Primary Fields: Macroeconomics and International Trade, with a focus on Production Networks.
Secondary Fields: Industrial Organization and Political Economy.
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JOB MARKET PAPER
This paper uses a firm-to-firm transaction dataset to evaluate quantitatively how shocks propagate through production networks when their underlying links are costly to form. I start by documenting a set of facts consistent with adjustment costs in these relationships. In particular, these links react sluggishly to firm-specific international trade shocks and are unresponsive to small shocks but strongly responsive to large shocks. Guided by these facts, I develop a dynamic general equilibrium model with endogenous production networks where links are costly to adjust. Solving for the links' dynamics with a large number of firms is made possible by leveraging the empirical sparsity of firm-to-firm links. To measure the aggregate relevance of these adjustment frictions, I estimate the model using a simulated method of moments and evaluate how international trade shocks during the Great Recession propagated in Chile. Without links' adjustment frictions, and thus with a totally flexible network, the output losses from these shocks would have been 30 percent lower. The application highlights the relevance that dynamics in firm-to-firm links has not only for firms' connectivity but also for how aggregate output responds to shocks.
with In Song Kim.
We study the causal effect of firms’ lobbying activities on the misallocation of resources through the distortion of firm size. To address the endogeneity between firms’ lobbying expenditure and their size, we propose a new instrument. Specifically, we measure firms’ political connections based on the geographic proximity between their headquarter locations and politicians’ districts in the U.S., and trace the value of these networks over time by exploiting politicians’ assignment to congressional committees. We find that a 10 percent increase in lobbying expenditure leads to a 3 percent gain in revenue. To investigate the macroeconomic consequences of these effects, we develop a heterogeneous firm-level model with endogenous lobbying. Using a novel dataset that we construct, we document new stylized facts about lobbying behavior and use them, including the one from the instrument, to estimate the model. Our counterfactual analysis shows that the return to firms’ lobbying activities amounts to a 22 percent decrease in aggregate productivity in the U.S.
THE INTERNAL LABOR MARKETS OF BUSINESS GROUPS
Business groups (BGs) can be beneficial for affiliated firms through the formation of internal markets that improve the allocation of their resources. Although shown for internal capital markets, little is known about BGs’ internal labor markets (ILM). We provide novel micro evidence that business groups use and benefit from ILM. Consistent with ILM, labor reallocation in response to international trade shocks is stronger between pairs of firms in business groups than between pairs of unaffiliated firms. This internal reallocation only holds among top-occupation employees. We test several hypotheses from the literature of the reasons behind these ILM and fail to find support for diversification, insurance for workers, transaction costs, and imperfect information. Instead, we find that flows within ILM are stronger when the employee’s origin firm controls the destination firm, and in more complex ownership structures. Finally, we provide suggestive evidence that reallocation within ILM increases the destination firm’s profitability and is beneficial for the group as a whole. Our results are consistent with the idea that ownership networks between firms facilitates the accumulation and transfer of intangible inputs such as management practices.
WORK IN PROGRESS (selected)
Industrialization Among Early and Late Developers
with Richard Rogerson.
the rise of constituents’ political polarization in the us
Firm Matching and the Returns to Elite College Education
I. PRINCETON - UNDEGRADUATE TEACHING ASSISTANT
II. UNIVERSITY OF CHILE - UNDERGRADUATE Lecturer
III. UNIVERSITY OF CHILE - GRADUATE TEACHING ASSISTANT