Economics and Investment

Firm Financial Constraints And Employment

Tania Babina – University of North Carolina at Chapel Hill; Timothy Dore – Federal Reserve Board of Governors; Paige Ouimet – University of North Carolina at Chapel Hill; Geoffrey Tate – University of North Carolina at Chapel Hill; Liu Yang – University of Maryland; Rebecca Zarutskie – Federal Reserve Board of Governors

This research examines how financial constraints affect firm behavior and how a financially constrained firm’s employees conditionally influence the impact of those constraints. Types of constraints studied here include restricted access to commercial bank credit, venture capital financing, and public bond and equity markets. This research tests whether employees alleviate financial constraints by deferring wages until firms can pay them. It also examines the alternative hypothesis that workers exacerbate financial constraints by requiring higher upfront wages as compensation for the higher risk of failure that a financially constrained firm faces, leading such a firm to invest less in the development and training of its employees.42 Research at the Center for Economic Studies and the Research Data Centers: 2014 U.S. Census Bureau

Globalization, Investment, And Corporate Payout Strategies

Deniz Civril – Brandeis University; Catherine Mann – Brandeis University

Firms in recent years have changed their corporate payout strategies and have gone more global in their activities. This project investigates the relation¬ship between the international activities of a firm, its profitability, payout strategies, and capital accumulation. The analysis is carried out on three categories of firms according to their payout strategy: (1) dividend payers and regular repurchases, (2) regular repurchasers, and (3) occasional repurchasers. It starts with an assessment of the relationship between global activities and the observed corporate payout behavior, focusing on the international character-is tics of firms, controlling for other firm, product, and country characteristics. Then, it assesses the relationship between global activities and corporate profitability for these three groups of firms. The last part investigates whether the increase in payments coincides with the decrease in capital accumulation and employment.

An Analysis Of The Measurement And Determinants Of Vertical Integration

Jonathan Lee – East Carolina University

This project uses internal Census Bureau microdata, as well as inspection data from the Mine Safety and Health Administration (MSHA), to study the effects of product differentiation and regulatory compliance on the vertical integration of select production processes within a company. In particular, this research focuses on the vertical integration of mining, pulp production, foundries, die casting, etc. across NAICS industries 311, 321, 322, 323, 327, 331, 332, and 334. The project analyzes the impact of transaction costs on firms’ decisions to integrate vertically integrate. This research develops methods for accurately aggregating vertical integration data to the firm level, as well as develops methods for handling data with missing values and measurement error.

External Capital Influence And Firm Production

Yelena Larkin – Pennsylvania State University

This project addresses a long-going debate in the financial literature regarding the paradox of stock run-up and subsequent deterioration after the issuance. While past studies tried to distinguish between market timing and capital budgeting explanations, the lack of detailed data produced mixed results and conclusions. Census Bureau data on firm’s productivity allow a better way of disentangling between these explanations. This study examines the sources of the price increase before the issuance and underperformance after the issuance by examining the production variables at the plant level, including total factor productivity, capacity utilization, costs of inputs and outputs, and subsequent plant acquisition. The ability to observe the changes in the production function of the plants before and after the issuance allows one to determine whether the firms raised capital as a response to improving growth opportunities, which can be captured through increases in productivity, capacity, and profit mar¬gins, or whether they just took advantage of current financial market conditions.46 Research at the Center for Economic Studies and the Research Data Centers: 2014 U.S. Census Bureau

Employee Risk Tolerance And Corporate Decisions

Jie He – University of Georgia; Tao Shu – University of Georgia; Huan Yang – University of Georgia

This research examines how employees’ tolerance for risk affects corporate decisions and firm performance, including firm debt, capital expenditures, patents, acquisitions, returns on assets and equity, firm age, and public/private status. Proxies for employee risk-tolerance include firm-level measures of employee age and gender, percentage of employees with earnings sources from other companies, percentage of employees with dual wage earners in their household, and county-level measures of religiosity. This project also examines a firm’s ownership status, i.e., public or private, and the demo¬graphic characteristics of the firm’s employees.

Personal Bankruptcy Law And Entrepreneurship

Nathaniel Johnson – City University of New York; Robert Seamans – New York University

This research investigates how statewide changes in debtor protection provided by U.S. personal bankruptcy law affect firm entry and exit dynamics. The project assesses the effects of personal bankruptcy law on entrepreneurship rates, the size and industry distribution of incumbent firms, and on business closures, as well as the extent to which firm entry and exit varies with bankruptcy exemption laws and local demographic and economic conditions. U.S. Census Bureau Research at the Center for Economic Studies and the Research Data Centers: 2014 47

U.S. Importer Heterogeneity And Exporter Performance

Raluca Dragusanu – Federal Reserve Board of Governors

This project explores the characteristics of the overseas trading partners, and how the various dimensions of U.S. importer heterogeneity, characteristics of U.S. importers, and importer types affects the performance of exporting firms in the manufacturing sector in India over time. The project will match a data¬base of Indian firms provided by the Center for Monitoring Indian Economy (CMIE)-Prowess with the Longitudinal Firm Trade Transactions Database (LFTTD). The LFTTD can credibly establish a causal relationship between U.S. importer types and their characteristics, on the one hand, and the productivity of Indian firms, as well as identify the mechanisms that can explain these relationships. This research will produce estimates of the nature of adjustment of U.S. imports during large crises, and if import adjustments happen at the extensive margin, with U.S. importers dropping overseas suppliers, or at the intensive margin, with importers adjusting downward the quantity purchased from each supplier.

Analyzing the Long-Term Effectiveness of Business Assistance on Firm Productivity and Survival

Sanjay Arora – Georgia Institute of Technology; Clifford Lipscomb – Greenfield Advisors; Earnest Curtis – Wake Forest University; Jan Youtie – Georgia Institute of Technology

This research seeks to increase knowledge about the determinants of manufacturing establishment performance. The project will link Census Bureau datasets to an external establishment-level dataset of business assistance recipients, to assess the importance of business assistance in the productivity (and related outcomes) of small- and medium-sized manufacturing establishments. The external dataset will also be used to validate and improve the quality of Census Bureau data.

The Microfoundations of Trade in Industrial Products

Nathaniel Aden – University of California, Berkeley; Mar Reguant – Stanford University; Meredith Fowlie – University of California, Berkeley; Matthew Woerman – University of California, Berkeley; Louis Preonas – University of California, Berkeley 

Complex trade relationships and sourcing strategies in industrial manufacturing complicates the classification and measurement of domestic industrial activity. Imprecise measurement of outsourcing-related activities can lead to imprecise measures of industry contributions to economic growth and productivity in manufacturing. This research will improve the quality and understanding of microdata on domestic imports of industrial commodities. The Census Bureau maintains a rich dataset of the universe of transaction-level import data linked to firm-level data. These data, along with establishment-level data collected from the industrial sector, are used to characterize the structure of imports in the industrial commodities sector. The descriptive statistics and regression estimates generated will document structural changes in import flows over time and across industries. This research will also identify determinants of domestic firms’ sourcing decisions. These statistics will provide a richer portrait of trade patterns in these important sectors.48 Research at the Center for Economic Studies and the Research Data Centers: 2014 U.S. Census Bureau

Effects of Organizational Structure and Governance on Retail Establishment Productivity

Matthew Sveum – University of Missouri; Michael Sykuta – University of Missouri

This project uses data from the Survey of Business Owners and the Census of Retail Trade (CRT), augmented with other federal and enterprise data, to analyze the relationship between franchising and establishment productivity. Focusing on establishments that indicated a franchise connection on the CRT, this study compares franchisee-run establishments with franchisor-run establishments and investigates the productivity effects of franchising. U.S. Census Bureau Research at the Center for Economic Studies and the Research Data Centers: 2014 49

The Transformation of the U.S. Manufacturing Sector

Christopher Kurz – Federal Reserve Board of Governors; Justin Pierce – Federal Reserve Board of Governors; Paul Lengermann – Federal Reserve Board of Governors; Mine Senses – Johns Hopkins University; Dominic Smith – University of Minnesota

This project documents the recent employment and productivity dynamics within the manufacturing sector and analyzes the factors driving these dynamics. This research establishes basic facts about changing dynamics, empirically tests explanations for the change in manufacturing dynamics, and analyzes the factors behind the changing manufacturing landscape with a focus on production fragmentation and innovation.

Firm Production Structure 

Rong Huang – Baruch College; Lucas Threinen – Temple University 

This project seeks to describe which production structures firms select from among the various alternatives, their reasons for doing so, and how the production structures selected change over time when firms face external shocks such as technological advances or regulatory changes. The project focuses on the service sector but will also examine the manufacturing sector.

Cross-Sectional and Time Series Analysis of Production and Energy Efficiency in Manufacturing

Gale Boyd – Duke University; Jonathan Lee – East Carolina University; Earnest Curtis – Wake Forest University; Jerome Reiter – Duke University; Nicole Dalzell – Duke University; Andrew Steck – Duke University; Yifang Guo – Duke University; Kirk White – U.S. Census Bureau; Tatyana Kuzmenko – College of William & Mary; Su Zhang – Duke University

This research continues work conducted under prior projects, conducting both cross-sectional and time series analyses of the underlying causes of changes in the distributions of production and energy efficiency. The principal analytic approach will be the application of frontier production functions and related procedures. Prior projects have successfully implemented these methods for selected industrial sectors.

How Does Competition Affect Firms’ Decisions of Buying or Producing their Intermediate Inputs?

Ildiko Magyari – Columbia University

This project investigates how local competition among suppliers within geographically segmented markets drives manufacturing firms’ decisions of whether to integrate or outsource the production of their intermediate inputs, and if they outsource, whether to buy the input from domestic producers or import it from abroad. Using Census of Manufactures, Commodity Flow Survey, and foreign trade data, this research examines market outcomes such as mark-ups, prices, and quantities supplied, as well as consumers' welfare. 50 Research at the Center for Economic Studies and the Research Data Centers: 2014 U.S. Census Bureau

Firm Dynamics And The Composition Of External Finance

Nicolas Crouzet – Northwestern University

This project studies the link between firm-level growth and the structure of firms’ debt, using the Quarterly Financial Report (QFR) of manufacturing firms. Benefits to the Census Bureau include the construction of time series moments of QFR variables that address issues raised by firm reclassification across asset size bins, as well tabulations of the QFR using an alternative size criterion (sales).

Local Credit Availability and the Performance of Small and Young Businesses

Frederick Mencken – Baylor University; Lynn Riggs – Baylor University; Charles Tolbert – Baylor University

This project investigates the role credit availability plays in the development and growth of small and young businesses in different geographical areas. This role will be moderated by the availability of credit for these ventures, whether it is for start-up capital or for expansion capital. By examining these issues for different geographic areas and by using different measures of geographic areas, this project will also establish the role geography can play in economic modeling.

Internal Resource Reallocation Over The Business Cycle

Xavier Giroud – Massachusetts Institute of Technology

This project examines how firms internally reallocate resources (e.g., labor, capital) over the business cycle, with emphasis on the recent financial and economic crisis of 2007-2009 (the “Great Recession”). This research assesses capital stock imputation from Census Bureau data, assesses the geographical classification of establishments, and builds a bridge among several establishment- and employee-level datasets.U.S. Census Bureau Research at the Center for Economic Studies and the Research Data Centers: 2014 51