Research
Working papers
Working papers
"Climate Change, Firms, and Aggregate Productivity" draft (joint with Andrea Caggese, Sampreet Goraya, and Carolina Villegas-Sanchez), October 2023. New!
This paper presents a general equilibrium structural framework that separates the effects of temperature on firm-level demand, productivity, and input allocative efficiency to examine the aggregate productivity losses caused by climate change. By analyzing data from Italian firms, that cover approximately 75% of aggregate gross output, and incorporating detailed climate data, the paper reveals an inverted U-shaped relationship between temperature and firm-level outcomes such as productivity and revenue-based marginal product of capital. Leveraging these micro semielasticities, the paper projects the aggregate productivity losses resulting from climate change scenarios. The findings indicate a significant and nonlinear relationship between climate change and aggregate productivity, with a projected 2-degree Celsius increase leading to a 1.8% decline. Doubling the expected increase to 4 degrees exacerbates the decline nearly fourfold to approximately 6.4%. Finally, the analysis highlights widening regional disparities as a consequence of climate change.
This paper presents a general equilibrium structural framework that separates the effects of temperature on firm-level demand, productivity, and input allocative efficiency to examine the aggregate productivity losses caused by climate change. By analyzing data from Italian firms, that cover approximately 75% of aggregate gross output, and incorporating detailed climate data, the paper reveals an inverted U-shaped relationship between temperature and firm-level outcomes such as productivity and revenue-based marginal product of capital. Leveraging these micro semielasticities, the paper projects the aggregate productivity losses resulting from climate change scenarios. The findings indicate a significant and nonlinear relationship between climate change and aggregate productivity, with a projected 2-degree Celsius increase leading to a 1.8% decline. Doubling the expected increase to 4 degrees exacerbates the decline nearly fourfold to approximately 6.4%. Finally, the analysis highlights widening regional disparities as a consequence of climate change.
"Customer Accumulation, Returns to Scale, and Secular Trends" draft, appendix, February 2024. (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
I build a model, grounded in directed search in the product market, to study the macroeconomic consequences of rising returns to scale on firm competition for customers. I estimate the firm-level production function, finding a within-sector rise of 5% in returns to scale since 1980. In the model, this rise produces unequal gains that give a competitive advantage to larger firms, making markets less contestable by new entrants, and it quantitatively explains a substantial fraction of several US trends. Additionally, the micro-level channels through which the model explains these trends are consistent with empirical observations.
Awarded Best Job Market Paper by the European Economic Association and Unicredit Foundation
I build a model, grounded in directed search in the product market, to study the macroeconomic consequences of rising returns to scale on firm competition for customers. I estimate the firm-level production function, finding a within-sector rise of 5% in returns to scale since 1980. In the model, this rise produces unequal gains that give a competitive advantage to larger firms, making markets less contestable by new entrants, and it quantitatively explains a substantial fraction of several US trends. Additionally, the micro-level channels through which the model explains these trends are consistent with empirical observations.
"The Rise of Intangible Capital and the Macroeconomic Implications" draft, appendix (joint with Sampreet Goraya), April 2024.
We document a technological change in production technology biased towards intangible capital, such as intellectual property 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) reductions in allocative efficiency. 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.
We document a technological change in production technology biased towards intangible capital, such as intellectual property 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) reductions in allocative efficiency. 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), August 2023.
Firms’ markups cyclicality is at the heart of monetary policy transmission in New Keynesian models. Using US Compustat data and employing local projection techniques, we uncover a novel fact: dominant firms have a countercyclical markup response after an unexpected contractionary monetary policy shock. Building a heterogeneous firms New Keynesian model with demand accumulation and endogenous markups that evolve over firms’ life-cycle, we show that this can be due to the different demand elasticities faced by firms. Dominant firms face a more inelastic demand, which implies a lower pass-through rate from costs to prices. Therefore, after a contractionary monetary policy shock, dominant firms pass less the reduction in marginal costs to prices compared to competitors, and increase their markups by more, as documented empirically. After calibrating the model to US micro-level data, we also find that firms’ heterogeneous demand elasticities can lead to the amplification of monetary policy shocks.
Firms’ markups cyclicality is at the heart of monetary policy transmission in New Keynesian models. Using US Compustat data and employing local projection techniques, we uncover a novel fact: dominant firms have a countercyclical markup response after an unexpected contractionary monetary policy shock. Building a heterogeneous firms New Keynesian model with demand accumulation and endogenous markups that evolve over firms’ life-cycle, we show that this can be due to the different demand elasticities faced by firms. Dominant firms face a more inelastic demand, which implies a lower pass-through rate from costs to prices. Therefore, after a contractionary monetary policy shock, dominant firms pass less the reduction in marginal costs to prices compared to competitors, and increase their markups by more, as documented empirically. After calibrating the model to US micro-level data, we also find that firms’ heterogeneous demand elasticities can lead to the amplification of monetary policy shocks.
Work in progress
Work in progress
“Risk-Free Rate, Marginal Product of Capital, and Intangible Investment” (with Julia Faltermeier and Sampreet Goraya)
Discussions
"How do Firms Build Market Share?" slides (by David Argente, Doireann Fitzgerald, Sara Moreira, and Anthony Priolo), May 2021