Working Papers
1. Endogenous Production Networks and Firm Dynamics (with Gaurav Khanna)
[draft]
Abstract: We study the role of firm-to-firm matching 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 input costs. Motivated by these patterns, we develop a model of endogenous network formation where heterogeneous firms slowly match with partners over time using a random search technology. Firms in the decentralized equilibrium search inefficiently due to standard search externalities. This inefficiency turns out to be central for understanding how search technology shapes aggregate productivity. Calibrating the model to the Indian data, we find that most of the gains from technology improvement come from improvement in allocative efficiency, rather than in technical efficiency.
[draft]
Abstract: We study the role of firm-to-firm matching 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 input costs. Motivated by these patterns, we develop a model of endogenous network formation where heterogeneous firms slowly match with partners over time using a random search technology. Firms in the decentralized equilibrium search inefficiently due to standard search externalities. This inefficiency turns out to be central for understanding how search technology shapes aggregate productivity. Calibrating the model to the Indian data, we find that most of the gains from technology improvement come from improvement in allocative efficiency, rather than in technical efficiency.
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.