Revisiting the empirical evidence on firmsÂ’ money demand

In this paper we estimate the demand for liquidity by US non financial firms using data from COMPUSTAT database. In contrast to the previous literature, we consider firm-specific effects, such as cost-of-capital and wages. From the balanced and unbalanced panel estimations we infer that there are economies of scale in money demand by US business firms, because estimated sales elasticities are smaller than unity. In particular, they are lower than in previous empirical studies, suggesting that economies of scale in the demand for money are even bigger than formerly thought. In addition, it emerges that labor is not a substitute for money.Panel Data, Liquidity, Demand for Money, COMPUSTAT

Is firm growth proportional? An appraisal of firm size distribution

The aim of this paper is to shed light on the phenomenon of firm growth, analyzing the evolution of young firms within some selected industries. We find that the firm size distribution is fairly skewed to the right during the infancy stage, whereas it converges towards a more symmetric distribution, via selection mechanisms, with the passing of time.

Industry Dynamics and the Distribution of Firm Sizes: A Non-Parametric Approach

The aim of this paper is to analyze the evolution of the size distribution of young firms within some selected industries, trying to assess the empirical implications of different models of industry dynamics: the model of passive learning (Jovanovic 1982), the model of active learning (Ericson and Pakes, 1995), and the evolutionary model (Audretsch, 1995). We use a non-parametric technique, the Kernel density estimator, applied to a data set from the Italian National Institute for Social Security (INPS), consisting in 12 cohorts of new manufacturing firms followed for 6 years. Since the patterns of convergence to the limit distribution are different between industries, we conclude that the model of passive learning is consistent with some of them, the active exploration model with others, the evolutionary model with all of them.Cohorts; Gibrats Law; Kernel; Industry Dynamics; Non-parametric; Shakeouts.

Entry decisions and adverse selection: an empirical analysis of a local credit markets

During the last decades there has been a widespread relaxation of legal entry barriers into the banking industry, with potential benefits for financial integration and competition. Obstacles to banks' geographical and business expansion have been removed and branching has been substantially liberalized. This paper analyzes the determinants of entry decisions into local credit markets using a unique data set before and after deregulation of the Italian banking industry. We estimate an entry model à la Poisson and find evidence that spreads between loan and deposit rates drive entry only for newly chartered banks, but does not affect the decision to open branches of banks operating in other markets. Branching by outside banks is instead positively correlated with business opportunities in the provision of financial services which do not require the acquisition of substantial proprietary information. Both these results are consistent with the hypothesis that in credit markets incumbents have an informational advantage over new entrants.Entry, deregulation, informational barriers, count data, overdispersion

The Costs and Benefits of Informality

We explore the costs and benefits of informality associated with the informal sector lying outside the tax regime in a two-sector New Keynesian model. The informal sector is more labour intensive, has a lower labour productivity, is untaxed and has a classical labour market. The formal sector bears all the taxation costs, produces all the government services and capital goods, and wages are determined by a real wage norm. We identify two welfare costs of informalization: (1) long-term costs restricting taxes to the formal sector and (2) short-term fluctuation costs of tax changes to finance fluctuations in government spending. The benefit of informality derives from its wage flexibility. We investigate whether taxing the informal sector and thereby reducing its size sees a net welfare improvement.Informal economy, labour market, tax policy, interest rate rules