This paper investigates the sources of capital misallocation across a group of 11 developing and developed countries. The main findings are (i) technological frictions, namely, adjustment costs and uncertainty, account for only a modest share of observed misallocation, leaving ample scope for...

We develop a methodology to disentangle sources of capital ‘misallocation', i.e. dispersion in value-added/capital. It measures the contributions of technological/informational frictions and a rich class of firm-specific factors. An application to Chinese manufacturing firms reveals that...

We develop and implement a methodology to disentangle various sources of capital misallocation, i.e., dispersion in static marginal products. Our strategy uses readily observable moments in firm-level data, e.g., capital and revenues, to measure the contributions of technological and...

This paper develops a search and matching model of mergers and acquisitions (M&A) and uses it to evaluate the implications of merger activity for aggregate economic outcomes. The theory is consistent with a rich set of micro-level facts on US M&A, including, e.g., sorting among merging firms, a...

We develop a theory linking “misallocation,” i.e., dispersion in static marginal products of capital (MPK), to systematic investment risks. In our setup, firms differ in their exposure to these risks, which we show leads naturally to heterogeneity in firm-level risk premia and, more...

We develop a theory linking "misallocation," i.e., dispersion in marginal products of capital (MPK), to macroeconomic risk. Dispersion in MPK depends on (i) heterogeneity in firm-level risk premia and (ii) the price of risk, and thus is countercyclical. We document strong empirical support for...

We study the role of firm heterogeneity in affecting business cycle dynamics and optimal stabilization policy. Firms differ in their degree of cyclicality, and hence, exposure to aggregate risk, leading to firm-specific risk premia that influence resource allocations. The heterogeneous firm...

This paper develops a search and matching model of mergers and acquisitions (M&A) and uses it to evaluate the implications of merger activity for aggregate economic outcomes. The theory is consistent with a rich set of micro-level facts on US M&A, including, e.g., sorting among merging firms, a...

How does growing international financial diversification affect firm-level and aggregate labor shares? We study this question using a novel framework of firm labor choice in the face of aggregate risk. The theory implies a cross-section of labor risk premia and labor shares that appear as...

Ever since Keynes' famous quote about animal spirits, there has been an interest in linking firms' expectations and actions. However, empirical evidence has been limited due to a lack of firm-level panel data on expectations and outcomes. In this paper, we build such a dataset by combining a...