Working Papers

Valerio Dionisi

Title: The Horizontal Geometry of Production Networks

Abstract: Modern economies are organized as dense production networks, yet comovement is typically understood through vertical Input-Output linkages and cascade effects. This paper argues that this view is incomplete. I show that comovement fundamentally depends on horizontal complementarities: the extent to which sectors share upstream suppliers or downstream buyers. These similar demand and supply network structures induce simultaneous responses to idiosyncratic shocks, shaping the sign of comovement. The theoretical framework developed disentangles vertical from horizontal transmission, offering a unified view of comovement rooted in the horizontal geometry of common economic interactions rather than trade intensity. Unlike vertical propagation, horizontal transmission does not rely on cascading amplification or dominant sectors for aggregate fluctuations, but generates systematic comovement that prevents shocks from averaging out. Using U.S. Input-Output data, I show that sectoral employment responses vary systematically with demand and supply distances, with nearby sectors exhibiting dampened or opposing responses and distant sectors comoving positively.

Valerio Dionisi

Title: Industrial Structure, Technological Change, and U.S. Wage Inequality

Abstract: This paper examines the determinants of U.S. wage inequality between industries. It distinguishes two channels of Skill-Biased Technological Change: a quantity effect, mirroring variations in the distribution of capital and labour inputs, and a structural effect, reflecting differences in substitution elasticities across factors of production. Counterfactual exercises show that evolving technological heterogeneity in substitution patterns dominates wage dispersion. A quantitative decomposition reveals that structural forces, mostly reflecting substitutability of routine with non-routine labour, account for 94% of observed wage variance, exacerbated by stronger sorting and segregation effects. Upon neutralising structural differences, the quantity channel reckons merely 6-15%. Indeed, structural heterogeneity, rather than mere changes in factor quantities, is the dominant force behind U.S. wage inequality.

Aniello Piscopo

Title: Informal Labour Market, Inflation and monetary policy

Abstract: Informality represents a pervasive feature of many emerging and developing economies, yet standard macroeconomic models often ignore its effects, potentially biasing the analysis of shocks and the design of monetary policy. This paper studies the macroeconomic and policy implications of informality using a structural VAR for Colombia and a two-agent New Keynesian model with formal and informal sectors, featuring heterogeneous households including hand-to-mouth consumers. I show that informal labor supply shocks generate sectoral reallocation: informal activity absorbs part of the shock, sustaining aggregate output while altering wages, hours, and capital allocation. In contrast, monetary policy shocks propagate more strongly when informality is present, amplifying distributional and capital-reallocation effects. Critically, the presence of informality alters equilibrium determinacy: standard Taylor rules may fail to ensure uniqueness, with stability depending on the share of Ricardian households, the size of the informal sector, and the monetary policy stance. My findings highlight that accounting for informal production is essential for understanding transmission mechanisms and designing effective policy in economies with significant informality.

Lorenzo Portaluri

Title: The Transparency Trap: Quality of Public Information and the Intensity of Revolutionary Violence

Abstract: This paper develops a theoretical framework to study how the quality of public information shapes the intensity of revolt in global games of regime change. Building on the canonical literature, I model citizens deciding whether to attack a regime where intensity determines both effectiveness and failure costs. I extend the framework by endogenizing total conflict intensity through the strategic interaction of vanguard groups seeking to maximize the potential of the attack, and including the regime's response. The analysis reveals a non-monotonic "transparency trap": at intermediate beliefs, the relationship between information quality and total violence becomes U-shaped. Intensity is high when information is scarce (serving as a substitute coordination device), minimizes at intermediate levels, and surges again when high transparency facilitates violent coordination. These dynamics persist when intensity is the outcome of decentralized strategic choice. Moreover, as the number of competing vanguard groups increases, so does the equilibrium intensity. I empirically test these predictions drawing 177 events from the Revolutionary Episodes dataset (1900–2014), combined with historical Freedom of Expression indices. The results provide robust support for the U-shaped hypothesis and confirm that higher vanguard competition structurally escalates conflict. These findings highlight that transparency reforms can have counterintuitive effects, providing relevant policy implications.

Matteo Nozza

Title: The Dynamics of Honor: Cultural Transmission of Reciprocity and Private Punishment 

Abstract: Standard evolutionary arguments suggest that, barring reputational incentives, costly punishment strategies should be extinguished by material selection. This paper shows that reciprocity persists when transmitted as a belief-dependent preference. Using an overlapping generations model with incomplete information, imperfect empathy incentivizes parents to transmit materially inefficient traits to avoid psychological disutility. Under "aggressive reciprocity,'" the population can settle into a "full deterrence" equilibrium: the practice of violence disappears, yet the retaliatory trait persists. Second, under "defensive reciprocity,'" the honor trait can survive as a stable minority. These regimes rationalize, respectively, the historical demise of Honor Duels and the persistence of the Culture of Honor in the U.S. South.  

Aniello Piscopo (work in progress) 

Title: Hidden Monopsonies: Labor Power in Informal Markets

Aniello Piscopo

Title: DTC and green productivity paradox with Angelica Bertucci

Abstract: This paper revisits the relationship between Artificial Intelligence (AI) and green productivity by explicitly modeling AI adoption as an endogenous and directed process. Existing literature typically treats AI as a homogeneous and exogenous increase in automation, documenting a “green productivity paradox” whereby digital investment does not necessarily translate into immediate productivity gains, particularly in energy-intensive economies. We propose a framework in which firms optimally choose the direction of AI innovation between green and non-green applications. Using firm-level patent data (PATSTAT/OECD REGPAT), we construct a measure of green-directed AI as the share of AI patents associated with climate mitigation technologies (Y02). This is combined with balance-sheet data (ORBIS/Amadeus) and country-level measures of energy prices and carbon regulation. We first estimate a policy function for the direction of AI adoption, and then assess its impact on green total factor productivity accounting for endogeneity. The results show that the effects of AI on environmental performance critically depend on its direction of use. The so-called green productivity paradox largely reflects the assumption of exogenous and undirected AI adoption. Once AI is modeled as endogenous and directed, its impact is shaped by firms’ characteristics and policy incentives.