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Working Paper
Introducing a Framework for Measuring the Quantitative Benefits of Privacy-Enhancing Technologies
This paper reviews privacy-enhancing technologies (PETs) and explores their benefits when used to make traditional payment processes more private. PETs can decrease privacy risk by reducing the amount of sensitive information accessible to payment-processing personnel and systems. This paper proposes a framework for quantifying the risk-reduction benefits of PETs. This method can be used to calculate the amount of privacy-risk exposure that may be created by a set of payment activities, estimate the amount by which PETs can decrease that exposure, and compare that quantified benefit against ...
Working Paper
Firm Dynamics and SOE Transformation During China’s Economic Reform
We study the reform of China’s state-owned enterprises (SOE) with a focus on the corporatization of SOEs. We first document the empirical patterns of the "grasp the large and let go of the small" policy. To quantify the implications of the reform for aggregate output and TFP, we build a three-sector firm dynamics model featuring financial frictions and endogenous firm-type choices. Our calibrated model shows that the SOE reform can increase long-run TFP by encouraging the exit of the least efficient firms in the state sector, but the magnitude of TFP growth also depends on the efficiency in ...
Working Paper
Connecting to Power: Political Connections, Innovation, and Firm Dynamics
How do political connections affect firm dynamics, innovation, and creative destruction? To answer this question, we build a firm dynamics model, where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. Our model generates a number of theoretical testable predictions and highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity. We test the predictions of our model using a brand-new dataset on Italian firms and their workers. Our dataset spans the ...
Working Paper
Firm Dynamics and SOE Transformation During China's Economic Reform
We study China’s state-owned enterprises (SOE) reform with a focus on the corporatization of SOEs. We first empirically document that small SOEs are more likely to exit or become privatized, whereas big SOEs are more likely to be corporatized while remaining under state ownership. We then build a heterogeneous-firm model featuring financial frictions, endogenous entry and exit, and optimal firm-type choices. Our calibrated model suggests that in the long run, the SOE reform increases the aggregate output by facilitating resource reallocation to the private sector. Along the transition, the ...
Working Paper
Credit Enforcement Cycles
Empirical evidence suggests that widespread financial distress, by disrupting enforcement of credit contracts, can be self-propagatory and adversely affect the supply of credit. We propose a unifying theory that models the interplay between enforcement, borrower default decisions, and the provision of credit. The central tenets of our framework are the presence of capacity constrained enforcement and borrower heterogeneity. We show that, despite heterogeneity, borrowers tend to coordinate their default choices, leading to fragility and to credit rationing. Our model provides a rationale for ...
Working Paper
Entrepreneurship through Employee Mobility, Innovation, and Growth
Firm-level productivity differences are big and largely ascribed to ex-ante heterogeneity in the entrepreneurs’ growth potential at birth. Where do these ex-ante differences come from, and what can the policy do to encourage the entry of high-growth entrepreneurs? I study empirically and by means of a quantitative growth model the spinout firms: the firms founded by former employees of the incumbent firms. By focusing on innovating spinouts identified through the inventor mobility in the patent data, I document that spinout entrants significantly outperform regular entrants throughout their ...
Working Paper
Legal Institutions, Credit Markets, and Economic Activity
This paper provides novel evidence on the causal connections between legal institutions, credit markets, and real economic activity. Our analysis exploits an unexplored within-country setting?Native American reservations?together with quasi-experimental variation in legal contract enforcement wherein the US Congress externally assigned state courts to adjudicate contracts on a subset of reservations. According to area-specific data on small business credit, reservations assigned to state courts, which enforce contracts more predictably than tribal courts, have stronger credit markets. ...
Working Paper
Spatial Patterns of Development: A Meso Approach
Over the last two decades, the literature on comparative development has moved from country-level to within-country analyses. The questions asked have expanded, as economists have used satellite images of light density at night and other big spatial data to proxy for development at the desired level. The focus has also shifted from uncovering correlations to identifying causal relations, using elaborate econometric techniques including spatial regression discontinuity designs. In this survey we show how the combination of geographic information systems with insights from disciplines ranging ...
Working Paper
The quantitative role of capital-goods imports in U.S. growth
Over the last 40 years, an increasing share of U.S. aggregate E&S investment expenditure has been allocated to capital-goods imports. While capital-goods imports were only 3.5 percent of E&S investment in 1967, by 2008 their share had risen tenfold to 36 percent. The goal of this paper is to measure the contribution of capital-goods imports to growth in U.S. output per hour using a simple growth accounting exercise. We find that capital-goods imports have contributed 20 to 30 percent to growth in U.S. output per hour between 1967 and 2008. More importantly, we find that capital-goods imports ...
Working Paper
Multinationals, Monopsony, and Local Development: Evidence from the United Fruit Company
This paper studies the short- and long-run effects of large firms on economic development. We use evidence from one of the largest multinationals of the 20th century: the United Fruit Company (UFCo). The firm was given a large land concession in Costa Rica—one of the so-called "Banana Republics"—from 1899 to 1984. Using administrative census data with census-block geo-references from 1973 to 2011, we implement a geographic regression discontinuity design that exploits a quasi-random assignment of land. We find that the firm had a positive and persistent effect on living standards. Company ...