Social Capital, Trust and Entrepreneurial Productivity

With an incomplete panel data from 63 countries over 25 years this paper finds that the average number of employees per entrepreneur increases with the countries'' levels of social capital. This evidence is in line with predictions from occupational choice models, where the equilibrium average size of firms increases with lower internal costs of growth, when social capital supported trust reduces these costs facilitating the delegation of decision power in firms. We also find that the influence of social capital in self-employed rates differs if the self-employed have employees or not so entrepreneurs should be treated as a heterogeneous group

An endogenous approach to the cyclicality of R&D investment under credit constraints: Firms' cash flow matters!

This paper examines the sensitivity of firms'' R&D expenditures to being externally financial constrained to undertake innovation projects, considering that being constrained is endogenous. It focuses on devising a model that enable us to explore the combined impact of liquidity constraints, demand shocks, and credit cycle on the cyclically of R&D, controlling by the firms characteristics. The methodology proposed consists of jointly estimating three interrelated equations with mixed distributions of dependent variables. The results obtained complete and improve those of the previous research. It is found that the effect of the business cycle on the perception of external financial constraints is subject to the availability of internal funds in each firm. On the other hand, constrained firms expend in R&D halve of the unconstrained ones, and the sensitivity of firms'' R&D expending to GDP is countercyclical in firms with low cash flows and procyclical in firms with high cash flows. The R&D expending of firms is negatively associated with the aggregate leverage ratio of the non-financial sector. These results mean that business decisions, in particular R&D expending decisions, and macroeconomic variables are strongly related. A better understanding of these interrelations should help in designing macroeconomic policies aimed at stabilizing the economy and reduce growth volatility

Organization of production and the distribution of labor income in Spain

This paper examines evidences of market labor income inequality in Spain, as if they were the outcome of the market equilibrium from occupational choices of individuals with different general skills. We find that the parameters of the distribution of skills, production technology, and internal organization of firms that match the observed organization of production (number of persons occupied as employees, entrepreneurs-managers and solo self-employed, distribution of firm sizes) in Spain, also explain reasonably well the distribution of market labor income, within groups and for all occupied individuals together. The proposed model can be of use in evaluating the potential consequences for labor income inequality of changes in the organization of production

Firm size and productivity from occupational choices

We model the distributions of firm sizes and of firms’ total factor productivity (TFP) as outcomes of a market equilibrium from the occupational decisions of individuals with different entrepreneurial skills, of working as employees, employers, or solo entrepreneurs. The model explains empirical regularities such as (i) the positive cross-section correlation between average size of firms and average labor productivity of countries, (ii) the positive association between size and TFP of firms in an economy, and (iii) the power law distribution of firm sizes. Two parameters of the model, one that measures the organizational size diseconomies and other related to the dispersion of the distribution of entrepreneurial skills in the population, appear as main determinants of the differences in firm sizes and in productivity, across economies and among firms within an economy. The results of the paper should be of interest for the design and evaluation of firm-size-dependent policies