Managers and development

This paper describes the 2018 wave of the World Management Survey in Hungary. We compare the management practices of firms run by managers who started their careers before the transition from socialism to capitalism. We find that older managers are less likely to use modern management practices, such as performance monitoring, target setting, and incentives.

How did Hungarian top managers differ in the 1980s and the 1990s? We study manager and entrepreneur biographies, focusing on the role of foreign experience while studying or learning. Early foreign experience, acquired during socialism, is not correlated with firm performance. By contrast, foreign experience acquired after the transition to capitalism is associated with higher firm performance.

We study an almost exhaustive longitudinal panel of business entities in Hungary between 1988 and 2022. We document the entry, exit, and growth of firms, and the characteristics of their owners. We analyze the distribution of firm size, age, and productivity, and the relationship between firm performance and the characteristics of their owners.

We study the demography of entrepreneurs in Hungary using administrative data on firms and their owners between 1986 and 2022. We decompose the number of entrepreneurs and their average age into (i) general demographic trends in the population, (ii) overall entry of entrepreneurs and (iii) changes in the lifecycle of entrepreneur entry and exit.

Using a novel Hungarian dataset on firms and their Chief Executive Officers (CEOs), we estimate the impact of hiring expatriate CEOs. By examining foreign acquisitions where the new owner replaces the incumbent CEO with an expatriate or a local CEO, we address the selection into both acquisition and CEO hiring. Firms led by expatriate CEOs show 13 percent total factor productivity growth, 95 percent sales growth, and increase both exports and domestic sales. Hiring expatriate CEOs enhances firm performance in both international and domestic markets. Our findings suggest that expatriates have superior general management skills.

Understanding geospatial flows, such as the movement of goods or people between locations, is critical for a wide range of policy questions.Various formulations of the gravity equation have been commonly used to model these flows. But can this equation predict future geospatial flows with high accuracy, and how do more complex machine learning models stack up against it? This chapter evaluates the out-of-sample predictive accuracy of four classes of models—standard gravity equations, random forests, neural networks, and graph neural networks—across three distinct data sets: international trade, inter-state mobility in the U.S., and intra-state human mobility. By most metrics, machine learning models only marginally outperform the gravity equation. The high explanatory power achieved by all models is primarily due to their ability to explain cross-sectional variation rather than time-series changes. Our findings provide nuanced insights into the strengths and weaknesses of different modelling approaches for geospatial flows, informing future research and policy considerations.

eventbaseline is a Stata package that transforms the coefficients estimated by xthdidregress into a correct event study relative to a baseline. The reported coefficients are the average treatment effects on the treated (ATT) for each period relative to the baseline. The baseline can be either a period before the treatment or the average of the pre-treatment periods.

Trade costs, broadly defined, limit interaction between far-away economic agents and motivate them to concentrate in close proximity to one another. The gravity equation, which assigns a large role for geographic distance as a determinant of trade costs, has been remarkably successful in explaining patterns of international and international goods trade between firms, services trade, individual mobility and migration, and even scientific collaboration. It is unclear, however, why distance is relevant for sectors in which direct trade costs are zero. We study patterns of interaction when the good in question is ``weightless’’ using data from the open-source software industry. We find that importing other software packages as dependencies is at most weakly correlated with distance. By contrast, collaboration between different developers on the same piece of software is strongly decaying with distance. These results suggest that geography continues to matter for goods and services where collaboration is frequent and deep.

Good management practices are important determinants of firm success. It is unclear, however, to what extent pro-management policies can shape aggregate outcomes. We use data on corporations and their top managers in Hungary during and after its post-communist transition to document a number of salient patterns. First, the number of managers is low under communism when most employment is in large conglomerates. After the transition to capitalism, the number of managers increased sharply. Second, economics and business degrees became more popular with capitalist transition. Third, newly entering managers tended to run smaller firms than incumbent managers. We build a dynamic equilibrium model to explain these facts. In the model, the number and average quality of managers react to schooling and career choice. We use the model to evaluate hypothetical policies aiming to improve aggregate productivity through management education and corporate liberalization. Our results suggest that variations in the supply of good managers are important to understand the success of management interventions.

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Mérhető-e a tudományos teljesítmény, legyen szó akár egyénekről (kutatókról), akár intézményekről (például tanszékekről, kutatóintézetekről, egyetemekről, vállalati laboratóriumokról)? A tudománymetria (scientometrics) története a hatvanas évekig nyúlik vissza, 1978 óta saját havi folyóirata van, művelői nemzetközi egyesületbe tömörülnek, sokfelé használt mérési módszertana, mutatórendszere folyamatosan gazdagodik. De vajon ment-e a tudománymetria által a világ elébb? Eredményei hasznos iránytűként szolgálnak, vagy inkább tévutakra vezetnek? Kicsit általánosabban fogalmazva: félni kell-e a számoktól, a számszerű adatoktól, a matematikai formuláktól, rangsoroktól akkor, ha a tudományos munka értékeléséről van szó?

The typical README in social science journals serves the purpose of guiding a reader through the available material and a route to replicating the results in the research paper, including the description of the origins of data and/or description of programs. As such, a good README file should first provide a brief overview of the available material and a brief guide as to how to proceed from beginning to end, before then diving into the specifics. These template files structure such a README in a way that is compliant with the typical data and code workflow in the social sciences.

Social distancing interventions can be effective against epidemics but are potentially detrimental for the economy. Businesses that rely heavily on face-to-face communication or close physical proximity when producing a product or providing a service are particularly vulnerable. There is, however, no systematic evidence about the role of human interactions across different lines of business and about which will be the most limited by social distancing. Here we provide theory-based measures of the reliance of U.S. businesses on human interaction, detailed by industry and geographic location. We find that, before the pandemic hit, 43 million workers worked in occupations that rely heavily on face-to-face communication or require close physical proximity to other workers. Many of these workers lost their jobs since. Consistently with our model, employment losses have been largest in sectors that rely heavily on customer contact and where these contacts dropped the most: retail, hotels and restaurants, arts and entertainment and schools. Our results can help quantify the economic costs of social distancing.

How does incremental improvement in the quality of capital contribute to widening wage inequality? We study the wage effects of imported machinery in Hungary between 1988 and 2004 through the lens of a model. In our model, imported machines are faster and more reliable than old ones. Both characteristics complement worker skill: (i) better workers will be assigned to imported machines, where (ii) their productivity and wage will increase and (iii) their wages will become more unequal. We confirm these predictions in the data. Our estimates imply that about half of the increase in wage inequality among machine operators can be attributed to the increased availability of imported machines. The policy implications of our mechanism are different from the conventional view that certain skills will become obsolete with new technologies.

A widely held view is that openness to international trade leads to higher income volatility, as trade increases specialization and hence exposure to sector-specific shocks. Contrary to this common wisdom, we argue that when country-wide shocks are important, openness to international trade can lower income volatility by reducing exposure to domestic shocks, and allowing countries to diversify the sources of demand and supply across countries. Using a quantitative model of trade, we assess the importance of the two mechanisms (sectoral specialization and cross-country diversification) and show that in recent decades international trade has reduced economic volatility for most countries.

We use firm-level data from Hungary to estimate knowledge spillovers in importing through fine spatial and managerial networks. By identifying from variation in peers’ import experience across source countries, by comparing the spillover from neighboring buildings with a cross-street placebo, and by exploiting plausibly exogenous firm moves, we obtain credible estimates and establish three results. (1) There are significant knowledge spillovers in both spatial and managerial networks. Having a peer which has imported from a particular country more than doubles the probability of starting to import from that country, but the effect quickly decays with distance. (2) Spillovers are heterogeneous: they are stronger when firms or peers are larger or more productive, and exhibit complementarities in firm and peer productivity. (3) The model-implied social multiplier is highly skewed, implying that targeting an import-encouragement policy to firms with many and productive neighbors can make it 26\% more effective. These results highlight the benefit of firm clusters in facilitating the diffusion of business practices.

We introduce location choice in a multi-sector general equilibrium model to study how it affects development accounting. Producers in agriculture, manufacturing and services choose their location to trade off land rents with transport costs to the city center. We show how space affects the aggregate production Function and decompose output per worker into productivity, land per worker, and a term adjusting for sector location. In our model, services are luxury goods. As a result, richer cities have larger service cores, higher service prices, and relatively less output per worker in services. These predictions are broadly consistent with the data. We calibrate our model to data on cities in OECD countries and show that land and location explain 10–30 percentage points of the variation in output per worker.

The goal of this chapter is to summarize the state of the art in research in inter- national trade and global production, and discuss issues relevant to European policymakers. Much of recent research on globalization is primarily empiri- cal, owing to the proliferation of available data. We begin by discussing recent advances in measuring the causes and effects of globalization, and discussing the particular data challenges that have emerged. We then turn to theories of trade and global production, rst summarizing the conclusions on which there is a broad consensus in the eld. We discuss new insights that may be relevant for policy-makers, and open research questions.

Blum, Claro and Horstmann (2016) make two statements about the balls-and-bins model of Armenter and Koren (2014). First, that using firm-level shipment data changes some of our results. Second, that the balls-and-bins model is not an appropriate statistical method. We respond to the first statement and argue that the second statement is unfounded and unrelated to the first. Indeed, the work of Blum, Claro and Horstmann (2016) is a perfect example of how to use balls-and-bins in a rich dataset to spot interesting data patterns.

We estimate a model of importers in Hungarian micro data and conduct counterfactual policy analysis to investigate the effect of imported inputs on productivity. We find that importing all input varieties used in production would increase a firm’s revenue productivity by 22 percent, about half of which is due to imperfect substitution between foreign and domestic inputs. Foreign firms use imports more effectively and pay lower fixed import costs. Our estimates imply that during 1993-2002, a quarter of the productivity growth in Hungary was due to imported inputs. Simulations show that the productivity gain from a tariff cut is larger when the economy has many importers and many foreign firms, implying policy complementarities between tariff cuts, dismantling non-tariff barriers, and FDI liberalization.

We survey the recent economics literature on international trade and global production. We identify five areas where further research would help policy makers: gains from global production sharing, more quantitative analysis of the redistribution effects of globalization, a better understanding of cross-border frictions, and estimates of the side effect of trade. With the goal of providing a research agenda, we identify nineteen specific challenges for measurement, theory, and policy analysis.

Exporters are few—less than one fifth among U.S. manufacturing firms—and are larger than non-exporting firms—about 4-5 times more total sales per firm. These facts are often cited as support for models with economies of scale and firm heterogeneity as in Melitz (2003). We find that the basic Melitz model cannot simultaneously match the size and share of exporters given the observed distribution of total sales. Instead exporters are expected to be between 90 and 100 times larger than non-exporters. It is easy to reconcile the model with the data. However, a lot of variation independent of firm size is needed to do so. This suggests that economies of scale play only a minor role in determining the export status of a firm. We show that the augmented model also has markedly different implications in the event of a trade liberalization. Most of the adjustment is through the intensive margin; and productivity gains due to reallocation are halved.

We build a model of administrative barriers to trade to understand how they affect trade volumes, shipping decisions and welfare. Because administrative costs are incurred with every shipment, exporters have to decide how to break up total trade into individual shipments. Consumers value frequent shipments, because they enable them to consume close to their preferred dates. Hence per-shipment costs create a welfare loss. We derive a gravity equation in our model and show that administrative costs can be expressed as bilateral ad-valorem trade costs. We estimate the ad-valorem equivalent in Spanish shipment-level export data and find it to be large. A 50 percent reduction in per-shipment costs is equivalent to a 9 percentage point reduction in tariffs. Our model and estimates help explain why policy makers emphasize trade facilitation and why trade within customs unions is larger than trade within free trade areas.

A közgazdaságtanban általában a cégekre olyan szereplőkként gondolunk, amelyek csak anonim piaci mechanizmuson keresztül érintkeznek egymással. Ezzel szemben a valóságban a cégek életében fontos szerepet játszanak a gazdaság más, konkrét szereplőivel meglévő kapcsolataik. Tanulmányunkban a vállalati hálózatok közgazdaságtanának elméleti és empirikus irodalmát összegezzük. Az áttekintett művek szerint a vállalati kapcsolatok hálózati jellege pozitív és negatív hatást egyaránt gyakorol a gazdaság egészére. A mikroszintű adatok újszerű vizsgálataiból pedig gazdag kép bontakozik ki a vállalatok viselkedéséről, például a technológiai fejlődés, a hitelezés, az ellátási láncok vagy akár a korrupció szempontjából.

We build a continuous-space theory of trade in which people in a region agglomerate to exploit trading opportunities with another region. The regions are separated by a river, which can be crossed anywhere, but more cheaply at bridges. In the model, most trade takes place via bridges, leading to a key prediction that population density declines with distance to the bridge. We derive additional predictions about the spatial distribution of population and test them on current high-resolution population density data around twelve major American rivers. The data is mostly consistent with our model. In a historical event study of 19th-century bridges on these rivers, we find that the neighborhood of bridges developed faster after the bridge was built. Also, the two sides of the bridge converged in development, highlighting the connecting role of the bridge. More generally, our results suggest that economies of density arising from transport infrastructure can help explain why and where people agglomerate.

Using detailed U.S. and Spanish export data, we document that trade costs of a per-shipment nature are associated with less frequent and larger shipments, i.e. more lumpiness, in international trade. This finding is pervasive across broad product categories, but most apparent for food products, industrial supplies and parts and accessories.

Many of the facts about the extensive margin of trade—which firms export, and how many products sent to how many destinations—are consistent with a surprisingly large class of trade models because of the sparse nature of trade data. We propose a statistical model to account for sparsity, formalizing the assignment of trade shipments to country, product and firm categories as balls falling into bins. The balls-and-bins model quantitatively reproduces the pattern of zero product- and firm-level trade flows across export destinations, and the frequency of multi-product, multi-destination exporters. In contrast, balls-and-bins overpredicts the fraction of exporting firms.

We propose a new theory of the extensive margin of trade based on a standard random-utility, discrete choice model for import demand. Crucially, there are only a finite number of independent purchase decisions each period. Whereas traditional demand systems predict market shares, our model yields instead the probability that a purchase for a given good is supplied by any given country. The model has a rich set of predictions regarding the extensive margin across goods, countries, and time. The underlying probabilistic struc- ture naturally reconciles two commanding observations in the data: there is a large fraction of varieties that are not traded yet the entry and exit rates of commodities are very high. We purse an exhaustive evaluation of the model’s quantitative performance with data on U.S. imports at the HS10 product level over the period 1990-2001. The model reproduces faithfully the cross-section distribution of varieties traded per product along several dimensions. Regard- ing dynamic facts, the model is spot on its predictions on the net change, gross entry and exit of commodities, both by count and weighted by value; as well as survival probabilities and hazard rates. We briefly explore the model’s implications for price changes, using NAFTA as a case study, and welfare gains from new varieties.

Economies at early stages of development are frequently shaken by large changes in growth rates, whereas growth in advanced economies tends to be relatively stable. To explain this pattern, we propose a theory of technological diversification. Production makes use of input-varieties that are subject to imperfectly correlated shocks. Endogenous variety adoption by firms raises average productivity and provides diversification benefits against variety-specific shocks. The volatility decline thus arises as a by-product of the development process. We quantitatively assess the model’s predictions and find that for reasonable parametrizations, it can generate a decline in volatility with development consistent with empirical patterns.

This paper studies the evolution of volatility and its sources in the six Gulf Cooperation Council (GCC) countries from 1970 to the present. We break down volatility into three main components. The first component relates to the volatility caused by sector-specific shocks (e.g. shocks to the oil sector). The second component relates to aggregate country-specific shocks that affect all sectors in the economy (e.g. shocks due to policy or political instability). The third component relates to the covariance between countryspecific and sector-specific shocks (e.g. the degree of pro- or counter-cyclicality of macroeconomic policy vis-à-vis sectoral shocks). We find that volatility has significantly declined in the past four decades, in part due to a higher degree of sectoral diversification in most GCC economies. There is, however, considerable scope for progress, which could stem, for example, from more countercyclical fiscal and monetary policies. Moreover, the global financial crisis has revealed financial-sector vulnerabilities in some GCC countries that need to be addressed in order to limit future economic disruptions.

This policy report asks how the Great Recession impacted European firms. There is a large amount of heterogeneity across countries and firms in the way they were affected by or responded to the crisis. We use the unique firm-level dataset compiled from the EFIGE Survey to uncover this heterogeneity. We find that exporters contracted more than non-exporters, while importers, those that outsource some of their production or have an affiliate suffered less of a decline. This raises an important policy trade-off. On the one hand, while export oriented strategies may improve competitiveness, they also bring about a greater exposure to foreign crisis. The flip side of the same trade-off is that outsourcing to other countries has distinct stabilisation benefits. Dominant firms centrally placed in the technology, trade and ownership network, fared better. Further, we find that firms relying on external finance and experiencing financial constraints to growth experienced a greater sales decline.

We use Hungarian Customs data on product-level imports and exports of manufacturing firms to document that the import price of a particular product varies substantially across buying firms. Importantly, we can relate the level of import prices to firm characteristics such as size, foreign ownership and market power. We develop a theory of "pricing to firm" (PTF), where markups depend on the technology and competitive environment of the buyer. The predictions of the model are confirmed by the data: import prices are higher for firms with greater market power, and for more essential intermediate inputs (with a high share in material costs). We take account of the endogeneity of the buyer's market power with respect to higher import prices. We show that even if unobserved cost heterogeneity within product categories is substantial, it is uncorrelated with our variables of interest. The magnitude of PTF is big: the standard deviation of price predicted by PTF is 21.5 percent.

Why is GDP growth so much more volatile in poor countries than in rich ones? We identify three possible reasons: (i) poor countries specialize in fewer and more volatile sectors, (ii) poor countries experience more frequent and more severe aggregate domestic shocks, and (iii) poor countries' macroeconomic fluctuations are more highly correlated with the shocks affecting the sectors they specialize in. We show how to decompose volatility into these three sources, quantify their contribution to aggregate volatility, and study how they relate to the stage of development. We find that, as countries develop, their productive structure moves from more volatile to less volatile sectors and the volatility of country-specific macroeconomic shocks declines. There is also evidence that the level of specialization follows a U-shaped curve with respect to development; the higher specialization at later stages, however, occurs in low-volatility sectors. We argue that many theories linking volatility and development are not consistent with these findings, and suggest new directions for future theoretical work.

A minimálbér-emelés a munkapiacon közvetlenül hat a keresletre és a kínálatra. Közvetett hatásai azonban túlmutatnak a munkapiacon, ezért azokat egy makromodell keretei között elemezzük. A makromodellben háromféle munkafajta és tíz ágazat van; az egyes ágazatok az árképzésükben és az adó- és járulékelkerülésük szerkezetében különböznek. A minimálbér-emelés munkapiaci feszültséget generál: csökkenti a foglalkoztatást a szakképzetlenek körében. Mivel az árszint az átlagbérnél gyorsabban nõ, és az aggregált foglalkoztatás is csökken, így csökken a reálfogyasztás. A vállalatok profitja és beruházása csökken, ugyanakkor a vállalati profit csökkenése már csekély mértékû adóelkerülés-növeléssel is kiegyensúlyozható. A minimálbér-emelés hatására nõnek ugyan az adóbevételek, viszont a kiadások nagyobb mértékben nõnek, így általában romlik az egyenleg. Aki tehát a minimálbér emelését követeli, annak a felelõs döntés során számolnia kell ezekkel a következményekkel.

In this paper I estimate the labor demand response of Hungarian exporting firms to real exchange rate movements. The use of firm level export/import data enables me to separate two channels through which the exchange rate affects labor demand. First, a real depreciation raises the forint-equivalent price of foreign competitors, thereby boosting demand for the firm’s export and, hence, the firm’s demand for labor. Second, by raising the cost of imported inputs, a depreciation has an adverse effect on employment through the cost channel. A higher marginal cost induces a decrease in production and thus shrinks labor demand. Since firms with higher export share tend to import more, this latter negative effect might offset the former positive one. The cost effect may be dampened if labor and imported inputs are substitutes. I show that the relative importance of the demand and cost effects is industry specific. The short-run exchange rate/employment elasticity stemming from the demand effect is around 0.04. This channel is most pronounced in the case of the Food and tobacco industry. Machinery, on the other hand, exhibits a cost effect of roughly −0.04. Surprisingly, I find no evidence that export share affects exchange rate exposure.