Andreas Lichter, Max Löffler, Ingo E. Isphording, Thu-Van Nguyen, Felix Poege, Sebastian Siegloch, 21 December 2021

Studies have shown that targeted R&D tax incentives – such as tax credits for R&D spending – induce firms to conduct more R&D. However, little is known about the effects of general profit taxes on firm-level R&D spending and innovation output. This column presents evidence from Germany that points to sizeable negative effects of increasing profit taxes on firms’ R&D spending and patents. However, slashing business tax rates may not be the most efficient policy instrument to spur innovation altogether.

Debora Revoltella, Julie Delanote, Tessa Bending, 03 December 2021

The European economic policy response to the COVID-19 pandemic has ensured business continuity and shielded investment, but digital and green transitions are now ever more urgent. This column uses data on 12,000 European firms from the European Investment Bank Investment Survey to show that the pandemic spurred many firms to start accelerating transformation efforts. Policy should seek to support this momentum amid post-pandemic economic recovery.

Xavier Giroud, Simone Lenzu, Quinn Maingi, Holger Mueller, 01 December 2021

It is widely believed that the productivity gains from place-based policies are geographically highly localised. This column argues instead that productivity spillovers from local place-based policies may propagate far beyond the initial target region to the entire economy, through the plant-level networks of multi-region firms. But while these productivity spillovers amplify the aggregate welfare gains from local place-based policies, they widen economic disparities between individual workers and regions in the economy. 

Cameron LaPoint, Shogo Sakabe, 08 November 2021

Growing spatial inequality has led policymakers to offer firms tax breaks to attract investment and jobs to economically peripheral regions. This column examines a place-based bonus depreciation scheme in Japan which granted high-tech manufacturers immediate cost deductions from their corporate income tax bill. The policy generated big gains in employment and investment in building construction and in machines at pre-existing production sites. This response was driven by firms which rely on costly but long-lived capital inputs like industrial machines. How firms react to spatially targeted tax incentives ultimately depends on their internal network and their composition of intermediate capital inputs. 

Daan Freeman, Leon Bettendorf, Yvonne Adema, 03 November 2021

As in most other countries, the government in the Netherlands implemented generous support measures for firms during the Covid-19 crisis. This column shows that unlike in other countries, however, government support disrupted the creative destruction process in the Netherlands by saving a disproportionately high number of low-productivity firms. The authors suggest this might be because the support measures were more widely and easily available. The speed of the phasing out will play an important role in determining how many firms that have been propped up fail once the support is removed or even has to be paid back.

Anne Epaulard, Etienne Fize, Titouan Le Calvé, Philippe Martin, Hélène Paris, Kevin Parra Ramirez, David Sraer, 02 November 2021

Governments around the world announced fiscal support measures to keep businesses afloat in response to the Covid-19 shock. This column uses bank account data from 100,000 French firms to examine the solvency and liquidity of companies across sectors. Firms in the accommodation and food services sector are doing surprising well, while many firms in the construction sector are struggling financially. The findings suggests fiscal support may not have worked as intended, and that policymakers should continue to monitor bankruptcies closely in the coming months.

Marianne Bertrand, Chang-Tai Hsieh, Nick Tsivanidis, 20 October 2021

Changes in contract labour regulation were introduced in India in the late 1940s. The hope was that controlling whether firms could downsize would reduce mass job losses as large British companies left the country post-independence. This column explores the effect of the Industrial Disputes Act on firms of different sizes. The authors find that smaller firms did not see much change, but larger firms did employ fewer contract workers as a result. However, this effect was driven by firms exploiting a loophole, rather than the law itself.

Ruo Shangguan, Jed DeVaro, Hideo Owan, 18 September 2021

It has been argued that when workers are already working long weeks, adding more hours can reduce productivity. This column tests this argument using evidence from Japan. The authors find that long working hours of key team members harm team productivity. In contrast, shorter hours cause the opposite effect, perhaps because workers recover from fatigue and arrive for work with increased energy and focus.

Wouter den Haan, Lukas B. Freund, Pontus Rendahl, 11 September 2021

It has been argued that increased uncertainty can worsen unemployment if employers prefer to wait and postpone job creation. However, under the dominant theory of unemployment – the search-and-matching model – the value of waiting plays no role. This column proposes an amended model which relaxes some of the theoretical assumptions, and shows that an increase in perceived uncertainty does indeed increase the value of waiting, thus reducing job creation.

Sebastian Siegloch, Nils Wehrhöfer, Tobias Etzel, 04 June 2021

Increasing regional inequality has become a major concern for policymakers both in the US and Europe. This column investigates the effects of a large place-based investment subsidy targeted at manufacturing firms in East Germany. It shows that a decrease in the subsidy rate leads to a decrease in manufacturing employment, highlighting spillovers to untreated sectors in treated counties and untreated counties connected via trade and local taxes. It also finds that the place-based policy is at least as efficient as cash transfers for the unemployed but is more effective in curbing regional inequality overall.

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This workshop aims to bring together leading US- and Europe-based researchers with a specific focus on developing countries, working in the fields of:

  • Political Economy
  • Economics of Conflict
  • Firms and Organizations in Developing Countries

Speakers and Programme:

  • 2:00 to 2:45 pm: Michele Di Maio (La Sapienza University Rome)
  • 2:45 to 3:30 pm: Pamela Medina Quispe (University of Toronto)
  • 3:30 to 3:40 pm: Break
  • 3:40 to 4:25 pm.: Lavinia Piemontese (ENS de Lyon)
  • 4:25 to 5:10 pm: Vasily Korovkin (CERGE-EI)
  • 5:10 to 5:20 pm: Break
  • 5:20 to 6:05 pm: Jonas Hjort (Columbia University and CEPR
  • 6:05 to 6:50 pm: Tarek Ghani (Olin Business School)

To attend the online event, please register your interest via the zoom registration page.

Organizers:

  • Mathieu Couttenier (ENS de Lyon and CEPR)
  • Lavinia Piemontese (ENS de Lyon)

Megha Patnaik, Andrea Lamorgese, Andrea Linarello, Fabiano Schivardi, 01 May 2021

In response to COVID-19, firms had to adapt to nationwide lockdowns and social distancing measures with little to no prior experience. This column examines the role of management in firms’ responses to the pandemic in Italy, the first western country to be badly hit by the outbreak, and finds that firms with structured management practices experienced lower declines in performance during the post-lockdown period. These firms were more likely to adopt labour-related strategies in response to the lockdown, including transitions to remote work.

Gee Hee Hong, Yukiko Saito, 25 February 2021

Firm exits have been at the centre of policy discussions since the start of the Covid-19 pandemic. This column explores Japanese firm exit patterns during severe crises as well as during normal times. Using a dataset that distinguishes firm exit types, the authors find that Japanese firms mainly exit voluntarily, while bankruptcy rates are extremely low. Further, Japanese firms respond to economic shocks mainly through adjustments to output instead of exits – as was seen during the Covid-19 crisis. The ‘cleansing effects’ of firm exits vary by exit type, but appear stable during the current crisis.

Dimitris Papanikolaou, Lawrence D.W. Schmidt, 23 July 2020

COVID-19 has massively disrupted the supply side of the world economy, shutting down entire industries. This column analyses how these disruptions affected different types of firms and workers by looking at how effectively different sectors can shift to remote work. While the major policy interventions in the US have treated all types of business as equivalent, industries which are not able to do their work remotely have been hit much harder than business that can. This cross-sectional dispersion shows up across a variety of measures, including changes in employment, revenue projections, likelihood of default, current liquidity, and stock returns. Going forward, aid that targets disrupted sectors may be a more cost-effective means to alleviate the impacts of COVID-19.

Morten Bennedsen, Birthe Larsen, Ian Schmutte, Daniela Scur, 28 June 2020

Much of the economic turmoil caused by the COVID-19 pandemic is channelled through firms and their managers’ decisions. Responding to the pandemic, governments have closed non-essential workplaces and imposed social distancing measures while offering firms various forms of aid. Using firm-level survey data from Denmark, this column examines the impact of these measures on firms, and the uptake and effects of certain policy tools used in Denmark, which are similar to those used in many other countries. It shows that while most firms suffered pronounced revenue declines, targeted government policy helped many stay afloat, and created incentives for job retention.

Andrea Ariu, Florian Mayneris, Mathieu Parenti, 06 February 2020

Many large and successful firms sell both goods and services; yet economists and policymakers continue to consider the two as distinct sectors subject to their own market adjustments and specific policies. Based on Belgian data, this column argues that the most successful manufacturing firms thrive through selling services that are associated with their goods. Services increase the appeal of a firm’s products, thus allowing it to sell more and at higher prices in international markets. Considering goods and services separately in trade agreement negotiations is likely to miss part of the business and welfare gains and losses. 

Yong Suk Lee, Benjamin Cedric Larsen, Michael Webb, Mariano-Florentino Cuéllar, 14 December 2019

As artificial intelligence becomes more widespread and its performance improves, it will likely have significant long-term consequences for jobs, inequality, organisations, and competition. Regulation may be used to address its risks and possibilities, but little is known about how AI-related regulation might affect firm behaviour. This column examines the impact of actual and potential AI regulations on business managers through a randomised online survey experiment. It finds that exposure to information about regulation decreases managers’ reported intent to adopt AI technologies in their firm’s business processes.

Francis Kramarz, Julien Martin, Isabelle Mejean, 11 December 2019

Economists continue to disagree about whether international trade exacerbates or diminishes volatility. This column presents firm-level evidence from French exporters and their European trading partners over 15 years to show that firm-level volatility increases individual-level and aggregate-level volatility. High concentration among buyers as well as suppliers can amplify these shocks.

Anna Gumpert, Henrike Steimer, Manfred Antoni, 24 October 2019

Distance and other geographic frictions between firms’ headquarters and their establishments have a negative effect on performance. This column shows that hiring middle managers helps firms mitigate the impact of geographic frictions, by improving the efficiency of management resources. Factors affecting the efficiency of a local establishment have knock-on effects for the whole firm, regardless of distance.

Gábor Békés, Peter Harasztosi, 30 September 2019

In less developed countries, upgrading production technologies by importing machinery is an important source of growth. Using new firm-level data from Hungary for the period 1992-2003, this column finds that firms are more likely to import a particular piece of sector-specific machinery when other local firms previously imported the same machine. A similar pattern holds regarding the choice of the machine’s source country. These benefits are concentrated in large and foreign-owned companies, while small and domestically owned firms may actually be adversely affected.

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