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Mr. Adil Mohommad
The employment impact of environmental policies is an important question for policy makers. We examine the effect of increasing the stringency of environmental policy across a broad set of policies on firms’ labor demand, in a novel identification approach using Worldscope data from 31 countries on firm-level CO2 emissions. Drawing on evidence from as many as 5300 firms over 15 years and the OECD environmental policy stringency (EPS) index, it finds that high emission-intensity firms reduce labor demand upon impact as EPS is tightened, whereas low emission-intensity firms increase labor demand, indicating a reallocation of employment. Moreover, tightening EPS during economic contractions appears to have a positive effect on employment, other things equal. Quantifications exercises show modest positive net changes in employment for market-based policies, and modest negative net changes for non-market policies (mainly emission quantity regulations) and for the combined aggregate EPS. Within market-based policies, the percent decline in employment in high-emission firms (correspondingly the increase in low-emission firms) for a unit change in a policy index is smallest (largest) for trading schemes (“green” certificates, and “white” certificates)—although stringency is not comparable across indices. Finally, the employment effects of EPS are not persistent.
Mr. Adil Mohommad

-standard deviation tightening in aggregate EPS would result in employment losses of about 1 percent of aggregate employment. Such a quantification also shows that tighter market EPS results in a modest net employment gain while tighter non-market EPS in results in a modest net loss. (iv) The estimated magnitudes of employment effects differ across different types of market and non-market policies. For example, for market-based trading schemes, the positive employment effects for low-emission intensity firms is relatively large, and the negative employment effects on high

Mr. Adil Mohommad

. Abstract The employment impact of environmental policies is an important question for policy makers. We examine the effect of increasing the stringency of environmental policy across a broad set of policies on firms’ labor demand, in a novel identification approach using Worldscope data from 31 countries on firm-level CO2 emissions. Drawing on evidence from as many as 5300 firms over 15 years and the OECD environmental policy stringency (EPS) index, it finds that high emission-intensity firms reduce labor demand upon impact as EPS is tightened, whereas low emission-intensity

International Monetary Fund. European Dept.

clustered at the sector level in brackets. *** p<0.01, ** p<0.05, * p<0.1. 24. Greater knowledge intensity is associated with a stronger investment response to demand . Figure 7 illustrates the predicted effect of demand on investment for high and low knowledge intensity firms in htkis sectors, overlaid on the sample distribution of real sales growth which is roughly symmetric. For these sectors, the investment response to demand is significantly boosted for high knowledge-intensive firms. A 10 percent rise in sales growth is associated with a 5 percentage point

Mr. Juan Zalduendo

were tested but found not to be statistically significant. 6 The sector-related binary dummies identify (i) low labor skill (LL) and low capital intensity (LK) firms, (ii) high labor skill (HL) and low capital intensity firms, and (iii) high labor skill and high capital intensity (HK) firms. 7 The data in the figure are different from the specification of the dummy variable; the former reflect sector averages for labor skill and capital intensity over the whole period, the latter reflects the labor skill and capital intensity of firms for each year in the

International Monetary Fund. European Dept.
This Selected Issues paper analyzes household balance sheet structure in Denmark and sensitivity to rising rates. Households in Denmark have gotten considerably wealthier in recent decades. High household assets, in particular in the mandatory pension system and housing, provide stability by funding future consumption and protecting against shocks. The high, but mostly illiquid, assets have a counterpart, however, in the high household debt, as households often need to borrow to consume or buy property. The resulting combination of large assets and liabilities on household balance sheets make the Danish economy sensitive to interest-rate changes. Sudden increases in interest rates can create macroeconomic instability via their impact on the debt service of households and knock-on effects on consumption.
Mr. Juan Zalduendo
This paper reviews developments in corporate performance in the FYR Macedonia during the 1990s. The paper finds substantial differences in performance between surviving old firms and nimbler new ones. The paper reviews factors that facilitated restructuring among surviving firms, and concludes that private sector ownership, hard budget constraints, and market-based economic institutions have served to strengthen corporate performance. The paper also shows that the predominance of insider privatization and the resulting low ownership concentration is one of the reasons for the poor performance of surviving firms.
Mai Dao, Ms. Camelia Minoiu, and Mr. Jonathan David Ostry
We examine the relationship between real exchange rate depreciations and indicators of firm performance using data for a sample of more than 30,000 firms from 66 (advanced and emerging market) countries over the 2000-2011 period. We show that depreciations boost profits, investment, and sales of firms that are more financially-constrained and have higher labor shares. These findings are consistent with the view that depreciations boost internal financing opportunities by reducing real wages, thereby spurring investment. We show that these effects on firm performance are enduring, including in the market valuation of firms.
Ms. Anna Ilyina and Roberto M. Samaniego
The benefits from financial development are known to vary across industries. However, no systematic effort has been made to determine the technological characteristics that are shared by industries that tend to grow relatively faster in more financially developed countries. This paper explores a range of technological characteristics that might underpin differences across industries in the need or the ability to raise external funding. The main finding is that industries that grow faster in more financially developed countries tend to display greater R&D intensity or investment lumpiness, indicating that well-functioning financial markets direct resources towards industries that grow by performing R&D.