Research
Working Papers
Business Formation, Labor Market Frictions, and Business Cycles [PDF]
This paper studies how the labor market conditions affect the formation and growth potential of new businesses over the business cycle. I develop a dynamic occupational choice model in which the labor market conditions shape the business formation through two channels in downturns. First, a higher unemployment rate increases the entry as a stopgap activity. Second, the lower job finding probability, by increasing the cost of a business failure, discourages entry from employment, especially for highly educated individuals who are precisely those more likely to start high-growth startups. Using U.S. individual-level data, I provide empirical support for these mechanisms. Then, I use the calibrated model to study the macroeconomic implications of these individual-level dynamics during and after the Great Recession. I show that consistently with U.S. firm-level data, (i) entry due to stopgap motives increases while entry into entrepreneurship declines, and (ii) the change in the composition of entrepreneurial founders toward fewer highly educated individuals makes new cohorts of businesses have fewer high-growth startups. Both features hinder job creation recovery, keeping the labor market depressed longer and, thus, persistently low entrepreneurship entry.
Presented at: LACEA-LAMES, 2023; Money, Macro, and Finance Society Annual Conference, 2022; PUC-Chile, 2022; SECHI Macro Group, 2022; Central Bank of Chile, 2021; Cleveland FRB, 2021; ITAM, 2021; Universidad del Rosario, 2021; ERSA, 2021; Federal Reserve Board Pre-Job Market Conference, 2020; European Winter Meeting of the Econometric Society, 2020; II Economics Alumni Workshop PUC-Chile, 2020; Productivity Workshop I: Understanding Productivity, 2019.
Startup Employment and Career Trajectories, with Nathalie Gonzalez and Álvaro Silva. [PDF]
We study how working for a startup affects labor market outcomes using Chilean employer-employee data. Findings reveal that joining a startup results in a 6.7% reduction in earnings over the next five years, with half attributed to lower average earnings and a half to spending more time out of formal employment. Workers at startups also exhibit a lower probability of being employed and experiencing job-to-job transitions. They also hold fewer jobs. These effects are persistent but vary across worker and firm characteristics. In particular, startups that survive have a smaller earnings penalty, while top-performing startups offer an earnings premium.
Presented at: University of Maryland, 2023*; Central Bank of Chile, 2022; LACEA-LAMES, 2022; 5th Annual IZA/World Bank/NJD/UNU-WIDER Jobs and Development Conference, 2021.
Work in Progress
Composition of Founding Teams over the Business Cycle and Firm Dynamics
Business Formation in the U.S.: Individual-level Analysis using SIPP data?
Trade Liberalization and Inequality: Role of Institutions and Financial Markets
Publications
Understanding Domestic Savings: An Empirical Approach, 2020, Applied Economics, Volume 52 Issue 9, pages 905-928 , with R. Cerda, R. Fuentes and J. I. Llodra. Formerly, Inter-American Development Bank, 2015, Working Papers Series Nº IDB-WP-626 [Journal Link] [IDB Working Paper]
The Impact of a Carbon Tax on the Chilean Electricity Generation Sector, Energies, 2015, 8(4), 2674-2700, with C. Benavides, L. Gonzales, M. Diaz, R. Fuentes, R. Palma-Behnke, and C. Ravizza [Journal Link]
A Look to Sectoral Productivity in Chile: Is There a Structural Change?, Journal Economia Chilena, 2014, 17(1), 4-36, with Rodrigo Fuentes (in Spanish) [Journal Link]