Research

We study crises characterized by large adjustments of aggregate consumption through their microlevel patterns. We document the cross-sectional patterns of consumption adjustment across the income distribution and find large adjustments for top-income households, who exhibit consumption-income elasticities similar to or larger than the average. We construct a heterogeneous-agent open economy model of consumption under income fluctuations and show that the data patterns are largely consistent with theories that attribute the dynamics of aggregate consumption to changes in aggregate permanent income. We also discuss our findings' implications for theories based on the tightening of households' borrowing constraints and analyze policy implications.

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, firm-level, and international trade data from various developed and emerging economies, we quantify the relevant model-based sufficient statistics. We find that differences in sectoral composition between emerging and developed economies can explain up to 77% of the excessive business cycle volatility in emerging economies, while disparities in the distribution of firms account for up to 9%, and the role of international prices shocks is negligible. Despite the significant influence of sectoral composition, the decrease in volatility observed in emerging economies over the past four decades cannot be attributed to changes in their economic structure.

We study and quantify the aggregate implications of the trade of firms in the presence of financial frictions. Empirically, we document that one in four U.S. entrepreneurs purchased their business, with younger, smaller, and higher average revenue product of capital (ARPK) firms having the highest trading rates. After trade, capital outpaces output growth, reducing firms' ARPK over time. To explain these findings, we propose a general equilibrium model of entrepreneurship with a frictional market for firms in which firm trade alleviates financial constraints. We show that the predictions of our theory are consistent with the cross-sectional and longitudinal facts. Quantitatively, we show that taxing transactions in the market for firms generates sizable aggregate losses, reflecting the role of this market in improving allocative efficiency. The productivity gains from this market are potentially larger in less financially developed economies.

We study the origins and life cycles of firms that reach the top 1 percent of the size distribution and show that they are central for quantifying the aggregate effects of financial frictions. Using longitudinal data, we document that future top firms make sizable capital investments early in life, exhibit strongly backloaded profits, and heavily rely on external financing. By contrast, firms in the bottom 99 percent operate with little capital early on and exhibit fairly flat profit shares over their life cycle. To interpret these patterns, we develop a firm dynamics model with ex-ante heterogeneity, fixed costs in inputs that generate non-homotheticities in production, and forward-looking financing that makes it possible for high-growth potential firms to sustain backloaded profits. Quantitatively, the aggregate losses from financial frictions are driven primarily by distortions that affect the entry and survival of future top firms.

This paper analyzes the macroeconomic implications of firms' rollover risk. I develop a heterogeneous-firms macroeconomics model where rollover crises arise from coordination failures among creditors. Rollover crises are events in which a firm defaults because creditors fail to roll over its debt, but would have repaid otherwise. I assess the quantitative relevance of rollover crises using a model-based identification strategy informed by the observed distribution of firms' bankruptcy outcomes. Finally, I use the model to evaluate the aggregate implications of rollover risk for the U.S. economy and examine the effectiveness of imperfectly targeted credit policies for stabilization during recessions.

In this article, I estimate how many workers have jobs that can be performed at home (WFH) and jobs with close physical contact with other people (CI) in Uruguay. To identify the jobs that are WFH and CI, I adopt the methodology of Dingel and Neiman (2020) and Mongey, Pilossoph and Weinberg (2020) used for the U.S. My baseline estimates show that around 78% of the workers in the private sector can't WFH and 22% have CI jobs. Next, I find large heterogeneity in WFH and CI propensities across the income distribution, geographical locations, age groups, education levels, and production sectors. In addition, I study the access to social insurance, hand-to-mouth propensity, and intra-household insurance for households exposed to the pandemic. Lastly, I show that my baseline estimates of WFH are consistent with ex-post survey estimations during the Covid-19 pandemic lockdown in Uruguay.

In this paper, we study whether financial crises accelerate or slow down structural change. We document the sectoral reallocation of economic activity following banking and sovereign debt crises, using data from 79 emerging and developed economies covering over 100 crisis episodes between 1950 and 2019. We then quantify the drivers of this reallocation through a workhorse model of structural transformation extended to an open economy with distortions. Our analysis reveals significant and persistent reallocation in the aftermath of crises. Agricultural employment shares rise persistently, driven primarily by income effects, and partially offset by a relative price effect. Construction contracts sharply and persistently, explained by price effects and demand distortions. In manufacturing, output shares rise substantially as income, price, and trade effects shift activity there, but employment barely responds — a gap captured by a persistent rise in labor distortions. Finally, net exports in agriculture and manufacturing rise substantially after crises, reallocating activity away from services. Taken together, our findings suggest that crises significantly delay structural change.