Research

We study the role of strategic interactions between firms in wage setting and their implications for aggregate wage adjustment. Building on recent developments in the estimation of peer effects and utilizing granular administrative employee-employer data from Colombia, we identify strategic interactions through a network-based approach. Our findings reveal that external shocks triggered by an exchange rate depreciation – "revenue" shocks for export-oriented firms, and "cost" shocks for import-oriented ones – significantly influence firms' wage adjustments, even when firms are not directly exposed to these shocks. First, firms adjust their wages by approximately 2% in response to a 10% change in the wages of their competitors, controlling for external shocks. Second, firms respond to the external shocks faced by their competitors if the shocks are differential – stronger competitors' "revenue" shocks lead to the upward pressure on wages, while stronger competitors' "cost" shocks lead to wage depression. The strategic interactions contribute to sluggish aggregate wage adjustment following the external shocks and slow it down by 10 p.p. over a two-year horizon. Our firm-to-firm network analysis demonstrates the crucial role of import-oriented and high-paying firms in the transmission of shocks to the economy. External shocks initially hit the above firms and propagate to the rest of the economy. To rationalize our empirical findings and to conduct counterfactual analysis, we develop a general equilibrium model with rich firm and worker heterogeneity featuring strategic interactions between firms in wage setting.

Award: 2025 CIBE International Research Award by the Center for Global Business at the Robert H. Smith School of Business and 2025 BSOS Dean’s Research Initiative: Doctoral Dissertation Research

Inequality Response to the Russian Ruble Depreciation [link]

Non-linear Impulse Responses of Monetary Policy Shocks, with Guido Kuersteiner 

Financial Repression and Public Finance in Calibrated General Equilibrium Model, working paper, with Sergey Pekarski (Higher School of Economics) [link]