Research
Main question. How do firms (re)allocate resources over time and in the cross-section — and what does that imply for macro aggregates such as business dynamism and productivity?
Approach. Micro-to-macro: I bring census-level firm data into structural models with real and financial frictions.
Work in Progress
Second Chances: Bankruptcy Regimes and the Financing of the Intangible Economy ▶
How do firms finance their growth in an increasingly intangible-oriented economy?
While difficult to pledge as collateral today, intangible assets promise to generate future high cashflows. This has an ambiguous impact on firms' borrowing ability and growth. To address this, I develop a model where firms invest in different types of capital subject to adjustment costs and borrow under limited enforcement. By introducing a bankruptcy regime that promotes restructuring — as opposed to liquidation —, the lender can seize the going-concern value of the restructured firm. By preserving specific (i.e. difficult to redeploy) capital within the firm after default, restructuring-prone regimes favour intangible-oriented firms by opening up a channel of cashflow-based borrowing, which boosts investment and reduces cash holdings. The model is disciplined by a novel dataset that puts together detailed intangible capital accumulation by the universe of private firms in Portugal, linked with credit registry and court filings for bankruptcy. I show that firms with intangibles borrow more than those without, and are four times more likely to file for restructuring. Model-based simulations suggest that a restructuring-prone regime can partially offset the effects of real frictions (adjustment costs), raising investment and output. Moreover, it increases the take-up of riskier projects (more specific intangibles) while raising aggregate TFP — both via firm growth and firm selection.
Nonlinear Productivity Dynamics ▶
How harmless is the AR(1) assumption on productivity?
This paper explores the nonlinear dynamics of firm-level productivity, focusing on the distinction between technical efficiency (TFPQ), taken as exogenous, and revenue productivity (TFPR), which incorporates the endogenous pricing decision of the firm. We make two contributions. First, we propose an iterative procedure for jointly estimating production functions and demand systems, yielding firm-level measures of TFPQ and demand advantages that are jointly identified. Second, we estimate flexible dynamics for TFPQ and compare them to those of TFPR. Using a novel dataset of Portuguese manufacturing firms spanning 2011–2019, we estimate theory-consistent measures of TFPQ and TFPR and study their cross-sectional properties and dynamics. Our findings for TFPQ highlight significant deviations from the linear-Gaussian assumptions otherwise standard in the literature (such as AR(1) processes): we document hump-shaped conditional kurtosis and productivity history-wiping properties under extreme shocks. TFPR is more persistent than TFPQ and less variable in persistence across states and shocks. We find that TFPQ and demand shifters are positively correlated, and that prices partially offset productivity differences, compressing TFPR relative to TFPQ. These findings highlight the importance of distinguishing physical efficiency from revenue-based measures when studying firm dynamics.
Dissecting the Decline in Investment Rates: Shocks vs. Responsiveness ▶
Why has investment dynamism declined across countries since the Global Financial Crisis?
We document a broad-based and persistent decline in macro- and micro-level investment rates by private firms in major European economies since the Great Financial Crisis. Focusing both on the frequency and on the magnitude of firm-level investment, we propose a framework to disentangle the roots of the decline in investment dynamism through the lenses of canonical business-dynamics models. This framework allows us to trace declining investment dynamism, at the country level, back to (i) changes in the idiosyncratic TFP process (the shocks hypothesis), or to (ii) changes in firm-level responsiveness to those shocks — i.e. have firms become less agile in expanding or contracting their capital stock? — the responsiveness hypothesis. Bridging data and theory, we map observed changes in TFP and in firm behavior into changes in the parameters of a firm-level structural model, pre- and post-2008, with an emphasis on capital adjustment costs. The framework also supports a series of counterfactual exercises (within- and cross-country) on competing sources of declining investment dynamism — e.g. technology, capital adjustment costs, investors' discount rate, or barriers to entry.
Books
Crises in the Portuguese Economy: from 1910 to 2022 ▶
Over a century of Portuguese business-cycle history: the committee's dating chronology and analysis of every recession from 1910 to 2022.
Portuguese Business Cycle Dating Committee — Luís Aguiar-Conraria, Pedro Bação, Isabel Horta Correia, José Alberto Ferreira, Ricardo Reis, José Tavares, Nuno Valério and José Varejão. Fundação Francisco Manuel dos Santos. ISBN 978-989-9153-32-5.