Research
Edoardo Acabbi, Andrea Alati, Luca Mazzone and Marta Morazzoni (2025).
Sorting into Entrepreneurial Teams
Also available at SSRN
Abstract
This paper studies how entrepreneurs sort into teams and how team entrepreneurship affects the equilibrium distribution of firms. Leveraging employer-employee administrative records matched with privately-held firms’ balance sheet data for Portugal, we show that firms of entrepreneurial teams have higher sales, productivity and survival rates than those owned by single entrepreneurs. We then exploit information on individuals’ careers before opening a firm to establish that there is a strong degree of sorting in entrepreneurial teams along observed and unobserved heterogeneity. A novel theory of career choices and team formation rationalizes why similarity in entrepreneurs’ overall talent and dissimilarity in their specialization lead to better firm outcomes, providing insights into the micro-foundations of firm growth.
Edoardo Acabbi, Andrea Alati, and Luca Mazzone (2024).
Human Capital Ladders, Cyclical Sorting, and Hysteresis
R & R at the American Economic Review, also available at SSRN and BoE-WP
Abstract
Evaluating the allocative effects of recessions is challenging due to the dynamic and jointly evolving distributions of workers and firms. Workers constantly gain or lose human capital, while the landscape of firms shifts with cyclical vacancy posting, entry and exit. We build a search model with aggregate risk and worker-firm heterogeneity, in which human capital accumulation depends on the sorting of workers to firms. The framework allows us to account for how workers' skills and firms' distributions jointly vary with and in turn impact business cycles. We estimate the model on administrative data and show that persistent negative effects on the productivity of worker-firm matches dominate cleansing effects, with distortions in sorting and human capital accumulation accounting for approximately 60% of cumulative output losses. Our model offers a rationale for the increased length of recessions and their heterogeneous welfare effects across age, income, and human capital distributions.
Andrea Alati, Johannes Fischer, Maren Froemel and Ozgen Ozturk (2024).
Firms' Sales Expectations and Marginal Propensity to Invest
Also available at BoE-WP
Abstract
How do firms adjust their investment in response to sales shocks and what determines the response? Using a unique firm‑level survey, we propose a novel approach to estimate UK firms’ marginal propensity to invest (MPI) out of additional income: the forecast error of their sales growth expectations. Investment responds significantly to these sales surprises, with a 1 percentage point unexpected growth in sales translating into a 0.31 percentage point increase in capital expenditure. Firms that are more attentive to the state of the economy are more responsive, consistent with sales growth surprises providing firms with information about their demand. Sales growth surprises also cause firms to increase their prices, supporting this interpretation. We do not find evidence that these results are driven by financial frictions, uncertainty, or productivity shocks.
Edoardo Acabbi and Andrea Alati (2023).
Defusing leverage: liquidity management and labor contracts
New version coming soon. Also available at SSRN and BoE-WP
Abstract
We study how firms use flexible employment contracts to decrease the pass-through of aggregate fluctuations to fundamentals and alleviate cost rigidities. Leveraging Italian administrative data, we first show that firms’ adoption of temporary contracts contributes to a reduction in the variability of cash-flows and profits, particularly when their initial labor share is high. We then provide a causal identification of the effect for firms fundamentals of a reform liberalizing the use of temporary contracts in 2001. We find that the liberalization of temporary contracts increased their adoption and led to a decline in average labor compensation. The reform caused a substantial rise in profit margins and a reduction in the cross-sectional standard deviation of profits, but only among firms characterized by initially more rigid labor costs. Crucially, we find that these firms experienced also a significant increase in labor productivity, debt capacity and capital investment.
Andrea Alati (2021).
Initial aggregate conditions and heterogeneity in firm-level markups
Old draft, new version coming soon
Abstract
I explore the role of aggregate fluctuations as a persistent determinant of heterogeneity in firm-level markups. To analyze how business cycles generate dispersion in markups, I estimate the effects of aggregate conditions at key moments of firms' lives on the age profiles of markups for a sample of U.S. listed companies. Using the estimated markups, I calibrate a general equilibrium model that features heterogeneous product markets, customer base accumulation and firm dynamics. A novel feature of the model is that, in addition to making direct investments in customer acquisition, firms can accumulate customers by increasing sales, which is important to match the empirical findings. As the value of operating in each product market fluctuates endogenously with business cycles, aggregate conditions generate a selection on the product-market composition of firm cohorts that results in time-varying heterogeneity in product-market characteristics across active companies. This heterogeneity is persistent and can significantly affect both the response of the economy to future aggregate shocks and the co-movements of aggregate markups with output.
Work in Progress
Andrea Alati, Tomas Key, Philip Schnattinger, Bradley Speigner and Eran Yashiv
Hiring, Mismatch, and Vacancies: Lessons from Unique U.K. Vacancy Data
Andrea Alati, Fergus Cumming and Alberto Polo
Household Income and Debt
Edoardo Acabbi, Andrea Alati, Ben Griffy, Luca Mazzone and Stanislav Rabinovich
The Optimal Design of Job Retention Schemes
Dormant
Andrea Alati, Adrien Bussy and Friedrich Geiecke
Free manuals and productivity
Abstract
This note considers the possible productivity effect of the vast amount of free answers to coding questions available online, a phenomenon we term manuals. Large parts of the manual production are the result of non-pecuniary motives, e.g. warm glow and social recognition. Developers take the time to answer detailed programming questions online and their answers are freely accessible. Different users than those who had originally asked the questions search and find the answers on a daily basis when they have to solve similar problems in their work. The re-use component of answers is very substantial. Up to 2018, there were around 17 million questions on today’s most popular website. These questions and their answers have been been viewed around 39 billion times over the same time span. Unlike patents or other measures of technological progress, most of such manuals has no proprietary rights or price. To motivate our analysis, we first establish that historical use of programming alone is a surprisingly competitive predictor of recent regional US economic growth, also when additionally controlling for historical IT investment or education. We then document the frequent use of manuals by programmers and look into the social norms which drive their wide-spread provision. A stylized model depicts manuals and new functionalities in programming languages as being close to perfect complements in a production function: The economy could not leverage the productivity of new programming functionalities close to as quickly without the widespread norms that generate the required manuals almost simultaneously.
Andrea Alati, Silvana Tenreyro and Gregory Thwaites
The public and private debt channel of monetary policy
