Research

• R&D and Productivity: A Two Way Avenue? (with C. Bravo-Ortega, 2011). World Development, 39:7, 1090-1107.

Abstract:

Most of the empirical studies assessing the R&D-productivity relationship at the country level fail to consider the possible simultaneity of these variables. Using a 65-country panel for the period between 1965 and 2005, this paper studies the relationship between R&D and productivity using several R&D indicators. We establish that per capita R&D expenditure is strongly exogenous to productivity. This result allows us to develop a further argument that demonstrates the high social returns to R&D spending. Our estimates also indicate that a 10% increase in R&D per capita generates an average increase of about 1.6% in the long-run TFP.

• Productivity, Innovation and Exports in the Chilean Manufacturing Industry (with R. Alvarez, 2010), El Trimestre Economico, 77:1, 155-184. In Spanish.

Abstract:

This paper examines the relationship between exports, productivity, and technological innovation. It first analyzes the causality between the firms’ export behavior and productivity. Unlike other papers using a similar methodology, our results show no evidence of learning by exporting. In fact, although once the firms begin exporting total productivity increases by around 10 percent this increase is not statistically significant and does not prevail over time. This study also explores whether other forms of learning could be associated to the exporting process. Contrary to other analysis for developed economies, the results for Chile do not point to major gains from the exporters’ geographic and sectoral agglomeration. Finally, this paper studies whether the firms’ innovating activity favors export performance. Using product and process innovation indicators, together with data on R&D investment, no evidence is found that they increase the probability of exporting. In this context, our results reveal that firm size and the fact of having previously exported are more important than innovation in increasing the probability of exporting in future.

• Forecasting Inflation in Chile With an Accurate Benchmark (with P. Pincheira, 2012), El Trimestre Economico, 79:1, 85-123. In Spanish

Abstract:

In this article we analyze the accuracy and stability of short-run inflation forecasts for Chile coming from Extended Seasonal Arima (ESARIMA) models. We compare ESARIMA forecasts to those coming from surveys and traditional time series bench- marks available in the literature. Our results show that ESARIMA based forecasts display lower out-of-sample Mean Squared Prediction Error than forecasts coming from traditional benchmarks when the predictive horizon ranges from 1 to 4 months. At longer horizons, the worst models from the ESARIMA family are outperformed by the best univariate traditional benchmarks. We obtain opposite results when compar-ing ESARIMA outcomes to survey-based forecasts: the survey provides more accurate forecasts at every single horizon. Our results are, in general, statistically significant at usual confidence levels. We also notice that ESARIMA forecasts are more stable than traditional time series methods but less stable than survey-based forecasts.

• Oil Shocks and Inflation The Case Of Chile and a Sample of Industrial Countries (with P. Pincheira, 2007), Economia Chilena, 10:1, 5-36. In Spanish

Abstract:

This paper evaluates the inflationary impact of an oil shock on several components of the consumer price index for several countries including Chile. All the countries in our sample display a significant response in headline inflation, energy inflation and non-core inflation. We also find a significant response in core inflation for all countries other than the U.S and France. Chile’s inflationary response is one of the highest and most persistent in the sample. Indeed, Chile’s response in headline, total and non-core inflation is above average. Notwithstanding the above, we notice that the size and persistence of inflation responses are rather moderate.

WORKING PAPERS

• Product-Level Productivity and Core Competence in Multi-Product Plants (with N. Voigtlaender, January, 2017)

Abstract:

A growing literature examines trade-related dynamics at the product-level within firms or plants. Product-level efficiency is a key theoretical component, and so is the ranking of products by "core competence." However, data limitations make it difficult to construct product-level efficiency, and productivity patterns across products within plants are largely unexplored. We exploit a uniquely detailed Chilean dataset that allows us to compute several alternative efficiency measures (such as marginal costs, revenue productivity, physical efficiency, and marginal costs), for each product within plants. We present novel stylized facts in three areas. First, on product-level efficiency patterns, we show that productive plants tend to be relatively efficient across the board, not just for their core products. Second, we show that the typically used sales-based product ranks correctly reflect higher physical efficiency (TFPQ); however – seemingly contradictory – marginal costs are higher for top-ranked sales products. We show that this discrepancy is likely driven by product quality and present a stylized model that underlines the importance of the ranking variable. Finally, using the prominent metric of export skewness towards core products, we highlight the importance of using the appropriate ranking variable when testing predictions of flexible manufacturing models. Product ladders based on marginal costs or revenue productivity do not show export skewness, while TFPQ-based rankings do yield skewness towards the most efficient product and thus aggregate efficiency gains from trade

• Competition, Innovation and Within-Plant Productivity: Evidence from Chilean Plants (with Ana P. Cusolito and William F. Maloney, January, 2017)

Abstract:

This paper studies the effect of competition on within plant-productivity, and a principal channel through which it may work - innovation. We employ a unique plant-level panel from Chile that allows backing out price-cost markups, constructing direct measures of TFPQ, and tracking innovative activity in detail. We document a strong positive relationship between plant-level markups and within-plant physical productivity, and with innovation investment, with the latter accounting for about half of the productivity impact. These effects are only observed in lagging plants - productivity and innovation of plants at the frontier responds positively, although statistically insignificantly, to competition. Finally, we find that the link between markups and innovation is strong in industries that are more dependent on external financing, suggesting that part of the positive correlation is due to increased markups facilitating self-financing.

• The U.S. Debt Restructuring of 1933: Consequences and Lessons (with S. Edwards and F. Longstaff, December, 2016) Submitted.

Abstract:

In 1933, the U.S. unilaterally restructured its debt by declaring that it would no longer honor the gold clause in Treasury securities. We study the effects of the abrogation of the gold clause on sovereign debt markets, the Treasury's ability to issue new debt, investors' willingness to hold Treasury bonds, and on the Treasury's borrowing costs. We find that the restructuring was followed by a flight to quality in the sovereign market. Despite this, there was little effect on the Treasury's ability to sell new debt or the willingness of investors to roll over restructured debt. The Treasury incurred a marginally higher cost of capital by issuing new bonds without the gold clause.

• Commodity Prices Shocks and Poverty in Chile (with R. Álvarez and S. Ilabaca, July, 2017) Submitted

Abstract:

This paper examines the local economic impact of large increases in metal-mining product prices on poverty in Chile. Using household data from 1998 to 2013 and exploiting differences in municipalities’ exposure to price changes, we provide evidence of a reduction in poverty rates following the positive terms of trade shock of 2003. According to our estimations, the increase in mineral prices experienced between 2003 and 2009 reduced poverty by more than 2 percentage points in municipalities relatively exposed to the commodity boom – with at least 7% of employment in the metal-mining sector – in comparison to municipalities with no exposure to the boom. In addition, we explore some of the mechanisms explaining the reduction in poverty. We find significant effect of higher products prices on wages and employment, especially for unskilled workers and for workers employed in metal-mining industries.

• Income Distribution, Quality Sorting and Trade (November, 2014)

- Additional Materials: [Online Appendix]

Abstract:

Product quality has been highlighted as an important determinant of trade in recent empirical and theoretical contributions. However, a major limitation for a thorough understanding of these patterns is the lack of direct measures of product quality. In this paper, I construct a new dataset for the Chilean wine industry that is unique in its ability to offer firm-product level measures of quality. Quality measures at this level of disaggregation are typically not available; I use this information to provide novel evidence on how firms vary the quality of their export bundle across markets. The patterns I derive in the data suggest an important role for income distribution in explaining within-firm quality flows. Accordingly, I develop a stylized quality model featuring non-homothetic quality demand and heterogeneous consumers' income. The model predicts that in countries with higher income dispersion, firms tend to skew their exports towards products of higher quality. This effect tends to be weaker in countries with higher average income. I use the Chilean wine data to illustrate the main mechanism. In line with the model's main prediction, I find that firms tend to export proportionally more high-quality products to countries with higher levels of income dispersion. I find this effect to be quantitatively more important in low- and middle-income countries.

OTHER PUBLICATIONS

• Educacion y Derechos Constitucionales (with S. Edwards, 2015). Estudios Públicos, 139 (Invierno), 67-104. In Spanish

Resumen:

Esta investigación procura determinar en qué medida la inclusión de derechos sociales en las constituciones políticas inciden en el desempeño social. Más específicamente, se analiza si la incorporación del derecho a la educación en la carta fundamental de una nación se relaciona con “resultados educacionales más igualitarios”. El estudio se basa en datos de 61 países que participaron en las pruebas PISA 2012. Los resultados son claros y robustos en relación a la técnica de estimación: no hay evidencia que incluir el derecho a la educación en la constitución se traduzca en menor dispersión en los resultados de la PISA. Estos resultados son relevantes para países que están debatiendo la adopción de nuevas constituciones, como es el caso de Tailandia y Chile.

WORK IN PROGRESS

• "Cities, Trade and Productivity" (with Andrei Potlogea, Nico Voigtlaender and Yang Yang)

Colchagua Valley, Chile. Picture kindle shared JuanEsOc via flickr