This version: September 2022. Also available as NBER Working Paper 30503
Abstract: We build a general equilibrium production-based asset pricing model with heterogeneous firms that jointly accounts for firm-level and aggregate facts emphasized by the recent macroeconomic literature, and for important asset pricing moments. Using administrative firm-level data, we establish empirical properties of large negative idiosyncratic shocks and their evolution. We then demonstrate that these shocks play an important role for delivering both macroeconomic and asset pricing predictions. Finally, we combine our model with data on the universe of U.S. seaborne import since 2007, and establish the importance of supply chain disasters for the cross-section of asset prices.
Returns to Scale, Firm Entry, and the Business Cycle - Journal of Monetary Economics
Last draft: July 2022. Previously circulated under the title "Locus of Control and Business Formation"
Abstract: I document that fewer firms with high returns to scale tend to get started in recessions, and that financial conditions at birth are critical for the formation of such businesses. A version of a firm dynamics model with financial frictions and the ability of potential entrepreneurs to choose their returns to scale can account for the data. In the estimated model, financial frictions slow the rate at which businesses with high returns to scale grow disproportionately; this discourages such firms from entering during recessions. The “missing generation” of firms with high returns to scale delays recoveries in the aftermath of economic crises.
Abstract: We investigate cyclicality of variance and skewness of household labor income risk using PSID data. There are five main findings. First, we find that head’s labor income exhibits countercyclical variance and procyclical skewness. Second, cyclicality of hourly wage is muted, suggesting that head’s labor income risk is mainly coming from volatility of hours. Third, younger households face stronger cyclicality of income volatility than older ones, although the level of volatility is lower for the younger ones. Fourth, while the second earner helps lowering the level of skewness, it does not mitigate the volatility of household labor income risk. Meanwhile, government taxes and transfers are found to mitigate the level and cyclicality of labor income risk volatility. Finally, among heads with strong labor market attachment, cyclicality of labor income volatility becomes weaker, while cyclicality of skewness remains.
Shock Propagation within Multisector Firms - Revision requested at the Journal of Money, Credit and Banking
Last draft: June 2022
Abstract: This paper studies the role of multi-sector firms in the cross-sectoral propagation of economic shocks. By leveraging an increase in import competition from China as a source of a negative economic shock, we show that employment of an establishment in a given industry is negatively affected by the shock that hits establishments operating in other industries within the same firm. We explore a range of explanations for our findings, emphasizing the role of within-firm input-output linkages and within-firm diversification across sectors. At the sectoral level, the shock that propagates through firms' internal networks has a sizable impact on industry-level employment dynamics.
First draft: August 2021
Abstract: We document a growing link between university research and development expenditures and patenting activity in the surrounding metropolitan statistical areas (MSAs) since 1980. The gap in patents per capita between MSAs with and without a research university has doubled, while the elasticity of patents per capita with respect to university R&D has tripled. We establish that this trend reflects growing knowledge spillovers from university R&D by showing that it survives controlling for MSA and university characteristics; that it holds by research/patent field; and that it is stronger in areas where universities do more basic R&D. We show that a portion of this change can be linked to the passage of the Bayh-Dole Act, which was designed in part to improve knowledge flows between universities and firms. The growing importance of teams for leading scientific research and reduction in corporate basic research likely also play a role.
Works in Progress
Macroeconomic Effects of the Universe of EPA Regulations
Returns to Scale and Markups: Micro-level Decomposition Using Administrative Data
Uncertainty Driven Entry and Exit Over the Business Cycle