Publications
Market Power and Innovation in the Intangible Economy
American Economic Review - January 2024 [VoxEU summary] [online appendix] [replication code]
This paper offers a unified explanation for the slowdown of productivity growth, the decline in business dynamism, and the rise of market power. Using a quantitative framework, I show that the rise of intangible inputs, such as software, can explain these trends. Intangibles reduce marginal costs and raise fixed costs, which gives firms with high-intangible adoption a competitive advantage, in turn deterring other firms from entering. I structurally estimate the model on French and US micro data. After initially boosting productivity, the rise of intangibles causes a decline in productivity growth, consistent with the empirical trends observed since the mid-1990s.
When is the Fiscal Multiplier High? A Comparison of Four Business Cycle Phases
European Economic Review - September 2021 [replication code] (with Travis Berge and Damjan Pfajfar)
This paper compares the effect of fiscal spending on economic activity across four phases of the business cycle. We show that the fiscal multiplier is higher when unemployment is increasing than when it is decreasing. Conversely, fiscal multipliers do not depend on whether the unemployment rate is above or below its long-term trend. Our findings synthesize previous, at times conflicting, evidence on the state-dependence of fiscal multipliers and imply that fiscal intervention early on in economic downturns is most effective at stabilizing output.
American Economic Review - January 2024 [VoxEU summary] [online appendix] [replication code]
This paper offers a unified explanation for the slowdown of productivity growth, the decline in business dynamism, and the rise of market power. Using a quantitative framework, I show that the rise of intangible inputs, such as software, can explain these trends. Intangibles reduce marginal costs and raise fixed costs, which gives firms with high-intangible adoption a competitive advantage, in turn deterring other firms from entering. I structurally estimate the model on French and US micro data. After initially boosting productivity, the rise of intangibles causes a decline in productivity growth, consistent with the empirical trends observed since the mid-1990s.
When is the Fiscal Multiplier High? A Comparison of Four Business Cycle Phases
European Economic Review - September 2021 [replication code] (with Travis Berge and Damjan Pfajfar)
This paper compares the effect of fiscal spending on economic activity across four phases of the business cycle. We show that the fiscal multiplier is higher when unemployment is increasing than when it is decreasing. Conversely, fiscal multipliers do not depend on whether the unemployment rate is above or below its long-term trend. Our findings synthesize previous, at times conflicting, evidence on the state-dependence of fiscal multipliers and imply that fiscal intervention early on in economic downturns is most effective at stabilizing output.
Working papers and work in progress
The Hitchhiker's Guide to Markup Estimation: Assessing Estimates from Financial Data
Revise and Resubmit - Econometrica, February 2024 [markup estimation toolbox] (with Basile Grassi and Giovanni Morzenti)
Macroeconomic outcomes depend on the distribution of markups across firms and over time, making firm-level markup estimates key for macroeconomic analysis. Methods to obtain these estimates require data on the prices that firms charge. Firm-level data with wide coverage, however, primarily comes from financial statements, which lack information on prices. We use an analytical framework to show that trends in markups or the dispersion of markups across firms can still be well-measured with such data. Finding the average level of the markup does require pricing data, and we propose a consistent estimator for such settings. We validate the analytical results with simulations of a quantitative macroeconomic model and firm-level administrative production and pricing data. Our analysis supports the use of financial data to measure trends in aggregate markups.
[new!] Growth through Innovation Bursts
Draft, May 2024 (with Giuseppe Berlingieri, Danial Lashkari, Davide Rigo)
In theories of creative destruction, product innovation is a key driver of aggregate economic growth. We confront the predictions of these models with the empirical patterns of product innovation, documented based on product-level data on the near-universe of French manufacturing firms. Two key patterns in our data stand in contrast to the workings of the conventional models. First, product innovation is best described as a process of “bursts”–episodes where firms rapidly add a series of products to their portfolio. These bursts lead to substantial shifts in revenue and explain the majority of the variance in firm-level growth. Second, we find that the growth in product-level revenue declines over the course of a product’s life cycle, indicating a diminishing effectiveness of process innovation. Including these features into a quantitative framework that nests the canonical models of creative destruction, we show that innovation bursts explain the concentration of production in a small number of large firms. Our model thus enables the joint study of the determinants of industry concentration and growth in a setting consistent with the empirical patterns of product dynamics. In a quantitative comparison against the conventional models, our theory attributes to creative destruction a substantially greater impact on aggregate productivity growth and on the concentration of production.
[new!] Lost in Transition: Financial Barriers to Green Growth
Draft, April 2024 (with Philippe Aghion, Antonin Bergeaud, John Van Reenen)
The share of climate-enhancing innovations in total patents was booming in the years leading up to the Global Financial Crisis, but has ceased to grow since. We provide causal evidence that tight credit disproportionately affects green innovation, through its effect on young firms. To explain this, we develop a quantitative framework in which firms direct innovation towards green or polluting technologies, and become better at innovating in technologies that they have previously succeeded in. This means that mature, incumbent firms predominantly innovate in polluting technologies. When green technologies become more attractive, e.g. due to a carbon tax, young firms are responsible for a disproportionate share of the transition to green innovation. As young firms are financially constrained, a credit shock disproportionately harms their innovation, slowing the green transition.
Emissions-Adjusted Total Factor Productivity
Work in Progress, July 2024 (with Lukasz Rachel)
Traditional estimates of total factor productivity (TFP) measure the output that a bundle of inputs produces. But production comes with emissions that stay in the atmosphere for decades, which means that productivity does not capture the full effect of current production on the present value of current and future output. We propose a new measure, emissions-adjusted total factor productivity (TFPE), that takes these long-run effects into account. TFPE is a relevant measure of productivity under general assumptions consistent with canonical integrated assessment models. It can be calculated for most countries and relies only on publicly available data, as well as an estimate of the social cost of carbon. Using United States data, we show that the rapid decline of emissions since the mid-2000s raises annual TFPE growth by 0.2 percentage points. Furthermore, we show that achieving net-zero emissions will raise TFPE by 26%.
The Fiscal Multiplier of Education Expenditures
CFM Working Paper, updated February 2024 [VoxEU summary] (with Julio Brandao-Roll, Simona Hannon, Damjan Pfajfar)
This paper examines the short-run effects of federal education expenditures on local income. We exploit city-level variation in exposure to national changes in the $30-billion Federal Pell Grant Program, which is the largest program to help low-income students attend college in the U.S., to calculate fiscal multipliers of education expenditures. An increase in Pell grants by 1 percent of a city’s income raises local income by 2.4 percent over the next two years.
Intangible Investment and the Persistent Effect of Financial Crises on Output
CFM Working Paper, updated December 2019 [VoxEU summary]
This paper identifies the mechanism through which financial crises exert long-term negative effects on output. Theory suggests that a shortfall in productivity-enhancing investments temporarily slows technological progress, creating a gap between pre-crisis trend and actual GDP. Exploiting exogenous variation in firm-level exposure to the Global Financial Crisis, I show that tight credit reduced investments in productivity-enhancement, and significantly slowed down output growth between 2010 and 2015.
Policy Shocks and Wage Rigidities: Empirical Evidence from the Regional Effect of National Shocks
Cambridge INET working paper, April 2017 (with Damjan Pfajfar)
This paper studies the effect of wage rigidities on the transmission of fiscal and monetary policy shocks. We calculate downward wage rigidities across U.S. states using the Current Population Survey. These estimates are used to explain differences in the state-level economic effects of identical national shocks in interest rates and taxes. In line with the role of sticky wages in New Keynesian models, we find that contractionary monetary policy and tax shocks increase unemployment and decrease economic activity in rigid states considerably more than in flexible states.
Revise and Resubmit - Econometrica, February 2024 [markup estimation toolbox] (with Basile Grassi and Giovanni Morzenti)
Macroeconomic outcomes depend on the distribution of markups across firms and over time, making firm-level markup estimates key for macroeconomic analysis. Methods to obtain these estimates require data on the prices that firms charge. Firm-level data with wide coverage, however, primarily comes from financial statements, which lack information on prices. We use an analytical framework to show that trends in markups or the dispersion of markups across firms can still be well-measured with such data. Finding the average level of the markup does require pricing data, and we propose a consistent estimator for such settings. We validate the analytical results with simulations of a quantitative macroeconomic model and firm-level administrative production and pricing data. Our analysis supports the use of financial data to measure trends in aggregate markups.
[new!] Growth through Innovation Bursts
Draft, May 2024 (with Giuseppe Berlingieri, Danial Lashkari, Davide Rigo)
In theories of creative destruction, product innovation is a key driver of aggregate economic growth. We confront the predictions of these models with the empirical patterns of product innovation, documented based on product-level data on the near-universe of French manufacturing firms. Two key patterns in our data stand in contrast to the workings of the conventional models. First, product innovation is best described as a process of “bursts”–episodes where firms rapidly add a series of products to their portfolio. These bursts lead to substantial shifts in revenue and explain the majority of the variance in firm-level growth. Second, we find that the growth in product-level revenue declines over the course of a product’s life cycle, indicating a diminishing effectiveness of process innovation. Including these features into a quantitative framework that nests the canonical models of creative destruction, we show that innovation bursts explain the concentration of production in a small number of large firms. Our model thus enables the joint study of the determinants of industry concentration and growth in a setting consistent with the empirical patterns of product dynamics. In a quantitative comparison against the conventional models, our theory attributes to creative destruction a substantially greater impact on aggregate productivity growth and on the concentration of production.
[new!] Lost in Transition: Financial Barriers to Green Growth
Draft, April 2024 (with Philippe Aghion, Antonin Bergeaud, John Van Reenen)
The share of climate-enhancing innovations in total patents was booming in the years leading up to the Global Financial Crisis, but has ceased to grow since. We provide causal evidence that tight credit disproportionately affects green innovation, through its effect on young firms. To explain this, we develop a quantitative framework in which firms direct innovation towards green or polluting technologies, and become better at innovating in technologies that they have previously succeeded in. This means that mature, incumbent firms predominantly innovate in polluting technologies. When green technologies become more attractive, e.g. due to a carbon tax, young firms are responsible for a disproportionate share of the transition to green innovation. As young firms are financially constrained, a credit shock disproportionately harms their innovation, slowing the green transition.
Emissions-Adjusted Total Factor Productivity
Work in Progress, July 2024 (with Lukasz Rachel)
Traditional estimates of total factor productivity (TFP) measure the output that a bundle of inputs produces. But production comes with emissions that stay in the atmosphere for decades, which means that productivity does not capture the full effect of current production on the present value of current and future output. We propose a new measure, emissions-adjusted total factor productivity (TFPE), that takes these long-run effects into account. TFPE is a relevant measure of productivity under general assumptions consistent with canonical integrated assessment models. It can be calculated for most countries and relies only on publicly available data, as well as an estimate of the social cost of carbon. Using United States data, we show that the rapid decline of emissions since the mid-2000s raises annual TFPE growth by 0.2 percentage points. Furthermore, we show that achieving net-zero emissions will raise TFPE by 26%.
The Fiscal Multiplier of Education Expenditures
CFM Working Paper, updated February 2024 [VoxEU summary] (with Julio Brandao-Roll, Simona Hannon, Damjan Pfajfar)
This paper examines the short-run effects of federal education expenditures on local income. We exploit city-level variation in exposure to national changes in the $30-billion Federal Pell Grant Program, which is the largest program to help low-income students attend college in the U.S., to calculate fiscal multipliers of education expenditures. An increase in Pell grants by 1 percent of a city’s income raises local income by 2.4 percent over the next two years.
Intangible Investment and the Persistent Effect of Financial Crises on Output
CFM Working Paper, updated December 2019 [VoxEU summary]
This paper identifies the mechanism through which financial crises exert long-term negative effects on output. Theory suggests that a shortfall in productivity-enhancing investments temporarily slows technological progress, creating a gap between pre-crisis trend and actual GDP. Exploiting exogenous variation in firm-level exposure to the Global Financial Crisis, I show that tight credit reduced investments in productivity-enhancement, and significantly slowed down output growth between 2010 and 2015.
Policy Shocks and Wage Rigidities: Empirical Evidence from the Regional Effect of National Shocks
Cambridge INET working paper, April 2017 (with Damjan Pfajfar)
This paper studies the effect of wage rigidities on the transmission of fiscal and monetary policy shocks. We calculate downward wage rigidities across U.S. states using the Current Population Survey. These estimates are used to explain differences in the state-level economic effects of identical national shocks in interest rates and taxes. In line with the role of sticky wages in New Keynesian models, we find that contractionary monetary policy and tax shocks increase unemployment and decrease economic activity in rigid states considerably more than in flexible states.
Non-refereed/policy publications
When do R&D investments foster economic growth? ESB (Dutch), June 2024
The Multiplier of the United States' Largest Scholarship Program, VoxEU, April 2022 (with Simona Hannon, Damjan Pfajfar)
Fiscal multipliers during a pandemic, Cambridge I-NET Special Feature, May 2020
Tijdens de coronacrisis hebben overheidsuitgaven veel effect op het nationaal product, ESB, May 2020
Intangible inputs can harm productivity growth, ESB (Dutch), October 2019
Untouchable firms: market power, business dynamism, and productivity growth in the intangible economy, VoxEU, July 2019
De economische effecten van het Algemeen Verbindend Verklaren, ESB, September 2017 (with Rob Euwals)
Endogenous growth and the lack of recovery from the Global Crisis, VoxEU, July 2017 (with Coen Teulings)
What are the wage effects of collective bargaining extensions? CPB Bureau for Economic Policy Analysis, April 2016 (with Rob Euwals)
The Multiplier of the United States' Largest Scholarship Program, VoxEU, April 2022 (with Simona Hannon, Damjan Pfajfar)
Fiscal multipliers during a pandemic, Cambridge I-NET Special Feature, May 2020
Tijdens de coronacrisis hebben overheidsuitgaven veel effect op het nationaal product, ESB, May 2020
Intangible inputs can harm productivity growth, ESB (Dutch), October 2019
Untouchable firms: market power, business dynamism, and productivity growth in the intangible economy, VoxEU, July 2019
De economische effecten van het Algemeen Verbindend Verklaren, ESB, September 2017 (with Rob Euwals)
Endogenous growth and the lack of recovery from the Global Crisis, VoxEU, July 2017 (with Coen Teulings)
What are the wage effects of collective bargaining extensions? CPB Bureau for Economic Policy Analysis, April 2016 (with Rob Euwals)
Discussions
Data and Markups: A Macro-Finance Approach (by Eeckhout and Veldkamp) - 9th ECB Annual Research Conference [video]
A Theory of Endogenous Degrowth and Environmental Sustainability (by Aghion, Boppart, Peters, Schwartzman, Zilibotti) - CdF conference
Competition, Firm Innovation, and Growth under Imperfect Technology Spillovers (by Jo and Kim) - CEPR growth meeting
Market Concentration, Growth, and Acquisitions (by Weiss) - CFM & Warwick & Vienna Global Macro Workshop
Good Rents vs Bad Rents: R&D Misallocation and Growth (by Aghion, Bergeaud, Boppart, Klenow and Li) - NBER SI
Patents that Match Your Standards (by Bergeaud, Schmidt, and Ziggo) - Banque de France
Productivity, Demand and Growth (by Ignaszak and Sedlacek) - DNB Annual Research Conference
Kaldor and Piketty's Facts: The Rise of Monopoly Power in the United States (by Eggertson, Robbins and Wold) - JME SNB conference
A Theory of Endogenous Degrowth and Environmental Sustainability (by Aghion, Boppart, Peters, Schwartzman, Zilibotti) - CdF conference
Competition, Firm Innovation, and Growth under Imperfect Technology Spillovers (by Jo and Kim) - CEPR growth meeting
Market Concentration, Growth, and Acquisitions (by Weiss) - CFM & Warwick & Vienna Global Macro Workshop
Good Rents vs Bad Rents: R&D Misallocation and Growth (by Aghion, Bergeaud, Boppart, Klenow and Li) - NBER SI
Patents that Match Your Standards (by Bergeaud, Schmidt, and Ziggo) - Banque de France
Productivity, Demand and Growth (by Ignaszak and Sedlacek) - DNB Annual Research Conference
Kaldor and Piketty's Facts: The Rise of Monopoly Power in the United States (by Eggertson, Robbins and Wold) - JME SNB conference