Working Papers

Growth and the Fragmentation of Production

(with Ezra Oberfield)

How much do changes in the fragmentation of production contribute to growth? Using detailed plant-level data on the manufacturing sector in India between 1990 and 2014, we study a version of Smithian growth, the link between greater fragmentation of supply chains and productivity. We propose a measure of a plant's vertical span, which corresponds roughly to the number of stages in a supply chain that the plant performs in-house; when plants have smaller vertical spans, production is more fragmented. We find that fragmentation increases with development in both the cross-section and time series. Further, within locations at a point in time, larger plants tend to have smaller vertical spans, and those that increase sales tend to decrease vertical span. Using changes in demand during the tariff liberalization in the 1990s, we provide evidence that increased demand causes specialization. We find evidence for economies of scale in specialization. We construct a general equilibrium model to rationalize these findings and estimate the sources and magnitude of scale economies. Goods are produced in a succession of steps, each combining labor and a set of intermediate inputs, giving rise to a tree-like structure. Firms exert effort to find suppliers for inputs, and choose the set of production stages (and thereby inputs) to produce the output at lowest cost. The structure implies that the returns to searching are more strongly diminishing for inputs that are further upstream. Firms with high productivity draws are therefore more likely to choose to be more vertically specialized. (Updated 2022-11-03)

Trade and the End of Antiquity

(with Thomas Chaney)

Conditionally accepted, Econometrica

What was the role of trade, and how did economic activity evolve at the End of Antiquity, when political power shifts away from the Mediterranean towards northern Europe and the Middle East? To answer those questions, we assemble a database of hundreds of thousands of ancient coins from the fourth to the tenth century, estimate a dynamic model of trade and money where coins gradually diffuse along trade routes, and recover granular regional trade and real consumption time series. Our estimates suggest that Mediterranean trade was disrupted by the newly formed border between Islam and Christianity; that economic activity shifts away from the Mediterranean starting in the fifth century; that real consumption peaks in the Middle East in the eighth century; and that by the end of the ninth century, Atlantic regions from Islamic Spain to Frankish northwestern Europe have become the wealthiest regions of the ancient western world. (Updated 2026-01-20)

Firm Adaptation in Production Networks: Evidence from Extreme Weather Events in Pakistan

(with Clare Balboni and Mazhar Waseem)

Forthcoming, American Economic Review

This paper considers how far private adaptation may reduce future vulnerability to climate risks. Using data on monthly firm-to-firm transactions from Pakistan, we find that flood-affected firms are more likely to relocate to safer ground, and shift purchases towards suppliers in less flood-prone regions and reached via less flood-prone roads. The results indicate that firms are imperfectly informed about flood risk, and update their beliefs following floods. We quantify aggregate impacts using a spatial model of endogenous production network formation. The findings suggest that climate change impacts will be mediated as firms learn from the experience of increasingly frequent disasters. (Updated 2025-11-12)

The Network Origins of Firm Dynamics: Contracting Frictions and Dynamism with Long-Term Relationships

(with Ezra Oberfield, Ruairidh South, and Mazhar Waseem)

We study theoretically and empirically how firm-to-firm sales relationships shape firm dynamics and productivity. We first present a parsimonious model of firm dynamics where dynamics arise from the arrival of new potential matches between firms, acting as supply shocks from the perspective of buyers, and as demand shock from the perspective of suppliers. Buyers switch to new suppliers when it is optimal to do so. The model matches the empirical regularities on firm volatility and exit probabilities declining with size, endogenous fat tails in firm growth rates, and some firms with persistently (but not permanently) high growth rates. We apply the model to a setting in which contracting frictions between firms give rise to long-term relationships. These arrangements improve incentives within the relationship, but firms switch to new suppliers less frequently. This reduces firm dynamism, in the sense that firm sales are less volatile, there is less mean reversion, exit rates are lower, and the right tail of the firm size distribution is thinner. We corroborate these predictions with production data on Indian manufacturing plants and transaction-level data from Pakistan, using variation across regions in court congestion as a proxy for weak formal enforcement and variation across industries in whether the output requires customization. Using a quantitative implementation of our model we show that the dynamic cost of long-term contracts is significant, with the increased court congestion between the state with the fastest courts and the state with the slowest courts reducing aggregate productivity by roughly 15%. (Updated 2024-09-13)

Trade and the Origins of the Territorial State

How do states, and state borders, emerge? This paper studies the emergence of territorial states in Eastern Europe during the ninth and tenth century AD, during a time when previously tribal areas were penetrated by a long-distance trade of slaves against Islamic silver coins. Slaves were taken by Rus and other tribes in Eastern Europe, and transported via a network of rivers to trading entrepots in Khazaria and Volga Bulgaria, where they were traded against silver coins with Arab merchants. I show that increases in market access to Arab silver led to an increased likelihood in the formation of territorial states. I present a quantitative model of territorial choice in the presence of trade, which provides opportunities for taxation, and estimate the model using data on coin finds, which inform the location of trade flows, and the observed territorial boundary of the first Polish state. The estimates reveal that trade shaped the borders of the Polish state alongside other strategic concerns. Toll revenues accounted for only a small share of fiscal revenues, but because they were in the form of silver, and therefore liquid and predictable, were suitable to pay soldiers, which in turn allowed raising revenues through slave raids.

Clearing the Air on the Costs and Benefits of Road Infrastructure

(with Clare Balboni, Aaron Berman, Lorenzo Marzano, and Mazhar Waseem)

Published and Forthcoming

Five Facts about MPCs: Evidence from a Randomized Experiment

(with Xavier Jaravel and Etienne Fize)

American Economic Review 115(1), p. 1-42, January 2025

We present five facts from an experiment on the marginal propensity to consume (MPC) out of transitory transfers: (1) the one-month MPC on a cash-like transfer is 23 percent; (2) it is substantially higher (61 percent) on a transfer administered via a card where remaining funds expire after three weeks, inconsistent with money fungibility; (3) the consumption response is concentrated in the first three weeks; (4) MPCs vary with household characteristics but are high even for the liquid wealthy; (5) unconditional MPC distribution exhibits large variation. Our findings inform the design of stimulus policies and pose challenges to existing macroeconomic models.

[Download paper (.pdf)] [Article page at journal] [Online Appendix]

The Comparative Advantage of Firms

(with Swati Dhingra and John Morrow)

Journal of Political Economy 130(12), p. 3025-3100, December 2022

Resource-based theories propose that firms grow by diversifying into products that use common capabilities. We provide evidence for common input capabilities, using a policy that removed entry barriers in input markets to show that the similarity of a firm's and an industry's input mix determines firm production choices. We model industry choice and economies of scope from input capabilities. When the model is estimated for Indian manufacturing, input complementarities make firms 5% more likely to produce in an industry and are quantitatively as important as time-invariant drivers of coproduction rates. Upstream entry barriers were equivalent to a 9.5% tariff on inputs.

[Download paper (.pdf)] [Article page at journal] [Online Appendix]

Vertical Integration and Foreclosure: Evidence from Production Network Data

(with Jan Sonntag)

Management Science 68(1), 141-161, January 2023

This paper studies the prevalence of potential anticompetitive effects of vertical mergers using a novel data set on U.S. and international buyer-seller relationships and across a large range of industries. We find that relationships are more likely to break when suppliers vertically integrate with one of the buyers' competitors than when they vertically integrate with an unrelated firm. This relationship holds for both domestic and cross-border mergers and for domestic and international relationships. It also holds when instrumenting mergers using exogenous downward pressure on the supplier's stock prices, suggesting that reverse causality is unlikely to explain the result. In contrast, the relationship vanishes when using rumored or announced but not completed integration events. Firms experience a substantial drop in sales when one of their suppliers integrates with one of their competitors. This sales drop is mitigated if the firm has alternative suppliers in place. These findings are consistent with anticompetitive effects of vertical mergers, such as vertical foreclosure, rising input costs for rivals, or self-foreclosure.

[Last working paper version (.pdf)] [Article page at journal]

Misallocation in the Market for Inputs: Enforcement and the Organization of Production

(with Ezra Oberfield)

Quarterly Journal of Economics 135(4), p. 2007-2058, November 2020

The strength of contract enforcement determines how firms source inputs and organize production. Using microdata on Indian manufacturing plants, we show that production and sourcing decisions appear systematically distorted in states with weaker enforcement. Specifically, we document that in industries that tend to rely more heavily on relationship-specific intermediate inputs, plants in states with more congested courts shift their expenditures away from intermediate inputs and appear to be more vertically integrated. To quantify the impact of these distortions on aggregate productivity, we construct a model in which plants have several ways of producing, each with different bundles of inputs. Weak enforcement exacerbates a holdup problem that arises when using inputs that require customization, distorting both the intensive and extensive margins of input use. The equilibrium organization of production and the network structure of input-output linkages arise endogenously from the producers' simultaneous cost minimization decisions. We identify the structural parameters that govern enforcement frictions from cross-state variation in the first moments of producers' cost shares. A set of counterfactuals show that enforcement frictions lower aggregate productivity to an extent that is relevant on the macro scale.

[Download paper (.pdf)] [Article page at journal] [Online Appendix]

The Impact of Contract Enforcement Costs on Value Chains and Aggregate Productivity

Review of Economics and Statistics 104(1), p. 34-50, January 2022

I study how supplier contracting frictions shape the patterns of intermediate input use and quantify the impact of these distortions on aggregate productivity. Using the frequency of litigation between US firms as a novel measure to capture the need for formal enforcement, I find a robust relationship between countries' input-output structure and their quality of legal institutions. In countries with high enforcement costs, firms have lower expenditure shares on intermediate inputs in sector pairs where US firms litigate frequently for breach of contract. A quantitative model shows that improvement of contract enforcement institutions would lead to sizable welfare gains.

[Download paper (.pdf)] [Article page at journal] [Download enforcement-intensity measures (.zip)]

Teaching

PhD International Trade (IHEID, Fall 2024): Syllabus

Macro A (IHEID, Fall 2024): see Moodle

Microeconomics (Sciences Po, Fall 2018-2023): see Moodle

International Trade & Finance (Sciences Po, Fall 2018-2023): see Moodle

Macroeconomics and Finance (Insead, Spring 2017)

KEPP 2385: Macroeconomics 2 (for Master Economics, Sciences Po, Spring 2015, 2016, 2017)

BECO 1750: Money and Banking (Sciences Po, Fall 2014, 2015, 2016)

EC220: Introduction to Econometrics (LSE, 2009/10)

EC400: Introductory Course in Maths and Statistics (LSE, 2010/2011)

EC321: Monetary Economics (LSE, 2010/2011)

EC321: Money and Banking (LSE, 2010/2011)

EC210: Macroeconomic Principles (LSE, 2011/2012)

EC442: Macroeconomics for PhD (LSE, 2013/2014)

Software

I wrote some packages to help with doing econometrics in Julia. In particular:

• GLFixedEffectModels is a package for estimating Generalized Linerar Models with high-dimensional fixed effects
• Douglass is a package that allows you to do data manipulation tasks using a Stata-like syntax
• RegressionTables creates journal-style regression tables similar to 'estout' in Stata or 'stargazer' in R
• KeplerGL to make beautiful maps

All these packages, and some others, are on Github.