The impact of capital market imperfections and costs of creating and operating formal sector firms on total factor productivity is studied. We propose a firm dynamics model with endogenous formal and informal sectors where firms face a technology adoption opportunity. The model predicts that...

First Draft: November 1, 2011 We propose a theory of endogenous firm-level volatility over the business cycle based on endogenous market exposure. Firms that reach a larger number of markets diversify market-specific demand risk at a cost. The model is driven only by total factor productivity...

Skill intensive technologies seem to be adopted more often by rich countries rather than poor ones. Related to that observation, the ratio of wages of skilled to unskilled workers - the skill premium - shows two important features over time and across countries. In the US the skill premium...

The aim of this paper is to quantify the role of formal-sector institutions in shaping the demand for human capital and the level of informality. We propose a firm dynamics model where firms face capital market imperfections and costs of operating in the formal sector. Formal firms have a larger...

This is a theory of endogenous volatility over the business cycle based on firm-level intangible expenditures. We propose a firm dynamics model with endogenous market participation. Firms that incur higher intangible expenses are able to serve more markets and diversify market-specific demand...

productivity differences between the US and developing economies.

In this paper we document the relationship between idiosyncratic risk and non productive expenditures at the rm level from the Kauman Firm Survey. We then propose a model of entrepreneurial activity subject to nancial constraints where rms engage in borrowing to nance capital and wages, but also...