Bruno Pellegrino 𝄪 Research

Bruno Pellegrino and Geoffery Zheng (2018), previously titled "What is the extent of misallocation?"

Abstract: Measures of the institutional quality correlate strongly with cross-country differences in income and productivity. The institutional economics literature suggests that one of the ways in which institutions influence economic growth is by affecting the degree of resource misallocation across companies. In this study, we measure this effect using a unique dataset that combines firm-level financial accounts with an extensive survey administered to the companies' managers. We use a general equilibrium model and a new econometric methodology to infer the size of the distortions induced by red tape and labor regulations in six large European Union economies. We then compute the amount of output that is lost in the aggregate as a result of these frictions.

Bruno Pellegrino and Luigi Zingales (2017), Under Review

Abstract: Italy’s aggregate productivity abruptly stopped growing in the mid-1990s. This stop represents a puzzle, as it occurred at a time of stable macroeconomic conditions. In this paper, we investigate the possible causes of this “disease” by using sector and firm-level data. We find that Italy’s productivity disease was most likely caused by the inability of Italian firms to take full advantage of the ICT revolution. While many institutional features can account for this failure, a prominent one is the lack of meritocracy in the selection and rewarding of managers. Unfortunately, we also find that the prevalence of loyalty-based management in Italy is not simply the result of a failure to adjust, but an optimal response to the Italian institutional environment. Italy’s case suggests that familism and cronyism can be serious impediments to economic development even for a highly industrialized nation.


Non-technical summary: [VoxEU] - Wikipedia Entry: [Economic history of Italy] Press Coverage: [Bloomberg] [Washington Post] [Project Syndicate] [II Sole 24 Ore] [Barron's] [LaRepubblica] [Frankfurter Allgemeine]

Bruno Pellegrino (2019) First-year paper, published in the Economics Bulletin

Abstract: Informal contracting is widely spread, but what makes it work in the absence of institutional enforcement and repetition? According to game-theoretic models of social capital, informal relationships can help agents self-enforce contracts when third-party enforcement is not available, because agents can use network links as a form of "collateral". While recent empirical studies find a link between network proximity and the ability to self-enforce contracts, it is unclear whether this effect is mediated by agents behaving altruistically or whether they are responding to incentives to preserve their network status. Additionally, the endogeneity of natural networks makes econometric identification of these effects challenging. In this study, I estimate a structural decision model in which both mechanisms are present but distinct, using experimental gameplay data from the administration of an Optional Prisoner's Dilemma. The game is framed to mimic a situation of informal exchange. I find the gameplay to be consistent with the "social collateral" channel, but not with the "directed altruism" channel.