Current Projects

Investment and Saving along the Development Path

with Manuel García-Santana, Lucciano Villacorta

Health, Consumption, and Inequality

with Jay Hong, Víctor Ríos-Rull

Healthy Habits and Inequality

with Dante Amengual, Jesús Bueren

Working Papers

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.

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

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.

Dual Labor Markets and the Equilibrium Distribution of Firms

with Pau Roldan-Blanco

Downloads: Working paper (November 2023); CEPR Discussion Paper DP17762 (December 2022); 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 equilibrium distribution of firms, the allocation of workers across and within firms, and aggregate productivity. 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 firms size, which is positive when looking at within-firm variation but negative when looking at the variation between firms. To capture these facts, we write a directed search model of multi-worker firms with fixed-term and open-ended contracts. Firms are ex-ante heterogeneous in their technology type, and ex-post heterogeneous in transitory productivity, level of employment, and the composition of employment in terms of both contract types and human capital accumulated on the job. In the calibrated model, the permanently more productive firms prefer a higher share of high human capital workers, so they employ a larger share of their workers with an open-ended contract. However, within a firm type, fixed-term contracts are increasingly useful for firms as they grow toward their optimal size. In counterfactual exercises, we find that limiting the duration of fixed-term contracts decreases the share of temporary employment, increases aggregate productivity, and reduces total employment for an overall decline in total output. The increase in productivity comes from a better selection of incumbent firms and an increase in the number of firms relative to total employment, 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

Old Working Papers

Durable Goods, Borrowing Constraints and Consumption Insurance

with Enzo Cerletti

Downloads: Working paper (May 2014, first version June 2012) 

Abstract: We analyze the transmission of income shocks into durable consumption goods. We show that binding borrowing constraints lead to a substitution between goods of different durability upon arrival of an unexpected income change. The sign of this substitution depends on the persistence of the shock, whereas its size depends on the durability of goods and on their role as collateral for borrowing. An important consequence is that the response of nondurable consumption to income shocks may be an imperfect measure of household insurance against labor market risk. We use a calibrated two-good life-cycle model with labor market uncertainty and incomplete markets to quantify the actual amount of insurance implied by the observed transmission of income shocks to nondurable consumption. We find that young households have substantially less insurance against transitory shocks and more insurance against permanent shocks than commonly thought.

The Effects of Labor Market Conditions on Working Time: the US-EU Experience

with Claudio Michelacci

Downloads: working paper (September 2008)

Abstract: We consider a labor market search model where, by working longer hours, individuals acquire greater skills and thereby obtain better jobs. We show that job inequality, which leads to within-skill wage differences, gives incentives to work longer hours. By contrast, a higher probability of losing jobs, a longer duration of unemployment, and in general a less tight labor market discourage working time. We show that the different evolution of labor market conditions in the US and in Continental Europe over the last three decades can quantitatively explain the diverging evolution of the number of hours worked per employee across the two sides of the Atlantic. It can also explain why the fraction of prime age male workers working very long hours has increased substantially in the US, after reverting a trend of secular decline.