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Markus Poschke - One of the best experts on this subject based on the ideXlab platform.
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the Firm Size Distribution across countries and skill biased change in entrepreneurial technology
American Economic Journal: Macroeconomics, 2018Co-Authors: Markus PoschkeAbstract:How and why does the rm Size Distribution dier across countries? This paper documents that features of the rm Size Distribution are strongly associated with income per capita. Richer countries have fewer entrepreneurs and fewer small rms. The average, dispersion and skewness of rm Size are all larger in richer countries. A simple general equilibrium model of occupational choice with skill-biased change in entrepreneurial technology calibrated to U.S. data can account very well for these patterns. The crucial assumption is that some entrepreneurs benet more from technological progress than others. Marginal entrepreneurs then switch to becoming employees as technology advances.
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the Firm Size Distribution across countries and skill biased change in entrepreneurial technology
Social Science Research Network, 2014Co-Authors: Markus PoschkeAbstract:How and why does the Firm Size Distribution differ across countries? Using two datasets covering more than 30 countries, this paper documents that several features of the Firm Size Distribution are strongly associated with income per capita: the entrepreneurship rate and the fraction of small Firms fall with per capita income across countries, while average Firm employment, the median and higher percentiles of the Firm Size Distribution, and the dispersion and skewness of employment all rise with per capita income.The paper broadens existing evidence on the first three facts to cover more countries and newly introduces the last three to the literature. It then proposes a simple theory of skill-biased change in entrepreneurial technology motivated by recent microeconomic literature that fits with the evidence. For this, it introduces two additional features into an otherwise standard occupational choice, heterogeneous Firm model a la Lucas (1978): technological change does not benefit all potential entrepreneurs equally, and there is a positive relationship between an individual's potential payoffs in working and in entrepreneurship. If some Firms consistently benefit more from technological progress than others, they stay closer to the frontier, while others fall behind. Because wages rise for all workers, marginal entrepreneurs exit and become workers. Quantitatively, the model fits both the U.S. time series experience and cross-country patterns well.
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the decision to become an entrepreneur and the Firm Size Distribution a unifying framework for policy analysis
Research Papers in Economics, 2013Co-Authors: Markus PoschkeAbstract:Developing and emerging economies have high entrepreneurship rates and relatively many small Firms. There is enormous heterogeneity among these Firms and entrepreneurs. This paper presents a simple occupational choice model that captures motives for entrepreneurship at both edges of the Size Distribution. The model is then used to analyse the effects of productivity growth, distortions, financial and labor market frictions, and risk. Capturing entrepreneurship across the Size Distribution allows for different reactions of high- and low-ability entrepreneurs to changes in policies and the environment. These may result in powerful general equilibrium effects. In particular, policies affecting high-ability entrepreneurs potentially running large Firms can indirectly have a strong effect on entry by low-ability entrepreneurs and thus on the prevalence of small Firms.
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the labor market the decision to become an entrepreneur and the Firm Size Distribution
Cahiers de recherche, 2012Co-Authors: Markus PoschkeAbstract:Why do some people become entrepreneurs, how do institutions affect this choice, and how does this affect the Firm Size Distribution and aggregate productivity? This paper addresses this question using a matching model with occupational choice and heterogeneity in both ability as a worker and ex ante unknown productivity of Firm start-ups. This rich setting allows to address effects of heterogeneity and diverse types of institutions, like labor market institutions, entry restrictions, taxes, which can possibly differ by Firm Size and thereby allow addressing informality. Importantly, the model allows for a comparatively flexible lower tail of the Firm Size Distribution and can explain the existence and persistence of small, low-productivity Firms with low profits: their owners have low outside options in the labor market. Key effects from a preliminary analysis are the following: labor market conditions affect incentives to start Firms differently for workers and the unemployed, with repercussions on aggregate productivity; and they affect the expected value of Firm creation due to the possibility of failure. Labor market frictions can have a new effect here: they shape prospective entrepreneurs' value of failure. Given that failure of new projects is common, they can strongly affect not only entry rates, but also the type of Firms that enter.
Matthew Plosser - One of the best experts on this subject based on the ideXlab platform.
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bank liquidity provision across the Firm Size Distribution
Journal of Financial Economics, 2021Co-Authors: Gabriel Chodorowreich, Olivier Darmouni, Stephan Luck, Matthew PlosserAbstract:Abstract We use supervisory loan-level data to document that small Firms (SMEs) obtain shorter maturity credit lines than large Firms, post more collateral, have higher utilization rates, and pay higher spreads. We rationalize these facts as the equilibrium outcome of a trade-off between lender commitment and discretion. Using the COVID recession, we test the prediction that SMEs are subject to greater lender discretion. Consistent with this hypothesis, SMEs did not draw down whereas large Firms did, even in response to similar demand shocks. PPP recipients reduced non-PPP loan balances, indicating the program bolstered their liquidity and alleviated the shortfall.
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bank liquidity provision across the Firm Size Distribution
Social Science Research Network, 2020Co-Authors: Gabriel Chodorowreich, Olivier Darmouni, Stephan Luck, Matthew PlosserAbstract:Using loan-level data covering two-thirds of all corporate loans from U.S. banks, we document that SMEs (i) obtain much shorter maturity credit lines than large Firms; (ii) have less active maturity management and therefore frequently have expiring credit; (iii) post more collateral on both credit lines and term loans; (iv) have higher utilization rates in normal times; and (v) pay higher spreads, even conditional on other Firm characteristics. We present a theory of loan terms that rationalizes these facts as the equilibrium outcome of a trade-off between commitment and discretion. We test the model's prediction that small Firms may be unable to access liquidity when large shocks arrive using data on drawdowns in the COVID recession. Consistent with the theory, the increase in bank credit in 2020Q1 and 2020Q2 came almost entirely from drawdowns by large Firms on pre-committed lines of credit. Differences in demand for liquidity cannot fully explain the differences in drawdown rates by Firm Size, as we show that large Firms also exhibited much higher sensitivity of drawdowns to industry-level measures of exposure to the COVID recession. Finally, we match the bank data to a list of participants in the Paycheck Protection Program (PPP) and show that SME recipients of PPP loans reduced their non-PPP bank borrowing in 2020Q2 by between 53 and 125 percent of the amount of their PPP funds, suggesting that government-sponsored liquidity can overcome private credit constraints.
Luigi Buzzacchi - One of the best experts on this subject based on the ideXlab platform.
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Firm Size Distribution testing the independent submarkets model in the italian motor insurance industry
International Journal of Industrial Organization, 2006Co-Authors: Luigi Buzzacchi, Tommaso VallettiAbstract:This paper tests the presence of multiple independent submarkets in the Italian motor insurance industry. Independence is motivated by administrative boundaries among provinces and by further locational reasons. We find that the independence effects are sufficient to induce a minimum degree of inequality in the Size Distribution of Firms once submarkets are aggregated. These results are fully consistent with the predictions of Sutton (1998). We also show that the degree of skewness in the Firms Size Distribution is related to characteristics such as the population living in an area, its density and the riskiness of a submarket.
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Firm Size Distribution in small samples
Bulletin of Economic Research, 2004Co-Authors: Luigi Buzzacchi, Tommaso VallettiAbstract:Sutton (1998) has recently proposed a theoretical lower bound to Firm Size inequality when a market is made of several independent submarkets. His results are valid asymptotically, as the number of submarkets becomes arbitrarily large. We show that, in small samples, his results can be interpreted as a positive relationship between an index of Firm Size inequality and the number of submarkets. We also test this relationship in the Italian motor insurance market.
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Firm Size Distribution testing the
Social Science Research Network, 1999Co-Authors: Luigi Buzzacchi, Tommaso ValettiAbstract:This paper tests the presence of multiple independent submarkets in the Italian motor insurance industry. Independence is motivated by administrative boundaries among provinces and by further locational reasons. We find that the independence effects are sufficient to induce a minimum degree of inequality in the Size Distribution of Firms once submarkets are aggregated. These results are fully consistent with the predictions of Sutton (1998). We also show that the degree of skewness in the Firms Size Distribution is related to characteristics such as the population living in an area, its density and the riskiness of a submarket.
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Firm Size Distribution testing the independent submarkets model in the italian motor insurance industry
Research Papers in Economics, 1999Co-Authors: Luigi Buzzacchi, Tommaso VallettiAbstract:This Paper tests the presence of multiple independent submarkets in the Italian motor insurance industry. Independence is motivated by administrative boundaries among provinces and by further locational reasons. We find that the independence effects are sufficient to induce a minimum degree of inequality in the Size Distribution of Firms once submarkets are aggregated. These results are consistent with the predictions of Sutton (1998). At the submarket level, some degree of inequality can be explained by a model of equilibrium price dispersion based on costly consumer search. Our findings show that Sutton’s limiting approach and one based on a game theoretical analysis of an industry are good complements when the industry is made of several independent submarkets.
Jose Mata - One of the best experts on this subject based on the ideXlab platform.
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on the evolution of the Firm Size Distribution facts and theory
The American Economic Review, 2003Co-Authors: Luis M B Cabral, Jose MataAbstract:Using a comprehensive data set of Portuguese manufacturing Firms, we show that the Firm Size Distribution is significantly right-skewed, evolving over time toward a log-normal Distribution. We also show that selection accounts for very little of this evolution. Instead, we propose a simple theory based on financing constraint. A calibrated version of our model does a good job at explaining the evolution of the Firm Size Distribution.
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on the evolution of the Firm Size Distribution facts and theory
The American Economic Review, 2003Co-Authors: Luis M B Cabral, Jose MataAbstract:Using a comprehensive data set of Portuguese manufacturing Firms, we show that the Firm Size Distribution is significantly right-skewed, evolving over time toward a lognormal Distribution. We also show that selection accounts for very little of this evolution. Instead, we propose a simple theory based on financing constraints. A calibrated version of our model does a good job at explaining the evolution of the Firm Size Distribution. (JEL L11)
Luis M B Cabral - One of the best experts on this subject based on the ideXlab platform.
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on the evolution of the Firm Size Distribution facts and theory
The American Economic Review, 2003Co-Authors: Luis M B Cabral, Jose MataAbstract:Using a comprehensive data set of Portuguese manufacturing Firms, we show that the Firm Size Distribution is significantly right-skewed, evolving over time toward a log-normal Distribution. We also show that selection accounts for very little of this evolution. Instead, we propose a simple theory based on financing constraint. A calibrated version of our model does a good job at explaining the evolution of the Firm Size Distribution.
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on the evolution of the Firm Size Distribution facts and theory
The American Economic Review, 2003Co-Authors: Luis M B Cabral, Jose MataAbstract:Using a comprehensive data set of Portuguese manufacturing Firms, we show that the Firm Size Distribution is significantly right-skewed, evolving over time toward a lognormal Distribution. We also show that selection accounts for very little of this evolution. Instead, we propose a simple theory based on financing constraints. A calibrated version of our model does a good job at explaining the evolution of the Firm Size Distribution. (JEL L11)