1. "Knowledge Diffusion, Markups, and Cohorts of Firms"
Abstract: This paper investigates the differences in markups between and within cohorts of US firms. I document substantial between-cohort differences and a relatively flat profile over time within cohorts. The paper uses administrative patent data to provide suggestive evidence that knowledge creation and diffusion explain these patterns. Namely, the between-cohorts pattern is associated with improvements in innovation quality, and the within-cohort pattern is the result of the interaction of innovation and knowledge diffusion. Motivated by this new empirical evidence, I develop a general equilibrium endogenous growth model of creative destruction augmented with knowledge diffusion. I build the model for two purposes. First, I estimate the changes in the intensity of knowledge diffusion. I find knowledge diffuses 38% faster in 2010 than it did in 1980. Second, I quantify the effect of changes in the innovation step size and intensity of knowledge diffusion on growth and welfare. The quantitative exercises show the consumption-equivalent welfare increases by 0.29% if the innovation step size and intensity of knowledge diffusion increase from their 1980 to their 2010 values. By contrast, the counterfactual experiments highlight the increase in these parameters has no substantial effect on growth. Changes in the innovation quality and the speed of knowledge spillover can be achieved by reforming the patent system, such as changing the non-obviousness requirements or the patent term. The findings suggest policymakers, who aim to maximize welfare, should choose short patent terms and low innovative-step requirements.
Presentations: Washington Center for Equitable Growth, 84th Midwest Economic Associated (canceled), Georgetown University, University of Pompeu Fabra, Bank of Chile, Universidad San Francisco de Quito, Universidad de Los Andes, Universidad del Rosario, Federal Reserve Board, University of Georgia
2. "Do Unemployment Insurance Benefits Improve Match Quality? Evidence from Recent U.S. Recessions," (with A. Farooq, and A. Kugler), March 2022 [NBER WP Version]
Abstract: Unemployment Insurance (UI) benefits have a moral hazard effect and a liquidity effect, with both generating increases in unemployment spells but the latter increasing wages due to the ability to find better matches or better jobs. Previous papers, however, find mixed evidence on the impact of UI on wages. In this paper, we re-examine the effect of UI on wages in the U.S. and present novel evidence using LEHD data to examine the channels through which UI increases earnings, including: (1) the quality of the match, (2) positive sorting of employers and employees, and (3) the quality of the employer. We find that the increased UI generosity in the U.S. increased wages by both increasing the quality of the match as well as the quality of the job obtained after the unemployment spell, though there is less evidence of improved sorting. Consistent with improvements in match and employer quality, we also find that the likelihood of remaining on the job increases with UI generosity. Consistent with a liquidity effect on search, we also find that the effects on the quality of the match are larger for those who are more likely to be liquidity constrained, including women, minorities, and the less-educated.
Presentations: NBER Labor Studies program meeting (co-author), University of Notre Dame (co-author), University of Michigan (co-author), Washington Center for Equitable Growth (co-author)
Media Coverage: The Weeds Podcast - Vox, The Hill, Marketplace, VoxEU
3. "Heterogeneous Spending, Heterogeneous Multipliers" (with P. Juarros, and D. Valderrama), March 2023, IMF Working Paper No. 2023/052
Abstract: Do local fiscal multipliers depend on what the government purchases? To answer this question, we build a panel of military spending at the product-MSA level and implement an instrumental variables research design. Purchases of services have larger effects on employment than spending in goods. Differences in the labor intensity of industries producing goods or services are an important mechanism behind our results. Intuitively, the larger is the spending on labor-intensive industries, the larger is the amount of spending that translates into increases in labor income and consumption, generating multiplier effects. Our estimates imply the aggregate fiscal multiplier is driven by spending in services.
Presentations: Max-Weber Programme June Conference (European University Institute), Equitable Growth Grantee Conference*
1. "The Labor Market Effects of the COVID-19 Recession on Minorities in the U.S." (with A. Kugler)
2. "Product Patents vs. Process Patents" (with A. Davila Ospina and H. Zuleta)
3. "Innovators' Cyclicality" (with A. Davila Ospina)
1. "In Search of Larger Per Capita Incomes: How To Prioritize across Productivity Determinants?", IDB Working Paper Series no. 680, March 2016 (with A. Izquierdo, J. Llopis, and J.J. Ruiz). [Data] [Slides]
Abstract: This study is the first contribution to prioritization across productivity determinant capabilities that attempts to obtain the equivalent of a "shadow price" for each of these capabilities by estimating their impact on the success a country may have in reaching higher income per capita groups. The prioritization of these determinants-spanning different sectors-seems to be specific to the income per capita group to which a country belongs. Moreover, empirical estimates reveal that interactions among sectors matter for increasing the probability of climbing up the income-per-capita ladder, reflecting the existence of complementarities across sectors, thus indicating that the joint improvement of some of them may be necessary before effects are noticeable. Results also indicate that the identification of priorities by looking at the impact that sectors have on increasing the likelihood of advancing to a better income per capita group may or may not coincide with the size of sector gaps typically used for the determination of priorities, as larger gaps do not necessarily capture the relevance of sector restrictions and their interactions.
Presentations: Sustainability and Development Conference (University of Michigan)
2. "Contagion in the Euro Area Sovereign Bond Market", Social Sciences, vol. 4(1): 66-82, March 2015.
Abstract: In the last half-decade the European Monetary Union (EMU) has experienced a growing financial instability culminating with an extended sovereign debt crisis that has hit mostly the peripheral countries. Besides weak macroeconomic fundamentals, contagion phenomena in the government bond market damaged the countries more exposed to financial stress. In this paper, the author investigates the issue of contagion by applying to the financial field an innovative econometric technique, i.e., panel spatial regression. The paper documents: (i) the presence of contagion, in particular among peripheral countries; (ii) the changes in the magnitude of contagion in the different phases of the debt crisis; and (iii) the relevance of policy interventions in reducing the contagion effect in the EMU.