Research
Working Papers
- Trade Shocks in Distorted Economies: Evidence from Firm-level Import Data
(with Rodrigo Adão, Ana Fernandes, and Chang-Tai Hsieh)
[Paper] [Slides] (from Princeton IES 2025)
Abstract [+]
Using a dataset of firm-level imports for 57 countries, we measure importer firm concentration and its impact on the aggregate and distributional effects of tariff changes. Our model links importer concentration to the domestic market power of importer firms, as summarized by the firm-level elasticity of imports to tariff changes. In our data, this elasticity decreases monotonically with a firm's import share of a given good, implying that a firm's markup increases with its import share. Given these estimates, the incidence of tariff changes depends on the between- and within-good covariance between (i) import responses and (ii) initial markups. Among the trade liberalization episodes in our sample, we find that import market concentration induces changes in allocative efficiency comparable in magnitude to welfare changes predicted by neoclassical mechanisms. The higher and more dispersed concentration in import markets of poorer and smaller countries amplifies the effect of tariff changes on allocative efficiency.
- Learning Segmentation and Economic Development (New Draft coming soon!)
(with Santiago Franco)
[Paper] [Slides] (from The Economics of Informality 2024)
Abstract [+]
How does learning from others shape economic development? We answer this question with a quantitative model of multiple labor markets and modern and traditional sectors, capturing key features of dual economies in developing countries. Workers sort across sectors and labor markets and accumulate human capital by learning from peers. Learning opportunities are sector-specific and depend on peer composition within the labor market. The model makes one main prediction: more skilled workers sort into the modern sector and, as a consequence, workers in this sector experience faster wage growth because they are exposed to higher-skilled peers. We test this prediction using longitudinal worker data from Chile and find empirical support for it. Finally, we estimate the model and use it to quantify how income per capita and welfare would change if traditional-sector workers had access to the same learning opportunities as modern-sector workers.
Work in Progress
- Cost of Size-dependent Regulations: The Role of Informality and Firm Heterogeneity
(with Ufuk Akcigit, Y. Emre Akgunduz, Harun Alp, and Seyit M. Cilasun)
Abstract [+]
We study the effects of size-dependent regulations in a dynamic model in which heterogeneous firms spend resources to grow by improving their productivity and can rely on informality in the labor market. We use the model to study firms in Turkey, where labor market regulations make operation more costly for firms with more than 50 employees. We find that firms rely more on informality to avoid the burden of size-dependent regulations: the overall share of informality would be lower by 5.9% in the absence of regulation. Additionally, size-dependent policies take a higher toll on firms with high growth potential. In a counterfactual economy without distortion, the share of these firms would increase by 2.5%, and the share of firms with more than 50 employees would increase by 78%. Finally, without regulation, economic growth and welfare would increase by 1.9% and 0.6%, respectively.
- Financial Development, Informality, and Misallocation
(with Sreyas Mahadevan, and David Perez-Reyna)
Abstract [+]
Financial development plays a crucial role in driving economic growth. In this paper, we analyze the relationship between financial development and informality. Using Enterprise Surveys (WBES) data, we find a negative correlation: economies with higher financial development exhibit lower informality rates. To rationalize these observations, we propose a two-period model where firms are subject to financial friction and endogenously choose formal and informal labor. The financial friction is a correlated distortion, so higher financial development reduces misallocation and benefits more productive firms. This leads to increased labor demand, productivity-enhancing investments, and positive effects on aggregate welfare and production.