2.03 percent. The estimations also find that firm-specific features are attributable to significant differences in their wages as well as FDI-linked wage spillovers.     

Why firms set different export prices? Evidence from Spain

Using firm-level export data for the 2010–2014 period, we investigate the variation of export prices across and within Spanish manufacturing firms. We find that more productive firms set higher export prices. However, this result is not robust to controlling for other firm-level characteristics and alternative productivity measures. We show that firms set higher export prices in more distant markets and in destinations with high GDP per capita, and lower export prices in large and low-competition markets. These latter results suggest that firms adjust the quality of their products to destination characteristics.     

Why do similar firms export differently?

Eaton et al. (2011) underline that firms with similar production costs, entry costs and demand export to different countries. In this theoretical article, I provide a rationale for this feature of the data. I demonstrate that similar firms exporting differently can be explained by a baseline trade-off between attractiveness and competition that is present in any model with monopolistic competition. I then show that this trade-off also generates valuable theoretical features including distance-related mark-ups, third country effect and equivalence with random utility models.     

When do firms support environmental agreements?

Several firms have recently supported their countries’ participation in international environmental agreements where countries commit to stricter environmental regulation. This paper analyzes the rationale of this conduct by examining equilibrium emission standards with and without environmental treaties. We identify that more stringent environmental regulation produces two effects on firm profits: a negative effect due to larger abatement costs, and a positive effect that arises from the amelioration of duopoly overproduction. We describe under which conditions the positive effect dominates the negative effect, increasing firm profits, and inducing them to support their countries’ participation in environmental treaties.     

How should firms carry out technological diversification to improve their performance? An analysis of patenting of Korean firms

This research aims to analyze how a firm's technological diversification strategies influence its financial performances, in terms of ‘technological diversification’ in broad technology sectors and ‘technological concentration’ on its own core technology, especially in the case of Korean large firms. The data used in the analysis were panel data encompassing the years between 1990 and 2006, which linked Korean firms’ patent information registered in the United States Patent and Trademark Office to the financial data of those firms collected from Korea Investors Service, Inc. (Kis-Value). For the estimation of the panel data, a fixed effect model, which considers the individual firms’ own effect on the financial performance, was used. Tobin's q was used as a dependent variable representing firm performance, while ‘broad technology diversity’ and ‘core technology diversity’ were used as the focal explanatory variables. The results show that a firm seeking to have more technological assets should invest in a broad technological diversification strategy in its search for new business opportunities; it should likewise concentrate on the core technology in order to maintain its financial performance.     

Why do firms use fixed-term contracts?

Portuguese Economic Journal - In this article we look at how one specific form of temporary employment - employment with fixed-term contracts - fits into employers’ hiring policies. We find...     

How do housing cycles influence listed firms’ R&D investment: evidence from the collateral channel

ABSTRACT

Firm innovation is essential to long-run economic growth. Financially constrained R&D firms may use firm-owned properties as collateral to finance their R&D projects. Therefore, the housing price cycle can affect firms’ R&D investment through influencing their real estate value. By examining listed R&D firms during the housing boom period 2002–2006 in the U.S., we find that a $1 increase in real estate value leads a firm to increase its R&D investment by $0.38. We also find that this collateral effect is more pronounced among financially constrained R&D firms than that among unconstrained ones. Additionally, we examine the housing bust period 2008–2012, and find that real estate depreciation retarded R&D investment, especially among constrained R&D firms.     

How do middle-aged children allocate time and money transfers to their older parents in Europe?

This paper analyses the determinants of financial and time transfers from adult children to their older parents using the Survey of Health, Ageing and Retirement in Europe (SHARE). It is the first survey containing rich comparable interdisciplinary information about individuals aged 50+ from ten European countries (Austria, Denmark, France, Germany, Greece, Italy, the Netherlands, Spain, Sweden and Switzerland). The first part of the paper highlights the differences in the provision of upward private intergenerational transfers (in terms of both time and money) across the ten European countries. The second part describes the different determinants in the decision to provide time or money transfers to parents and evaluates whether these two types of assistance are substitutes or complements. Results highlight the existence of a substitution between time and money in relation to geographical distance and the existence of a weak substitution regarding the employment status of the middle-aged children.

How do electoral and voice accountability affect corruption? Experimental evidence from Egypt

How far does democracy decrease corruption? And which specific aspects of democracy help generate such effects? Corruption is famously one of the strongest obstacles to social and economic development. Whereas there has been extensive research identifying the causes of corruption, there is little experimental research on the impact of political institutions on corruption using designs that control for significant confounders. This paper uses a series of laboratory experiments conducted in 2013 Egypt in which a government official decides whether to spend tax revenues paid by subjects on a self-serving good or a good that benefits everyone equally. We have two experimental manipulations: (a) whether the official is electorally accountable to subjects or not; (b) whether subjects could send messages of protests to the official (and one another). We find evidence that electoral accountability does decrease the probability of the official choosing the self-serving good by 17% whereas voice accountability generates such outcome only in the authoritarian treatment (a reduction of corruption by 29%). We also find suggestive evidence that, in the authoritarian treatment, the likelihood of funding the self-serving good decreases by 27% when taxes paid by citizens fall short of the official’s threshold. Our contribution to the literature is two-fold: (a) we are able to single out the effect of specific democratic mechanisms on government corruption; (b) we test outcomes of democratic mechanisms on a traditionally understudied subject pool.     

How do selling mechanisms affect profits,surplus, capacity and prices with unknown demand?

I analyze a model in which a seller wishes to sell multiple homogeneous goods to a large group of buyers with unknown demand. The seller may either sell objects via a posted‐price mechanism, a discriminatory‐price auction, a uniform‐price auction, their open‐bid analogs, or a revelation mechanism in which the seller first asks all potential buyers to report their valuations and then sets a reserve price. I show that the revelation mechanism leads to the greatest profits, the auction mechanisms result in identical expected profits and the posted‐price mechanism results in the smallest profits. However, the more profitable mechanisms impose stronger informational requirements that may make these mechanisms infeasible in practice, and the posted‐price mechanism also results in the greatest total surplus. I also find the seller chooses a lower capacity and reserve price in an auction than in the posted‐price mechanism.     

How do entrepreneurs know what to do? learning and organizing in new ventures

Acquiring the knowledge they need to organize new businesses is a life-long learning process for nascent entrepreneurs, both before and during the organizing process. We argue that creating viable and profitable ventures depends not only on the habits, heuristics, and routines that nascent entrepreneurs have acquired from family, schools, and work careers prior to the startup stage, but also on what they can learn by doing, borrowing, and experimenting during the startup process. Entrepreneurs without effective habits or heuristics, or who have acquired less knowledge or fewer routines, may not be able to learn fast enough from feedback during the startup process to avoid being selected out. We conclude the paper by offering critical questions and a research agenda for learning and organizing in new ventures.     

How much profit shifting do European banks do?

This paper studies whether and to what extent the largest and systemically relevant European multinational banks engage in profit shifting to lower their tax burden. We exploit unique data on bank operations reported on a country-by-country basis since 2015 in compliance with European legislation. The dataset contains information on profits, turnover, taxes paid and employment of bank affiliates worldwide, including tax and regulatory havens. In our empirical model, profits shifting incentives are captured through a weighted average of international tax rate differences between all countries where the bank is active. We find that international tax differences trigger the geographical distribution of profits within multinational banks, and that low tax jurisdictions, notably tax havens, attract disproportionately high profits. Our results suggest that, overall, 21% of profits is shifted. Moreover, profits in tax havens are 51% higher than they would be without tax-motivated profit shifting, pointing to a significant reduction of tax bases in high-tax countries.     

How to escape poverty through education?: intergenerational evidence in Spain

This article analyses the determinants of escaping poverty through education in Spain, with this being the country that, is among the top European countries regarding the percentage of the population affected by poverty. Specifically, the article studies the transmission of poverty over two generations by analysing the factors that affect the probability of having completed the secondary level of education. To that end, we use the conceptual Quantity–Quality model of Becker–Lewis, empirically estimated by using the Survey of Living Conditions (2011) provided by the Spanish Statistical Institute. Our results confirm the intergenerational transmission of poverty in Spain, in such a way that the probability that the respondent has completed secondary education is determined, although not exclusively, by the family conditions of the respondents during their teenage years.