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Firm Heterogeneity and Regional Business Cycles Differentials

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  • Roberto Basile
  • Sergio de Nardis
  • Carmine Pappalardo

Abstract

This study represents a first attempt to empirically analyze the role of firm heterogeneity in regional business cycle behaviour. Working with monthly Italy’s firms data and estimating a random effects ordered probit model, we first document sizable asymmetries in Northern and Southern firms business cycles positively related to the intensity of the national cycle: firms located in the South are more likely to reduce production levels than firms located in the North in periods of business cycle expansion and vice versa. Then, we explore the role of sectoral mix and several firm-specific factors (firm size, export propensity, liquidity constraints, demand conditions, capacity utilization and expectations) in explaining regional disparities in business cycle fluctuations. Results suggest that North-South differences in sectoral composition do not help explain the diverging behaviour of Southern firms, while by controlling for firm heterogeneity we are able to capture large part of regional business cycles differences. JEL codes: D21, E32, R10 Keywords: Regional business cycle, firm heterogeneity, random effects ordered probit

Suggested Citation

  • Roberto Basile & Sergio de Nardis & Carmine Pappalardo, 2012. "Firm Heterogeneity and Regional Business Cycles Differentials," ERSA conference papers ersa12p84, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa12p84
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    Cited by:

    1. Carlo Gianelle & Letizia Montinari & Simone Salotti, 2017. "Interregional Trade, Specialization, and the Business Cycle: Policy Implications for the EMU," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 13(1), pages 1-27, May.
    2. Jürgen Bierbaumer & Werner Hölzl, 2015. "Business Cycle Dynamics and Firm Heterogeneity. Evidence for Austria Using Survey Data," WIFO Working Papers 504, WIFO.
    3. Alessandro Girardi & Marco Ventura, 2021. "Measuring credit crunch in Italy: evidence from a survey-based indicator," Annals of Operations Research, Springer, vol. 299(1), pages 567-592, April.
    4. Wenzel, Lars, 2013. "Forecasting regional growth in Germany: A panel approach using business survey data," HWWI Research Papers 133, Hamburg Institute of International Economics (HWWI).
    5. Girardi, Alessandro & Ventura, Marco & Margani, Patrizia, 2018. "An Indicator of Credit Crunch using Italian Business Surveys," MPRA Paper 88839, University Library of Munich, Germany.
    6. Soomi Lee & Shu Wang, 2023. "Impacts of political fragmentation on inclusive economic resilience: Examining American metropolitan areas after the Great Recession," Urban Studies, Urban Studies Journal Limited, vol. 60(1), pages 26-45, January.
    7. Petraglia, Carmelo & Pierucci, Eleonora & Scalera, Domenico, 2020. "Interregional redistribution and risk sharing through public budget. The case of Italy in times of crisis (2000–2016)," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 162-169.
    8. Fazio, Giorgio & Piacentino, Davide, 2018. "Convergence analysis for hierarchical longitudinal data," Economic Modelling, Elsevier, vol. 73(C), pages 89-99.

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    More about this item

    Keywords

    regional business cycle; firm heterogeneity; random effects ordered probit;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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