We investigate the effects of input variety creation and destruction on both micro- and macroeconomic outcomes using detailed data from Belgium. Our microeconomic analysis establishes that the elasticity of downstream firms' marginal cost to supplier separation captures the area under the input...

We investigate the effects of input variety creation and destruction on both micro- and macroeconomic outcomes using detailed data from Belgium. Our microeconomic analysis establishes that the elasticity of downstream firms' marginal cost to supplier separation captures the area under the input...

We provide a price theory for incomplete markets that extends the traditional Walrasian analysis. We derive formulas expressing the consumption response to current and future changes in interest rates and income. Our analysis provides a natural decomposition of these responses into substitution...

We characterize the response of aggregate output to micro shocks in disaggregated economies with entry, non-constant returns to scale, input-output linkages, and distortions. We decompose output changes into technical and allocative efficiency components, and show that the latter depends on...

How does an increase in market size, say due to globalization, affect welfare? We study this question using a model with monopolistic competition, heterogeneous markups, and fixed costs. We characterize the change in welfare in the decentralized equilibrium, and decompose it into changes in...

We propose a supply-side channel for the transmission of monetary policy. We study an economy with heterogeneous firms, sticky prices, and endogenous markups. We show that if, as is consistent with the empirical evidence, bigger firms have higher markups and lower pass-throughs than smaller...