NEW E-OLS: A FIXED-POINT ESTIMATOR FOR NESTED CES PRODUCTION FUNCTIONS   (joint with J. Tong)

Abstract: We study nested CES production-function estimation under imperfect competition when production parameters and latent market-power wedges must be estimatedjointly. Because the controls required for identification depend on the parameters being identified, estimation cannot proceed through independent steps. We develop equilibrium OLS (E-OLS), an estimator defined as a fixed point of the best-response map induced by an interdependent system of conditionally linear regressions and control functions. We establish sufficient conditions for local identification, existence, uniqueness, and consistency around the true parameter vector. Monte Carlo evidence indicates reliable convergence from economically motivated initial values and good finite-sample performance, with estimation accuracy increasing as sample size grows. Applied to UK manufacturing firms, EOLS, jointly recovers substitution elasticities, factor-biased technical change, firmlevel markups and markdowns, and revenue productivity. The estimates indicate substantially stronger substitution between labour and intermediate inputs than between capital and the variable-input bundle.

Acquisitions, Inventors' Turnover, and Innovation: Evidence from the Pharmaceutical Industry (joint with L. Cassi) - accepted at European Economic Review

Abstract: This paper examines the relationship between the post-merger decline in patenting among pharmaceutical firms, as observed in previous firm-level studies, and the following individual-level dynamics: (i) the exit of inventors from the innovation market, (ii) the departure of inventors from target firms to other research labs, and (iii) a decline in the innovative output of inventors who remain within the acquired firms. Using a large sample of target companies, we estimate that acquisitions are associated with an increase in exit rates of inventors between 7.6 and 17.5 percentage points and of their departure rates ranging from 12.2 to18.9 percentage points. We find similar results are obtained for large and small deals and that top inventors of targets are also more likely to exit or to leave when an acquisition takes place. Our results show that, for each inventor that exits the innovation market, around 2 patents are foregone, representing more than 30 percent loss of the expected output these scientists could have produced over their careers. Inventors who relocate to a different lab also generate 2 fewer patents compared to similar control scientists, representing a 30 percent decrease in their productivity too. Finally, inventors that stay at the acquired targets also experience a decrease in output of nearly one fewer patent. These results point to a significant decline in both human capital and consumer welfare, which call for a closer scrutiny of M&As. 

Related piece on ProMarket.org: Do Pharmaceutical Acquisitions Undermine Innovation by Disrupting Human Capital? 

Technology vs Information to Promote Conservation: Evidence from Water Audits (joint with E. Ansink and M. Tonin)

Abstract: We study the impact of audits on water conservation, distinguishing between the information and technological components. We observe water consumption for thousands of households in the South East of England for up to 18 months after they receive a visit of a so-called Green Doctor. We observe a decrease in water usage between 7.5 and 10 litres per day for each water-device and we find that this effect is persistent over 18 months. Devices reducing water pressure are particularly effective, while shower timers are ineffective. The information component of the water audit has a large initial impact of around 40 litres per day, but this effect gradually fades away over time, until it stabilizes to around 10 litres per day. Technology appears to be more cost-effective than information provision and this can help in the design of policy interventions.  PDF