Supplier Search and Market Concentration [JMP Draft]
Abstract
Abstract: This paper studies how easier access to foreign suppliers of intermediate inputs reshapes the firm size distribution. I develop a quantitative model of supplier search in which firms incur fixed costs to discover and bargain with input suppliers. The model provides a microfoundation for how input trade influences aggregate productivity and resource allocation. Evidence from firm-level import data motivates the framework through four patterns: growing dispersion in imported varieties, rising inequality in importer sales, lower input prices for larger firms, and stronger supplier-network expansion in municipalities with better digital infrastructure. In general equilibrium, lower input search frictions reallocate resources toward more productive firms, raising real GDP by about 13 percent and increasing market concentration by 12.7 percent. A 10 percent tariff on imported inputs offsets the GDP gain and lowers concentration.
Abstract
Abstract: Mainstream analyses of automation often treat capital as a homogeneous input or focus narrowly on specific capital classes, such as industrial robots. We use matched Swedish administrative microdata linking firms, workers, and imports to study how heterogeneous forms of capital interact with labor and firm performance. First, we replicate the main findings of Acemoglu et al. (2020) for Sweden and confirm that robot adoption has similar effects on firms’ value added, employment, and workforce composition as in France. Second, we extend the empirical setting to capture heterogeneous effects by firm size and the value of robot adoption. Third, we apply the same framework to a broad range of disaggregated capital goods identified at the 8-digit product level. We find that several non-robot capital types have effects on labor and productivity comparable to those of robots, while aggregated capital measures tend to yield weak results. Our findings suggest that although robots have large and visible impacts on labor markets, they are not unique in their economic function, and their interaction patterns with labor resemble those of older and more conventional capital-embodied technologies.
Inflation Persistence and a new Phillips Curve [Draft]
Abstract
Abstract: Inflation exhibits substantial persistence in the data, yet the standard New Keynesian Phillips Curve (NKPC) fails to generate this persistence without resorting to ad-hoc assumptions like inflation indexation. This paper demonstrates that menu-cost models with state-dependent pricing naturally produce inflation persistence consistent with empirical evidence. The key insight is that menu-cost models feature both intensive and extensive margins of price adjustment. In response to shocks to the growth rate of nominal demand, the intensive margin generates the standard marginal cost channel as in the NKPC, whereas the extensive margin generates history dependence that is captured by the lagged inflation rate. Using a calibrated menu-cost model with idiosyncratic productivity and stochastic adjustment costs, we show that when nominal demand growth is autocorrelated (as in the data), firms optimally delay price adjustments, generating history-dependent inflation dynamics. In Phillips Curve regressions, lagged inflation exhibits a coefficient of 0.50 when controlling for expected marginal costs alone—consistent with empirical estimates. However, this coefficient drops to 0.05 when we include lagged nominal demand growth, revealing that the persistence primarily stems from the extensive margin channel. Our findings suggest that inflation persistence emerges endogenously from firms' optimal price-setting behavior under menu costs, without invoking the Lucas critique concerns associated with mechanical indexation assumptions.
Work in Progress
When Unified Market Meets Local Markets: How Big Firms Drive Local Price Dynamics?