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How is corporate investment affected by the weighted average cost of capital (WACC)? Since existing studies focus on listed firms, little is known of the case of private firms, in spite of their re...

Le defaut sur la dette souveraine en 2001 a ouvert pour l’Argentine une periode de relations financieres complexes avec le reste du monde et riche en changements de politique economique. Raisonnant en termes des determinants d’offre et de demande de financement externe, cet article montre que l’acces du pays aux marches internationaux de capitaux a ete abordable dans certaines periodes, notamment apres la restructuration de la dette en 2005. D’ailleurs certains episodes de diminution des flux de capitaux entrants nets n’ont pas ete dus a des restrictions d’offre mais a une volonte ferme de desendettement des autorites argentines, couplee a la levee de barrieres reglementaires. Le renforcement a partir de 2011 de certaines politiques « non conventionnelles », comme la monetisation du deficit et le controle des changes, decoule certainement de cette penurie de financement en devises. Or d’autres facteurs plus « structurels » le sous-tendent egalement : une quete continue d’autonomie dans la politique economique via l’autarcie financiere et la « peur » seculaire de devaluer le peso et de le laisser flotter, de crainte qu’il alimente les anticipations d’inflation.Classification JEL : E58, F30, F32, G01, O54.

We provide a quantitative assessment of the impact of imports from low-wage countries (LWCs) on CPI inflation in France during 1994-2014, using detailed micro data on imports and exports. The share of imports from low-wage countries in consumption increased from about 2% to 7%, and resulted in a negative impact on CPI inflation of about 0.17 pp per year on average. This effect decomposes in three channels. 1) The substitution channel, capturing the replacement of domestic production by goods from LWCs, accounts for almost -0.05 pp. 2) The rise in the proportion of LWC goods in total imports weighed down on imported inflation. This channel reduced French CPI inflation by 0.06 pp per year. 3) Instrumental variable estimation of the competition channel at the product level shows that the increase in the market share of LWCs in French expenditures led to a negative effect of 0.06 pp on CPI inflation.

We exploit a new dataset of consolidated balance sheets for some 1,850, mostly nonlisted, French corporate groups, in order to investigate the relationship between corporate investment and the cost of capital. Our empirical model is motivated by a standard Q-theory of investment and relates the rate of investment to a proxy for profits, the cost of capital and firm- and sector-level controls. We notably construct firm-level measures of the weighted average cost of capital (WACC) that account for industry-specific values of the cost of equity and reflect the actual capital structure of firms. We find a confirmation that a high WACC drags down investment: a one SD increase in the real WACC (+2 pp) is associated on average with a reduction by 0.65 pp in the investment rate. The effect is somewhat larger for manufacturing firms and when firms are highly leveraged or more dependent on external finance. We also investigate the impact of lower competition or higher uncertainty on business investment and do not find evidence in support of any role of these two factors in France in recent years.

We develop a simple model to study how globalization affects wage inequalities. The model features three goods, one is an “international” good, and two are local non-tradable goods. The non-tradable goods are produced by local labor, either skilled or unskilled, while labor of all types and all origins contribute to the production of the international good. We find that increasing participation of the South in global production and consumption lead to an increase in wage inequalities in the North. Higher South integration into global value chains reduces North-South wage inequalities.

International audience; Do variations in labor market institutions affect the cross-border organization of the firm? Using firm-level data on multinationals located in France, we show that firms are more likely to outsource the production of intermediate inputs to external suppliers when importing from countries with high worker bargaining power. This effect is stronger for firms operating in capital-intensive and differentiated industries. We propose a theoretical mechanism that rationalizes these findings. The fragmentation of the value chain weakens the workers' bargaining position, by limiting the amount of revenues that are subject to union extraction. The outsourcing strategy reduces the share of surplus that is appropriated by the union, which enhances the firm's incentives to invest. Since investment creates relatively more value in capital-intensive industries, increases in worker bargaining power are more likely to be conducive to outsourcing in those industries. Overall, our findings suggest that global firms choose their organizational structure strategically when sourcing intermediate inputs from markets where worker bargaining power is high.

We estimate the impact of international trade on wages using data for French manufacturing firms. We instrument firm-level trade flows with firm-specific instrumental variables based on world demand and supply shocks. Both export and offshoring shocks have a positive effect on wages. Exports increase wages for all occupational categories while offshoring has heterogeneous effects. The impact of trade on wages varies across bargaining regimes. In firms with collective bargaining, the elasticity of wages with respect to exports and offshoring is higher than in firms with no collective bargaining. Wage gains associated with collective bargaining are similar across worker categories. Keywords: exports, offshoring, firm-level wages, collective bargaining.

We present a factor-proportions trade model in which heterogeneous firms can offshore intermediate inputs subject to fixed offshoring costs. In the skill-abundant country, high-productivity firms offshore a larger range of labor-intensive inputs to the labor-abundant countries than low-productivity firms. Differently from the traditional versions of factor-proportions trade theory, Heckscher-Ohlin forces operate at the within-industry level, leading to endogenous variation in skill intensity across firms that is positively correlated with firm productivity. Using French firm-level data for the years 1996 to 2007, we provide empirical support for the factor proportions channel through which offshoring to labor-abundant countries affects the firm-level skill intensities of French manufacturers.

This report analyses and reviews the corporate finance structure of non-financial corporations (NFCs) in the euro area, including how they interact with the macroeconomic environment. Special emphasis is placed on the crisis that began in 2007-08, thus underlining the relevance of financing and credit conditions to investment and economic activity in turbulent times. When approaching such a broad topic, a number of key questions arise. How did the corporate sector’s capital structure, internal and external financing sources, and its tendency to leverage, evolve in the euro area over the last decade and in the run-up to the financial crisis in particular? Did these developments contribute to and/or exacerbate the financial crisis? Did the corporate sector’s response to various shocks and vulnerabilities support or encumber the euro area economy, both during the financial crisis and in its aftermath? JEL Classification: E0, E5

Does foreign entry improve host country productivity and welfare? Existing studies have focused on the role of technology spillovers and backward linkages with domestic suppliers. In this paper, we study how these externalities are affected by technological incompatibilities between foreign and domestic technologies. When foreign technologies require specialized inputs, some local suppliers self-select into production for multinational firms. A decrease in the cost of inputs compatible with the foreign technology has heterogeneous effects. It benefits foreign firms and the most productive downstream domestic firms adopting the foreign technology, and negatively affects firms using the domestic technology. The impact on welfare is positive when we allow for endogenous entry in both upstream and downstream industries, but welfare gains can be negatively related to observed foreign presence at equilibrium. Our model can also reproduce various stylized facts drawn from the empirical literature on vertical and horizontal FDI spillovers.

We develop a simple model to study the interactions between a supplier’s financial constraints and contract incompleteness in a vertical relationship. Production complexity increases the extent of contract incompleteness and the hold-up problem, which generates a cost when the supplier needs financial participation from the downstream firm. Vertical integration alleviates the impact of financial constraints but reduces the supplier’s incentives. We apply the model to an analysis of multinational firms’ sourcing strategies and predict that (1) complex and specific inputs are more likely to be sourced from financially developed countries and (2) multinationals are more likely to integrate suppliers located in countries with poor financial institutions, especially when trade involves complex goods. We examine and validate these predictions using firm-level trade data on multinational firms with operations in France. We provide evidence that financial development generates a comparative advantage in the supply of complex goods. Moreover, we find higher shares of intra-firm imports of complex inputs from countries with a lower level of financial development. The findings are robust to different measures of complexity and specificity, and are not driven by industry differences in fixed costs or traditional measures of external financial dependence. Quantitatively, we find that financial development is as important as contract enforcement in alleviating hold-up problems.

Empirical studies provide evidence of positive spillovers from multinational firms to upstream suppliers coupled with negative spillovers to firms in the same industry. This paper shows that these empirical regularities can be rationalized in a model with incompatibilities between foreign and domestic technologies. When foreign technologies require specialized inputs, some local suppliers self-select into production for multinational firms. This "technological segmentation" in the upstream industry magnifies the productivity advantage of multinationals by restricting backward and forward linkages to groups of firms using the same technology. In this setting we study the role of heterogeneity among domestic firms. We show that only the best suppliers adopt the foreign technology and cater to multinationals. In the long run, technology adoption by the most productive downstream firms creates complementarities with multinationals that can offset the negative impact of segmentation., Les études empiriques mettent en évidence des retombées positives de la présence de multinationales sur les fournisseurs (de l'industrie amont) qui s'accompagnent de retombées négatives pour les entreprises du même secteur. Cet article montre que ces régularités empiriques peuvent être rationalisées dans un modèle d'incompatibilité entre technologie étrangère et technologie nationale. Lorsque les technologies étrangères exigent des biens intermédiaires spécialisés, certains fournisseurs locaux choisissent de se spécialiser dans la production à destination des entreprises multinationales. C'est cette segmentation technologique dans l'industrie en amont qui amplifie l'avantage de productivité des multinationales en limitant les transferts en amont et en aval entre groupes d'entreprises utilisant la même technologie. Dans ce cadre, en étudiant le rôle de l'hétérogénéité entre les entreprises nationales, nous montrons que seuls les meilleurs fournisseurs adoptent la technologie étrangère afin de servir le marché des multinationales. Dans le long terme, l'adoption de la technologie étrangère par les entreprises de l'industrie aval les plus productives crée des complémentarités avec les multinationales qui peuvent contrebalancer l'impact négatif de la segmentation.

Do variations in labor market institutions across countries affect the cross-border organization of the firm? Using firm-level data on multinationals located in France, we show that multinational firms are more likely to import intermediate inputs from external independent suppliers instead of importing from their own subsidiaries when importing from countries with empowered unions. Moreover, this effect is stronger for firms operating in capital-intensive industries. We propose a theoretical mechanism that rationalizes these findings. The fragmentation of the value chain weakens the union’s bargaining position, by limiting the amount of revenues that are subject to union extraction. The outsourcing strategy reduces the share of surplus that is appropriated by the union, which enhances the firm’s incentives to invest. Since investment creates relatively more value in capital-intensive industries, increases in union power are more likely to be conducive to outsourcing in those industries. Overall, our findings suggest that multinational firms use their organizational structure strategically when sourcing intermediate inputs from unionized markets.

Does foreign entry improve host country productivity and welfare? Existing studies have focused on the role of technology spillovers and backward linkages with domestic suppliers. In this paper, we study how these externalities are affected by technological incompatibilities between foreign and domestic technologies. When foreign technologies require specialized inputs, some local suppliers self-select into production for multinational firms. A decrease in the cost of inputs compatible with the foreign technology has heterogeneous effects. It benefits foreign firms and the most productive downstream domestic firms adopting the foreign technology, and negatively affects firms using the domestic technology. The impact on welfare is positive when we allow for endogenous entry in both upstream and downstream industries, but welfare gains can be negatively related to observed foreign presence at equilibrium. Our model can also reproduce various stylized facts drawn from the empirical literature on vertical and horizontal FDI spillovers.