Countries where my research has been presented, as of 02/06/2025, and a tribute to "The World Turned Upside Down"
PhD Candidate in Economics at The London School of Economics and Political Science
with Pietro Garibaldi
IZA DP No. 17392, CEPR DP19652
The neoclassical growth model assumes fixed labor supply and competitive labor markets. Is it harmless to ignore monopsonistic power in the neoclassical growth model? The paper argues that it is not, especially if a growth model needs to be consistent with the long-run dynamics of the labor share. This paper solves a minimalist growth model with monopsonistic power at the firm level and two production technologies with different degrees of efficiency. The paper shows that monopsonistic power by the representative firm implies either a ``level" or a ``growth" effect in the determination of the labor share. If the two sectors feature unbalanced growth, the economy converges to a an asymptotic balanced growth in which the labor share asymptotically decline, in line with secular evidence on labor share dynamics. The paper shows also that the monopsonistic equilibrium has sizeable ``misallocative" effects, since it implies the use of less efficient technologies that are not used by the optimal growth problem. Finally, the paper shows that the negative welfare effect of monopsony is larger when the model accounts for endogenous labor supply as the redistribution from wages to profits induces a reduction in hours worked. The generalized model is also consistent with recent evidence on balanced growth with declining labor supply.
Timeline
with Thomas Drechsel, Michael McLeay and Silvana Tenreyro
Is the inflation targeting framework suitable for an environment with commodity price swings? Are there circumstances in which a fixed exchange rate could be beneficial? We study these perennial questions from the perspective of economies that have different exposures to commodity trade. We develop a flexible but tractable model for an economy that imports and/or exports commodities; moreover, in line with empirical evidence, we allow international borrowing conditions to vary endogenously with the commodity cycle, which gives rise to additional costs and benefits of active exchange rate management. By varying the economy’s commodity exposure along these dimensions, we analyze the implied volatility of inflation and activity under different policy rules, and derive the optimal policy. We find that the desirability of different policy configurations critically depends on the economy’s specific commodity exposure. Nonetheless, some form of inflation targeting tends to perform well in a relatively wide range of macroeconomic environments. Active exchange rate management is particularly costly in response to fundamentals-driven movements, with countervailing benefits when volatility is driven by financial factors.
Timeline