Published and Forthcoming Articles

We study the labor market effects of information technology (IT) during the onset of the COVID-19 pandemic, using data on IT adoption covering almost three million establishments in the US. We find that in areas where firms had adopted more IT before the pandemic,  the unemployment rate rose less in response to social distancing. IT shields all individuals, regardless of gender and race, except those with the lowest educational attainment. Instrumental variable estimates--leveraging historical routine employment share as a booster  of IT adoption--confirm IT had a causal impact on fostering labor markets' resilience. Additional evidence suggests this shielding effect is  due to the easiness of working-from-home and to stronger creation of digital jobs in high IT areas. 

We study the impact of bank credit on firm productivity. We exploit a matched firm-bank database, covering all the credit relationships of Italian corporations, to measure idiosyncratic supply-side shocks to credit availability and estimate a production model augmented with financial frictions. We find the effect of credit supply to be asymmetric: contractions harm TFP growth, halting productivity-enhancing activities;  credit expansions have limited effects. We find that a credit crunch was followed by a productivity slowdown while a sustained growth of credit supply did not lead to productivity increases at firms. This suggests a role of financial stability in preserving productivity growth.

What are the implications of information technology (IT) in banking for financial stability? Data on US banks’ IT equipment and the background of their executives reveals that higher pre-crisis IT adoption led to fewer non-performing loans and more lending during the global financial crisis. Empirical evidence indicates a direct role of IT adoption in strengthening bank resilience; this includes instrumental variable estimates exploiting the historical location of technical schools. Loan-level analysis shows that high-IT banks originated mortgages with better performance, indicating better borrower screening. No evidence points to offloading of low-quality loans, differences in business models, or enhanced monitoring.

Government intervention and bank markups: Lessons from the global financial crisis for the COVID-19 crisis with Brandon Tan, Deniz Igan, Maria Soledad Martinez Peria, and Andrea Presbitero

The COVID-19 pandemic could result in large government interventions in the banking industry. To shed light on the possible consequences on markups, we rely on the experience of the Global Financial Crisis and exploit granular data on government interventions in more than 800 banks across 27 countries between 2007 and 2017. Using a multivariate matching method, we find no evidence of an increase in markups. Interventions—especially longer and larger ones—have no significant impact on prices but they increase costs, mostly because of higher loan impairment charges, lowering markups.

Cloud computing has “democratized computing” by bringing it to the masses of firms. First, cloud computing has seen massive growth. Less than 0.5% of firms had adopted it in 2010, whereas 7% had by 2016, which is an annualized growth rate of almost 50%. Second, the adoption of cloud computing has occurred across the U.S., not just in one region — albeit with heaviest and earliest adoption in urban and educated areas. But third, and most strikingly, cloud computing – unlike other technologies like PCs and e-commerce – has been adopted first by smaller and younger firms.

Working Papers

This paper documents that production networks play an essential role in the job search and matching process. Employer-employee data, matched with the universe of firm-to-firm transactions for the Dominican Republic, reveals that one-fifth of workers who change firm move to a buyer or supplier of their original employer—significantly more than predicted by standard labor market characteristics. Supply chain moves are a major contributor to mobility up the job ladder. An event study shows that moving to a buyer or supplier is associated with a persistent 2 percent earnings premium relative to other workers hired by the same firm. Survey evidence shows that the main reasons for hiring within the supply chain are a supply chain-specific component of human capital and better information about job applicants. Worker mobility along the supply chain is also associated with an increase in firm-to-firm trade, which points to human capital as the most likely explanation for the supply chain earnings premium. These results reveal a new channel through which factors affecting the supply chain, such as international outsourcing or contracting frictions, affect labor market dynamism.

This paper provides novel evidence on the importance of information technology (IT) in banking for entrepreneurship. To guide our analysis, we build a parsimonious model of bank screening and lending. The model predicts that IT in banking can spur entrepreneurship by making it easier for startups to borrow against collateral. We empirically show that job creation by young firms is stronger in US counties that are more exposed to IT-intensive banks. Consistent with a strengthened collateral channel, entrepreneurship increases by more in IT-exposed counties when house prices rise. Instrumental variable regressions at the bank level further show that banks’ IT adoption makes credit supply more responsive to changes in local house prices, and reduces the importance of geographical distance between borrowers and lenders. These results suggest that IT adoption in the financial sector can increase dynamism by improving startups’ access to finance

This paper relies on administrative data to study determinants and implications of US banks' Information Technology (IT) investments, which  have increased six-fold over two decades.  Large and small banks had similar IT expenses a decade ago. Since then, large banks sharply increased their spending, especially those which were more exposed  to  competition from fintech lenders. Other local-level and bank-level factors, such as county income and bank income sources, also contribute to explain the heterogeneity in  IT investments. Analysis of the  mortgage market reveals that fintechs' lending behavior is  more similar to that of   non-bank financial intermediaries rather than  IT-savvy banks, suggesting that factors other than technology are responsible for the differences between banks and other lenders. However, both IT-savvy banks and fintech lend to lower income borrowers, pointing towards benefits for financial inclusion from higher IT adoption. Banks' IT investments are also shown to  matter for the responsiveness of bank lending to monetary policy.

Using self-reported data on emissions for a global sample of 4,000 large, listed firms, we document large heterogeneity in environmental performance within the same industry and country. Laggards—firms with high emissions relative to the scale of their operations—are larger, operate older physical capital stocks, are less knowledge intensive and productive, and adopt worse management practices. To rationalize these findings, we build a novel general equilibrium heterogeneous-firm model in which firms choose capital vintages and R&D expenditure and hence emissions. The model matches the full empirical distribution of firm-level heterogeneity among other moments. Our counter-factual analysis shows that this heterogeneity matters for assessing the macroeconomic costs of mitigation policies, the channels through which policies act, and their distributional effects. We also quantify the gains from technology transfers to EMDEs.

 We study the costs of hospitalizations on patients’ earnings and labor supply, using the universe of hospital admissions in Denmark and full-population tax data. We evaluate the quality of treatment based on its ability to mitigate the labor market consequences of a given diagnosis and propose a new measure of hospital quality, the ``Adjusted Earning Losses'' (AEL). We show that AEL contains significant additional information relative to traditional measures and does not suffer from worse selection issues. We document a sizeable heterogeneity in quality across hospitals and a large decline in the labor cost of hospitalizations between 1998 and 2012.

We examine trends in bank competition since the early 2000s. The Lerner index—arguably the most commonly used measure—shows evidence of a marked increase in market power in advanced economies, especially after the global financial crisis. But other frequently used indicators of banking sector competition seem much more muted. We show that the significant drop in policy rates that occurred in the aftermath of the crisis could explain the seeming disconnect. Adjusting the Lerner index for the impact of policy rates reveals that market power has been fairly constant in advanced economies—consistent with the other signals and similar to the pattern observed in emerging markets.

This paper investigates the effect of ''price parity'' clauses in vertical contracts between hotels and online travel agencies on average prices. These restrictions require a hotel to set its lowest prices for a given room on a travel agency's website and have come under recent scrutiny by antitrust regulators. We exploit two recent policy changes in Europe: a settlement in 2014 in Germany that banned price parity clauses by the largest online travel agency and subsequent regulatory action in 2015 in Sweden, Italy, and France. Using a differences-in-differences strategy, we find that these regulatory actions were associated with a decrease in prices of between 9% and 15%.

Policy Papers

Insolvency Prospects Among Small-and-Medium-Sized Enterprises in Advanced Economies with Chiara Maggi, Jiayue Fan, José Garrido, Federico Diez, Romain Duval, Maria Soledad Martinez Peria, Sebnem Kalemli-Ozcan

The COVID-19 pandemic has increased insolvency risks, especially among small and medium enterprises (SMEs), which are vastly overrepresented in hard-hit sectors. Without government intervention, even firms that are viable a priori could end up being liquidated—particularly in sectors characterized by labor-intensive technologies, threatening both macroeconomic and social stability. This staff discussion note assesses the impact of the pandemic on SME insolvency risks and policy options to address them. It quantifies the impact of weaker aggregate demand, changes in sectoral consumption patterns, and lockdowns on firm balance sheets and estimates the impact of a range of policy options, for a large sample of SMEs in (mostly) advanced economies.

We use high-frequency indicators to analyze the economic impact of COVID-19 in Europe and the United States during the early phase of the pandemic. We document that European countries and U.S. states that experienced larger outbreaks also suffered larger economic losses. We also find that the heterogeneous impact of COVID-19 is mostly captured by observed changes in people’s mobility, while, so far, there is no robust evidence supporting additional impact from the adoption of nonpharmaceutical interventions. The deterioration of economic conditions preceded the introduction of these policies and a gradual recovery also started before formal reopening, highlighting the importance of voluntary social distancing, communication, and trust-building measures.


Rising Corporate Market Power: Emerging Policy Issues