Research

Research Interests:

Macroeconomics, Industrial Organization, Economic Growth and Innovation, Microeconomic theory



Job Market Paper:


 Among the ways to measure market power, special attention has always been given to the wedge between marginal cost and price: the markup. This paper investigates the validity of firm-level markup estimation techniques, focusing on the cost accounting (CA) approach—a straightforward, transparent, and data-thrifty alternative that, despite its origins in early industrial organization literature, has seen little modern application. While the production function (PF) approach has quickly become the workhorse method in macroeconomic applications, several high-profile criticisms have brought its validity into question. My findings show that the rise in U.S. markups is robust to CA, suggesting that the trend is not driven by PF’s biases. In fact, variation in PF estimates is driven almost entirely by variation in its ‘accounting component,’ rather than its ‘production function component,’ which contains the well-known biases. For validation, I develop a novel test based on Dorfman-Steiner's (1954) advertising equation, concluding that the cost accounting approach has a higher signal-to-noise ratio, while both measures retain some signal of underlying markups. The data-thrifty nature of CA makes it feasible for a broader range of applications. To highlight this, I conclude with several examples that play into CA’s strengths. Collectively, these results suggest that practitioners can confidently implement CA in some cases.

 



Other Working Papers:


How are markups linked to growth and entry rates? This paper demonstrates how an endogenous growth model micro-founded in monopolistic competition can produce rich  predictions about the dynamics of productivity growth, entry, and markups driven by the preferences for quantity and variety. With non-homothetic, non seperable preferences markups react to changes in real income and changes in the number of competing firms. Larger markups incentivize entry and divert research effort away from productivity innovation.  Equilibrium markups then arise from a no-arbitrage condition between research sectors. A balanced growth path arises whenever the price elasticity of demand effects of quantity growth and variety growth move in opposite directions, and equilibrium markups are globally stable so long as the quantity effect decreases prices sensitivity, and the variety effect increases price sensitivity. This produces predictions consistent with several recent macroeconomic trends, such as declining research productivity, declining growth rates, declining entry rates, and a rise in markups.


What is ``quality'', how does it differ from ``quantity'', and why do some consumers buy higher quality goods than others? I show how in the presence of time opportunity cost of consumption, income heterogeneity creates a motive for differentiation in product quality, and breaks the quality-quantity equivalence found in most theories of quality. This distinction leads consumers to make distinct and separate quality and quantity decisions. In such a setting, the level of heterogeneity in prices, in quality, in wealth, and in income all have effects both at the microeconomics and macroeconomic level. The degree of price heterogeneity effects how labor supply reacts to an increase in prices, while inequality and the distribution of product quality have a role in determining labor supply, as well as individual and aggregate welfare. Lastly I introduce and implement a method to estimate the price-quality curve, and measure the wage elasticity of quality across various consumption sectors, which can be used to better make quality adjustments to measures like the consumer price index.



Works In Progress: