Working Paper
Firm Demographics and the Great Recession
Joint with Gian Luca Clementi and Berardino Palazzo
Abstract: The last U.S. recession stands out not only for its depth, but also for the rather slow recovery the followed it. What is less well known is that the number of productive units also dropped substantially, while it barely budged in occasion of the 1981 recession, and kept increasing during the 1991 and 2001 recessions. To the extent that the stock of establishments is a very slow–moving variable, a recession characterized by an unusually large drop in establishments will necessarily be followed by a slow recovery. In order to evaluate the quantitative significance of this simple mechanism, we build a general equilibrium business cycle model with heterogeneous firms and endogenous entry and exit, and calibrate it so that the implied firm–level and aggregate dynamics are consistent with the empirical evidence. Preliminary results show that, when hit with a negative total factor productivity shock, the model produces a much more persistent decline in employment and output than an off-the-shelf model with a fixed number of establishments.
Presentations (by coauthor or myself): SED2017, CEF2017
Joint with Gian Luca Clementi and Berardino Palazzo
Abstract: The last U.S. recession stands out not only for its depth, but also for the rather slow recovery the followed it. What is less well known is that the number of productive units also dropped substantially, while it barely budged in occasion of the 1981 recession, and kept increasing during the 1991 and 2001 recessions. To the extent that the stock of establishments is a very slow–moving variable, a recession characterized by an unusually large drop in establishments will necessarily be followed by a slow recovery. In order to evaluate the quantitative significance of this simple mechanism, we build a general equilibrium business cycle model with heterogeneous firms and endogenous entry and exit, and calibrate it so that the implied firm–level and aggregate dynamics are consistent with the empirical evidence. Preliminary results show that, when hit with a negative total factor productivity shock, the model produces a much more persistent decline in employment and output than an off-the-shelf model with a fixed number of establishments.
Presentations (by coauthor or myself): SED2017, CEF2017
Work in Progress
Market Concentration and Investment Cyclicality
Joint with Alberto Polo
Abstract: We find that higher market concentration is related to stronger cyclicality of investment at both firm and industry level, and is negatively correlated with labor share and investment rate in the cross-section. We build a macroeconomic model with a continuum of industries. Within each industry, firms play a dynamic duopoly game by investing in capital. Strategic investment competition generates time-varying firm and industry markups endogenously, amplifying investment responses to aggregate shocks. Preliminary results show that the model is qualitatively consistent with the empirical evidence. Firms’ strategic investment decisions play a key role in determining market concentration and the impact on the business cycle.
Joint with Alberto Polo
Abstract: We find that higher market concentration is related to stronger cyclicality of investment at both firm and industry level, and is negatively correlated with labor share and investment rate in the cross-section. We build a macroeconomic model with a continuum of industries. Within each industry, firms play a dynamic duopoly game by investing in capital. Strategic investment competition generates time-varying firm and industry markups endogenously, amplifying investment responses to aggregate shocks. Preliminary results show that the model is qualitatively consistent with the empirical evidence. Firms’ strategic investment decisions play a key role in determining market concentration and the impact on the business cycle.
Endogenous Financial Intermediary Formation
Abstract: Building on Duffie, Garleanu, and Pedersen (2005), but with different risk types of investors, this paper develops a dynamic model of endogenous financial intermediary formation. I show that financial intermediary trades happen when two different risk type investors meet, even when one of the agents is not motivated by need. There are two reasons for investors to get involved in financial intermediation: either because they face a high risk shock and they care more about the future, or because they get a satisfactory bid-ask spread from intermediary trades.
Abstract: Building on Duffie, Garleanu, and Pedersen (2005), but with different risk types of investors, this paper develops a dynamic model of endogenous financial intermediary formation. I show that financial intermediary trades happen when two different risk type investors meet, even when one of the agents is not motivated by need. There are two reasons for investors to get involved in financial intermediation: either because they face a high risk shock and they care more about the future, or because they get a satisfactory bid-ask spread from intermediary trades.
Manuscripts
Multiplier effect of government investment on infrastructure (in Chinese), graduation thesis, June 2013
An improvement on Massera's theorem about periodic solutions of Lienard equation (in Chinese), graduation thesis, June 2013
An improvement on Massera's theorem about periodic solutions of Lienard equation (in Chinese), graduation thesis, June 2013
