Essays on Empirical Macroeconomics

Carreno-Garcia, Jose

doi:https://doi.org/10.21985/n2-zh3q-d113

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Essays on Empirical Macroeconomics

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This dissertation is composed by three chapters. Chapter one is about productivity hysterisis in the U.S. after the Great Recession. The United States has been experiencing a slowdown in productivity growth for more than a decade. I exploit geographic variation across U.S. Metropolitan Statistical Areas (MSAs) to investigate the link between the 2006-2012 decline in house prices (the housing bust) and the productivity slowdown. Instrumental variable estimates support a causal relationship between the housing bust and the productivity slowdown. The results imply that one standard deviation decline in house prices translates into an increment of the productivity gap---i.e. how much an MSA would have to grow to catch up with the trend---by 6.9p.p., where the average gap is 14.51\%. Using a newly-constructed capital expenditures measure at the MSA level, I find that the long investment slump that came out of the Great Recession explains an important part of this effect. Next, I document that the housing bust led to the investment slump and, ultimately, the productivity slowdown, mostly through the collapse in consumption expenditures that followed the bust. I construct a quantitative general equilibrium model that rationalizes these empirical findings, and find that the housing bust is behind roughly 50 percent of the productivity slowdown. Chapter two is about market concentration and monetary policy pass-through. This chapter examines the role of market concentration in the transmission of monetary policy. I use a detailed panel of Spanish manufacturing firms to test for heterogeneity in the price and output elasticities to monetary policy shocks across the degree of market concentration. I carry out a VAR identification of monetary policy shocks in the eurozone, and I document four novel facts: (a) the price elasticity with respect to monetary policy shocks is close to zero for firms with insignificant pre-sample market share, whereas these firms have a large output elasticity; (b) the price elasticity increases substantially and quickly along with the degree of pre-sample market share; (c) the output elasticity largely decreases along with the market share dimension, mirroring the increase in the price elasticity; (d) after controlling for market share, firm size has not a significant impact, but firm leverage still plays an important role, as price responses tend to concentrate more on low leverage firms with significant market shares. A complementary analysis based on the frequency and size of price adjustment matches these patterns. Taken together---specially in a context where market shares have been steadily increasing over time---these results suggest that monetary policy makers should track market concentration. Chapter three is about firm behavior and concentration during the Russian communist transition. After the dissolution of the old USSR, Boris Yeltsin carried out a number of reforms in order to balance budget, liberalize a very centralized communist Russia and walk towards a free-market economy. Among these measures, there was a very fast, radical battery of mass privatizations, where private firms were put in private hands. This process of mass privatizations opened the path to a very complex transition, given that, first, a very sizable part of shares concentrated in a few big financiers and, second, the majority of shares (around two thirds) ended up in the hands of unexperienced employees that probably lacked the ability to coordinate, monitor and implement important reforms during crucial times. This opens the question of what happened in the short run, along this transition, with the behavior of firms and the structure of the market and how this ultimately impacted the consumers. Was there any strategic behavior coming from the large accumulation of firms by a few economic and politically powerful large financiers? did the firm dynamics implemented by these frictions affected the purchasing power of the Russian consumers during this complex transition? What this chapter does is to estimate firm specific markups from output elasticities coming from a novel method to estimate production functions applied to the Russian manufacturing firms. The results suggest that markups decreased slightly during the years of the mass privatizations and they decreased uniformly and strongly right after the mass privatizations. This uniform decrease in markups implies that neither the concentration of a large portion of shares in a few big financiers, nor the potential problems to survive this transition for some firms managed by inexpert employees, had any effect in firm behavior that could be detrimental for the consumers. Firms adjusted markups right after the mass privatization and there was no strategic behavior or friction that could have hurt the consumer across the transition (or, if there was, it was outweighed by the benefits of the liberalization). These results are robust to a battery of alternative specifications and controls.

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