The Micro Anatomy of Macro Consumption Adjustments
(NBER working paper | link to journal)
with Pablo Ottonello and Diego Perez
American Economic Review 2023, Vol. 113, No. 8, 2201-31
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.
Financial Frictions and the Market for Firms
with Federico Kochen
We study and quantify the aggregate study and quantify the aggregate implications of the trade of firms in the presence of financial frictions. In the U.S., one out of four entrepreneurs purchased their business. In the cross-section, younger, smaller, and higher return to capital firms have the highest trading rates. To explain these findings, we propose a general equilibrium model of entrepreneurship with a frictional market for firms where gains from trade arise from credit constraints, incomplete markets, and preference shocks. Using firm-level data from several high-income countries, we document that post-trade firm dynamics are consistent with the trade of firms alleviating financial constraints, as predicted by the model. Our quantitative results for the U.S. suggest that firms' trade significantly improves capital allocation in the economy, accounting for 9.1% of entrepreneurial output and 2.2% of TFP. We argue that the trade of firms can play an even more important role in less financially developed economies.
The Business Cycle Volatility Puzzle: Emerging vs Developed Economies
with Lucia Casal
Tapan Mitra Memorial Prize for Outstanding 3rd Year Paper (awarded to Lucia Casal, Cornell University)
Firms' Rollover Risk and Macroeconomic Dynamics
(slides | thread)
Job Market Paper
2022 National Prize in Economics (Premio Raul Trajtenberg) Uruguay
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.
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 with 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 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.
Work in Progress