Searching where Ideas Are Harder to Find – The Productivity Slowdown as a Result of Firms Hindering Disruptive Innovation
Richard Bräuer
IWH Discussion Papers,
No. 22,
2023
Abstract
This paper proposes to explain the productivity growth slowdown with the poaching of disruptive inventors by firms these inventors threaten with their research. I build an endogenous growth model with incremental and disruptive innovation and an inventor labor market where this defensive poaching takes place. Incremental firms poach more as they grow, which lowers the probability of disruption and makes large incremental firms even more prevalent. I perform an event study around disruptive innovations to confirm the main features of the model: Disruptions increase future research productivity, hurt incumbent inventors and raise the probability of future disruption. Without disruption, technology classes slowly trend even further towards incrementalism. I calibrate the model to the global patent landscape in 1990 and show that the model predicts 52% of the decline of disruptive innovation until 2010.
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The Importance of Credit Demand for Business Cycle Dynamics
Gregor von Schweinitz
IWH Discussion Papers,
No. 21,
2023
Abstract
This paper contributes to a better understanding of the important role that credit demand plays for credit markets and aggregate macroeconomic developments as both a source and transmitter of economic shocks. I am the first to identify a structural credit demand equation together with credit supply, aggregate supply, demand and monetary policy in a Bayesian structural VAR. The model combines informative priors on structural coefficients and multiple external instruments to achieve identification. In order to improve identification of the credit demand shocks, I construct a new granular instrument from regional mortgage origination.
I find that credit demand is quite elastic with respect to contemporaneous macroeconomic conditions, while credit supply is relatively inelastic. I show that credit supply and demand shocks matter for aggregate fluctuations, albeit at different times: credit demand shocks mostly drove the boom prior to the financial crisis, while credit supply shocks were responsible during and after the crisis itself. In an out-of-sample exercise, I find that the Covid pandemic induced a large expansion of credit demand in 2020Q2, which pushed the US economy towards a sustained recovery and helped to avoid a stagflationary scenario in 2022.
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Labor Market Power and Between-Firm Wage (In)Equality
Matthias Mertens
International Journal of Industrial Organization,
December
2023
Abstract
I study how labor market power affects firm wage differences using German manufacturing sector firm-level data (1995-2016). In past decades, labor market power increasingly moderated rising between-firm wage differences. This is because high-paying firms possess high and increasing labor market power and pay wages below competitive levels, whereas low-wage firms pay competitive or even above competitive wages. Over time, large, high-wage, high-productivity firms generate increasingly large labor market rents while charging comparably low product markups. This provides novel insights on why such top firms are profitable and successful. Using micro-aggregated data covering most economic sectors, I validate key results for multiple European countries.
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Internships
Internship at Halle Institute for Economic Research (IWH) Interested in gaining an authentic insight in the interesting daily business and the variable tasks of an institute for…
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The Labor Effects of Judicial Bias in Bankruptcy
Aloisio Araujo, Rafael Ferreira, Spyridon Lagaras, Flavio Moraes, Jacopo Ponticelli, Margarita Tsoutsoura
Journal of Financial Economics,
No. 2,
2023
Abstract
We study the effect of judicial bias favoring firm continuation in bankruptcy on the labor market outcomes of employees by exploiting the random assignment of cases across courts in the State of São Paulo in Brazil. Employees of firms assigned to courts that favor firm continuation are more likely to stay with their employer, but they earn, on average, lower wages three to five years after bankruptcy. We discuss several potential mechanisms that can rationalize this result, and provide evidence that imperfect information about outside options in the local labor market and adjustment costs associated with job change play an important role.
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Three Essays on Cross-Firm Interactions
William McShane
PhD Thesis, Otto-von-Guericke-Universität Magdeburg,
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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IWH Macrometer
IWH Macrometer Macroeconomic Database for the German Länder, East and West Germany The data offered by the IWH Macrometer consists of two parts: (1) interactive macro data and (2)…
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Green Investing, Information Asymmetry, and Capital Structure
Shasha Li, Biao Yang
IWH Discussion Papers,
No. 20,
2023
Abstract
We investigate how optimal attention allocation of green-motivated investors changes information asymmetry in financial markets and thus affects firms‘ financing costs. To guide our empirical analysis, we propose a model where investors with heterogeneous green preferences endogenously allocate limited attention to learn market-level or firm-specific fundamental shocks. We find that a higher fraction of green investors in the market leads to higher aggregate attention to green firms. This reduces the information asymmetry of green firms, leading to higher price informativeness and lower leverage. Moreover, the information asymmetry of brown firms and the market increases with the share of green investors. Therefore, greater green attention is associated with less market efficiency. We provide empirical evidence to support our model predictions using U.S. data. Our paper shows how the growing demand for sustainable investing shifts investors‘ attention and benefits eco-friendly firms.
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"Let Me Get Back to You" — A Machine Learning Approach to Measuring NonAnswers
Andreas Barth, Sasan Mansouri, Fabian Wöbbeking
Management Science,
No. 10,
2023
Abstract
Using a supervised machine learning framework on a large training set of questions and answers, we identify 1,364 trigrams that signal nonanswers in earnings call questions and answers (Q&A). We show that this glossary has economic relevance by applying it to contemporaneous stock market reactions after earnings calls. Our findings suggest that obstructing the flow of information leads to significantly lower cumulative abnormal stock returns and higher implied volatility. As both our method and glossary are free of financial context, we believe that the measure is applicable to other fields with a Q&A setup outside the contextual domain of financial earnings conference calls.
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Regulation and Information Costs of Sovereign Distress: Evidence from Corporate Lending Markets
Iftekhar Hasan, Suk-Joong Kim, Panagiotis Politsidis, Eliza Wu
Journal of Corporate Finance,
October
2023
Abstract
We examine the effect of sovereign credit impairments on the pricing of syndicated loans following rating downgrades in the borrowing firms' countries of domicile. We find that the sovereign ceiling policies used by credit rating agencies create a disproportionately adverse impact on the bounded firms' borrowing costs relative to other domestic firms following their sovereign's rating downgrade. Rating-based regulatory frictions partially explain our results. On the supply-side, loans carry a higher spread when granted from low-capital banks, non-bank lenders, and banks with high market power. We further document an operating demand-side channel, contingent on borrowers' size, financial constraints, and global diversification. Our results can be attributed to the relative bargaining power between lenders and borrowers: relationship borrowers and non-bank dependent borrowers with alternative financing sources are much less affected.
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