Research

Abstract. Large firms exhibit systematically higher capital intensity relative to peers, a fact at odds with standard models where firms technological differences are factor-neutral. This paper develops a general equilibrium framework in which firms expand by adapting their technology in order to adopt capital goods when they become cheaper. Firms can pay a firm-specific switching cost to change their production technology for a more capital-intensive one. As the cost of capital falls due to capital-embodied technical change, the firms that face the smallest switching costs become relatively more capital intensive and gain a competitive edge. This allows them to build market shares and markups. Markups endogeneity generates strategic interactions which widens further the dispersion in capital intensity and market shares. The model provides a unified explanation for rising dispersion in markups, a falling aggregate labor share despite a rising median labor share, sluggish investment, and the divergence between sales and employment concentration.

Abstract. As an economy becomes more capital intensive, the effect of monetary policy shocks on the rental rate of capital becomes more important to determine the response of the marginal cost of firms. In an environment where the utilization rate of capital is endogenous and where the rental rate of capital is an increasing function of the interest rate, a "cost channel" dampens the traditional "Taylor channel" that implies a negative correlation between interest rates and marginal costs and therefore prices due to demand effects. This happens even if the structural relationship between marginal cost and inflation, the primitive New Keynesian Phillips curve, is unchanged. On the contrary, because marginal costs are less elastic to interest rate shocks, the slope of the conventional New Keynesian Phillips curve, which relates prices to the output gap, declines as the economy becomes more capital intensive.

Abstract. A common practice when estimating markups using the "production function approach" is to assume homogeneous output elasticity to inputs across firms. In this paper, I first show that this assumption biases upward both the dispersion of firms’ markups and the estimated increase in average and aggregate markups. I then show that this assumption doesn't hold and propose a method to co-estimate firms' markups and output elasticity to inputs by complementing the production function approach with firms' cost shares. Even after accounting for dispersion in output elasticity to capital, the rise in markups dispersion and in the aggregate markup resist remarkably well. However, I find that levels are significantly lower than previously estimated by the literature. 

Abstract. The micro origin of markups conditions the welfare effect of profit and wealth taxation. If markups arise from firms’ productivity, the net effect of taxing profitable firms is to increase misallocation. If instead markups arise from different demand slopes, due to demand shifters that could result from marketing efficicency, then taxing profitable firms might be welfare increasing. In this paper, I develop a model where productivity and demand shifters can be co-estimated if one observes prices and quantities separately in the data. I  intend to estimate quantitatively the origin of firms’ markups using French administrative data. 

Abstract. Since 2000, the GDP of the United States has grown consistently faster than that of the European Union. The prevailing explanation attributes this divergence to differences in productivity growth. Yet, over the same period, the U.S. capital intensity (capital-to-labor ratio) has also risen much more rapidly than Europe’s. In this paper, I intend to investigate whether part of the transatlantic growth gap can be explained by differences in the adoption of innovative capital. If so, policies that facilitate the diffusion and adoption of innovation — including those originating abroad — could serve as an effective complement to policies that incentivize innovation.