Repository logo

Essays in Macroeconomics and Firm Dynamics



Change log


Vaziri, Maryam 


This thesis contains three chapters and employs empirical and structural tools to study determinants of productivity growth and resource misallocation among firms in the economy. The first chapter studies the implications of financing constraints on optimal expansion strategies of multiple-product firms and their consequent effect on aggregate productivity level. In particular, this chapter seeks to understand how firms may prioritise expanding their domestic product scope over exporting when they have limited access to financing. To answer this question, I develop a firm dynamics model in which firms are heterogeneous in terms of their productivity and access to financing. Analytically, I find that a firm with sufficiently high levels of productivity but low access to financing overcomes its financing constraints by expanding in the domestic market with lower productivity goods and then exporting. I verify this result by structurally estimating an international trade model that matches the moments of the US economy in the early 2000s. I estimate that removing financing constraints would increase the aggregate productivity level by 3.1%. The second chapter provides an empirical investigation of the relationship between the enforcement of antitrust law and various macroeconomic outcomes such as productivity growth, firm entry rate, and investment in Research and Development for two cases: the US and Europe. For the US, I proxy antitrust enforcement by the relative share of antitrust budget, and combine it with firm-level and sector-level data. Similarly, for Europe, I use firm-level and sector-level data together with an antitrust index capturing variation of law across countries and over time. Through both exercises, I find that in more concentrated industries stronger antitrust policies are associated with higher productivity growth, higher entry rate but lower investment in Research and Development. This chapter serves as a motivation to the results in chapter 3. The third chapter develops a structural model to study firms’ strategic and anticompetitive actions, and the consequent role of antitrust law as a macroeconomic policy in generating higher productivity growth. In this chapter, I propose a dynamic general equilibrium model with innovation and oligopolistic product market competition. The oligopolistic competition provides firms with market power, which combined with a dynamic setup, implies that firms may find it optimal to eliminate their competitors through strategic decision making. I then structurally estimate the model to match the recent US experience. Through a quantitative exercise, I find that strengthening antitrust policies improves business dynamism on various fronts: (1) firm entry rate increases, (2) productivity growth improves, (3) labour share of GDP becomes higher, (4) while innovation proxied by the relative share of R&D expenditure falls. The model shows that stronger antitrust policies can improve welfare by up to 16% in consumption equivalent terms.





Carvalho, Vasco


Firm Dynamics, International Trade, Competition Policy, Productivity Growth


Doctor of Philosophy (PhD)

Awarding Institution

University of Cambridge