We develop a new general equilibrium model of trade with heterogeneous firms, variable demand elasticities and endogenously determined wages. Trade integration favors wage convergence, intensifies competition, and forces the least efficient firms to leave the market, thereby affecting aggregate...

Using a German firm-level data set, this paper is the first to jointly study the cyclical properties of the cross-sections of firm-level real value added and Solow residual innovations, as well as capital and employment adjustment. We find two new business cycle facts: 1) The cross-sectional...

Is time-varying firm-level uncertainty a major cause or amplifier of the business cycle? This paper investigates this question in the context of a heterogeneous-firm RBC model with persistent firm-level productivity shocks and lumpy capital adjustment, where cyclical changes in uncertainty...

"We present a dynamic two-region model with overlapping generations. There are two types of public expenditure, education and infrastructure funding, and governments decide optimally on budget size (tax rate) and its allocation across the two outlays. Productivity of government infrastructure...

We use disaggregated data on Chilean plants, and the Chilean input-output table to examine the impact of agglomeration spillovers on total factor productivity (TFP). In common with previous studies, we find evidence of intra-industry spillovers, but no evidence of cross-industry spillovers in...

The world is replete with spatial frictions. Shipping goods across cities entails trade frictions. Commuting within cities causes urban frictions. How important are these frictions in shaping the spatial economy? We develop and quantify a novel framework to address this question at three...

Using comprehensive data for German establishments (1999-2008), we estimate plant-level production functions to analyze if "cultural diversity" affects total factor productivity. We distinguish diversity in the establishment's workforce and in the aggregate regional labor force where the plant...

When employers face a trade-off between growing large and paying low wages - that is, when they have monopsony power - some productive employers will decide to acquire fewer customers, forgo sales, and remain small. These decisions have adverse consequences for aggregate labor productivity....

When employers face a trade-off between growing large and paying low wages - that is, when they have monopsony power - some productive employers will decide to acquire fewer customers, forgo sales, and remain small. These decisions have adverse consequences for aggregate labor productivity....