Working Papers
Supplier Search and Market Concentration [JMP]
Abstract
Abstract: This paper examines how lower search costs in input markets reshape the distribution of firm sizes. Using Swedish administrative data, I document four facts: (i) more productive firms pay lower input prices, (ii) the dispersion in imported varieties across firms is widening, (iii) the sales distribution among importers has become more unequal, and (iv) municipalities with greater fiber-optic coverage experience faster supplier network growth, especially among more productive firms. To interpret these patterns, I develop a quantitative model of monopolistic competition with frictional input markets, in which firms incur fixed costs to search and bargain with suppliers. The model shows that falling search costs reallocate resources toward importers, raising aggregate productivity but also increasing market concentration. A counterfactual exercise indicates that a 10 percent tariff on inputs would largely offset these gains.
Inflation Persistence and a New Phillips Curve
with Marcus Hagedorn, Juan Llavador & Kurt Mitman
Abstract
Abstract: Auclert et al. (2024) recently argued that, to first order, menu-costs models deliver
the same New Keynesian Phillips Curves as time-dependent models in response to AR(1)
shocks. We show here that when considering a broader class of shocks, menu-costs models
can generate qualitatively and quantitatively different Phillips curves than implied by
time-dependent models. Shocks to the growth rate of nominal demand generate inflation
persistence in the model, in line with the data, but at odd with the standard time-
dependent NKPC. Changes in the extensive margin of price adjustment in the menu-cost
model generate history dependence that is captured by the lagged inflation rate. Once
we control for lagged nominal demand growth, the explanatory power of lagged inflation
drops significantly. The reason is that nominal demand growth is a second determinant
of inflation in the Phillips curve in menu-cost models and inflation therefore inherits the persistence of the process for nominal demand.
Work in Progress
When Unified Market Meets Local Markets: How Big Firms Drive Local Price Dynamics?
Are Robots Special?
with Isabella Maassen