Declining Business Dynamism in Europe: The Role of Shocks, Market Power, and Technology
Filippo Biondi, Sergio Inferrera, Matthias Mertens, Javier Miranda
IWH-CompNet Discussion Papers,
No. 2,
2023
Abstract
We study the changing patterns of business dynamism in Europe after 2000 using novel micro-aggregated data that we collect for 19 European countries. In all of them, we document a decline in job reallocation rates that concerns most economic sectors. This is mainly driven by dynamics within sectors, size classes, and age classes rather than by compositional changes. Large and mature firms show the strongest decline in job reallocation rates. Simultaneously, the shares of employment and sales of young firms decline. Consistent with US evidence, firms’ employment changes have become less responsive to productivity. However, the dispersion of firms’ productivity shocks has decreased too. To enhance our understanding of these patterns, we derive a firm-level framework that relates changes in firms’ productivity, market power, and technology to job reallocation and firms’ responsiveness.
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Declining Business Dynamism in Europe: The Role of Shocks, Market Power, and Technology
Filippo Biondi, Sergio Inferrera, Matthias Mertens, Javier Miranda
IWH Discussion Papers,
No. 19,
2023
Abstract
We study the changing patterns of business dynamism in Europe after 2000 using novel micro-aggregated data that we collect for 19 European countries. In all of them, we document a decline in job reallocation rates that concerns most economic sectors. This is mainly driven by dynamics within sectors, size classes, and age classes rather than by compositional changes. Large and mature firms show the strongest decline in job reallocation rates. Simultaneously, the shares of employment and sales of young firms decline. Consistent with US evidence, firms’ employment changes have become less responsive to productivity. However, the dispersion of firms’ productivity shocks has decreased too. To enhance our understanding of these patterns, we derive a firm-level framework that relates changes in firms’ productivity, market power, and technology to job reallocation and firms’ responsiveness.
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Intuit QuickBooks Small Business Index: A New Employment Series for the US, Canada, and the UK
Ufuk Akcigit, Raman Chhina, Seyit Cilasun, Javier Miranda, Eren Ocakverdi, Nicolas Serrano-Velarde
IWH Discussion Papers,
No. 9,
2023
Abstract
Small and young businesses are essential for job creation, innovation, and economic growth. Even most of the superstar firms start their business life small and then grow over time. Small firms have less internal resources, which makes them more fragile and sensitive to macroeconomic conditions. This suggests the need for frequent and real-time monitoring of the small business sector’s health. Previously this was difficult due to a lack of appropriate data. This paper fills this important gap by developing a new Intuit QuickBooks Small Business Index that focuses on the smallest of small businesses with at most 9 workers in the US and the UK and at most 19 workers in Canada. The Index aggregates a sample of anonymous Quick- Books Online Payroll subscriber data (QBO Payroll sample) from 333,000 businesses in the US, 66,000 in Canada, and 25,000 in the UK. After comparing the QBO Payroll sample data to the official statistics, we remove the seasonal components and use a Flexible Least Squares method to calibrate the QBO Payroll sample data against official statistics. Finally, we use the estimated model and the QBO Payroll sample data to generate a near real-time index of economic activity. We show that the estimated model performs well both in-sample and out-of-sample. Additionally, we use this analysis for different regions and industries. Keywords:
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14.02.2023 • 4/2023
Study on Europe's top bankers: Risky business despite bonus cap
Ten years ago, the EU Parliament decided to cap the flexible remuneration of bank managers. But the cap on bonuses misses its target: Managers of systemically important European banks take high risks without changes, shows a study by the Halle Institute for Economic Research (IWH).
Michael Koetter
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The Effect of Bank Failures on Small Business Loans and Income Inequality
Salvador Contreras, Amit Ghosh, Iftekhar Hasan
Journal of Banking and Finance,
January
2023
Abstract
Using variation in the timing and location of branches of failed banks we analyze its effect on income inequality. Employing a difference-in-differences specification we find that bank failures increased the GINI by 0.3 units (or 0.7%). We show that the rise in inequality is due to a decrease in the incomes of the poor that outpaces declines of the rest. We further show that individuals with lower levels of education exhibit a relatively greater decline in real wages and weekly hours worked. Exploring channels of transmission, we find income inequality is explained by a general decline in small business loans. This in turn reduces net new small business formation and their job creation capacity, a sector that hires a substantial share of low-income earners.
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Financial Linkages and Sectoral Business Cycle Synchronization: Evidence from Europe
Hannes Böhm, Julia Schaumburg, Lena Tonzer
IMF Economic Review,
December
2022
Abstract
We analyze whether financial integration leads to converging or diverging business cycles using a dynamic spatial model. Our model allows for contemporaneous spillovers of shocks to GDP growth between countries that are financially integrated and delivers a scalar measure of the spillover intensity at each point in time. For a financial network of ten European countries from 1996 to 2017, we find that the spillover effects are positive on average and much larger during periods of financial stress, pointing towards stronger business cycle synchronization. Dismantling GDP growth into value added growth of ten major industries, we observe that spillover intensities vary significantly. The findings are robust to a variety of alternative model specifications.
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