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Author : Davide Maria Melcangi
Release : 2018
Genre :
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Book Synopsis Essays on the Macroeconomics of Firm Dynamics and Financial Frictions by : Davide Maria Melcangi
Download or read book Essays on the Macroeconomics of Firm Dynamics and Financial Frictions written by Davide Maria Melcangi. This book was released on 2018. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Lei Zhang
Release : 2016
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Book Synopsis Essays on Macroeconomics and Firm Dynamics by : Lei Zhang
Download or read book Essays on Macroeconomics and Firm Dynamics written by Lei Zhang. This book was released on 2016. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation contains three essays at the interaction between macroeconomics and the financial market, with an emphasis on macroeconomic implications of heterogeneous firms under financial frictions. My dissertation explores the relationships among financial market friction, firms' entry and exit behaviors, and job reallocation over the business cycle. Chapter 1 examines the macroeconomic effects of financial leverage and firms' endogenous entry and exit on job reallocation over the business cycle. Financial leverage and the extensive margin are the keys to explain job reallocation at both the firm-level and the aggregate level. I build a general equilibrium industry dynamics model with endogenous entry and exit, a frictional labor market, and borrowing constraints. The model provides a novel theory that financially constrained firms adjust employment more often. I characterize an analytical solution to the wage bargaining problem between a leveraged firm and workers. Higher financial leverage allows constrained firms to bargain for lower wages, but also induces higher default risks. In the model, firms adopt (S,s) employment decision rules. Because the entry and exit firms are more likely to be borrowing constrained, a negative shock affects the inaction regions of the entry and exit firms more than that of the incumbents. In the simulated model, the extensive margin explains 36% of the job reallocation volatility, which is very close to the data and is quantitatively significant. Chapter 2 investigates firms' financial behaviors and size distributions over the business cycle. We propose a general equilibrium industry dynamics model of firms' capital structure and entry and exit behaviors. The financial market frictions capture both the age dependence and size dependence of firms' size distributions. When we add the aggregate shocks to the model, it can account for the business cycle patterns of firm dynamics: 1) entry is more procyclical than exit; 2) debt is procyclical, and equity issuance is countercyclical; and 3) the cyclicalities of debt and equity issuance are negatively correlated with firm size and age. Chapter 3 studies the equilibrium pricing of complex securities in segmented markets by risk-averse expert investors who are subject to asset-specific risk. Investor expertise varies, and the investment technology of investors with more expertise is subject to less asset-specific risk. Expert demand lowers equilibrium required returns, reducing participation, and leading to endogenously segmented markets. Amongst participants, portfolio decisions and realized returns determine the joint distribution of financial expertise and financial wealth. This distribution, along with participation, then determines market-level risk bearing capacity. We show that more complex assets deliver higher equilibrium returns to expert participants. Moreover, we explain why complex assets can have lower overall participation despite higher market-level alphas and Sharpe ratios. Finally, we show how complexity affects the size distribution of complex asset investors in a way that is consistent with the size distribution of hedge funds.
Author : Juan Pablo Medina Guzman
Release : 2004
Genre : Macroeconomics
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Book Synopsis Essays on Financial Frictions and Macroeconomic Dynamics by : Juan Pablo Medina Guzman
Download or read book Essays on Financial Frictions and Macroeconomic Dynamics written by Juan Pablo Medina Guzman. This book was released on 2004. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Xiaomei Sui
Release : 2023
Genre : Economic development
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Book Synopsis Essays on International Macroeconomics, Productivity Growth, and Firm Dynamics by : Xiaomei Sui
Download or read book Essays on International Macroeconomics, Productivity Growth, and Firm Dynamics written by Xiaomei Sui. This book was released on 2023. Available in PDF, EPUB and Kindle. Book excerpt: "This dissertation consists of essays studying how macroeconomic outcomes, particularly aggregate productivity growth, are affected by the change in market environment or market frictions in the presence of heterogeneous firms from an international perspective. Each chapter employs both empirical and quantitative macroeconomic methods. The first chapter studies how globalization contributes to uneven firm growth and its implications for industrial concentration and productivity growth in OECD countries. I document new facts showing that industry leaders grow faster in sales and patenting than followers, particularly in industries with increasing export intensities; sales divergence is mainly driven by exports rather than domestic sales. To rationalize these facts, I develop a two-country endogenous growth model with strategic domestic and international competition and an 'innovation disadvantage of backwardness' that captures how firms innovate less when left behind. Globalization, modelled as decreasing trade iceberg costs and increasing international knowledge spillovers, triggers a stronger innovation response among leaders than followers via the market size effect, inducing an increase in domestic concentration that depresses firm innovation via weaker domestic competition: followers and leaders reduce innovation due to the innovation dis-advantage of backwardness and decreasing returns to innovation, respectively. The globalization-induced harsher foreign competition also reduces innovation via lower profits. In the calibrated model, globalization explains 80% of the rise in industrial concentration and 50% of the productivity growth slowdown in the data, mainly due to weaker domestic competition. The increasing international knowledge spillover force of globalization dominates. The second chapter studies how the less-developed financial market in Southern European countries contributes to their slower aggregate productivity growth than developed European countries since the information and communications technology revolution. I document that Southern European firms have lower productivity growth, lower intangible capital growth, and lower leverage than developed European firms. The disparity is larger among smaller firms. To rationalize these findings, I build a model featuring endogenous firm productivity growth through innovation investment and size-dependent financial frictions. Financial frictions lower productivity growth via two channels: innovation investment and misallocation. The model finds that financial frictions account for at least 11% of the aggregate productivity growth difference in the data, mainly via the innovation investment channel. The model also highlights that fast capital and output growth may coexist with slow productivity growth due to firms' tradeoffs in allocating a constrained amount of investment between capital and productivity."--Pages viii-ix.
Author : Liyan Shi
Release : 2018
Genre :
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Book Synopsis Essays on Macroeconomics and Firm Dynamics by : Liyan Shi
Download or read book Essays on Macroeconomics and Firm Dynamics written by Liyan Shi. This book was released on 2018. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation contributes towards the understanding of the macroeconomic effects of micro-level firm dynamics, in particular firm entry, exit, and innovation activities in driving aggregate economic dynamism and growth. It focuses on the frictions affecting firms in these activities when contracting with their managers and workers, as well as peers, and the corrective role policies can play. The dissertation consists of two chapters. The first chapter, "Restrictions on Executive Mobility and Reallocation: The Aggregate Effect of Non-Competition Contracts", assesses the aggregate effect of non-competition employment contracts, agreements that exclude employees from joining competing firms for a duration of time, in the managerial labor market. These contracts encourage firm investment but restrict manager mobility. To explore this tradeoff, I develop a dynamic contracting model in which firms use non-competition to enforce buyout payment when their managers are poached, ultimately extracting rent from outside firms. Such rent extraction encourages initial employing firms to undertake more investment, as they partially capture the external payoff, but distorts manager allocation. I show that the privately-optimal contract over-extracts rent by setting an excessively long non-competition duration. Therefore, restrictions on non-competition can improve efficiency. To quantitatively evaluate the theory, I assemble a new dataset on non-competition contracts for executives in U.S. public firms. Using the contract data, I find that executives under non-competition are associated with a lower separation rate and higher firm investment. I also provide new empirical evidence consistent with non-competition reducing wage-backloading in the model. The calibrated model suggests that the optimal restriction on non-competition duration is close to banning non-competition. The second chapter, "Knowledge Creation and Diffusion with Limited Appropriation" (joint with Hugo Hopenhayn), studies the interaction of innovation and imitation in driving economic growth. In relation to a series of recent papers in the macro literature have emphasized the interaction between the two forces, we introduce two key elements in considering the incentives to innovate versus imitate. First, we consider frictions in matching innovators and imitators in the process of knowledge diffusion. Second, while most of the recent literature assume that imitators capture the entire surplus from knowledge diffusion, we consider a general bargaining problem between the innovators and imitators in dividing surplus. In a simple one period model, we derive a Hosios condition for the optimal surplus division when firms are ex-ante homogeneous. But we also find that as the degree of firm heterogeneity increases, innovators' share of surplus must decrease to maximize growth, approaching zero for sufficiently large heterogeneity. Our calibrated dynamic model suggests that the optimal share of surplus innovators appropriate should be at the lower end, consistent with weak intellectual property rights.
