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, Oligopoly, and Resource Allocation
Concentration and profit rates have increased across American industries during the past decades, and there is growing concern that these trends might be related and that they may reflect a general decrease in product market competition. In order to investigate the economic consequences of increased consolidation, I introduce a general equilibrium model with oligopolistic competition, differentiated products, and hedonic demand. I take the model to the data for every year between 1997 and 2017, using a publicly-available dataset of bilateral measures of product similarity that covers all publicly-traded firms in the United States. The model yields a new firm-level measure of concentration, based on network centrality, which I find to be a strong predictor of markups, even after narrow industry controls are applied. I estimate that concentration causes a deadweight loss of about 16% of the surplus produced by public companies. This loss occurs primarily through factor misallocation, and has increased by nearly a third since 1997. I also show that this trend can be entirely explained by the secular decline of IPOs and the dramatic rise in the number of takeovers of venture capital-backed startups. My findings provide empirical support for the hypothesis that increased consolidation in US industries, particularly in highly innovative sectors, has resulted in 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)
Abstract: Italy’s aggregate productivity abruptly stopped growing in the mid-1990s. This stop represents a puzzle, as it occurred at a time of stable macroeconomic conditions. In this paper, we investigate the possible causes of this “disease” by using sector and firm-level data. We find that Italy’s productivity disease was most likely caused by the inability of Italian 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. Unfortunately, we also find that the prevalence of loyalty-based management in Italy is not simply the result of a failure to adjust, but an optimal response to the Italian institutional environment. Italy’s case suggests that familism and cronyism can be serious impediments to economic development even for a highly industrialized nation.
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 was the organizer of the session “Cronyism, corruption and growth” at last year's AEA (Jan 6th 2019) . The following papers were 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)