Research

Countries with a low-quality transportation infrastructure exhibit a high proportion of firms whose main market is local rather than national (or international), and a high price of tradable goods relative to the price of non-tradables. The objective of this paper is to analyze the impact of transportation infrastructure on the relative prices of tradable goods compared to non-tradable goods, driven by intra-national trade. Low transportation costs facilitate geographic specialization of manufacturing industry and its development, relative to the services sector. We build simple closed economy with multiple locations and two sectors, producing tradable and non-tradable intermediate goods at each location. The main finding of the model is that it predicts relatively well the decline in relative prices, as the transport infrastructure score increases, although it overestimates for large countries and underestimates for small countries. We relax the closed economy assumption in order to explain the latter and improve the prediction of the model. The change in the relative prices is due to the allocation of labor within the tradable sector.  [Draft Available]

The aim of this paper is to analyze the effect of relaxing borrowing constraints taking into account that firms may be facing either earnings-based or asset-based borrowing constraints on some aggregates such GDP per worker or TFP. We also analyze the impact on those aggregates of increasing the proportion of firms with earnings-based borrowing constraints. Using the World Bank Enterprise Survey, we show that the proportion of firms whose loans require collateral is lower in those countries whose bankruptcy laws facilitate reorganization. In addition, we show that there are no significant differences in the median/average contract-enforcement scores between countries where bankruptcy laws facilitate reorganization and countries where they do not, and that there is a significant negative link between the contract-enforcement score and the collateral-to-loan ratio. We build a model that takes into account country characteristics in the proportion of firms whose loans require collateral and also in the average collateral-to-loan ratio. We find that the impact of relaxing borrowing constraints on the main aggregates depends not only on how tight the country is on that dimension, but also on the average proportion of earnings based-constrained firms in the economy. We also find that policies aimed at reducing the proportion  of firms that face collateral constraints, and increasing the proportion of firms facing earnings-based constraints, so as to reduce the misallocation of debt, may be as important as those aimed at reducing the collateral-to-loan ratio. [Draft Available]

In this paper we analyze the extent to which corruption is a  source of resource misallocation in post-Soviet countries. Post-Soviet countries inherited high levels of bureaucracy and corruption, though they have performed quite differently since the USRR dissolution. We consider the period 2008-2019. We note that while corruption may “grease the wheels” by reducing government bureaucratic regulations, however, corruption also distorts resources favoring only a few firms, those that pay bribes. We show that in 2019, the Baltic countries and Georgia, characterized by high control of corruption, exhibit five times entry/exit rate of firms, and a lower dispersion of labor productivity, than the rest of Post-Soviet countries, with a much lower control of corruption. At firm level, we show empirically that corruption mitigates bureaucracy, but it exhibits a lower revenue-premium in countries with high control of corruption. We build a model capturing some of the characteristics of corruption in Post-Soviet countries. We check to what extent the differences of these countries in their control of corruption may affect firms' performance.