Bruno Pellegrino

PhD Candidate, Global Economics and Management
+1 (312) 257-8888
Areas of Expertise:
  • Empirical Corporate Finance
  • Micro-data in Macroeconomics
  • Political Economy



Figure 3 of my Job Market Paper:
a network representation of the US economy in 2004, created by applying a gravity-directed layout algorithm to the dataset of Hoberg and Phillips (2016)

Job Market Paper (on the market in 2019-2020)

Product Differentiation, Market Power and Resource Allocation

Concentration and profit rates have increased in US industries through the past decades. A major question in finance and macroeconomics is whether these trends reflect a decrease in product market competition and what are the implications for consumer welfare. A key challenge that needs to be overcome in order to answer these questions is modeling and measuring the degree of product substitutability across firms - a crucial determinant of the intensity of competition. In this paper, I introduce a general equilibrium theory of imperfect competition with differentiated products that uses hedonic utility to model product market competition. I take my model to the data for every year between 1997 ad 2017 using a publicly-available dataset that contains measures of product similarity for every pair of publicly-traded firms in the United States. My empirical analysis uncovers substantial welfare losses from market power, amounting to 16% of the surplus produced by public companies. These welfare losses occur primarily through factor misallocation, and have increased by nearly a third over the last twenty years. I also show that this trend can be entirely explained by the dramatic rise in the number of takeovers, by large public firms, of Venture-Capital backed startups. My findings provide empirical support for the hypothesis that increased concentration in American industries, particularly in highly-innovative, high-growth sectors, has resulted into sizable welfare losses to the consumer. 

What Is the Extent of Misallocation?
Bruno Pellegrino and Geoffery Zheng (2018)

Abstract: How much output is forgone due to market distortions? Recent studies suggest that there is substantial misallocation of resources, not just in developing economies, but also in developed economies. Frequently cited sources of distortions include regulations, financial frictions and family ownership. However, data availability has thus far forced researchers to rely on model-based inference and indirect measurement; as a consequence, we still know very little about the true extent and causes of misallocation. In this study, we exploit, for the first time, a combination of financial and survey data from a large, representative sample of EU manufacturing firms to reveal firm-level heterogeneity in policy and financial frictions. Using this rich data and a novel econometric methodology which is robust to mis-specification and endogeneity of the firm-level production function, we estimate the loss in aggregate industry output attributable to resource misallocation due to family control, bureaucracy, financial constraints and labor regulation. We find that the percentage loss in real output attributable to these factors to be at most one percent, in each of the six countries covered in our dataset (France, Germany, Hungary, Italy, Spain and the United Kingdom). We also introduce a number of methodological innovations that substantially reduce the upward bias in current estimates of the extent of misallocation.

Diagnosing the Italian Disease
Bruno Pellegrino and Luigi Zingales (2017) 

AbstractWe investigate why Italy's labor productivity stopped growing in the mid-1990s. We find no evidence that this slowdown is due to competition from China, Italy's protective labor regulations or increasingly inefficient institutions. By contrast, the data suggest that Italy's slowdown was more likely caused by the failure of its firms to take full advantage of the ICT revolution. While many institutional features can account for this failure, a prominent one is the lack of meritocracy in the selection and rewarding of managers. Italian firms lag in the adoption of meritocratic management, leading to lower ICT usage. We conclude that familism and cronyism are the ultimate causes of the Italian disease.

Non-technical summary: [VoxEU]
Wikipedia Entry: [Economic history of Italy]
Press Coverage [Bloomberg] [Washington Post] [Project Syndicate] [II Sole 24 Ore] [Barron's] [LaRepubblica] [Frankfurter Allgemeine]

Social Capital and Informal Contracting: Experimental Evidence
Bruno Pellegrino (2017)  

Abstract: Informal contracting is widely spread, but what makes it work in the absence of institutional enforcement and repetition? According to game-theoretic models of social capital, informal relationships can help agents self-enforce contracts when third-party enforcement is not available, because agents can use network links as a form of "collateral". While recent empirical studies find a link between network proximity and the ability to self-enforce contracts, it is unclear whether this effect is mediated by agents behaving altruistically or whether they are responding to incentives to preserve their network status. Additionally, the endogeneity of natural networks makes econometric identification of these effects challenging. In this study, I estimate a structural decision model in which both mechanisms are present but distinct, using experimental gameplay data from the administration of an Optional Prisoner's Dilemma. The game is framed to mimic a situation of informal exchange. I find the gameplay to be consistent with the "social collateral" channel, but not with the "directed altruism" channel.

American Economic Association - 2019 Annual Meeting

I'm organizing a session at the next AEA (Jan 6th 2019) titled "The economic consequences of cronyism and corruption", which I invite you to attend. The following papers will be presented: 

Connecting to Power: Political Connections, Innovation, and Firm Dynamics
- by Ufuk Akcigit*, Salome Baslandze and Francesca Lotti 

Corruption And Firms: Evidence From Randomized Audits In Brazil
- by Emanuele Colonnelli* and Mounu Prem 

Electoral Incentives and the Allocation of Public Funds
- by Frederico Finan and Maurizio Mazzocco* 

Diagnosing the Italian Disease
- by Bruno Pellegrino* and Luigi Zingales  

Session abstract:  A number of different measures, rankings and indices indicate that countries and regions that are less developed tend to have, or are at least perceived to have, a set of common institutional features: corruption is more endemic, connections (particularly political) are an important part of doing business and people tend to attain their position in hierarchies based on networks rather than than merit. What is the economic significance of these phenomena? Previous country-level studies have provided evidence of their effects on development. This session presents recent evidence from newly available datasets from Brazil and Italy, with the aim of offering fresh insights on this topic. The focus will be on the mechanisms through which cronyism and corruption affect economic development. In particular, the four papers from this session will cover the effects of corruption and cronyism in terms resource allocation, innovation, firm dynamics and productivity growth.



Research Grant (2018-19)
Research Grant (2017-18)

Ph.D. Student Research Grant (2018-19)
Ph.D. Student Research Grant (2015-17)