I investigate the importance of commodity price shocks on aggregate productivity dynamics through the variable utilization of primary factors. I exploit sectoral variation in product tradability and cost exposure to the copper industry to characterize the within-plant responses of manufacturing Chilean firms to copper price shocks. I find that, when copper prices increase, establishments selling non-tradables display higher RTFP than similar establishments selling tradables. At the same time, plants more cost-exposed to the copper industry display lower RTFP. I develop a multi-sector small open economy framework featuring frictions to primary input management and variable factor utilization. I find that variable factor utilization can generate a positive and strong association between copper price shocks and measured aggregate TFP, as is observed in Chilean data. The model induced volatility in aggregate TFP is larger than the actual one, which points to a negative correlation between utilization-adjusted aggregate TFP and copper price shocks.
This paper constructs and and calibrates a parsimonious two-country dynamic general equilibrium model of entrepreneurship and migration. Countries differ in their TFP and degree of financial frictions. The model is calibrated to replicate the economic and migratory situation of the United States and the rest of the world. I evaluate the impact of changing migration barriers on GDP per capita, average firms' productivity, business ownership rates, and consumption on both regions. I find that migration barriers have a non-monotone impact on the average productivity of the host country, depending this on the quality and the mass of people that move in and that are displaced by the entrants. A migration policy that favors the entry of foreign people with a higher entrepreneurial pulse would reduce profits of native entrepreneurs, but would make the economy more efficient and would lift the welfare of workers of the host economy.
Inequality has been a topic of lively debate during the last decade. This paper contributes to this literature by positing the channel of social connections and evaluating its quantitative importance. To do that, I have built a heterogeneous agents life-cycle model whose main features are a labor market with search and initial investments in education. Educational expenditures fulfill the double purpose of enhancing the human capital stock of the individual and his arrival rate of job offers when unemployed. The main result of the paper is that social connections play a very small role in generating a worse earnings inequality. Educational expenditures are performed mostly to raise the human capital stock, as the relative marginal return in terms of job offers is low. Educational expenditure subsidies that are focused on the lowest skill types of the population are a more effective policy to decrease earnings inequality than universal free public education, although shutting down the social connections channel is the most effective one.
"Sector-Specific Shocks and Optimal Exchange Rate Regime" with Piotr Żoch
We show that commodity producing countries are less likely to have floating exchange rate regimes than non-commodity producing countries. However, once one compares markets of similar levels of development, we find that poorer commodity producing countries display the opposite pattern, i.e. they favor floating regimes, and poorer non-commodity producing economies are relatively more likely to favor a more rigid scheme. Motivated by these facts, we develop a model of an open-economy featuring nominal rigidities and financial frictions. This economy is subject to exogenous price shocks to its tradable goods. We solve for the problem of a social planner that has to choose an optimal exchange rate arrangement. The planner trades-off the real and financial costs of stabilizing the value of the domestic currency with the real consequences that a volatile supply of foreign currency has on the balance sheets of financial intermediaries. We find that the model is able to account for the cross-country evidence about FX regime choices for commodity- and non-commodity producing economies.