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,
Nr. 2,
2023
Abstract
We study changes in business dynamism in Europe after 2000 using novel micro-aggregated data that we collected for 19 European countries. In all countries, we document a broad-based decline in job reallocation rates that concerns most economic sectors and size classes. This decline is mainly driven by dynamics within sectors, size, and age classes rather than by compositional changes. Large and mature firms experience the strongest decline in job reallocation rates. Simultaneously, the employment shares of young firms decline. Consistent with US evidence, firms’ employment has become less responsive to productivity shocks. However, the dispersion of firms’ productivity shocks has decreased too. To enhance our understanding of these patterns, we derive and apply a novel firm-level framework that relates changes in firms’ sales, market power, wages, and production technology to firms’ responsiveness and job reallocation.
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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,
Nr. 19,
2023
Abstract
We study changes in business dynamism in Europe after 2000 using novel micro-aggregated data that we collected for 19 European countries. In all countries, we document a broad-based decline in job reallocation rates that concerns most economic sectors and size classes. This decline is mainly driven by dynamics within sectors, size, and age classes rather than by compositional changes. Large and mature firms experience the strongest decline in job reallocation rates. Simultaneously, the employment shares of young firms decline. Consistent with US evidence, firms’ employment has become less responsive to productivity shocks. However, the dispersion of firms’ productivity shocks has decreased too. To enhance our understanding of these patterns, we derive and apply a novel firm-level framework that relates changes in firms’ sales, market power, wages, and production technology to firms’ responsiveness and job reallocation.
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Internationalisierung
Internationalisierung Das Leibniz-Institut für Wirtschaftsforschung Halle (IWH) hat die Aufgabe der wirtschaftswissenschaftlichen Forschung und wirtschaftspolitischen Beratung auf…
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Committing to Grow: Employment Targets and Firm Dynamics
Ufuk Akcigit, Harun Alp, André Diegmann, Nicolas Serrano-Velarde
IWH Discussion Papers,
Nr. 17,
2023
Abstract
We examine effects of government-imposed employment targets on firm behavior. Theoretically, such policies create “polarization,“ causing low-productivity firms to exit the market while others temporarily distort their employment upward. Dynamically, firms are incentivized to improve productivity to meet targets. Using novel data from East German firms post-privatization, we find that firms with binding employment targets experienced 25% higher annual employment growth, a 1.1% higher annual exit probability, and 10% higher annual productivity growth over the target period. Structural estimates reveal substantial misallocation of labor across firms and that subsidizing productivity growth would yield twice the long term increases in employment.
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Unsere Projekte 07.2022 ‐ 12.2026 Evaluierung des InvKG und des Bundesprogrammes STARK Bundesministerium für Wirtschaft und Klimaschutz (BMWK) Im Auftrag des Bundesministeriums…
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