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We study the effect of external financing constraint on job creation in emerging markets and developing countries (EMDC) at the firm level by looking at a specific transmission channel - the working capital channel. We develop a simple model to illustrate how the need for working capital financing of a firm affects the link between financial constraint and the firm's job creation. We show that the effect of relaxing financial constraint on job creation is greater the smaller the firm scale and the more labor-intensive its production structure. We use the World Bank Enterprise Surveys data to test the main predictions of the model, and find strong evidence for the working capital channel of external finance on firm employment.

Labor --- Macroeconomics --- Economic Theory --- Firm Behavior: Empirical Analysis --- Production --- Cost --- Capital and Total Factor Productivity --- Capacity --- Financial Institutions and Services: General --- Labor Force and Employment, Size, and Structure --- Labor Demand --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Labor Economics: General --- Financial Economics --- Wages, Compensation, and Labor Costs: General --- Labour --- income economics --- Economic theory & philosophy --- Job creation --- Financial frictions --- Labor share --- Economic theory --- Labor economics --- Economic forecasting --- United States --- Income economics

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Productivity growth in Italy has been persistently anemic and has lagged that of the euro area over the period 1999-2015, while the indebtedness of its corporate sector has increased. Using the ORBIS firm-level database, this paper studies the long-term impact of persistent corporate-debt accumulation on the productivity growth of Italian firms and investigates whether total factor productivity growth varies with the level of corporate indebtedness. We employ a novel estimation technique proposed by Chudik, Mohaddes, Pesaran, and Raissi (2017) to account for dynamics, bi-directional feedback effects, cross-firm heterogeneity, and cross-sectional dependence arising from unobserved common factors (for example, oil price shocks, labor and product market frictions, and stance of global financial cycle). Filtering out the effects of unobserved common factors and controlling for firmspecific characteristics, we find significant negative effects of persistent corporate debt build-up on total factor productivity growth, and weak evidence of a threshold level of corporate debt, beyond which productivity growth drops off significantly. Our results have strong policy implications, for example the design of the tax system should discourage persistent corporate debt accumulation, and effective and timely frameworks to reduce corporate debt overhangs are essential.

Exports and Imports --- Industries: Manufacturing --- Production and Operations Management --- Production --- Cost --- Capital and Total Factor Productivity --- Capacity --- Macroeconomics: Production --- International Lending and Debt Problems --- Industry Studies: Manufacturing: General --- Human Capital --- Skills --- Occupational Choice --- Labor Productivity --- 'Panel Data Models --- Spatio-temporal Models' --- Firm Behavior: Empirical Analysis --- Macroeconomics --- International economics --- Manufacturing industries --- Total factor productivity --- Productivity --- Debt burden --- Manufacturing --- Labor productivity --- External debt --- Economic sectors --- Industrial productivity --- Debts, External --- Italy --- Panel Data Models --- Spatio-temporal Models

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Nonviable “zombie” firms have become a key concern in China. Using novel firm-level industrial survey data, this paper illustrates the central role of zombies and their strong linkages with stateowned enterprises (SOEs) in contributing to debt vulnerabilities and low productivity. As a group, zombie firms and SOEs account for an outsized share of corporate debt, contribute to much of the rise in debt, and face weak fundamentals. Empirical results also show that resolving these weak firms can generate significant gains of 0.7–1.2 percentage points in long-term growth per year. These results also shed light on the ongoing government strategy to tackle these issues by evaluating the effects of different restructuring options. In particular, deleveraging, reducing government subsidies, as well as operational restructuring through divestment and reducing redundancy have significant benefits in restoring corporate performance for zombie firms.

Exports and Imports --- Financial Risk Management --- Macroeconomics --- Production and Operations Management --- Firm Behavior: Empirical Analysis --- Nonprofit Organizations and Public Enterprise: General --- Macroeconomics: Production --- Production --- Cost --- Capital and Total Factor Productivity --- Capacity --- International Financial Markets --- International Lending and Debt Problems --- Public ownership --- nationalization --- Finance --- International economics --- Public enterprises --- Productivity --- Total factor productivity --- Asset management --- Debt burden --- Economic sectors --- Asset and liability management --- External debt --- Government business enterprises --- Industrial productivity --- Asset-liability management --- Debts, External --- China, People's Republic of --- Nationalization

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This paper analyzes the effects of selected structural reforms on output and employment in the short and medium term. It uses a comprehensive cross-country firm-level dataset covering both advanced and emerging market economies over the period 2003-2014. In line with previous studies, it finds that structural reforms have in general a positive impact on output and employment in the medium term. Furthermore, the paper also assesses whether the impact of structural reforms varies with firm-specific characteristics, such as size, leverage, profitability, and sector. We find evidence that firm characteristics do influence the effectiveness of structural reforms. These findings have relevant policy implications as they help policymakers tailor the design of structural reforms to maximize their payoffs, taking into account their heterogeneous impact on firms.

Finance: General --- Labor --- Macroeconomics --- Production and Operations Management --- Economics of Regulation --- Microeconomic Policy: Formulation --- Implementation --- Evaluation --- Firm Behavior: Empirical Analysis --- Institutions and the Macroeconomy --- General Financial Markets: General (includes Measurement and Data) --- Labor Economics Policies --- Macroeconomics: Production --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Labour --- income economics --- Finance --- Structural reforms --- Commodity markets --- Labor market reforms --- Production growth --- Macrostructural analysis --- Financial markets --- Production --- Productivity --- Commodity exchanges --- Manpower policy --- Economic theory --- Industrial productivity --- Bosnia and Herzegovina --- Income economics

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In this paper we demonstrate the importance of distinguishing capital goods tariffs from other tariffs. Using exposure to a quasi-natural experiment induced by a trade reform in Colombia, we find that firms that have been more exposed to a reduction in intermediate and consumption input or output tariffs do not significantly increase their investment rates. However, firms’ investment rate increase strongly in response to a reduction in capital goods input tariffs. Firms do not substitute capital with labor, but instead also increase employment, especially for production workers. Reduction in other tariff rates do not increase investment and employment. Our results suggest that a reduction in the relative price of capital goods can significantly boost investment and employment and does not seem to lead to a decline in the labor share.

Exports and Imports --- Labor --- Taxation --- International Economics --- Industries: Manufacturing --- Firm Behavior: Empirical Analysis --- Investment --- Capital --- Intangible Capital --- Capacity --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Trade Policy --- International Trade Organizations --- Empirical Studies of Trade --- Trade: General --- Industry Studies: Manufacturing: General --- Public finance & taxation --- International economics --- International trade & commerce --- Labour --- income economics --- Manufacturing industries --- Tariffs --- Imports --- Trade facilitation --- Manufacturing --- Taxes --- International trade --- Revenue administration --- Economic sectors --- Tariff --- Customs administration --- Economic theory --- Colombia