Firms' Rollover Risk and Macroeconomic Dynamics
(slides | thread)
Job Market Paper
This paper analyzes the macroeconomic implications of firms’ rollover risk. I develop a heterogeneous-firms macroeconomic model with rollover crises emerging 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 by employing a model-based identification strategy which argues that their incidence is informed by the observed distribution of firms’ bankruptcy outcomes, and find that roughly half of bankruptcy events are due to rollover crises. I validate the model using individual firms' observed investment dynamics during the last recessions and then use the model to assess the aggregate implications of rollover risk for the U.S. economy. I find that rollover risk can significantly amplify the impact of recessions. Lastly, I show that imperfectly-targeted credit policies can mitigate rollover crises but can exacerbate firms' debt overhang in the future.
The Micro Anatomy of Macro Consumption Adjustments
(NBER Working Paper)
with Pablo Ottonello and Diego Perez
Revise and resubmit, American Economic Review
We study crises characterized by large adjustments of aggregate consumption through their microlevel patterns. We show that leading theories designed to explain aggregate consumption dynamics differ markedly in their cross-sectional predictions. While theories based on financial frictions predict that rich households with liquid assets should be able to smooth consumption during bad times, neoclassical theories predict that these agents would optimally adjust their consumption if crises severely affect their permanent income. Using microlevel data on several episodes of large aggregate-consumption adjustment, we document that rich households significantly adjust consumption relative to their income, consistent with the permanent-income hypothesis of consumption during crises. We discuss our findings' implications for the effectiveness of stabilization policies that target consumption during crises.
Entrepreneurship, Financial Frictions, and the Market for Firms (slides | YES discussion)
with Federico Kochen
We study the relation between financial frictions and the trade of privately held firms. In the U.S. one out of five entrepreneurs purchased their business, however, this number has decreased during the last 30 years. Further, in the cross section, younger, smaller, and high return to capital firms exhibit the highest probabilities of trade. We propose a general equilibrium model of entrepreneurship and frictional trade of firms that explains these findings. Gains from trading firms in our model arise from the presence of financial frictions with credit constrained firms, which tend to be young and small, being the ones most likely to be traded. Our quantitative exercises suggest that the better allocation of capital due to the trade of firms may account for 5 to 8% of entrepreneurial output. Moreover, we found that easier access to credit can explain 40% of the fall in the share of traded firms observed during the last decades.
Working From Home and Contact-Intensive Jobs in Uruguay (spanish | slides | post | data + codes)
RISEP paper (Social Sciences Research Network to Confront Sequels of the Pandemic - Uruguay)
supplementary material: risky jobs in Uruguay (spanish)
coverage: CEPAL, UNDP, UNDP blog, ILO, En la Mira (TV), El Observador (newspaper), El Pais Uruguay (newspaper), Puntos de Vista (radio)
In this article, I estimate how many workers have jobs that can be performed at home (WFH) and jobs with close physical contact to other people (CI) in Uruguay. To identify the jobs that are WFH and CI, I adopt the methodology of Dingel & Neiman (2020) and Mongey, Pilossoph & Weinberg (2020) used for US. 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 relation of WFH and CI measures with household access to social insurance, hand-to-mouth propensity, intrahousehold insurance and job-automation risk. Lastly, I show that my baseline estimates of WFH are consistent with ex-post survey estimations during the Covid-19 pandemic lockdown in Uruguay.
Work in Progress
The Business Cycle Volatility Puzzle: Emerging vs Developed Economies
with Lucia Casal