Firm Heterogeneity and Regional Business Cycles Differentials

Roberto Basile (), Sergio de Nardis and Carmine Pappalardo

ERSA conference papers from European Regional Science Association

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

Date: 2012-10
New Economics Papers: this item is included in nep-bec and nep-mac
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Journal Article: Firm heterogeneity and regional business cycles differentials (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:wiw:wiwrsa:ersa12p84

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