Firms in the developed world rely heavily on bank credit. But firms in developing countries, and particularly those in Latin America, rely much more heavily on trade credit--i.e. credit from their suppliers --and that has immense implications for pricing decisions and inflation. Most studies that have looked at inflation in emerging economies have examined the role of domestic … [Read more...] about How the Financing of Firms Affects Prices
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Firms’ Productivity and Workers’ Wages
Does the productivity of your firm affect your pay? Standard microeconomic theory says no. Firms have no power over setting wages when markets are perfectly competitive. All they can do is hire as many workers as they need for each type of labor at their respective market wages. Clearly, this view runs contrary to popular perception. Some firms pay higher wages than others. In … [Read more...] about Firms’ Productivity and Workers’ Wages