Abstract: This paper develops and tests a quantitative general-equilibrium model to study how sorting and segmentation in the labor market shape firms’ monopsony power, aggregate efficiency, and the distribution of welfare across heterogeneous workers. Firms (workers) are heterogeneous in productivity (ability), and intrafirm spillovers imply that firm productivity depends on the average quality of the workforce. This mechanism creates a trade-off between firm size and composition: hiring lower-ability workers reduces a firm’s average productivity, endogenizing labor market segmentation by worker ability. These forces generate localized competition, with firms primarily competing against others targeting similar workers. Less (more) productive firms exert greater labor-market power over lower- (higher-) ability workers. Using matched employer–employee data for Italy and Germany, I document that (i) high-paying firms impose higher hiring thresholds, (ii) low- (high-) paid workers are disproportionately employed in low- (high-) paying, smaller (larger) firms, (iii) concentration indices are non-monotonic across the worker-pay distribution, and (iv) exogenous increases (decreases) in workforce average quality causally raise (lower) firm-level productivity. Calibrated to the data, the model reproduces these moments and shows that, relative to a homogeneous-labor benchmark, segmentation reduces aggregate misallocation by weakening the link between firm size and market power. Competition is weakest at the tails of the ability distribution, where workers face more concentrated labor markets and larger welfare losses.

Presentations: VisitINPS Annual Conference, Fall 2025 Midwest Macroeconomics Meeting, AIEL, 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 the welfare implications of nonlinear pricing in supply chains. Using population level firm-to-firm transactions from Chile, we find indicative evidence that sellers engage in quantity-dependent and buyer-specific pricing strategies. We develop a general equilibrium model where firms pay and charge nonlinear prices. Under standard assumptions, we show that the optimal pricing scheme takes the form of a two-part tariff—comprising a flat fee and a marginal price—consistent with the price schedules observed in the data. Nonlinear pricing increases output per firm but distorts firm entry because flat fees redistribute profits unevenly across firms. Quantifying the model, we find that welfare under nonlinear prices reaches about 75% of the efficient benchmark. In a counterfactual policy that bans all price discrimination—constraining firms to uniform pricing, a single, quantity-invariant price for all buyers—welfare falls to about 49% of the efficient benchmark. Firms constrained to uniform pricing raise marginal prices that compound along supply chains, amplifying deadweight losses through markup accumulation. When interpreting the same data as uniform pricing, rather than nonlinear pricing, measured welfare is about 57% of the efficient benchmark. These results indicate that prohibiting price discrimination can be welfare-reducing and that the measured aggregate welfare impact of market power in supply chains depends meaningfully on the extent to which firms use nonlinear pricing 

Presentations: Fall 2025 Midwest Macroeconomics Meeting, Ridge Economic Forum, 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.