Agglomeration Premium and Trading Activity of Firms

Firms may benefit from proximity to each other due to the existence of several externalities. The productivity premia of firms located in agglomerated regions an be attributed to savings and gains from external economies. However, the capacity to absorb information may depend on activities of the firm, such as involvement in international trade. Importers, exporters and two-way traders are likely to employ a different bundle of resources and be organised differently so that they would appreciate inputs and information from other firms in a different fashion and intensity. Getting a better understanding of such external economies by looking at various types of firms is the focus of present paper. Using Hungarian manufacturing data from 1992-2003, we confirm that firms perform better in agglomerated areas and show that traders gain more in terms of productivity than non-traders when agglomeration rises. Firms that are stable participants of international trade gain 16 % in terms of total factor productivity growth as agglomeration doubles while non-traders may not benefit from agglomeration at all. Results also suggest that traders' productivity premium is most apparent in urbanised economies.agglomeration, international trade, firm heterogeneity

Firms and Products in International Trade: Data and Patterns for Hungary

This paper provides a detailed description of Hungarian trade data and key patters drawn at the firm and product level. The IEHAS-CEFiG Hungary dataset is an almost universal panel of balance sheet information (1992-2006) merged with firmproductcountry level customs data (1992-2003) taken until the 2004 EU accession. In the Bernard et al. (2007) tradition, statistics describe the prevalence of trading activity, typology of firms by internationalisation, concentration of trade volume within and across sectors as well as geographical features of activities. The aim of this paper is both to offer background statistics to existing studies and to stimulate future research on firms and trade by offering a great deal of descriptive statistics. After describing datasets, the prevalence of trading activity across sectors, concentration of trading volume across and within sectors, spatial distribution on trade and principal trading partners are described. Stylised facts show that trading activity is heavily concentrated, both exporters and importers show better performance than non-traders, and multi-product and multi-county firms are responsible for the bulk of trade volume.international trade, exporting, firm-product level data

The impact of the Magyar Nemzeti Bank's funding for growth scheme on firm level investment

The Magyar Nemzeti Bank (the central bank of Hungary) introduced a "funding for lending" type loan program aimed at small and medium sized enterprises (SMEs) in mid-2013. We combine firms' balance sheet data with two loan data sets to study the program's impact on firm level investment in 2013. We start from a simple difference-in-differences (DID) estimator, but argue that the parallel trend assumption that underlies the method is likely violated. Therefore, we propose a correction based on the idea that the selection process involved in securing a market loan in a pre-program year is similar to the selection process into the program. Our results indicate that the program succeeded in generating extra investment in the SME sector that would not have taken place otherwise; specifically, we atiribute to the program about 30% of the total investment undertaken by participating firms. Nevertheless, the effect is markedly heterogeneous with respect to firm size, being proportionally larger for smaller firms

Currency Matching and Carry Trade by Non-Financial Corporations JRC Working Papers in Economics and Finance, 2017/2

The paper investigates firms’ willingness to match the currency composition of their assets and liabilities and their incentives to deviate from perfect matching. Using detailed information at the loan contract level for the Hungarian non-financial corporate sector, the paper provides strong evidence to support the theory that currency matching plays a role in exporters’ debt currency choices. However, natural hedging is not the primary motivation for firms to choose foreign currency: it explains less than 5 per cent of the overall new corporate foreign currency loans contracted by exporters and less than 2 per cent of the aggregate new foreign currency bank loans. Besides hedging, our results suggest that both carry trade and diversification strategies are relevant factors in firms’ currency-of-denomination decisions.JRC.B.1-Finance and Econom

Assessing European firms’ exports and productivity distributions: The CompNet trade module. National Bank of Belgium Working Paper No. 282

This paper provides a new cross-country evaluation of competitiveness, focusing on the linkages between productivity and export performance among European economies. We use the information compiled in the Trade module of CompNet to establish new stylized facts regarding the joint distributions of the firm-level exports performance and productivity in a panel of 15 countries, 23 manufacturing sectors during the 2000’s. We confirm that exporters are more productive than nonexporters. However, this productivity premium is rising with the export experience of firms, with permanent exporters being much more productive than starters. At the intensive margin, we show that both the level and the growth of firm-level exports rise with firm productivity, and that the bulk of aggregate exports in each country are made by a small number of highly productive firms. Finally, we show that during the crisis, the growth of exports by high productive firms sustained the current account adjustment of European “stressed” economies. This last result confirms that the shape of the productivity distribution within each country can have important consequences from the point of view of the dynamics of aggregate trade patterns

Financial Constraints of EU firms: A Sectoral Analysis

In this paper we provide estimates of financial constraints in all EU sectors. Our empirical strategy consists in using the Orbis firm-level dataset to construct financial constraint measures for each of the firms in our sample, and then aggregate the results either by NACE code, or by business similarity. We use two main – somewhat complementary – financial constraint indices proposed by Ferrando et al (2015), and then submit them to a battery of robustness tests, including the alternative financial constraints estimators developed by Kaplan and Zingales (1997), Whited and Wu (2006), and Hadlock and Pierce (2010). We also establish correlations between a sector’s degree of financial constraints and other sectoral characteristics, such as firm size, TFP, capital intensity, and innovativeness. The results show that sectoral financial constraints do not converge for all indicators; yet there are sectors that classify at the bottom or top by two or more financial constraints measures. Tighter sectoral financial constraints tend to be associated with a lower firm size, a capital intensity much higher than average, and a total factor productivity lower than average.JRC.B.1 - Finance and Econom

Job Creation in Europe: A firm-level analysis

This note reports an innovative state-of-the-art empirical analysis of Job Creation in the European Union in the same vein as the classical studies in the United States. It is based on an exceptionally large sample of firm-level employment data in the period 2004-2015 obtained from Orbis, a databank published by Moody’s Bureau van Dijk. Consistently with our representiveness assessment, the final sample consists of firms registered in 20 out of the 28 EU Member States. The study follows the empirical literature and defines three indicators which may be equally plausible policy objectives. The job creation [destruction] is the total number of jobs created [destroyed] by growing [shrinking] firms and reflects the job turnover of a market and its capacity to enhance the labour market dynamism. The net job creation is the difference between job creation and job destruction and captures the employment growth. The net job creation rate is the employment growth rate and reflects the capacity of firms of being efficient in creating new jobs. The main findings are as follows: - The young-SME category is the largest contributor to net job creation (employment growth). Moreover, its contribution to job creation amounts to 40 percent which is far larger than its share in employment amounting to 15 percent. - The share of start-up firms in employment varies between 2 and 9 percent across countries with new Member States typically exhibiting larger shares. Even though to various degrees, nearly all Member States have experienced a decline of start-ups measured as the share of employment. - With nearly 60%, high-growth firms (HGF) exhibit the largest incidence on total job creation. Even though the young HGFs are more numerous, mature HGFs contribute to job creation to a larger extent. - Firms borrowing for the first time report net job creation rates of about 8 percent higher in the next three years, on average. Besides, the net job creation rates of firms with bank loans are less sensitive to economic cycles. The results yield a number of policy implications. In particular, they provide empirical support to policies aimed at encouraging young firms and entrepreneurship in Europe. They also show that job creation of SME may face obstacles in their "scaling-up" development phase. Last, the impact of external financing on net job creation rates may vary among Member States -- especially through the business cycles. These results deserve further investigation. By providing a large-scale investigation of job creation in Europe and providing related policy tools, the report aims to contribute to the European Commission’s first priority, "to boost jobs, growth and investment."JRC.B.1-Finance and Econom

EIB Working Paper 2020/08 - EIB Group Survey on Investment and Investment Finance

Providing a technical analysis of the data quality of the EIB Investment Survey (EIBIS), this paper finds that the chosen sampling framework captures the business population of interest well and that there is little evidence of selection bias during fieldwork. This suggests that EIBIS is a reliable data source to study the corporate investment situation in the EU

Fear the Walking Dead? Incidence and Effects of Zombie Firms in Europe.

The European corporate sector currently lacks investment dynamism and one explanation is that so-called zombie firms are spreading and that they crowd out the growth of other, potentially more “lively”, companies. Zombie firms are firms that apparently are unable to repay their debt and yet, they continue operating. The note describes estimates for 2010 and 2013 of the incidence of zombie firms across 19 European countries, using firm-level data for more than one million companies and considering three alternative definitions to ensure robustness of estimates. The note finds that zombie firms are spreading in Europe, judged by estimates for 2013 compared to those for 2010. It also finds that the aggregate figures hide considerable differences across countries. Zombie firm shares as of overall corporate capital are particularly high in Greece and Spain, while low in the Czech Republic and Slovakia. The estimates distinguish between size and age of firms and suggest that larger and older firms are more likely to be zombie firms than relatively smaller and younger firms (although very young firms of less than three years of age are not included in the sample). The report also finds that the growth of zombie firms in terms of employment crowds out the growth of other, non-zombie firms, especially young ones.JRC.B.1-Finance and Econom