Abstract: This paper investigates how labor market sorting and segmentation influence labor market power, aggregate efficiency, and welfare distribution. Using matched employer-employee data from Germany, I show that low-ability workers are disproportionately employed by smaller, low-productivity firms due to selective hiring by firms offering higher wage premiums. Motivated by this evidence, I develop a model that examines monopsony power driven by heterogeneous firm selection of the workforce. In this framework, more productive firms are larger, apply stricter hiring standards, and selectively employ higher-ability workers, resulting in an ability-based segmentation of the labor market, where not all firms are available as options to every worker. This creates localized competition, with firms primarily competing with others targeting similar workers. Less productive firms exert greater labor market power over lower-ability workers, while more productive firms over higher-ability ones. The model predicts welfare losses of 26% to 53% for workers, especially large for those at the lower end of the ability distribution, who face a restricted choice set as they are excluded by most firms, thereby reducing competition. Entrepreneurs experience welfare gains of 65%. Predicted output loss is 0.1%, significantly lower than the 8% seen in traditional models without labor market segmentation.

Presentations: XX Ridge Forum, SED Winter Meeting 2024, 17th PEJ Annual Meeting, 58th Canadian Economics Association meeting, 2024 RCEA International Conference, GLO Berlin 2024

Abstract: We study how nonlinear pricing in supply chains shapes output, firm entry, and aggregate welfare. We develop a general equilibrium model in which firms both charge and pay nonlinear prices along the supply chain. Relative to linear pricing, nonlinear prices increase firm-level output but reduce firm entry by distorting the distribution of profits, yielding ambiguous welfare effects. Using transaction-level data from Chilean firms, we document robust evidence consistent with widespread nonlinear pricing across buyer groups. Calibrating the model to the data, we find that nonlinear pricing raises production but deters entry. In equilibrium, output gains dominate: aggregate welfare losses from market power are approximately 18% lower under nonlinear prices than under linear pricing, indicating that analyses based on linear pricing overstate the welfare costs of market power. 

Presentations: W.I.E.N. 2025, 18th PEJ Annual Meeting

Abstract: Italian productivity growth has slowed down since the mid-90s, turning negative in the 2000s. To explain this breakdown, this thesis explores the role of firm-level technology adoption. Using data from the universe of Italian incorporated companies, I document an increase in the correlation between productivity and firm-level profit-reducing distortions. Over time, more productive firms are increasingly subject to profit distortions. This implies that incentives to engage in productivity-enhancing activities have progressively declined, as correlated distortions reduce the returns of such activities. I present a reverse causality test supporting the hypothesis that the correlation productivity-distortions has a causal effect on firm growth by reducing incentives to innovate. To quantify the impact on aggregate productivity, I build a general equilibrium model calibrated to the Italian pre-productivity breakdown. I find that Italy’s aggregate productivity would have been 6% higher if the correlation productivity-distortions had remained at its 1997 level. Furthermore, firm life-cycle growth decreases by 8% relative to the baseline. I show that the key driving mechanism behind the trend is a steady increase in the correlation with cost-of-capital distortions, which started in 1995 and ended in 2015. The broader message is that an important component of a country’s aggregate productivity growth can be explained by trends in the elasticity of productivity distortion that hampers firms’ technology adoption.