Working Papers
1. Endogenous Production Networks and Firm Dynamics (with Gaurav Khanna) (Job Market Paper)
(previously circulated as "Customers, Suppliers, and Firm Dynamics in India")
[draft]
Abstract: This paper studies the role of customer and supplier acquisition in shaping firm dynamics and aggregate productivity. Using transaction-level data from a large Indian state, we document lifecycle patterns of customer and supplier networks. We find that younger firms have fewer customers and suppliers, lower sales and intermediate expenditures, and higher output prices and input costs. Motivated by these patterns, we develop a model of endogenous network formation where heterogenous firms undertake costly acquisition of customers and suppliers over the lifecycle. We study the normative properties of the model and find that the decentralized equilibrium is inefficient due to vertical and search externalities. Inefficient pricing and acquisition choices lead to quantitatively large aggregate productivity losses. We use the model to study how differences in acquisition technology map to productivity differences. We find that improvements in acquisition technology can generate sizable productivity gains, and that improvements in allocative efficiency are central for delivering these gains.
(previously circulated as "Customers, Suppliers, and Firm Dynamics in India")
[draft]
Abstract: This paper studies the role of customer and supplier acquisition in shaping firm dynamics and aggregate productivity. Using transaction-level data from a large Indian state, we document lifecycle patterns of customer and supplier networks. We find that younger firms have fewer customers and suppliers, lower sales and intermediate expenditures, and higher output prices and input costs. Motivated by these patterns, we develop a model of endogenous network formation where heterogenous firms undertake costly acquisition of customers and suppliers over the lifecycle. We study the normative properties of the model and find that the decentralized equilibrium is inefficient due to vertical and search externalities. Inefficient pricing and acquisition choices lead to quantitatively large aggregate productivity losses. We use the model to study how differences in acquisition technology map to productivity differences. We find that improvements in acquisition technology can generate sizable productivity gains, and that improvements in allocative efficiency are central for delivering these gains.
2. Self-Financing in a Dynastic Model
[draft]
Abstract: This paper studies the role of financial frictions in determining aggregate productivity in a dynastic setting. Financial frictions generate aggregate productivity losses by distorting entry into entrepreneurship and capital usage across active entrepreneurs. Existing work has noted that aggregate productivity losses are small when idiosyncratic productivity shocks are highly persistent, as agents are able self-finance. In contrast to existing work, I study the role of self-financing using a dynastic model in which finitely-lived generations are altruistically linked. In the model, the size of aggregate productivity losses depends not only on the persistence of idiosyncratic productivity shocks, but also on the transmission of productivity between generations and the level of intergenerational altruism. Quantitatively disciplining the model, I find that financial frictions generate large aggregate losses, even when idiosyncratic productivity shocks are highly persistent.
[draft]
Abstract: This paper studies the role of financial frictions in determining aggregate productivity in a dynastic setting. Financial frictions generate aggregate productivity losses by distorting entry into entrepreneurship and capital usage across active entrepreneurs. Existing work has noted that aggregate productivity losses are small when idiosyncratic productivity shocks are highly persistent, as agents are able self-finance. In contrast to existing work, I study the role of self-financing using a dynastic model in which finitely-lived generations are altruistically linked. In the model, the size of aggregate productivity losses depends not only on the persistence of idiosyncratic productivity shocks, but also on the transmission of productivity between generations and the level of intergenerational altruism. Quantitatively disciplining the model, I find that financial frictions generate large aggregate losses, even when idiosyncratic productivity shocks are highly persistent.
3. Imitation with Imperfect Learning
Abstract: In this paper, I develop a model of endogenous growth through imitation. I allow for imperfect learning in the sense that agents may not be able to imitate every idea they come across. I derive restrictions necessary on the learning technology to ensure the existence of a balanced growth equilibrium. The main result of the paper is to show that a balanced growth equilibrium exists as long as the learning technology allows agents to learn any idea they come across with non-zero probability. In other words, there are no ideas that are too advanced for an agent to learn. This implies that a sort of "leap-frogging" in which agents make large jumps in productivity is critical to sustaining growth in imitation models of growth.
Abstract: In this paper, I develop a model of endogenous growth through imitation. I allow for imperfect learning in the sense that agents may not be able to imitate every idea they come across. I derive restrictions necessary on the learning technology to ensure the existence of a balanced growth equilibrium. The main result of the paper is to show that a balanced growth equilibrium exists as long as the learning technology allows agents to learn any idea they come across with non-zero probability. In other words, there are no ideas that are too advanced for an agent to learn. This implies that a sort of "leap-frogging" in which agents make large jumps in productivity is critical to sustaining growth in imitation models of growth.