We investigate the trade-off between the risk-sharing gains enjoyed by more interconnected firms and the costs resulting from an increased risk exposure. We find that when the shock distribution displays “fat” tails, extreme segmentation into small components is optimal, while minimal segmentation and high density of connections are optimal when the distribution exhibits “thin” tails. For less ...

We study the optimal combination of corporate tax rate and tax base in a model of a small open economy with heterogeneous firms. We show that it is optimal for the small country’s government to effectively subsidize capital inputs by granting a tax allowance in excess of the true costs of capital. Economic integration reduces the optimal capital subsidy and drives low-productivity firms from th...

Recent theoretical models of international trade with heterogeneous firms feature instantaneous adjustment of margins of exports to firm and market characteristics, and equality of distributions of margins of exports between new and incumbent exporters. By using the population of Slovenian firms and their transaction-level trade data we document large differences between these firms that cannot...

This paper is about how firms choose products. Product changes are frequent events at US manufacturing plants. Over two thirds of surviving plants add and/or drop at least one product every five years. We develop a theoretical model that integrates endogenous product choice into a dynamic analysis of industry evolution with entry and exit and heterogeneous firms. In equilibrium, firm productivi...

We investigate the long-run impact of environmental regulations on the intraindustry distribution of firm-level productivity and the resulting aggregate variables. In a general-equilibrium model that accounts for endogenous entry/exit of heterogeneous firms, neither the average productivity of firms nor the mass of firms is independent of the choice of policy instruments (i.e. emissions tax vs....

Four decades of rapid economic growth have enabled the Chinese government to dedicate more resources research and development. China is world’s second largest spender on food agricultural in terms absolute expenditures investor a purchasing power parity basis. Using unique panel dataset collected 2019 China’s seed company fixed effect models, this study analyzes heterogeneous effects central su...

This paper analyses two-way access pricing in a telecommunications market where consumers are heterogeneous in their demand for calls and firms are allowed to use nonlinear tariffs. We first investigate how the presence of access charges affects the tariffs offered by firms in symmetric equilibrium. Next we show that under certain conditions each firm’s profit is independent of the level of (re...