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Report
Market Concentration and Aggregate Productivity: The Role of Demand
This paper studies the relationship between market concentration and aggregate productivity when firm-level demand emerges from past marketing investments. Granular firms may invest in demand both to complement their productivity and to amplify market power—this second force can create persistent mismatch between customer capital and productivity. The importance of this mismatch depends on the relative persistence of productivity and demand. Empirically, we find that demand is more persistent than productivity, implying a sizable role for mismatch. This leads to sluggish demand-side ...
Working Paper
A Quantitative Theory of Relationship Lending
Borrower-lender relationships tend to be long-lasting, and lender switching is infrequent. What are the aggregate consequences of these facts? We address this question in a model of heterogeneous banks subject to financial frictions. We incorporate lending relationships using loan portfolio adjustment costs for borrowers and accumulation of "relationship capital" for lenders. The model's implied loan demand system is directly estimated on administrative loan-level micro data to recover the key novel parameters governing the strength and persistence of lending relationships. We find that ...