Research
Work in progress
Non-Compete Agreements, Tacit Knowledge and Market Imperfections (with Eric Bartelsman and Sabien Dobbelaere). 2024. IZA & Tinbergen Working Paper • Download paper
Abstract
This paper provides evidence from a natural experiment on the importance of tacit knowledge that workers have about firms' intangible assets for competition in product and labor markets. First, evidence is presented on product and labor market imperfections across firms in manufacturing and services industries in the Netherlands. Price-cost markups and wage markups are both shown to be positively related to intangible intensity at the firm level. A model is developed of the processes of intangible investment and wage bargaining of heterogeneous firms that provides a mechanism relating workers' tacit knowledge to product and labor market imperfections at the firm level. The model also provides a role for non-compete agreements (NCAs) limiting worker mobility. Our main empirical contribution comes from using linked employer-employee panel data with information on NCAs and changes in enforceability of these agreements. In a diff-in-diff specification, the paper shows that lifting NCAs increases worker wages and worker mobility and that the effect is stronger for intangible-intensive firms. We find that NCAs affect workers across the skill distribution and across industries. The causal findings from changes in the legality of NCAs correspond with the mechanisms described in the model.A structural break in EU corporate leverage trends (with Tomislav Ladika and Enrico Perotti);
Abstract
Contrary to widespread concerns about rising indebtedness, we show that corporate leverage in French and Dutch firms has been in a steady decline for two decades. The decline occurred during periods of strong growth, sharp crises, and recovery under very loose monetary policy. It is consistent across the entire firm size distribution, in dividend and non-dividend paying firms, and high or low productivity growth firms. It appears robust to financial constraint measures, and is not driven by survival bias. Our results suggest a key role for falling credit demand driven by declining investment prospects, while growing firms build intangible capital gradually and need less external financing.Publications
The impact of the euro on trade: two decades into monetary union (with Vanessa Gunnella, Laura Lebastard, Paloma Lopez-Garcia and Roberta Serafini,). 2021. ECB Occasional Paper Series • Download paper
Abstract
The consensus back in 2008 – ten years after the introduction of the euro – was that the adoption of a common currency had made a limited impact of around 2% in total on the trade flows of the first wave of euro area countries (Baldwin et al., 2008). Since then, six more countries have joined the euro area, and firms have internationalised their production processes. These two phenomena are interrelated and may have changed the way the common currency affects the euro area economy. Therefore, with the common currency now into its third decade – and with more countries queuing to adopt it – this paper revisits the trade effects of the euro, focusing on the newer euro adopters (i.e. those countries that have adopted the euro since 2007) and their interaction with the first wave of euro area members via supply chains. The contribution of the paper is twofold. First, it revisits the estimated aggregate impact of the euro on euro area trade, as well as on trade within and between the two waves of adopters. Data on bilateral flows between 1990 and 2015 for an extended sample of countries to estimate a gravity equation indicate a significant trade impact, ranging between 4.3% and 6.3% in total on average, with the magnitude being the highest for exports from the second wave of adopters to the first wave of adopters. If a synthetic control approach (Abadie and Gardeazabal, 2003; Abadie et al., 2010) is used instead, the estimated gains associated with euro adoption are greater. In particular, exports of both intermediate and final products from countries belonging to the first wave of euro adopters to those belonging to the second wave are estimated to have increased by about 30% using this approach. The second contribution made by this paper relates to the channels through which trade might be affected by a currency union. This question is explored by looking separately at trade in intermediate goods and final products. While we find that trade gains were mainly driven by trade in intermediate goods among countries that adopted the currency earlier (5.3%), our results also show that the euro had a positive effect on the exports of final products from the second wave of adopters to other euro area countries. This effect is as high as 10.6% with the gravity model and 32% with the synthetic control approach. One of the reasons for the difference in the range of estimates between the two approaches might be that the gravity model can control for unobserved characteristics via fixed effects, while the synthetic control approach may fail to do so. These results suggest that the euro facilitated the establishment and expansion of international production chains in Europe. In turn, this is likely to have increased business cycle synchronisation in the euro area and to have supported market access for later adopters.Living with Lower Productivity Growth: Impact on Exports (with Filippo Di Mauro, Bernardo Mottironi, Gianmarco Ottaviano). 2019. Facing Up to Low Productivity Growth, Columbia University Press, New York (USA). eds. Posen A. and Zettelmeyer J. • Link to download