My research interests are Marcoeconomics, Political Economy, Industrial Organization.
Working papers and publications:
Occupational Choice, Human Capital, and Financial Constraints with Rui Castro, Working Paper, March 2017. We study the aggregate productivity effects of firm-level financing frictions. Credit constraints affect production and household-level schooling decisions. In turn, entrepreneurial schooling decisions impact firm-level productivities, whose cross-sectional distribution becomes endogenous. In anticipation of future constraints, entrepreneurs under-invest in schooling. Frictions lower aggregate productivity because talent is misallocated across occupations, and capital misallocated across firms. Firm-level productivities are also lower due to schooling distrortions. These effects combined account for between 22 and 44 percent of the U.S.-India aggregate productivity difference, depending on the calibration. Schooling distortions are the major source of aggregate productivity differences.
Do Multi-plant Firms Reduce Misallocation? Evidence from Canadian Manufacturing Journal of Industrial Economics, 2017, 65(2), pp. 275-308. Published version here (requires subscription). Using Canadian plant-level data, this paper shows that, depending on the industry, the differences in the average plant-level productivity and cross-plant allocation of resources between multi-plant and single-plant firms account for 1 to 15 per cent of the industry-level TFP. A large part of this contribution stems from more efficient cross-plant allocation of resources, measured by the covariance between plant size and productivity, in the pool of plants in multi-plant firms compared to the pool of plants in single-plant firms. There is less dispersion in the marginal products of the inputs, and thus less misallocation, in industries in which multi-plant firms account for a larger share of output. The patterns found in the cross-plant distribution of productivity and size are also consistent with better allocative efficiency among plants in multi-plant firms than among plants in single-plant firms.
Financial Frictions, Internal Capital Markets, and the Organization of Production Review of Economic Dynamics, 2015, 18(3), pp. 502-522. Published version here (requires subscription). Online appendix here, program codes and data sets here. This paper evaluates the role of internal capital markets in business groups for allocating capital to its most productive use. A quantitative model in which business groups arise endogenously as substitutes for imperfect credit markets explains several stylized facts about establishment size distribution and cross-firm productivity differences. The impact of internal capital markets on economic development is positive: shutting down business conglomeration in the model calibrated to the Canadian economy would lead to a 3 percent reduction in output per capita. These losses are higher in economies with less developed financial markets.
Financial Contracts and the Political Economy of Investor Protection American Economic Journal: Macroeconomics, 2012, 4(4), pp. 163-197. Published version with an online appendix, program codes and data sets here (requires subscription). This paper studies the joint dynamics of investor protection and economic development in a political economy model with capital accumulation and occupational choice. Less investor protection implies higher costs of external financing for entrepreneurs. This excludes poorer agents from entrepreneurship, increasing the profits of the remaining entrepreneurs. The main determinants of investor protection policy preferences are the agent's net worth and the expected return from entrepreneurship. When the policy is chosen by the simple majority rule, the model generates several implications consistent with the observed variation of investor protection over time and across countries.
Cheap Talk, Gullibility, and Welfare in an Environmental Taxation Game with Herbert Dawid and Christophe Deissenberg, published in "Dynamic Games: Theory and Applications", 2005, Haurie and Zaccour (eds.), Springer, pp. 175-192. We consider a simple dynamic model of environmental taxation that exhibits time inconsistency. There are two categories of firms, Believers, who take the tax announcements made by the Regulator to face value, and Non-Believers, who perfectly anticipate the Regulator's decisions, albeit at a cost. The proportion of Believers and Non- Believers changes over time depending on the relative profits of both groups. We show that the Regulator can use misleading tax announcements to steer the economy to an equilibrium that is Pareto superior to the solutions usually suggested in the literature. Depending upon the initial proportion of Believers, the Regulator may prefer a fast or a low speed of reaction of the firms to differences in Believers/Non-Believers profits.
Work in progress:
Tuition Subsidies as a Tool for Economic Development, with Rui Castro.