This paper develops a theory of the formation and evolution of chains of production. Entrepreneurs search for production techniques that use alternative sets of inputs, which are in turn produced by other entrepreneurs. The value of a technique depends both on its inherent productivity and on...

We develop a framework that uses micro data to estimate the aggregate capital-labor elasticity of substitution. We first show that the aggregate elasticity is a convex combination of the plant-level elasticity of substitution and the elasticity of demand. This expression captures substitution...

This paper studies an environment in which the network structure of production - who buys inputs from whom - is determined endogenously and is the key determinant of aggregate productivity. I address two questions: How do contracting frictions shape the equilibrium network structure? And...

We derive the optimal income tax schedule for a life cycle labor supply model in which productivity varies exogenously and deterministically. Individuals choose whether and how much to work at each date. The government must finance a given expenditure and does not have access to lump sum...

Measured total factor productivity often declines sharply during financial crises. In 1982, the Chilean manufacturing sector suffered a severe contraction in output, most of which can be accounted for a falling Solow residual. Using establishment data from the Chilean manufacturing census, I...

Online appendix for the Review of Economic Dynamics article

We propose a novel theory of equilibrium price dispersion in product markets with search frictions. As in Diamond (1971), buyers search for sellers sequentially. In contrast to Diamond (1971), buyers do not meet all sellers with the same probability. Specifically, a fraction of the...

We evaluate the welfare gains of extending the duration and increasing the replacement ratio of the current unemployment insurance system in US. To this end, we build a general equilibrium overlapping generations model with on the job human capital accumulation. The model is able, among other...

Psychic costs are the most important component of the papers that are trying to match empirical facts related with college enrollment and dropout decisions of high school graduates. The absense of psychic cost requires very high levels of risk aversion to duplicate the same facts. However,...

We study a model where customers face frictions when changing their supplier, generating sluggishness in the firm's customer base. Firms care about expanding their customer base and this affects their pricing strategy. We characterize optimal pricing in this model and estimate it using data on...