Structural Change Accounting

with Manuel García-Santana, Lucciano Villacorta

Health, Consumption, and Inequality

with Jay Hong, Víctor Ríos-Rull

Working Papers

Buy Big or Buy Small? Procurement Policies, Firms’ Financing, and the Macroeconomy

with Julian di Giovanni, Manuel García-Santana, Priit Jeenas, Enrique Moral-Benito

Downloads: Working paper (January 2014); CEPR Discussion Paper DP17023 (July 2023); first version February 2022

Status: R&R at American Economic Review

Abstract: This paper provides a framework to study how different allocation systems of public procurement contracts affect firm dynamics and long-run macroeconomic outcomes. It builds a novel panel dataset for Spain that merges public procurement data, credit register loan data, and quasi-census firm-level data. The paper provides evidence consistent with the hypothesis that procurement contracts act as collateral for firms and help them grow out of their financial constraints. The paper then builds a model of firm dynamics with asset- and earnings-based borrowing constraints and a government that buys goods and services from private sector firms, and uses it to quantify the long-run macroeconomic consequences of alternative procurement allocation systems. The findings show that policies that promote the participation of small firms have sizeable macroeconomic effects, but the net impact on aggregate output is ambiguous. While these policies help small firms grow and overcome financial constraints, which increases output in the long run, these policies also increase the cost of government purchases and reduce saving incentives for large firms, decreasing the effective provision of public goods and output in the private sector, respectively. The relative importance of these forces depends on how the policy is implemented and the type and strength of financial frictions.

Macroeconomic Development, Rural Exodus, and Uneven Industrialization

with Tomas Budí-Ors

Downloads: Working paper (CEPR Discussion Paper DP17086, December 2022, first version March 2022) 

Abstract: Economic development and industrialization are typically led by a few regions within a country. The initially laggard regions may catch up and industrialize —as in the U.S. 1880 to 1940— or they may fail to industrialize, experience a population exodus, and help industrialization elsewhere —as in Spain 1940 to 2000. To understand the emergence and consequences of each pattern, we build a simple model of structural change with multiple locations and sectors where both internal migration and internal trade are costly. In the model, internal migrations change the relative labor demand across sectors at the local level and hence act as a force of within- region structural change and uneven paths to industrialization. We calibrate our economy to the development experience of Spain, and find that its large rural exodus and uneven regional industrialization were originated by the combination of a decline in migration costs towards the most industrial areas together with an early divergence in sectoral productivities across regions. More importantly, internal migrations fully explain the lack of industrialization in laggard areas, and accelerated growth and structural change at the aggregate level. Finally, we show how variation in changes of migration costs and in patterns of convergence of sectoral productivities across locations help explain cross-country heterogeneity in development patterns.

Dual Labor Markets and the Equilibrium Distribution of Firms

with Pau Roldan-Blanco

Downloads: CEPR Discussion Paper DP17762 (May 2024); first version July 2022

Abstract: We study the effects of dual labor markets --namely, the co-existence of fixed-term and open-ended contracts-— on the allocation of workers within and across firms, the equilibrium distribution of firms, aggregate productivity, and welfare. Using rich Spanish administrative data, we document that the use of fixed-term contracts is very heterogeneous across firms within narrowly defined sectors. Particularly, there is a strong relationship between the share of temporary workers and firm size, which is positive when looking at within-firm variation but negative when looking at the variation between firms. To explain these facts, we write a directed search model of multi-worker firms, with ex-ante firm heterogeneity in technology types, and ex-post firm heterogeneity in transitory productivity and in the composition of employment by contract type (fixed-terms or open-ended) and human capital accumulated on the job. In counterfactual exercises, we find that limiting the use of fixed-term contracts decreases the share of temporary employment and increases aggregate productivity, but it also reduces total employment and leads to an overall decline in total output and welfare. The increase in productivity comes from a better selection of firms, which more than offsets an increased misallocation of workers across firms.

Dual Labor Markets in Spain: a Firm-Side Perspective

with Ivan Auciello-Estevez, Federico Tagliati,  Pau Roldan-Blanco

Downloads: Working paper (Banco de España, Documentos Ocasionales, #2310, April 2023)

An empirical companion paper to “Dual Labor Markets and the Equilibrium Distribution of Firms”