Year: 2024
Type: dissertation
Abstract: This dissertation contains four essays on firm dynamics, firm mobility and the Environmental Kuznets Curve. The essays in this dissertation approach the topics from different angles. While the first two essays focus on the role of firm dynamics on the wage and the employer size distribution, the third essay brings the geographical dimension of firm dynamics to the fore by examining firm relocations. In addition, the link between environmental pollution and economic complexity is examined. After identifying the intersections and similarities of all four essays in chapter 1, the second chapter of this dissertation deals with the link between firm dynamics (in the form of firm entry and exit) and wage inequality. Using comprehensive establishment data for West Germany, I can show that business dynamism and the wage heterogeneity of new establishments increased during the 1990s, which contributed positively to the rising overall wage inequality. However, further analyses show that periods of increased establishment entry were followed by the more rapid exit of young and low-wage establishments. This, in turn, acted as a stabilizing factor on the wage distribution, as the exit dynamics reduced overall wage inequality. After analyzing the consequences of firm entry and firm exit on the wage distribution in chapter 2, chapter 3 studies causes and consequences of changes in the aggregate employer size distribution. We document substantial variation in the average establishment size in West Germany over the last three decades. The pronounced decline in the 1990s and early 2000s was followed by a sharp increase in the average establishment size in the 2010s. These developments are important because the average establishment size is positively correlated with GDP per capita, which we show by using regional variation. In a second step, we investigate the causes of these patterns and develop an explanation that is based on monopsony power in the labor market, which followed the opposite path to average establishment size. Higher monopsony power would induce firms to reduce their employment levels and additionally trigger the entry of new firms into the market. Our empirical analyses confirm these mechanisms as the degree of monopsony power is negatively correlated with the average establishment size and positively correlated with the extent of new firm entry. As an extension, we set up a structural model with monopsonistic competition in the labor market that is able to replicate our empirical findings. The analysis in chapter 4 complements the first two essays by considering the geographical dimension of firm dynamics. In their life cycle, firms do not only enter the market, grow, decline, and possibly exit the market, but they also sometimes change their location. Therefore, we study firm relocation patterns in Germany. We show that close to 4% of all establishments change their district during their life cycle and that firm relocation patterns exhibit suburbanization tendencies. Establishments rather move away from the large metropolitan districts to their surrounding urban districts. Using Cox proportional hazard models, we document that middle-sized, high-wage and rather knowledge-intensive establishments have the highest moving probabilities. In a subsequent regional analysis, the results of our Poisson regressions indicate that establishments rather prefer nearby regions with comparably low average scaling factors of the local business tax and low population densities. In contrast, we find no evidence of a greater role of the degree of industry specialization and therefore cannot confirm the theory of Duranton and Puga (2001), predicting relocation flows going from diversified to specialized districts. The fifth chapter turns away from firm dynamics and the use of establishment data and examines the link between pollution and economic complexity. We exploit the fall of the Iron Curtain as a shock that caused a massive decline in CO2 emissions and economic complexity in the former socialist transition countries. As a theoretical foundation, we refer to a variant of the Environmental Kuznets Curve (EKC), which assumes a non-linear relationship between economic complexity and pollution in the form of an inverted U. We use data on 27 countries for the years 1995-2017 and apply fixed effects estimations. To investigate the non-linearities, we include the Economic Complexity Index (ECI) and its square in our main regressions, while using production-based CO2 emissions per capita as our outcome variable. Our results for the full sample do not support the EKC hypothesis. However, we find robust evidence in favor of the EKC when we examine only those countries whose complexity increased over time, which are mainly located in Central and Eastern Europe. Further analyses using consumption-based CO2 emissions per capita show that emissions outsourcing was not a driving factor in the evolution of the inverted U-shaped relationship between economic complexity and pollution.
Author: Schröpf, Benedikt
Language: English
Topic: Firm Innovation and Growth
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7114917642
Cites:
Cited by:
Related to: