Andrea Chiavari

Welcome

I am an Associate Professor at the University of Oxford and a Tutorial Fellow at the Christ Church. Here you can find my CV and my Google Scholar page. My research interests lie in macroeconomics, with an emphasis on firm dynamics, technological change, search and matching, market power, and climate change.

Address:University of Oxford Manor Road Building Department of Economics 10 Manor Road OX1 3UQ Oxford, UK
Email:andrea [dot] chiavari [at] economics [dot] ox [dot] ac [dot] uk

Working Papers

“Mirrleesian Carbon Taxation” draft (with Alexandre Kohlhas)

Alleviating the economic damages from climate change is, to first order, a problem of efficiently limiting firms’ emissions. We analyze a neoclassical general-equilibrium model in which fossil-energy use generates climate damages. The model crucially incorporates substantial cross-firm heterogeneity in emission efficiency that we document using a novel firm-level dataset spanning 150 countries. Firms choose energy and other inputs and self-report emissions that are otherwise privately observed. Our central result is a simple formula for the marginal externality damage of emissions—the optimal carbon tax—that accounts for firms’ incentives to distort reported emissions. The optimal tax varies markedly across firms as a function of marginal damages, output, and emission efficiencies, and exceeds common uniform-tax benchmarks, on average. Quantifying the model shows large welfare gains from internalizing reporting incentives: the constrained optimal tax recovers 3/4 of the potential welfare benefits; a uniform tax that does not internalize reporting incentives, by contrast, recovers almost none of them.

“The Return on Capital in Disaggregated Economies: Theory and Measurement” draft (with Julia Faltermeier and Sampreet Goraya)

We develop a dynamic general equilibrium model of disaggregated economies with heterogeneous firms and flexible demand and production functions. The model delivers a non-parametric, closed-form decomposition of the aggregate return on capital into the risk-free rate, and firm-level profits, capital gains, risk premia, and capital wedges. Using U.S. data, we show that once profits are accounted for, the true return on capital has fallen from 9% to 6% since 1982, though it remains above the risk-free rate. Capital wedges—driven by reallocation toward new high-wedge cohorts—are the key obstacle, and removing them would raise aggregate productivity by 2–13%.

"Unemployed Capital in Space" draft (joint with Charles Cheng Zhang)

This paper exploits a unique dataset to document novel facts on spatial differences in capital unemployment—defined as idle units searching to be traded. The data reveal that these differences are persistent and primarily driven by spatial variation in separation rates between capital and firms. We demonstrate that a dynamic spatial search-and-matching model of local capital markets can quantitatively account for these patterns. Frictions in these markets reduce aggregate output and imply that the social planner’s allocation diverges from the decentralized equilibrium. Place-based policies implementing the planner allocation stimulate capital supply leading to welfare gains.

"Climate Change, Firms, and Aggregate Productivity" CEPR WP, draft (joint with Andrea Caggese, Sampreet Goraya, and Carolina Villegas-Sanchez)
[Coverage: VoxEU, ECB Research Bulletin]

This paper employs a general equilibrium framework to analyze how temperature affects firm-level demand, productivity, and input allocative efficiency, informing aggregate productivity damages due to climate change. Using data from Italian firms and detailed climate data, it uncovers a sizeable negative effect of extreme temperature on firm-level productivity and revenue-based marginal product of capital. Based on these estimates, the model generates aggregate productivity losses higher than previously thought, ranging from 0.60 to 6.82 percent depending on the scenario and the extent of adaptation. Additionally, climate change exacerbates Italian regional disparities.

"Customer Accumulation, Returns to Scale, and Secular Trends" draft, appendix (previously circulated as "The Macroeconomics of Rising Returns to Scale: Customer Acquisition, Markups, and Dynamism")
[Awarded Best Job Market Paper by the European Economic Association and Unicredit Foundation]
Conditionally accepted at Journal of Monetary Economics

This paper studies how rising returns to scale contributed to declining business dynamism and increasing markups and expenditures devoted to customer acquisition in the U.S. economy. It introduces a firm dynamics model with heterogeneous markups and customer accumulation based on directed search, in which larger firms gain a competitive edge from higher returns to scale. This makes markets less contestable for new firms and leads to the rise of superstar firms. The model quantitatively accounts for a substantial share of these trends, and the underlying micro-level mechanisms align with empirical evidence.

"The Rise of Intangible Capital and the Macroeconomic Implications" draft, appendix (joint with Sampreet Goraya)
Conditionally accepted at American Economic Journal: Macroeconomics

We document a technological change in production technology biased towards intangible capital, such as computerized information and software, over other inputs in the last three decades. This has led to higher investment adjustment costs for firms. A general equilibrium firm dynamics model suggests that this can result in (i) increased firm size and concentration, (ii) changes in aggregate factor shares, and (iii) rise in dispersion of total factor productivity revenue coupled with declining aggregate productivity. This paper provides an alternative mechanism behind these macroeconomic changes in the US economy, emphasizing the efficient response of firms to changes in production technology.

"Heterogeneous Markups Cyclicality and Monetary Policy" draft (joint with Marta Morazzoni and Danila Smirnov)
R&R at International Economic Review

This paper revisits the question on the conditional cyclicality of the aggregate markup using a micro-to-macro approach, which highlights the role of firm-level heterogeneous cyclicality, the reallocation of economic activity across firms, and aggregation methods. Using US firm-level data from 1990 to 2016, we find that young firms have procyclical markups conditional on monetary shocks, while older firms show countercyclical markups. Moreover, economic activity reallocates from old to young firms after monetary shocks. Aggregating these responses, we find that the aggregate markup is countercyclical to monetary shocks. Over time, firm aging has changed the distribution of firms, altering the aggregate markup cyclicality, which help reconcile part of the conflicting findings in the literature.

Discussions

"Heterogeneous Effects of Weather Shocks on Firm Economic Performance" slides (by Romano Tarsia)
"How do Firms Build Market Share?" slides (by David Argente, Doireann Fitzgerald, Sara Moreira, and Anthony Priolo)

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