Market Power and Firm-to-Firm Innovation Pass-Through Job Market Paper
This paper investigates how innovation pass-through from supplier to customer firms is affected by the strategic behavior of suppliers with high market power.
Production network theories suggest that productivity shocks to upstream suppliers reduce input costs for downstream customers, increasing aggregate output.
However, empirical evidence remains elusive, and firms with high market power might not have the incentives to pass-through their innovations.
I present new empirical evidence showing that innovations by high-markup suppliers lead to an actual decrease in their customer firms' sales, while innovations by low-markup suppliers lead to an increase in their customer firms’ sales.
High-markup suppliers are more innovative and produce more unique products (i.e., products with distinct attributes).
I embed these empirical findings in a quantitative model of endogenous growth with oligopolistic competition, where suppliers' innovation efforts affect their productivity (how efficiently they produce) and their uniqueness (how easily customer firms can substitute them).
The model is used to analyze the impact of innovation pass-through on suppliers' incentives and quantify the aggregate effects on productivity and growth. Finally, counterfactual analyses evaluate the role of product uniqueness in recent trends in aggregate productivity and market concentration in the US.
On the Investment Network and Development with Julieta Caunedo STEG PhD Research Grant
Capital accumulation and the systematic reallocation of economic activities across sectors are two of the most salient features of the process of economic development.
These two processes are interconnected through the production of capital of various types and heterogeneous usage intensity across sectors, which is summarized by the investment network.
Our paper introduces the first harmonized measures of the investment network across the development spectrum and documents novel empirical regularities.
We then propose a simple theory linking disparities in this network and disparities in income per capita across countries.
We show that Domar weights and the elasticity of output to sectorial productivity are non-trivial functions of the investment network and of the equilibrium sectorial investment rates along the Balanced Growth Path.
For our sample of 58 countries, we show that 30% of the crosscountry differences in steady state income per capita can be accounted for by disparities in the investment network.
These differences in the “technology" for producing new capital are double what a standard development accounting exercise would predict for the role of capital in income disparities.
The Business Cycle Volatility Puzzle: Emerging vs Developed Economies with Rafael Guntin Tapan Mitra Memorial Prize for Outstanding 3rd Year Paper
We study the drivers of business cycle volatility differences between emerging and developed economies.
We develop a multisector small open economy framework with heterogeneous firms and production linkages in which firms are subject to sectoral and firm-level TFP shocks and international prices shocks.
Using sector-level data, firm-level micro data, and international trade data from various developed and emerging economies, we quantity the relevant model-based sufficient statistics.
We find that differences in the sectoral composition and the distribution of firms explain roughly half of the excessive business cycle volatility in emerging economies.
Finally, we find that the contribution of international prices is sensitive to the households' preferences.