Working Papers

How much do changes in the cost of international freight spill over into domestic inflation? Using Chilean customs data, we document that the sharp increase in average freight costs observed during 2019-2021 was mostly driven by imports from Asia. We exploit the heterogeneous exposure to importing intermediates from this region to estimate a firm-level elasticity of substitution between intermediate inputs from Asia and the rest of the world. Using this estimate in the context of a parsimonious general equilibrium model with nominal rigidities, we calculate that the observed increase in freight costs had an impact, on average, of 1.19 log points on Chilean inflation, which is equivalent to 14% of the total figure for the period Q42019-Q42021.

I investigate the importance of commodity price shocks on aggregate productivity dynamics. I focus on variable utilization of primary factors as driving mechanism. I exploit variation in product tradability and cost exposure to the copper industry to characterize the responses of manufacturing Chilean firms to copper price shocks. I find that, when copper prices increase, establishments selling non-tradables display higher productivity growth than those selling tradables. At the same time, plants more cost-exposed to the copper industry display lower growth. I develop a multi-sector small open economy model featuring frictions to factor management and variable factor utilization. I quantitatively find that variable utilization can generate a strong positive association between copper price shocks and measured aggregate productivity, as it is observed in Chilean data. 

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.

Work in Progress

We show that commodity producing developing countries are less likely to have floating exchange rate regimes than non-commodity producing developing countries at moderate to high levels of foreign debt indebtedness. However, at low levels of indebtedness the opposite situation happens. Motivated by these facts, we develop an open-economy model featuring nominal rigidities, a banking sector subject to balance sheet currency mismatches, 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 chooses an optimal exchange rate arrangement by trading-off a better nominal accommodation of shocks and a higher amplification of shocks coming from balance sheet effects.  We find that the exports volatility threshold for adopting a flexible exchange rate regime is increasing in the share of foreign currency-denominated liabilities of the banking sector.

Over the last few decades employment became increasingly concentrated among a few firms, that act strategically and exert labor market power over their workers. This has macroeconomic implications at the worker level. This paper studies the effect of labor market power on the gender wage gap. A general equilibrium model of oligopsony shows that the relationship between employer concentration in a market and the gender wage gap is theoretically ambiguous. On one side, workers in concentrated markets have fewer outside options to give them bargaining power in wage negotiations. This would suggest a compression of the wage distribution that could improve the gender wage gap. On the other side, when firms have labor market power, wages are a function of labor supply elasticities. To the extent that there is gender heterogeneity in these elasticities, this could worsen the gender wage gap in concentrated markets. Determining if the supply or demand effect dominates is crucial to informing the design of policies that aim to reduce gender pay inequality. This project uses administrative employer-employee data from Chile to study the relative magnitudes of the two channels. Preliminary analysis suggests that wage gaps are smaller in markets with higher concentrations.

We estimate the dynamic process of prices and quantities at the product level after entry into foreign markets. In line with previous evidence in the literature, we find quantitatively significant growth dynamics of quantities after entry, but no changes in prices. This is evidence against theoretical models where the accumulation of firm customer base (demand) is determined by prices, and contributes to the debate on the mechanisms that determine customer base accumulation. In ongoing work, we aim to explore two different dimensions of heterogeneity: differences across industries or types of products, and differences according to firm productivity within industries. We build a quantitative framework of firm dynamics to analyze these differences.