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Mai Chi Dao and Lucy Qian Liu
We study the effect of external financing constraint on job creation in emerging markets and developing countries (EMDC) at the firm level by looking at a specific transmission channel - the working capital channel. We develop a simple model to illustrate how the need for working capital financing of a firm affects the link between financial constraint and the firm's job creation. We show that the effect of relaxing financial constraint on job creation is greater the smaller the firm scale and the more labor-intensive its production structure. We use the World Bank Enterprise Surveys data to test the main predictions of the model, and find strong evidence for the working capital channel of external finance on firm employment.
Mai Chi Dao and Lucy Qian Liu

capital financed externally by industry 2. Share of working capital financed externally: actual vs. predicted 3. Distribution of labor cost share in working capital by firm size 4. Contribution to employment and job creation by firm size 5. Correlation between aggregate employment growth and degree of financial constraint for small firms Tables 1. Access to finance and firm-level employment: within industry-country-year valuation …. 2. Access to finance and firm-level employment: differential impact within industry-country-year 3. Access to finance

Mr. Nicolas R Blancher, Maximiliano Appendino, Aidyn Bibolov, Mr. Armand Fouejieu, Mr. Jiawei Li, Anta Ndoye, Alexandra Panagiotakopoulou, Wei Shi, and Tetyana Sydorenko

Inclusion Current Policy Initiatives Need for Holistic Policy Approaches Annex 1. Methodology for the SME Financial Inclusion Index Annex 2. SME Financial Inclusion Gap Annex 3. Growth and Employment Benefits of Increased Access to Financing for SMEs Annex 4. Benefits from Relaxing Constraints on SME Financial Inclusion: Country-Specific Analysis Annex 5. Access to Financing and Firm-Level Employment, Sales, and Productivity Growth Annex 6. SME Financial Inclusion and Macroeconomic Policy Annex 7. Drivers of SME Financial Inclusion References

Mai Chi Dao, Lucy Qian Liu, Mr. Luis M. Cubeddu, and Maria Soledad Martinez Peria

same set of firms over time. We therefore first analyze this repeated cross-sectional data along 4 dimensions (firm i , industry j , country c , year t ) by estimating the following equation for the firm-level employment growth: Δ e i j c t = α j c t + β X i j c t + γ D i j c t f c + ε i j c t , ( 13 ) where the effect of financial constraint on employment growth in firm i is

Mr. Nicolas R Blancher, Maximiliano Appendino, Aidyn Bibolov, Mr. Armand Fouejieu, Mr. Jiawei Li, Anta Ndoye, Alexandra Panagiotakopoulou, Wei Shi, and Tetyana Sydorenko

). Annex 5. Access to Financing and Firm-Level Employment, Sales, and Productivity Growth To assess the impact of access to financing on firm-level employment and labor productivity growth in MENAP and CCA countries, we employ the following specification, as in Ayyagari and others (2016) , using data from the World Bank Enterprise Surveys : 1 Δ E i j t = α F i j t + B X i j t + Z j i + C j + Y t + ϵ i j t , where

Ms. Emilia M Jurzyk and Mr. Cian Ruane

this literature began with Restuccia and Rogerson (2008) and Hsieh and Klenow (2009) . See Hopenhayn (2014) for a review of the literature. 5 Information available at https://www.wind.com.cn/en/data.html . 6 We impute labor costs using firm-level employment and average urban wages from the NBS. This approach follows closely how intermediate inputs and value-added are constructed in David and Venkateswaran (2019) . See Data Appendix for more details. 7 This category includes Collectively-Owned Enterprises, Foreign Companies, Joint Ventures and

Sergii Meleshchuk, Mr. Yannick Timmer, Maria Soledad, and Martinez Peria

of capital by substituting away from labor, along the lines of Karabarbounis and Neiman (2013) . While the total welfare effects of trade liberalization in this case can still be positive, there can be substantial distributional asymmetries of the gains. To understand the distributional consequences of trade liberalization, we augment our analysis of investment by looking at how the reduction in tariffs affects firm-level employment. We do not find evidence in support of the hypothesis that a reduction in the price of capital goods decreases employment. In

Mr. JaeBin Ahn, Mr. Romain A Duval, and Can Sever

.1 Empirical Strategy The baseline empirical strategy is set on a differences-in-differences framework, thereby com-paring the difference in investment in intangible assets between firms with different levels of financial vulnerabilities, before and after the drastic unforeseen credit tightening that followed the collapse of Lehman Brothers. Our methodology bears similarities with Giroud and Mueller (2017) , who investigate the impact of this credit supply shock on firm-level employment in the U.S. by regressing the change in firm-level employment around the global

Florian Misch, Christian Saborowski, and Costas Christou

.1, assuming real interest and depreciation rates of 5 percent, whereas we assume a uniform wage rate across firms; the elasticity of substitution between the outputs of different firms is set to 3. Capital and sales come straight from the data. In the baseline specification, we use firm-level employment as the labor variable in the production function. We choose employment over the wage bill given that many firms in Mexico use unpaid labor (e.g., family members), implying that the wage bill may be incomplete, missing or zero even if firms have one or more employees. In a

Mishel Ghassibe, Maximiliano Appendino, Samir Elsadek Mahmoudi, and Mr. Nicolas R Blancher

efficient tax collection. Moreover, we argue that providing SMEs with broader access to formal finance could also lead to improved financial sector stability in certain circumstances. We then present micro-econometric evidence of substantial economic growth gains from SME financial inclusion in the Middle East and Central Asia regions. In particular, we estimate firm-level employment and labor productivity growth gains from SME access to formal finance. These gains are confirmed by exploiting cross-country variation in the implementation of reforms that may boost SME