Supplier Search and Market Concentration [JMP Draft]
Abstract
Abstract: This paper studies how easier access to intermediate input suppliers affects productivity and market concentration. 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. Quantitatively, the mechanism accounts for about 27 percent of productivity growth and about 46 percent of the observed rise in concentration in the Swedish manufacturing sector from 1998 to 2021. A 10 percent tariff on imported inputs offsets the GDP gain and lowers concentration, providing a policy counterpart to the supplier search mechanism.
Abstract
Abstract: Automation is often studied by relating investments in capital to labor market outcomes, yet production capital is highly heterogeneous, and different technologies need not interact with labor in the same way. This makes the empirical measurement of automation inherently sensitive to how automation capital is defined. Using matched Swedish administrative data linking firms, workers, and highly disaggregated imports of capital goods, we isolate the role of measurement by replicating the leading empirical approaches in the literature under a common institutional setting while systematically varying the definition of automation capital. We compare definitions ranging from industrial robots to broad automation measures and detailed capital classes. We find that capital heterogeneity matters in three ways. First, evidence based on industrial robots should be benchmarked against other capital goods before being interpreted as evidence on automation more generally, as many conventional technologies exhibit similar or stronger labor market effects while broader automation measures yield different conclusions. Second, aggregating heterogeneous technologies into broad automation measures masks economically meaningful variation. Third, under a common data environment, changing the definition of automation has a larger effect on empirical conclusions than changing the estimation strategy. Our results suggest that capital heterogeneity is a fundamental measurement issue and should be taken into account when drawing conclusions about the labor market effects of automation.
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?