ECON 1077

Step by step guide to the technical report (1,500 words)

IMPORTANT REMINDERS:

1. this assignment should be based on ana analysis of ORBIS industry-level data using Excel.

2. This is not a company report. This is an industry report. An industry is constituted by a group of firms (rather than just one firm) supplying the same product. Depending on the industry the group of firms could be small, with up to 10 firms, or contain hundreds of firms.

3. You must undertake each step of the analysis, rather than rely on a ready-made analysis.

4. Remember that the two countries (years) need to be analysed separately, as you need to compare them. The comparative element is an important criterion in this assignment. This means that if you have chosen, say the UK and Germany, you will have to calculate the measures below separately for each and then compare the results.

5. This is not a statistics module, so providing results without economic interpretation is not enough.

6. Don’t assume that I know what you are doing. This is an assessment. That is, the tool through which I will assess the extent to which you have acquired the necessary knowledge and developed the required skills. Be fully transparent on your choices about data and measures. Justify each choice you make, ideally on some objective ground.

Intro:

You may want to provide a brief intro about your industry worldwide before focusing on the two specific markets of your choice. Why is it important for the two markets chosen? Perhaps you could provide some figures that show its importance, for example how much it contributes to GDP in percentage terms, or to total employment, or total exports?

Industry identification:

Make sure your industry is clearly identified/identifiable based on the NACE Rev.2 Indicate exact digits and provide a description of that product category.

Firm size distribution:

1. For each country (or years) chosen, you need to provide what is the percentage of small, medium, large, very large firms.

2. Explain whether you are defining firm size based on number of employees or turnover. It would be preferable for this to be the number of employees, but there may be issues with your data. If you have some missing data there are a few things we can do, as discussed in the WK 11 tutorial (recorded and available in the Panopto section). However, if you have too many missing data in the employee’s column, then it may be better to use Turnover as a criterion to for firm size. Use an established criterion for firm size, such as the one provided by the OECD or national Statistical offices. You may even come up with your own classification to introduce some granularity in the case in which you only have very large firms, but also in this case demonstrate awareness of established approaches and explain in detail your classification also explaining why you are using it.

3. Use tables and figures to show in a clear and engaging way how the two countries (years) compare in terms of firm size distribution.

4. Interpret the results: Do the countries (years) differ in terms of their firm size distribution? What are the possible implications for the economy and society of having a larger percentage of larger (smaller) firms? For example see this blog entry by Dr Helena Vieira titled ‘In a recession large firms are more likely than SMEs to resort to personnel cuts”, LSE.

Descriptive statistics:

1. What is the max and min firm size in terms of both number of employees and turnover?

2. What is the mean turnover? The median? How much dispersion (use the standard deviation) is there?

3. What is the average number of workers, the median and the standard deviation?

4. Is there a correlation between turnover and number of employees? That is, do firms with more employees also tend to have higher turnover? (NOTE, correlation doesn’t imply causation, so we cannot establish based on a simple correlation whether, for example, having more employees causes the firm to have more turnover). Excel will calculate the correlation. Use a scatter plot to show whether there is correlation.

5. Are there outliers? What happens to your mean and standard deviation once the outliers are removed?

6. Is the distribution skewed (for example you tend to have a few very large firms and many very small firms)?

7. Use a table to represent in an effective manner all these descriptive measures and to allow comparison of these measures across the two countries (years)

8. Interpretation: Taken all together, what do these measures tell us from an economic perspective? Is the industry in one country experiencing higher revenues than the other? Are all the firms in a country equal when it comes to turnover? Do we have any firm that is significantly under-performing or over-performing?

Seller concentration analysis:

1. Calculate the total turnover in each country (year)

2. Calculate the market share for each firm in each country (year)

3. Choose a suitable CRn for your industry and calculate it for each country (year) separately

4. Calculate the HHI for each country (year)

5. Compare the CRN and the HHI in each market

6. Calculate the RE and/or the Variance of the logs in each country (year)

7. Interpret the results from these measures. Do the various measures provide consistent results? If not, could that be related to the way the different measures are constructed? What exact information is each measure conveying? Are they comparable?

8. What can we conclude with respect to the level of concentration of your chosen industry in each of the countries (year) chosen? Is this an industry with high, medium, or low concentration? What implications could this have for other firms, consumers, and society?

9. What factors could contribute to explaining the level of seller concentration in the industry?

Trends in the industry:

– What has been/will be in your view the impact of Covid-19/Brexit/climate emergency or any other event, trend or shift that may have a significant impact on your industry?

– Can you derive any policy recommendations from your analysis?