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Item Open Access Pass-on trade: Why do firms simultaneously engage in two-way trade in the same varieties?(LICOS Centre for Institutions and Economic Performance, 2012-05) P. Damijan, Jože; Konings, Jozef; Polanec, SašoThis paper documents that a large fraction of trade flows at the firm level consists of simultaneous imports and exports in identical products, narrowly defined at the 8-digit product classification, which we call Pass-On Trade, POT. We use data on imports and exports at the firm–product level for Slovenian manufacturing firms in the period 1994-2008, to show that, on average, 70 percent of all exporting firms engage in POT. This corresponds to more than 50 percent of all exported products. Thus, imported products that are exported again by the same firm is a statistical regularity of trade of Slovenian manufacturing firms. We document that the use of POT is increasing in firm size, product diversification, multinational status as well as firm productivity and profitability. We offer and explore empirically a number of explanations for POT. Among possible explanations, we find evidence on the importance of firms’ multinational networks and demand complementarities between firms’ own and POT products. The latter confirms the theoretical explanations for ‘Carry-Along Trade’ (CAT) as developed by the recent work of Bernard et al (2010, 2012).Item Open Access Trade liberalization, intermediate inputs and productivity: evidence from Indonesia(Centre for Economic Policy Research, 2005-06) Amiti, Mary; Konings, JozefThis paper estimates the effects of trade liberalization on plant productivity. In contrast to previous studies, we distinguish between productivity gains arising from lower tariffs on final goods relative to those on intermediate inputs. Lower output tariffs can produce productivity gains by inducing tougher import competition whereas cheaper imported inputs can raise productivity via learning, variety or quality effects. We use Indonesian manufacturing census data from 1991 to 2001, which includes plant level information on imported inputs. The results show that the largest gains arise from reducing input tariffs. A 10 percentage point fall in output tariffs increases productivity by about 1%, whereas an equivalent fall in input tariffs leads to a 3% productivity gain for all firms and an 11% productivity gain for importing firms.Item Open Access The impact of training on productivity and wages: firm level evidence(Centre for Economic Policy Research, 2009-09) Konings, Jozef; Vanormelingen, StijnThis paper uses firm level panel data of firm provided training to estimate its impact on productivity and wages. To this end the strategy proposed by Ackerberg, Caves and Frazer (2006) for estimating production functions to control for the endogeneity of input factors and training is applied. The productivity premium for a trained worker is estimated at 23%, while the wage premium of training is estimated at 12%. Our results give support to recent theories that explain work related training by imperfect competition in the labor market.Item Open Access The firm size distribution and inter-industry diversification(UCD GEARY INSTITUTE, 2009-08) Hutchinson, John; Konings, Jozef; Paul Walsh, PatrickWe show that the stylized facts of the Firm Size Distribution (FSD) by age cohorts, as shown in Cabral and Mata (2003), bind within 4-digit manufacturing industries in the UK and Belgium. As in Klepper and Thompson (2006) and Sutton (1998), we explore whether time to build a portfolio of products is a mechanism that relates age to firm size. While inter industry diversification, to some extent, accounts for the role of age, we find that the presence of economies of scope has a separate impact on firm size when controlling for age, amongst other factors. Using the techniques in Cabral and Mata’s we show that the FSD by degrees of product diversification shifts to the right, but more so in older age groups. This shows a role for inter-industry diversification over and above an age effect.Item Open Access The effect of globalization on union bargaining and price-cost margins of firms(LICOS Centre for Institutions and Economic Performance, 2007-01) Abraham, Filip; Konings, Jozef; Vanormelingen, StijnIn recent years, Europe has witnessed an accelerated process of economic integration. Trade barriers were removed, the euro was introduced and ten new member states have joined the European Union. This paper analyzes how this process of increased economic integration has affected labor and product markets. To this end, we use a panel of Belgian manufacturing firms to estimate price-cost margins and union bargaining power and show how various measures of globalization affect them. Our findings can be summarized as follows: On average, firms set prices about 30% above marginal costs, but there is substantial variation across sectors, with the lowest mark-up around 19% and the highest around 52%. In addition, we find evidence that unions bargain over both wages and employment. We estimate an index of bargaining power, which reflects the fraction of profits that is passed on to workers into higher wages. Depending on the sector, this fraction varies between 6% and 18% and it increases with the markups of firms. Finally, we find that globalization puts pressure on both markups and union bargaining power, especially when there is increased competition from the low wage countries. This suggests that increased globalization is associated with a moderation of wage claims in unionized countries, which should be associated with positive effects on employment.Item Open Access Staying home or moving away? The effect of restructuring on employment in multinational enterprises(Algemeen secretariaat – Steunpunt beleidsrelevant Onderzoek Fiscaliteit & Begroting, 2012-01) Abraham, Filip; Goesaert, Tim; Konings, JozefThis paper analyzes the geographic dispersion of employment restructuring in multinational enterprises, where we distinguish between headquarters and geographically dispersed affili- ates. To this end, we use data of 255 Belgian parents and 1,887 affiliates between 1996 and 2005. We show that for multinational enterprises that restructure headquarters have superior employment performance than their affiliates. This effect seems to be stronger for vertically integrated firms, which is consistent with theories of imperfect information and increased agency costs. We also show that proximity matters: restructuring hurts the most the further the affiliate is located from the headquarter. This effect is consistent with the monitoring difficulties that are associated with vertical FDI firms and with the role of social network effects.Item Open Access Merger Review: How much of industry is affected in an international perspective?(Center for Economic Studies, 2003-12) Van Cayseele, Patrick; Konings, Jozef; De Loecker, JanThe ex ante merger control process that exists at the EC as well as in many of the constituting member states is a particular type of government intervention, namely one in the market for corporate control. As such, it is supposed to correct for a market failure. Here in particular, merging firms could gain market power and raise prices at the expense of consumers in a way the welfare standard is reduced...Item Open Access Creative Destruction and Productivity Growth in an Emerging Economy Evidence from Slovenian Manufacturing(LICOS Centre for Transition Economics, 2003-12) De Loecker, Jan; Konings, JozefIn most transition countries the aggregate level evidence suggests that most industries are just destroying jobs, due to the legacy of communism where overmanning levels of employment were the norm. This paper sheds light on whether the transition process in Slovenian manufacturing has been one of just destruction or in contrast one of creative destruction. To this end we start by documenting gross job flows for the Slovenian manufacturing sector between 1994 and 2000. In contrast to slowly reforming transition economies where the transition process in manufacturing is characterized by little job creation and high job destruction, we find for Slovenian manufacturing a process of both substantial job creation and destruction. This indicates that restructuring in Slovenia involves a substantial reallocation process. We find higher job reallocation in private and small firms where the contribution of entry and exit to the job reallocation process is higher. We further use the Olley-Pakes methodology to estimate total factor productivity (TFP) and show that TFP has increased in most sectors. We find that this is mainly driven by existing firms becoming more efficient and by the net entry process, i.e. more efficient firms enter the industry.Item Open Access Importers, exporters, and exchange rate disconnect(National bureau of economic research, 2012-12) Amiti, Mary; Itskhoki, Oleg; Konings, JozefLarge exporters are simultaneously large importers. In this paper, we show that this pattern is key to understanding low aggregate exchange rate pass-through as well as the variation in pass-through across exporters. First, we develop a theoretical framework that combines variable markups due to strategic complementarities and endogenous choice to import intermediate inputs. The model predicts that firms with high import shares and high market shares have low exchange rate pass-through. Second, we test and quantify the theoretical mechanisms using Belgian firm-product-level data with information on exports by destination and imports by source country. We confirm that import intensity and market share are the prime determinants of pass-through in the cross-section of firms. A small exporter with no imported inputs has a nearly complete pass-through, while a firm at the 95th percentile of both import intensity and market share distributions has a pass-through of just above 50%, with the marginal cost and markup channels playing roughly equal roles. The largest exporters are simultaneously highmarket- share and high-import-intensity firms, which helps explain the low aggregate pass-through and exchange rate disconnect observed in the data.Item Open Access How do exporters react to changes in cost competitiveness?(European Central Bank, 2014-12) Decramer, Stefaan; Fuss, Catherine; Konings, JozefPolicy-making institutions such as the European Commission, the ECB and the OECD often use unit labor costs as a measure of international competitiveness. The goal of this paper is to examine how well this measure is related to international export performance at the firm level. To this end, we use Belgian firm-level data for the period 1999-2010 to analyze the impact of unit labor costs on exports. We use exports adjusted for their import content. We find a statistically significant negative effect of unit labor costs on export performance of firms with an estimated elasticity of the intensive margin of exports ranging between -0.2 and -0.4. This result is robust to various specifications, including firm, time and sector fixed effects and estimation approaches. We find that this elasticity varies between sectors and between firms, with firms that are more labor-intensive having a higher elasticity of exports with respect to unit labor costs. The micro data also enable us to analyze the impact of unit labor costs on the extensive margin. Our results show that higher unit labor costs reduce the probability of starting to export for non-exporters and increase the probability of exporters stopping. While our results show that unit labor costs have an impact on the intensive margin and extensive margin of firm-level exports, the effect is rather low, suggesting that passthrough of costs into prices is limited or that demand for exported products is not elastic. The latter is consistent with recent trade models emphasizing that not only relative costs, but also demand factors such as quality and taste matter for explaining firm-level exports.Item Open Access Heterogeneous responses of firms to trade protection(Centre for Economic Policy Research, 2008-02) Konings, Jozef; Vandenbussche, HylkeThis paper uses EU firm-level panel data to estimate the effect of Antidumping (AD) protection on the productivity of EU domestic firms in import-competing industries. We find that firms with relatively low initial productivity - laggard firms - have productivity gains during AD protection, while firms with high initial productivity - frontier firms - experience productivity losses. While the productivity of the average firm is moderately improved during AD protection, productivity remains below that of firms never involved in AD cases, thus questioning the desirability of protection. Our empirical results are consistent with recent theoretical work supporting the view that trade policy can have a differential effect on firms depending on their initial productivity.Item Open Access FDI spillovers in the chinese manufacturing sector: evidence of firm heterogeneity(Centre for Economic Policy Research, 2007-11) Abraham, Filip; Konings, Jozef; Slootmaekers, VeerleWe use a new longitudinal data set of more than 15,000 Chinese manufacturing plants to show that the direct and indirect effects of foreign direct investment on measured firm level productivity depend on a number of firm specific features and institutional factors. We find that domestic firms engaged in a joint-venture with a foreign partner are on average more productive, as well as exporting plants and plants located in special economic zones. In addition, domestic firms benefit from horizontal spillovers from foreign firms on average. However, these spillovers depend on the structure and origin of ownership as well as on specific characteristics of the special economic zones. First, spillovers are less likely to occur from fully foreign owned firms than from joint-ventures. Second, spillovers from foreign direct investment originating from oversees Chinese (Hong Kong, Macau and Taiwan) are stronger than from the rest of the world. Third, spillovers are higher in the special economic zone aimed at attracting foreign capital to fasten the development of China’s own high tech industries.Item Open Access Do wages reflect labor productivity? The case of Belgian regions(K.U.LEUVEN, VIVES, 2013-05) Konings, Jozef; Marcolin, LucaClassic economic theory applied to the labor market assumes that markets are perfectly informed and able to allocate workers in open vacancies in equilibrium. These workers are paid a salary equal to their marginal product of labor, since labor supply and demand are both satisfied. In the real world, however, this condition might not hold, as there exist many market frictions triggered by imperfect information and institutional factors, such as employment protection, unemployment benefits, collective bargaining, minimum wages and taxation. The persistently high unemployment rates plaguing the Western World, and Europe in particular in the aftermath of the Great Recession suggest that wage rigidity combined with falling productivity may be an important channel causing increasing unemployment. Belgium is no exception, with 7.6% national unemployment rate in 2012 averaging over the 17.4% unemployment rate of Brussels, the 4.5% rate of Flanders and the 10.0% rate of Wallonia (source: Eurostat)...Item Open Access Do Multinational Enterprises Relocate Employment to Low Wage Regions? Evidence from European Multinationals(Central Bank and Financial Services Authority of Ireland, 2005-03) Konings, Jozef; Murphy, AlanThis paper analyses the employment behavior of multinational enterprises (MNEs) in Europe. To this end we use a unique firm level panel data set of more than 1,000 European multinational parent enterprises and their affiliates. The affiliates are located either in the European Union divided into (North, South), Central and Eastern Europe or both. We find that for parent firms operating in the manufacturing sector the elasticity of parent employment with respect to North EU affiliates’ labour costs is positive and statistically significant, ranging from 0.03 to 0.08, depending on the specification considered. This implies employment substitution between parents and their North EU based affiliates takes place in response to wage cost differentials between the parent and its North EU based affiliates. This substitution effect becomes stronger when affiliates are operating in a different sector than their parent firm. However, we find no evidence for such substitution effects between parent employment and its affiliates that are located in low wage regions in the EU and in Central and Eastern Europe. Furthermore, substitution effects are absent for parent firms operating in the non-manufacturing sector. Our results suggest that on average during the period of this study competition from low wage countries in Central and Eastern Europe and the South of the EU did not contribute to a relocation of domestic jobs to these low wage regions.Item Open Access Did export promotion help firms weather the crisis?(Centre for Economic Policy Research, 2016-01-27) Van Biesebroeck, Johannes; Konings, Jozef; Volpe Martincus, ChristianIn the global recession of 2009, exports declined precipitously in many countries. We illustrate with firm‐level data for Belgium and Peru that the decline was very sudden and almost entirely due to lower export sales by existing exporters. After the recession, exports rebounded almost equally quickly and we evaluate whether export promotion programs were an effective tool aiding this recovery. We show that firms taking advantage of this type of support did better during the crisis, controlling flexibly for systematic differences between supported and control firms. The primary mechanism we identify is that supported firms are generally more likely to survive on the export market and, in particular, are more likely to continue exporting to countries hit by the financial crisis.Item Open Access Antidumping protection hurts exporters: firm-level evidence from france(Centre for Economic Policy Research, 2009-06) Konings, Jozef; Vandenbussche, HylkeThis paper empirically evaluates the effects of antidumping measures on the exports of protected firms. While antidumping protection raises the domestic sales of the more “traditional” non-exporting firms on the protected market with about 5%, it negatively affects the firm-level exports of similar products as the protected ones. Export sales of protected firms fall by almost 8% compared to a relevant control group of unprotected firms. The drop in firm-level exports more than doubles for firms that are global, i.e. firms with foreign affiliates. Measured at the product-level, extra-EU exports of goods protected by antidumping fall by 36% while exports to target countries fall by as much as 66% following protection. Protection also affects the extensive margin of exporters but to a lesser extent. Initial exporters face a marginally higher probability to stop exporting during protection compared to unprotected firms. Finally, we find that the productivity of exporters falls while that of nonexporters rises during antidumping protection. We offer a number of plausible explanations for our findings arising from the heterogeneous firm literature. We also discuss the importance of our findings for policy.