Abstract. This paper studies optimal defense spending and taxation in a dynamic economy in which public spending protects productive capital from destruction. Because the same capital stock can also be taxed to finance its protection, productive investment and protective investment are closely linked. The model implies that defense spending increases with destruction exposure when protection is active. When defense technology is sufficiently effective, greater destruction exposure can induce more protection and investment, allowing capital and output to recover, although this adaptation is costly. A Ramsey government can partially reproduce this response. Under discretion, anticipated taxation of installed capital reduces private investment, shrinks the capital base, and weakens defense. In the baseline calibration, lack of commitment generates a 1 percent consumption-equivalent welfare loss, and this loss increases with destruction exposure. The findings highlight the importance of fiscal institutions and policy credibility when the assets being protected are also an important source of tax revenue.
with Ergys Islamaj
Abstract: We study how sector-specific demand and supply shocks propagate through China’s input-output and regional networks. Indirect network effects account for a substantial share of aggregate fluctuations, with inter-sectoral linkages representing roughly 30 percent of economic activity. The results highlight the central role of manufacturing and production networks in amplifying shocks across sectors and regions. The framework provides a tool for assessing the economy-wide impact of trade, productivity, and other sector-specific shocks.
Abstract. This paper studies how the effectiveness of government spending varies across local economies. Matching granular U.S. defense procurement data and county-level labor market outcomes, I try to estimate local fiscal effects and examine how spending composition shapes economic performance. Preliminary results suggest that technology-intensive procurement generates more persistent employment and income gains. The findings highlight the role of local absorptive capacity and human capital accumulation in fiscal transmission.
with Mihyun You
“Propagation of Macroeconomic Shocks Through Input-Output and Geographic Networks in China,” in East Asia and Pacific Economic Update, April 2019: Managing Headwind, World Bank, 34-36, with Ergys Islamaj and Francesca de Nicola.
"Informal Economy in East Asia and Pacific,'' in Global Economic Prospects, January 2019: Darkening Skies, World Bank, 63-67
"Spillovers to Developing East Asia and Pacific from China",' in East Asia and Pacific Economic Update, October 2018: Navigating Uncertainty, World Bank, 39-42, with Ergys Islamaj and Ekaterine T. Vashakmadze.
Raw material commodity prices gain momentum amid stronger demand, World Bank, December 2020, with John Baffes
Beverage commodity prices to stabilize amid stronger demand and ample supplies, World Bank, December 2020,with John Baffes
Global food commodity prices in a post-COVID world, World Bank, November 2020, with John Baffes
Food prices to edge up in 2019 but energy, trade, and foreign exchange could unsettle outlook, World Bank, with John Baffes
Beverage prices weak on good crops and currency movements, World Bank, with John Baffes
Raw materials outlook: Cotton, rubber prices to stabilize in 2019, World Bank, with John Baffes
Food prices: Markets are well-supplied, but trade tensions, energy prices, and an Africa Swine Fever outbreak could create market instability, World Bank, with John Baffes
Raw material prices to stabilize in 2019, make gains in 2020, World Bank, with John Baffes