Job market paper
In this paper, I study firms’ strategic and anticompetitive behaviour, and the consequent role of antitrust law as a macroeconomic policy in promoting business dynamism. Over the past few decades, business dynamism has been declining in the US: firm entry has fallen, accompanied by a slowdown in the rate of productivity growth. Additionally, enforcement of antitrust law has been at historically low levels. Using firm-level and sector-level data from the US, I find that stronger antitrust enforcement is associated with higher entry and higher productivity growth but lower R&D investments. Next, I develop and structurally estimate a dynamic general equilibrium model with innovation and oligopolistic product market competition. The dynamic structure of the model allows firms to eliminate competition through strategic decision-making. The model is calibrated to the recent US experience and quantitative exercises show that strengthening antitrust policies results in: (1) a higher firm entry rate, (2) a higher rate of productivity growth, (3) a larger labour share of GDP, and (4) a decline in the innovation rate. Overall, the model indicates that stronger antitrust policies are effective at restoring business dynamism and can deliver up to 16% higher welfare in consumption-equivalent terms. The improvement in welfare is mainly driven by an increase in the welfare of workers, without affecting the capitalists, suggesting that antitrust law has distributional implications, and therefore, has a potential role in reducing inequality.
This paper investigates the growth trajectory of future multiple product exporters through developing and structurally estimating a model in which firms are heterogeneous in their productivity and assets. Through analytical derivations, I show that when firms are liquidity constrained, the sequence of product introduction depends on firms’ initial asset level. In particular, liquidity constrained firms with a high productivity and higher initial assets, first enter the foreign market and then increase their product scope in the domestic market. While other firms, with a similar level of productivity but lower initial assets, accumulate assets through increasing their domestic product scope and then export. The model is then calibrated to the US data in 1995-2000. The theoretical predictions are verified in the estimated model, and it is shown that financing constraints mainly affect the young firms by delaying their export decision. Further, I estimate that removing financing constraints would increase the aggregate productivity level by 1.9%.
A City of God: Religion, Insurance and Economic Behaviour in Brazil
with Tiago Cavalcanti, Sriya Iyer, Christopher Rauh and Christian Roerig
Using primary data from Brazil in 2019-2020, we quantify the link between religion, expectations and economic outcomes, suggesting a key complementarity that for religious networks to provide insurance in this life one also needs strong beliefs in the afterlife. Individuals invest more in their religious communities if they can also expect various forms of community support. The degree of this insurance channel varies across different religions and is highest for Pentecostals. Consistent with this, we build a lifecycle model with heterogeneous agents, imperfect insurance and afterlife beliefs. We discipline the value of model parameters with our data and show that under certain parameterizations the job support channel exists as a by-product of coordinated beliefs in the afterlife. Our results provide evidence that insurance by the community would not be enough to induce religious investments. It is complementarity with beliefs in the afterlife which raises the returns of religious investments above the threshold. The community support and afterlife channel together provide an average value worth 9.6% of consumption in each year.
with Karim Foda and Yu Shi
This paper studies the relation between firms’ access to finance, labor productivity and investment using Lithuanian firm-level data from 2000-2018. To do so, we construct a measure of financial constraints. We estimate that, given firm characteristics, removing these constraints can improve average productivity and investment of firms in Lithuania by 0.51% and 7.2%, respectively. Our results further suggest that policies targeting firm age and size together will be more effective in mitigating the impact of financial constraints as the relationship between firm age and size with financial constraints exhibits non-linearities.