UMD Theses and Dissertations
Permanent URI for this collectionhttp://hdl.handle.net/1903/3
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Item Essays on Firm Dynamics and Macroeconomics(2023) Kim, Seula; Haltiwanger, John; Shea, John; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation describes a broad set of topics in firm dynamics and macroeconomics, including young firm dynamics, business dynamism, firm innovation, technological advance, and economic growth in the U.S. economy. In Chapter 1, I study how workers’ uncertain job prospects affect young firms’ pay and employment growth, and quantify macroeconomic implications. Building a heterogeneous-firm directed search model in which workers gradually learn about permanent firm productivity types, I find that the learning process creates endogenous wage differentials for young firms. In the model, a high performing young firm must pay a higher wage than that of high performing old firms, while a low performing young firm offers a lower wage than that of low performing old firms, to attract workers. This is because workers are unsure whether the young firm’s performance reflects its fundamental type or a temporary shock given the lack of track records. I find that these wage differentials affect both hiring and retention margins of young firms and can dampen the growth of high-potential young firms. Furthermore, the model indicates that higher uncertainty about young firms results in bigger wage differentials and thus hampers overall young firm activity and aggregate productivity. Using employee-employer linked data from the U.S. Census Bureau and regression specifications guided by the model, I provide empirical support for the novel predictions of the model. Chapter 2 studies the effect of competition on firm innovation by developing a discrete-time endogenous growth model where multi-product firms do two types of innovation subject to friction in technology spillovers. Firms improve their existing products through internal innovation while entering others’ product markets through external innovation. We introduce a novel friction, which we label as imperfect technology spillovers, which refer to frictions in learning others’ technology in the process of external innovation. In contrast to existing models, this friction allows incumbent firms to defend themselves from competitors by building technological barriers through internal innovation. Using firm-level data from the U.S. Census Bureau integrated with firm-level patent data, we find regression results consistent with the model predictions. Our counterfactual analysis shows that rising competition by foreign firms leads domestic incumbent firms to undertake (i) more (less) internal innovation for the products in which they have (do not have) a technological advantage, and (ii) less external innovation. This compositional change in firm innovation affects overall innovation in the aggregate economy in different directions depending on the costs of external innovation. Specifically, the shift in innovation composition in response to rising competition decreases overall innovation in the U.S., but would increase overall innovation in an economy with high external innovation costs. Lastly, Chapter 3 examines how increasing knowledge complexity and the accompanying rise in innovation cost affect firm innovation patterns and business dynamism in the U.S. economy. Using detailed firm-level data from S&P’s Compustat and the U.S. Census Bureau, integrated with the U.S. patent database (USPTO PatentViews), we document the increasing trend in knowledge complexity in firm innovation activities. Specifically, the inventor team size, the number of technology types (technology subclasses), and the degree of interdependence across different technology subclasses associated with firms’ patent portfolio have been increasing over time. Furthermore, we find the increasing trend of knowledge complexity is associated with the declining trend of business dynamism, such as firm entry, the share of young firms, and young firms’ activity in job creation and reallocation. We offer a simple endogenous growth model in which different R&D inputs are interdependent (complementary) to each other and firms are required to use different types of inputs to generate a given amount of innovation. This increases more complexity in firm innovation process and makes small, young firms with less knowledge base more difficult to conduct innovation as before. This can impede firm entry and dampen the growth of small and young firms.Item USING LINKED EMPLOYER-EMPLOYEE DATA TO UNDERSTAND LABOR MARKETS AND IMPROVE DATA PRODUCTS(2007-08-02) Benedetto, Gary; Haltiwanger, John C.; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This thesis is comprised of three chapters. The first chapter (joint with John Haltiwanger, Julia Lane, and Kevin McKinney) explores a new way of capturing dynamics: following clusters of workers as they move across administrative entities. Information on firm dynamics is critical to understanding economic activity, yet fundamentally difficult to measure. The worker flow approach is shown to improve linkages across firms in longitudinal business databases. The approach also provides conceptual insights into the changing structure of businesses and employer-employee relationships. Many worker-cluster flows involve changes in industry -- particularly movements into and out of personnel supply firms. Another finding, that a nontrivial fraction of firm entry is associated with such flows, suggests that a path for firm entry is a group of workers at an existing firm starting a new firm. The second chapter makes use of linked employer-employee data from the U.S. Census Bureau's Longitudinal Employer-Household Dynamics (LEHD) Program and matches it to data on business acquisitions from the Federal Trade Commission to examine labor market outcomes of employees at firms undergoing mergers. Earnings and employment can be observed over time for workers at both the acquired firm and the acquiring firm. The findings suggest that while wages tend to be about the same or higher for workers at these restructuring firms, turnover is significantly higher, and the costs of job-loss are large and long lasting. The third chapter (joint with John Abowd and Martha Stinson) provides technical documentation for a project undertaken by the US Census Bureau, the Social Security Administration, and the Internal Revenue Service to explore a potential method of providing the public a valuable new dataset without compromising confidentiality. The underlying database was created by merging the respondents from the Census' own SIPP with administrative data on earnings and benefits from the IRS and SSA. The administrative variables combined with the detailed survey responses from the SIPP offer the potential to do interesting research especially in the areas of retirement, benefits, and lifetime earnings; however, they also add extensive new information for malicious data users to potentially reidentify SIPP respondents. This final chapter develops a cutting edge new technique for providing a micro-dataset that looks, in structure, just like the underlying confidential data. This "partially synthetic" database aims to preserve as many of the complex covariate relationships in the confidential data without posing any significant new risk to disclosure protection.Item Heterogeneity and Input Reallocation(2006-08-07) Pinto, Eugenio; Haltiwanger, John; Shea, John; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In this dissertation, we analyze some patterns of aggregate job reallocation that are significantly determined by the coexistence of heterogeneous businesses in any industry. First, we argue that the interaction of non-strictly convex adjustment costs and learning about true efficiency can explain the significant growth of survivors in a cohort of entering firms. Using Portuguese data we find evidence that survivors are the main source of growth in the cohort's average size, and that their contribution varies across sectors. By simulation, we show that we need adjustment costs to match this evidence with a selection model of industry dynamics. In a calibration of the model, we find that proportional costs and the fixed exit cost are key parameters in matching the evidence, and that firms in manufacturing learn relatively less initially about their efficiency, and are subject to much larger adjustment costs than firms in services. Second, we analyze how does structural heterogeneity across classes of firms affects the cyclical behavior of aggregate job flows. We find that types of firms whose optimal employment is relatively more determined by aggregate shocks than by idiosyncratic shocks influence the dynamics of aggregate job flows by more than they affect average aggregate flows. In Portuguese data, we conclude that large and old firms tend to affect aggregate dynamics by more than their already large employment shares would suggest. This tends to make job reallocation less procyclical than otherwise, and affects aggregate behavior in some sectors. Finally, as a background for the empirical analysis that is used in this dissertation, we analyze basic facts about the business cycle and gross job flows in Portugal from 1986 to 2000. We conclude that gross job flows are large and react in predictable ways to the business cycle and that patterns of job reallocation vary widely across sectors and firm's age and size.