In September 2018, I will join the Research Department of the Bank of Spain as an Economist.
I obtained a Ph.D. in Economics from New York University (NYU) in May 2018.
Firm Dynamics and Pricing under Customer Capital Accumulation (with Sonia Gilbukh)
This paper analyzes the macroeconomic implications of customer capital accumulation at the firm level. We build an analytically tractable search model of firm dynamics in which firms of different sizes and productivities compete for customers by posting pricing contracts in the product market. Cross-sectional price dispersion emerges in equilibrium because firms of different sizes and productivities use different pricing strategies to strike a balance between attracting new customers and exploiting incumbent ones. Using micro-pricing data from the U.S retail sector, we show that our mechanism can rationalize empirical correlations between store sales and relative prices, and the growth dynamics of stores across sizes. We then calibrate our theory to match long-run moments from the cross-sectional distribution of sales and prices, and use our estimated model to explain sluggish aggregate dynamics and cross-sectional heterogeneity in the markup response to aggregate shocks. Finally, we show that our estimated model can connect two secular trends experienced in the U.S. since the early 1980s: the decline in business dynamism and the rise in the average markup.
Advertising, Innovation, and Economic Growth (with Laurent Cavenaile)
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This paper analyzes the implications of advertising for firm dynamics and economic growth in the long run through its interaction with R&D investment at the firm level. We develop a model of endogenous growth with firm heterogeneity that incorporates advertising decisions. We model advertising by constructing a framework that unifies a number of facts identified by the empirical marketing literature. We then calibrate the model to match several empirical regularities across firm sizes using U.S. data. Through a novel interaction between R&D and advertising, we are able to explain the empirically observed deviation from size-invariant firm growth rates (Gibrat’s law) as well as the behavior of R&D expenditures across firm size. In addition, our model predicts a substitution effect between R&D and advertising at the firm level. Lower advertising costs are associated with lower R&D investment, slower growth and lower welfare. We provide empirical evidence supporting the substitution between R&D and advertising investment using exogenous variation in the cost of R&D arising from changes in the tax treatment of R&D expenditures over time and across U.S. states. We study the policy implications of our model in terms of advertising tax and R&D subsidies. Taxing advertising is shown to have a positive but relatively small effect on economic growth within a reasonable range of tax rates. We find that R&D subsidies are more effective under an economy calibrated to include advertising relative to one with no advertising.
Sunspots, Coordination, and Innovation Cycles
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I propose a theoretical mechanism that offers a possible explanation for the post-Great Recession stagnation experience observed in many industrialized countries. The theory is based on failures in the coordination of the beliefs of productive and innovative agents. In the model, an innovative sector determines endogenously the long-run growth rate of the economy, and research exhibits positive spillovers. Failing to internalize the general equilibrium effects of their innovation decisions, agents can coordinate into pervasive equilibria in which no innovation occurs, which leads the economy to growing through lower- and older-quality production for as long as pessimism persists. Through simulations, I show that the model can generate patterns that are qualitatively similar to those experienced by the U.S. output and private R&D investment since the 2008 financial crisis. In particular, output drops on impact due to the endogenously generated, belief-driven recession, and the subsequent recovery is sluggish and settles around a trend that is both lower and flatter than its pre-crisis level.
An Open-Economy Neoclassical Growth Model with a Two-Party System (with Daniel Garcia-Macia and Peter Zorn) Addenda Review, 3, Spring 2012.
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We construct an open-economy Neoclassical growth model with the particularity that two parties which have different views of the value of consumption when they are in office alternate in power. The base of the model is inspired in Aguiar and Amador (2010), but by introducing party heterogeneity on top of lack of commitment we are able to extend its insights and focus on the effects of the interaction between successive governments. We find that party heterogeneity gives rise to a pseudo steady state with a two-period cycle. Increased preference of parties for shifting consumption to their periods decreases the two steady-state values of capital compared to the first-best and to the case of a single party ruling forever. However, the more ‘spending’ party is able to enjoy higher capital and consumption levels than its opponent in the periods it is in office. Our model determines the dynamics of these two endogenous variables, as well as of taxes, transfers, foreign debt and trade balances for a given initial value of foreign debt.