Welcome
I am an Associate Professor of Economics and Finance at Universitat Pompeu Fabra, an Affiliated
Professor at the Barcelona School of Economics, and an Associate Researcher at CREI.
My research focuses on the aggregate implications of corporate investment and
employment decisions, on financial frictions and firm dynamics, on innovation and
entrepreneurship, and on firms and climate change.
Working Papers
Heterogeneous Firing Costs, Worker Types, and Productivity: Evidence from a Natural Experiment
with Ozan Guler, Mike Mariathasan and Klaas Mulier
Conditionally accepted, American Economic Journal: Applied Economics · Latest draft: July 2026
We investigate how firing costs affect input choices and total factor productivity (TFP) by exploiting a labor reform in Belgium that increased firing costs of blue-collar workers relative to white-collar workers. Using a difference-in-differences design, we show that hiring and separations at blue-collar-intensive firms declined by 8 percent after the reform relative to white-collar-intensive firms. Moreover, blue-collar-intensive firms shifted workforce composition toward white-collar workers, offered fewer permanent contracts, and relied more on outsourced labor. We find no evidence of capital-intensive technology adoption and only little evidence of human capital investment. Ultimately, blue-collar-intensive firms experienced a 4.8 percent decline in TFP.
Identifying Firm-Level Financial Frictions Using Theory-Informed Restrictions
with Geert Mesters
R&R, Journal of Financial Economics · Latest draft: August 2026
We propose a theory-based method for identifying financially constrained firms using firm-level balance sheet data. We separately identify firm level productivity, liquidity and financial frictions shocks from observed output, debt and production inputs using sign and magnitude restrictions. These restrictions are proven consistent with a wide range of structural dynamic models, and valid regardless of the type of financing imperfection. Based on the identified shocks we construct indicators for identifying financially constrained firms. The method is validated for large US manufacturing firms and the quasi-universe of Spanish firms. Among others, we show that our indicator can capture episodes of increased financial frictions following covenant violations, while other commonly used indicators do not.
Climate Change, Firms, and Aggregate Productivity
with Andrea Chiavari, Sampreet Goraya and Carolina Villegas-Sanchez
R&R, Journal of the European Economic Association · Latest draft: April 2026
This paper develops a general equilibrium framework to study how temperature affects firm-level demand, productivity, and input allocation, and uses it to derive an aggregate damage function for climate change. Using matched data for Italian firms and climate variation, we find that extreme temperatures reduce both productivity and the marginal product of capital. Our model estimates aggregate productivity losses from local temperature fluctuations ranging from 1.6% to 17.8%, depending on adaptation and scenario. For a given scenario, these losses are about four times larger than in representative-firm models, which overlook frictions and heterogeneity. Embedding our framework into Integrated Assessment Models would revise upward the economic costs of climate change.
Zombies? Growth Options, Heterogeneous Firms, and the Allocative Effects of Zombie Lending
with Gianmarco Ruzzier
Latest draft: August 2026
We develop a model with firm dynamics, imperfect competition, and investment options. Firms borrow using credit lines offered by competitive lenders that can optimally provide “zombie” lending, with an interest rate below the risk free rate. We show that zombie lending is used in equilibrium to subsidise two very different types of firms: “Stagnant zombies” previously borrowed to fund projects that are no longer feasible. They are offered zombie lending so that they can gradually reduce their debt and avoid default. “High-potential zombies” have options to invest in projects that can increase their profitability, and borrow to pursue them. Zombie lending “buys them more time”, in the hope they will become more profitable in the future and will thus be able to repay the debt. We show that while both types of zombie firms are consistent with the way such firms are usually identified in the empirical literature, they have opposite implications for misallocation and aggregate productivity and welfare. The model provides several testable predictions that allow us to identify these different types. Using firm-level data from Italian firms between 2007-2016, we show that in sectors where zombie firms are more likely to be the high potential type, they are significantly more likely to become highly profitable in the future. Furthermore, these sectors exhibit positive TFP responses to higher zombie prevalence, while those dominated by stagnant zombies show declining productivity.
The Impact of Uncertainty Shocks on Workforce Composition
with Vicente Cuñat and Daniel Metzger
Latest draft: August 2026
We show that firm-specific uncertainty shocks have large effects on the composition of hiring and firing, even when their impact on overall employment is small. We construct a firm-specific profit uncertainty index and profit shocks for Swedish firms and their employees (1997–2017) using shrinkage methods on commodity prices. Higher uncertainty decreases the likelihood of firing younger and shorter-tenured workers, while it increases the firing of more skilled workers. Furthermore, it increases the hiring of workers with sector-specific experience. These findings are consistent with a model where heterogeneous workers vary in specialization and flexibility, and uncertainty differently impacts the option value of firing and relocating workers.
Publications
Income Inequality and Entrepreneurship: Lessons from the 2020 Covid Recession
with Christoph Albert, Beatriz Gonzalez and Victor Martin-Sanchez
Journal of Banking & Finance, Vol. 149, April 2023
We study entry into entrepreneurship during the COVID-19 recession of 2020 using new data from an extensive survey of more than 24,000 Spanish households, conducted between June and November 2020. We find that while the overall decline in the startup rate in 2020 was large, and of a similar magnitude as that during the Great Recession, the differential impact depending on ex ante income was starkly different. During 2020, the drop in firm entry was entirely concentrated among low- and medium-income households. We show that the entrepreneurship gap between these households and their high-income counterparts is not directly explained by social distancing, since it is mostly driven by the sectors not directly affected by lockdown measures, and it is larger among households that did not suffer a negative income shock during the pandemic. We instead find evidence indicating that high-income households performed relatively better during the COVID-19 recession because they had the means to exploit new business opportunities, thanks to their larger wealth and better access to external finance.
How Stimulative are Low Real Interest Rates for Intangible Capital?
with Ander Perez-Orive
European Economic Review, Vol. 142, February 2022
We study theoretically and empirically how the increase in the intensity of intangible capital in production in recent decades affects the sensitivity of investment to interest rates. In contrast to tangible capital, intangible capital has low collateral value and must be financed in a larger part with accumulated corporate savings, especially in more financially constrained firms and for more lumpy investments. High-intangibles firms are, therefore, more likely to be net savers in equilibrium and, for them, low interest rates are not as stimulative as for high-tangibles firms. We show in a realistically calibrated model that the rise of intangible capital substantially dampens the positive effects of low interest rates on investment because of this mechanism, increasing the misallocation of resources. We find strong empirical support for this effect by studying the investment decisions of U.S. firms.
Cyclical Fluctuations, Financial Shocks, and the Entry of Fast-Growing Entrepreneurial Startups
with Christoph Albert
The Review of Financial Studies, Vol. 34(5), May 2021, 2508–2548
We analyze a multi-year, multi-country entrepreneurship survey with more than one million observations to identify startups with low- and high-growth potential, and we confirm the validity of these ex-ante measures with ex post firm-level information on employment growth. We find that negative aggregate financial shocks reduce all startup types, but their effect is significantly stronger for startups with high growth potential, especially when GDP growth is low. Our results uncover a new composition of entry channel that significantly reduces employment growth and is potentially important for explaining slow recoveries after financial crises.
Comments on: “What Drives Aggregate Investment? Evidence from German Survey Data”
Journal of Economic Dynamics and Control, Vol. 115, June 2020
Firing the Wrong Workers: Financing Constraints and Labor Misallocation
with Vicente Cuñat and Daniel Metzger
Journal of Financial Economics, Vol. 133(3), September 2019, 589–607
Firms consider wages, current and expected productivity as well as firing and hiring costs when firing a worker. Financing constraints distort this intertemporal trade-off, leading firms to sub-optimally fire short-tenured workers with high future expected productivity. We provide empirical evidence of this distortion using matched employer-employee data from the Swedish population between 2000 and 2010. We propose a new empirical strategy that uses credit ratings to identify financing constraints and uses exchange rates and trade data to identify demand shocks. Our empirical results identify an important new misallocation effect of financial frictions that operates within firms across different types of workers.
Financing Constraints, Radical versus Incremental Innovation, and Aggregate Productivity
American Economic Journal: Macroeconomics, Vol. 11(2), April 2019, 275–309
I provide new empirical evidence on the negative relationship between financial frictions and productivity growth over a firm’s life cycle. I show that a model of firm dynamics with incremental innovation cannot explain this evidence. However, further including radical innovation, which is very risky but potentially very productive, allows for the joint replication of several stylized facts about the dynamics of young and old firms and the differences in productivity growth in industries with different degrees of financing frictions. These frictions matter because they act as a barrier to entry that reduces competition and the risk-taking of young firms.
Financing Constraints, Firm Dynamics, Export Decisions, and Aggregate Productivity
with Vicente Cuñat
Review of Economic Dynamics, Vol. 16(1), January 2013, 177–193
Entrepreneurial Risk, Investment and Innovation
Journal of Financial Economics, Vol. 106(2), November 2012, 287–307
How Important Are Capital Markets Imperfections in Determining Firm Decisions and Aggregate Fluctuations?
Els Opuscles del CREI, November 2012
Financing Constraints and Fixed-Term Employment Contracts
with Vicente Cuñat
The Economic Journal, Vol. 118, October 2008, 2013–2046
Testing Financing Constraints on Firm Investment Using Variable Capital
Journal of Financial Economics, Vol. 86, December 2007, 683–723
We consider a dynamic multifactor model of investment with financing imperfections, adjustment costs and fixed and variable capital. We use the model to derive a test of financing constraints based on a reduced form variable capital equation. Simulation results show that this test correctly identifies financially constrained firms even when the estimation of firms’ investment opportunities is very noisy. In addition, the test is well specified in the presence of both concave and convex adjustment costs of fixed capital. We confirm empirically the validity of this test on a sample of small Italian manufacturing companies.
Financing Constraints, Irreversibility and Investment Dynamics
Journal of Monetary Economics, Vol. 54, October 2007, 2102–2130
Financial Constraints on Investments: A Three Pillar Approach
with Michele Bagella and Leonardo Becchetti
Research in Economics, Vol. 55, 2001, 219–254
Effects of Index Option Introduction on Stock Index Volatility: A Procedure for Empirical Testing Based on SSC-GARCH Models
with Leonardo Becchetti
Applied Financial Economics, Vol. 10, 2000, 323–341
Book Chapters and Other Papers
Firm Dynamics and Productivity Growth in Spain
with Andrea Sy and Carolina Villegas-Sanchez
In preparation for the Handbook sobre Productividad en España, edited by J. F. Jimeno and J. M. Montero, Ramón Areces Handbook Series · Draft: July 2026
This chapter examines the relationship between firm dynamics and aggregate productivity growth in Spain over 2000–2023, using firm-level data from the Central Balance Sheet Database of the Banco de España. It argues that Spain’s stagnation in total factor productivity reflects the interaction of two forces. The first is cyclical. A credit boom generated capital deepening alongside misallocation. The crisis then depressed productivity through slow factor adjustment among older incumbents and a banking-crisis-driven credit contraction constraining younger firms, while the recovery was driven disproportionately by incumbents aged 21 and over. The second is secular: Spain experienced a persistent decline in firm dynamism, reflected in falling entry rates, declining job reallocation, and a marked aging of the firm population that predates and outlasts the crisis. Their interaction helps explain the narrowness of the post-crisis recovery: as younger cohorts shrank, aggregate productivity became increasingly dependent on older incumbents rather than renewed by productive entry. The chapter finds no strengthening of the cleansing mechanism during the recession, and shows that age-related productivity growth differences flattened after the crisis, turning mildly negative for firms aged 6–20 during the recovery. This points to weaker life cycle dynamics underlying long-run productivity growth in Spain.
Firm Debt Deflation, Household Precautionary Savings, and the Amplification of Aggregate Shocks
with Angelo Gutierrez and Ander Perez-Orive
Working paper, February 2019
Deleveraging shocks that increase household precautionary savings, and financial and uncertainty shocks to firms, interact and amplify each other, even when these same shocks separately have moderate effects on output and employment. This result is obtained in a model in which heterogeneous households face financial frictions and unemployment risk and in which heterogeneous firms borrow funds using nominally fixed long-term debt and face costly bankruptcy. This novel amplification mechanism is based on a dynamic feedback between the precautionary behavior of households and the bankruptcy and entry decisions of firms. Our results support the view that firm financial frictions are important to understand the effect of household deleveraging on unemployment, consistent with recent empirical studies examining the 2007-2009 Great Recession.
The Short- and Long-run Employment Impact of Covid-19 through the Effects of Real and Financial Shocks on New Firms
with Christoph Albert and Beatriz Gonzalez
Bank of Spain Working Paper No. 2039, December 2020
Firm Financing Constraints, Labour Demand and R&D
Working paper, revised September 2006
Financial Constraints on Investments: Evidence from Direct Revelation of Italian Firms
with Michele Bagella and Leonardo Becchetti
In M. Baldassarri, M. Bagella and L. Paganetto (eds.), Financial Markets, Imperfect Information and Risk Management, Palgrave, 2001
Option Trading, Speculation and Firm Specific Risk: An Empirical Testing on Industrial Firm Equities
In M. Bagella (ed.), Finance, Investment and Innovation: Theory and Empirical Analyses, Ashgate, 1999