Research

Working Papers

Entrepreneurship Across Space: Capital Misallocation and Place-Based Policies [UPDATED VERSION] Draft

Presented at: ECB's Young Economist Prize (finalist), The University of Edinburgh, The University of Manchester, 14th European Meeting of the Urban Economics Association (finalist at the Student Prize), Public University of Navarre (UPNA), UPF Macroeconomics and International Lunch seminars, ANEKO seminar at UPV/EHU

Are entrepreneurs and their capital optimally allocated across space, and should governments use place-based entrepreneurial policies? We develop a dynamic spatial quantitative framework with financial frictions, capital accumulation, occupational and location choices, and agglomeration forces. Using administrative and balance-sheet data from Spain, we show that returns to capital vary across space and that entrepreneurs in more productive urban areas face tighter capital constraints. Policy counterfactuals indicate that targeting a subset of the most productive urban areas yields larger national welfare and aggregate output gains than a spatially neutral policy, but at the cost of greater spatial concentration of economic activity.

Individual-level simulation of the calibrated model. The x-axis denotes years. Panel A reports locations. Panel B reports idiosyncratic entrepreneurial productivity. Panel C reports the MPK premium (log scale). Panel D reports disposable income (dotted) and assets (solid). Agents share identical initial characteristics but differ in the timing of moving from a low-productivity (Granada) to a high-productivity (Madrid) urban area following a productivity shock at t=5.

Entrepreneurship, Financial Frictions and Optimal Policy Draft

The presence of financially constrained entrepreneurs generates an heterogeneity in returns which in turn leads to a non-trivial distinction between capital and wealth taxes. We study the effects of partial reforms and optimal long-run taxation in a model that matches key U.S. economy moments on its pass-through sector and degree of inequality. Relative to the existing literature, we examine the implications of a wider set of tax instruments (including exemptions and inheritance taxes), inter-generational transmission of abilities and endogeneity of the occupational choice. We find that (i) a lower degree of inter-generational transmission of abilities weakens the welfare gains attainable through optimal policy (ii) allowing for a wider set of tax instruments, in particular an exemption on the wealth tax, leads to significant additional relative welfare gains (+30%) and shifts wealth taxation into positive territory (iii) the presence of the endogenous occupational choice dimension weakens the motive to substitute capital for wealth taxation, given the extensive margin misallocation that it entails.

Response of welfare in the calibrated economy to revenue-neutral tax exchanges.

Work in Progress

Floods and Adaptation Strategies: Evidence from Indian Manufacturing (joint with Alejandro Rábano and José Nicolás Rosas) Draft

Spatial Distribution of Severe and Extreme Floods in India, by District