Department of Economics
3203 SE Woodstock Blvd
Portland, OR 97202-8199, USA
Eliot Hall, Rm 427
Cartels, Entry and Productivity: Evidence from the Chilean Nitrate Cartels (joint with Vitaly Titov) (Job Market Paper) [PDF]
This paper studies the effect of cartels on the quantity and quality of new firms in an industry with low barriers to entry. Since cartels generate artificially high profits, low productivity firms may be tempted to enter a cartelized industry, eroding the industry's productivity and reducing total surplus in the long-run. I use cartels in the early twentieth-century Chilean nitrate industry to quantify these effects. Results show that cartels increase the number of new plants by more than four plants per year, and that production units that entered during cartels were significantly less productive, in a magnitude equivalent to a reduction in revenue of roughly 1/3 for a median-sized plant in the industry. Counterfactual simulations establish that, had cartels not occurred, 25% of the new plants would have postponed or canceled their entry to the industry. Moreover, low barriers to entry are shown to cause a reduction of 39% of total cartel profits for incumbent cartel members. Results point to a complex interaction between barriers to entry, productivity, net entry, and cartel profits, with important potential policy implications for antitrust agencies.
Learning-by-colluding: Organization of Cartels in the Chilean Nitrate Industry (joint with Vitaly Titov)
This work studies how firms learn to collude. Between 1884 and 1909, Chilean nitrate of soda producers organized cartels on five separate occasions. Specific industry characteristics and the public nature of collusion in this industry allow us to explore how collusive agreements evolved as producers accumulated relevant knowledge. We find that contracts progressively became more complete, more efficient in allocating cartel production quotas, and better at regulating the transition from competition to collusion.
work in progress
Production Efficiency of Cartels with Transferable Market Shares
I use detailed information on cartel contracts and plant-level output decisions from the Chilean nitrate cartels to quantify the effect of transferable market shares on cartels' production efficiency. After World War I, nitrate producers adapted to changing market conditions in world fertilizer markets by organizing cartels that included transferable market shares, which had been explicitly banned in previous collusive episodes. To estimate the effect of this change in rules, I collect an original data set that includes plant-month output observations for all plants in the industry between the years 1918 and 1924.
Sent Away: Long-Term Effects of Forced Displacements (joint with Fernanda Rojas-Ampuero)
This work estimates the inter-generational effects of moving to a high-poverty neighborhood on both education and income, by exploiting a natural experiment that occurred in Chile between 1979 and 1984 when the Chilean government mandated the relocation of entire slums. This policy created two groups of families, movers and non-movers, which allows us to identify a neighborhood effect by comparing the children of these families forty years after the treatment. To implement the estimation, we construct a novel data set that combines archival records and administrative data containing more than 20,000 households affected by the policy.
Liquidity, Networks, and Unintended Consequences (joint with Gary Richardson and Francisco Arroyo)
Using a combination of empirical work and a theoretical model, we study the interaction between financial networks, liquidity provision, and central bank design, using the case of the creation of the Federal Reserve System in 1913. We document empirical facts of the period between the Federal Reserve creation and the stock exchange crash in 1929: banks abruptly reduced their reserves, and only a small fraction of state banks joined the Federal Reserve. Then, we develop a theoretical model of bank bargaining that accounts for the observed features of the system and sheds light on some negative unintended consequences of the Federal Reserve System design.