Professor Juan Carluccio
Juan Carluccio joined Surrey Business School in 2013. He holds a PhD in Economics from Ecole des Hautes Etudes en Sciences Sociales and Paris School of Economics, an Msc Economics from the LSE and a Bachelor in Economics from the University of Buenos Aires. From 2010 he works as researcher in the Bank of France, and his previous working experience includes the Ministry of Finance of Argentina, the WTO and the headquarters of Nestle SA. Juan has previously taught at Sorbonne University and Paris School of Economics and held postdoc positions at College de France and the CEP at LSE.
- International Trade
- Multinational firms, outsourcing, offshoring
- Trade and finance
- Labor market effects of trade
- International Trade
- Comparative Country Studies
09 MAR 2022
Surrey Business School and Banque De France examine the economic resilience of a post-Covid world
In the media
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 relevance in both developed and developing economies. In this paper, we attempt to fill this gap. We develop an empirical study on the impact of the WACC on private firms' investment rates. We exploit accounting information on a panel of around 1700 French private corporate groups in the non-farm, non-financial sectors, covering the period 2005–2015. We overcome the challenge posed by the lack of observable information about the cost of equity for private firms by developing a methodology that relies on estimates for comparable public firms. We find that a one-standard deviation increase in the WACC (2 percentage points) leads to a 0.7 percentage point decrease in the investment rate the following year. Increases in both components of the WACC, namely the cost of debt and the cost of equity, are associated with lower investment rates. A back-of-the-envelope calculation suggests that the heightened WACC following the euro area crises reduced the aggregate corporate investment rate of French private firms by a cumulative 1.6 percentage points over 2009–2015.
Using French manufacturing firm-level data for the years 1996-2007, we uncover a novel set of stylized facts about offshoring behavior: (i) Low-productivity firms ("non-importers") obtain most of their inputs domestically. (ii) Medium-productivity firms offshore skill-intensive inputs to skill-abundant countries and are more labor intensive in their domestic production than non-importers. (iii) Higher-productivity firms additionally offshore labor-intensive inputs to labor-abundant countries and are more skill intensive than non-importers. We develop a model in which heterogeneous firms, subject to fixed costs, can offshore intermediate inputs of different skill intensities to countries with different skill abundance. This leads to endogenous within-industry variation in domestic skill intensities. We provide econometric evidence supporting the factor-proportions channel through which reductions in offshoring costs to labor-abundant countries have significantly increased firm-level skill intensities of French manufacturers.
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.
Does foreign entry improve host country productivity and welfare? Previous studies have looked at the role of backward linkages with domestic suppliers and their effects on domestic competitors. 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 that adopt the foreign technology, and negatively affects firms using the domestic technology. Technological incompatibilities reduce the welfare gains from openness to FDI, but this negative effect can be overcome by domestic technology adoption. The model's predictions are consistent with the stylized facts drawn from the empirical literature on FDI spillovers.
We develop a simple model to study the interactions between a supplier's financial constraints and contract incompleteness in a vertical relationship. Applied to the analysis of multinational firms' sourcing strategies, the model predicts: (i) that complex and specific inputs are more likely to be sourced from financially developed countries and (ii) that multinationals are more likely to integrate suppliers located in countries with poor financial institutions, especially when trade involves complex goods. These predictions are examined and validated using firm-level trade data on multinational firms with operations in France.
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.
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.