Working Papers

• The Inception of Capitalism through the Lens of Firms (JMP) [pdf] (new version soon)

(awarded the Stigler Center Dissertation Fellowship)

Using firm-level data, I analyze one of the largest economic experiments of the twentieth century, the fall of communism. Post-communist economies experienced a sharp decline and slow recovery of output. This paper studies the output pattern of these countries using microdata from Hungary from both communist and market economy times (1986-1999). I propose a novel decomposition of output change which allows me to quantify the role of productivity, inputs and allocative efficiency in output change. I find that the majority of the output drop is accounted for by a reduction in labor input. In contrast, the recovery in the 1990s largely reflects gains from within-industry reallocation of inputs toward more productive firms. Next, I explore the mechanisms through which the fall in labor and the gains in allocative efficiency operated. I find that during communism a large share of firms employed an inefficiently high number of people given the wages firms paid. During the transition these firms saw their employment decrease 40% more relative to other firms. In particular, these firms shed more low-educated, blue-collar, older, and female workers. The evidence is consistent with the interpretation that the corporate sector in communism provided a social safety net in addition to producing output. With regard to the recovery, I provide evidence consistent with the bank privatization having improved allocative efficiency of capital by removing frictions caused by state banks.

Selected Works in Progress

• Entrepreneurship and Training: Evidence from post-apartheid South Africa (working paper available soon)

• Effects of Bank Privatization (working paper available soon, funded by Fama-Miller Research Grant)

• Banking and Firms' Trading Activity (working paper available soon)

• Innovation and the Transition to a Market Economy

Using patent data I characterize innovation in communist economies, and contrast it with innovation in market economies. Standard models predict that innovation in market economies is an important driver of growth, relative to non-market economies. I show that firms in communist economies produced a large amount of patents. Using name matching algorithms I combine microdata on firms and their patents, both before and after the fall of communism in Hungary. The goal of the project is to understand how innovative behavior was affected by the transition to a market economy, and how this change relates to the puzzling slow recovery of output in post-communist countries after the fall of communism.

• Local Elections and Municipal Debt Financing (with Anya Nakhmurina)

We explore whether governors’ political party affiliations affect the cost of borrowing of municipalities in their state. We estimate the reaction of within-state-issued municipal bond yields to the outcome of close gubernatorial elections. Using both parametric and non-parametric identification strategies, we find that municipal bond yields significantly increase upon the unexpected election of a Democratic gubernatorial candidate, relative to the unexpected election of a Republican gubernatorial candidate. Our results are consistent with the party affiliation of the governor being an additional source of heterogeneity in default risk premia across U.S. states.

• Firms and Managers (with Miklos Koren)

• Innovation and Finance (with Greg Buchak)

• Managers and International Trade (with Miklos Koren and Almos Telegdy)

• Industrial Policy and Firms (with Nathan Lee and Changkeun Lee)