Access to capital markets and the geography of productivity leaders and laggards

This paper examines whether access to the capital market of convertible and nonconvertible bonds affects total factor productivity (TFP) for the population of Italian joint stock manufacturing companies, based in highly segmented local financial markets, between 2007 and 2017. The hypothesis, well grounded in the literature, is that long-term capital favors investment in intangibles and other risky assets necessary for productivity growth. To identify this effect, we exploit the exogenous shock of the Italian banking deregulation of the mid-1990s as an instrument for firm-level access to capital, interacted with distance from logistic networks. These reforms changed the distribution of the type of branches at the local level, increasing the share of joint stock banks, which have high connections to international capital markets. This geographical reallocation of banking activities ultimately affected firms' financial structure, favouring their access to capital, even when based in peripheral financial areas. Firms which issued instruments of market debt achieved higher levels of productivity and a higher probability to reach top percentiles of productivity distribution

BrExit and foreign investment in the UK

We explore the likely effect of Brexit on inward foreign direct investment (FDI) through its possible effect on the benchmark variables that characterize the macroeconomy. For this we propose the use of a Markov regime switching structural vector auto-regression to distinguish between the volatile and stable states of the economy and account, among other effects, for the contemporaneous effects that the frequency of FDI innately generates. Our findings suggest that, if Brexit triggers a sterling depreciation in the current economic climate, this will fuel a prolonged negative effect on FDI. FDI flows may be positively affected (at most) by a sterling depreciation after Brexit only if this event drives the UK economy to a period of highly volatile growth, inflation, interest and exchange rates: a scenario that is rather unlikely. And, even then, the sterling depreciation benefits would last for only a short period of time

Multinational Firms, Internal Capital Markets, and the Value of Global Diversification

Over the past 30 years, multinational firms’ investment grew four times faster than worldwide GDP. Yet the evidence on whether global diversification is valuable is inconclusive. This paper uses detailed foreign direct investment (FDI) data for 251 UK multinational firms and 4,676 subsidiaries for the period 1999–2005 to show that multinational firms exhibit, on average, a global diversification premium. I investigate this result and show that the premium is positively related to “winner-picking” transfers in internal capital markets, and more so for better-governed firms. The findings help explain why multinational firms’ investment and global diversification have significantly increased over the past three decades. </jats:p

Varieties of capitalism and resilience clusters: an exploratory approach to European regions

Regions around the world suffered asymmetric effects with the global economic crisis of the last decade. European regions were not different, and a myriad of impacts with varied magnitudes was felt. This article, inspired by the literature of varieties of capitalism (VoC), presents statistical and econometric evidence about the differences of regional resilience, measured by the variation of economic product, unemployment and R&D across regions in European Union during the economic downturn. An exploratory approach analyses the socio‐economic resilience between different member states, and VoC ideal‐types (liberal market economies, the continental capitalism, the social‐democrat economies, the Mediterranean capitalism, and the Eastern economies). The study presents a typology of resilience clusters in European regions. There were found six types of profiles concerning resilience: great performers, fast growth, intermediate position, R&D reduction, regions in divergence, and Mediterranean regions in big trouble. The study identifies key aspects for resilience, providing policy implications for regional economic policies. The comparison of the resilience clusters and the original VoC categorization has implications for this branch of literature as it does not completely address the variety of regional answers to the shocks.info:eu-repo/semantics/acceptedVersio

Global Networks of Trade and Bits

Considerable efforts have been made in recent years to produce detailed topologies of the Internet. Although Internet topology data have been brought to the attention of a wide and somewhat diverse audience of scholars, so far they have been overlooked by economists. In this paper, we suggest that such data could be effectively treated as a proxy to characterize the size of the "digital economy" at country level and outsourcing: thus, we analyse the topological structure of the network of trade in digital services (trade in bits) and compare it with that of the more traditional flow of manufactured goods across countries. To perform meaningful comparisons across networks with different characteristics, we define a stochastic benchmark for the number of connections among each country-pair, based on hypergeometric distribution. Original data are thus filtered by means of different thresholds, so that we only focus on the strongest links, i.e., statistically significant links. We find that trade in bits displays a sparser and less hierarchical network structure, which is more similar to trade in high-skill manufactured goods than total trade. Lastly, distance plays a more prominent role in shaping the network of international trade in physical goods than trade in digital services.Comment: 25 pages, 6 figure

The Characteristics and Determinants of FDI in Ghana

Foreign Direct Investment (FDI) can be a valuable tool for development. However, not all forms of FDI are equally beneficial for the host country. The paper analyses the characteristics and determinants of FDI in a typical developing country: Ghana. Moreover, key policy areas are indicated, in order to enable Ghana both to attract more FDI and to increase the benefits from these capital inflows. The analysis combines qualitative and quantitative methods and is partly based on data retrieved from the World Bank's 2007 Enterprise Survey, and partly on our own survey of 54 multinational enterprises operating in Ghana

Employment Protection and Multinational Enterprises: Theory and Evidence from Micro Data

In this paper we show, theoretically and empirically, that stronger employment protection legislation (EPL) in a host country has important and differing effects on the various activities of multinational enterprises (MNEs). Using micro data on affiliates to Swedish multinational firms in 20 countries for the period of 19651998, we find that increased stringency in EPL is associated with fewer investments in new affiliates and lower employment in existing affiliates. We also find that it is mainly affiliate exports that are affected negatively by stronger EPL, while the impact on local sales is small. This is in accordance with our theoretical model, which predicts that the impact of EPL on the costs of competing firms is likely to put affiliates at a smaller disadvantage when selling for the local market than in the production for exports

Cross-Border Acquisitions and Corporate Taxes: Efficiency and Tax Revenues

We find that reduced foreign corporate taxes may lead to inefficient foreign acquisitions if complementarities between foreign and domestic assets are low, and to efficient foreign acquisitions if such complementarities are high. Moreover, with large complementarities, foreign acquisitions can increase domestic tax revenues. The reason is that in the bidding competition between the foreign firms, all benefits from the acquisition, including tax advantages and evaded taxes, are competed away and captured by the domestic seller which, in turn, pays capital gains tax on the proceeds. Technical issues in the tax code, such as the treatment of goodwill deductibility, is also shown to crucially affect the pattern of foreign acquisitions

Exporting and labor demand : micro-level evidence from Germany

It is widely believed that globalization affcts the extent of employment and wage responses to economic shocks. To provide evidence for this, we analyze the effect of firms' exporting behavior on the elasticity of labor demand. Using rich, German administrative linked employer-employee panel data from 1996 to 2008, we explicitly control for self-selection into exporting and endogeneity concerns. In line with our theoretical model, we find that exporting at both the intensive and extensive margins significantly increases the (absolute value of the) unconditional own-wage labor demand elasticity. This is not only true for the average worker, but also for different skill groups. For the median firm, the elasticity is three-quarters higher when comparing exporting to nonexporting firms