Job Market Paper
  • "Size-Dependent Policies and Efficient Firm Creation," draft coming soon
Abstract: I study the welfare implications of size-dependent policies (SDPs) in the presence of entrepreneurial risks. Although SDPs have been considered a source of misallocation, I show that once entrepreneurial risks are introduced SDPs might improve efficiency. The key observation is that, when entrepreneurial risks cause insufficient firm creation, the SDP mitigates the market failure by (1) preventing big firms from sucking up human resources and (2) reducing downside risks of entrepreneurship. Quantitatively, removing the SDP leads to output and welfare loss by 1.5 and 1.3%, respectively, in opposition to the output gain reported by the previous literature that abstracts from risks. Qualitatively, I solve an optimal nonlinear SDP problem and show that the observed SDP shares certain features with the optimal SDP. After establishing the channel through which risks justify SDPs, I extend the analysis by examining its generality. It is shown that (1) whether SDPs improve efficiency depends on the level of financial development and (2) capital accumulation and consumption-smoothing motive further justify SDPs.


Working Papers

Works in Progress
  • "Fiscal Uncertainty, Liquidity Trap and Stagnant Growth," (with Misaki Matsumura)