Date/Time
Date(s) - 02/10/2024
11:30 am - 12:30 pm

We are so excited to welcome Rafael Guntin this Wednesday for our weekly seminar series!

Rafael, Assistant Professor of Economics at the University of Rochester, will present to our economics graduate students and faculty on Wednesday, October 2nd, 11:30am-12:30pm (EST) in KTH 334.

Rafael will present the paper “Financial Frictions and the Market for Firms”.

Abstract

We study and quantify the aggregate implications of the trade of firms in the presence of financial frictions. Empirically, we document that one in four U.S. entrepreneurs purchased their business, with younger, smaller, and higher average revenue product of capital (ARPK) firms having the highest trading rates. After trade, capital outpaces output growth, reducing firms’ ARPK over time. To explain these findings, we propose a general equilibrium model of entrepreneurship with a frictional market for firms where the trade of firms alleviates financial constraints. We show that the predictions from our theory are consistent with the cross-sectional and longitudinal facts. Our quantitative results indicate that firms’ trade significantly improves allocative efficiency, with potential larger gains in less financially developed economies. We provide cross-country evidence supporting this prediction.

View Rafael’s professional website.