I am a researcher in economics at the University of Mannheim, funded by the Collaborative Research Center TR 224 "Economic Perspectives on Societal Challenges - Equality of Opportunity, Market Regulation, and Financial Stability" of the German Science Foundation (DFG).
My research interests are in international economics, organizational economics, macro and industrial organization. My research explores the behavior of firms and individuals in the context of aggregate economic developments such as globalization or technological progress and their consequences for economic performance. I combine microeconomic with macroeconomic perspectives and apply modern empirical methods with economic theory.
News: I am co-organizing a workshop on Trade Policy and Firm Performance in the Global Economy on 13-14 June 2019 jointly with Harald Fadinger and Yanping Liu, sponsored by the Collaborative Research Center TR 224. See here for the program.
Human Capitalists and the Global Division of Labor
Awarded the Walther-Rathenau Best Paper Award [Link]
Abstract: The widespread practice of equity-based compensation has transformed skilled labor from a labor input into a class of human capitalists. This paper examines the effects of globalization via improved access to foreign input markets on top earners' incentive contracts. I develop a heterogeneous firm span-of-control model in which firms choose to compensate managers with equity to alleviate agency frictions. The model illustrates that trade liberalization provokes a reallocation of compensation towards equity ownership for top earners when agency frictions depend on firm size or when top earners are compensated with stock options. Calibrating the model to micro and macro moments in U.S. and U.K. data, I illustrate that foreign input supply can account for substantial heterogeneity in compensation contracts. Ignoring the ownership of equity would result in considerable mismeasurement of the returns of globalization for highly skilled labor. Using data on equity ownership and income streams for managers of public firms in the U.S. and U.K. I then study the empirical relation between access to foreign input markets and compensation contracts for highly skilled labor. Based on international input-output tables and a shift-share instrumentation strategy that exploits variation in foreign input supply and trade costs, I find broad support for the model predictions. Improved access to foreign input markets induces a change in managerial compensation contracts. Managers of the largest firms in the economy attain higher levels of compensation and receive a larger fraction of their compensation as equity. This can explain why capital incomes are more prevalent than labor incomes for top earners in an open economy.
Foreign Competition and the Durability of U.S. Firm Investments
with Philippe Fromenteau and Jan Tscheke
[Abstract], [Media Coverage], [Working Paper Version]
accepted for publication in the RAND Journal of Economics
Abstract: How does the exposure to product market competition affect the investment horizon of firms? When tougher competition reduces future profitability, firms have an incentive to shift investments towards more short-term assets. To study this mechanism empirically, we formulate a stylized theoretical framework of firm investments and derive a within-firm estimator that uses variation across investments with different durabilities. We exploit the Chinese WTO accession as a competition shock for US firms to estimate the effects of product market competition on the composition of firm investments using expenditures across different assets within listed US manufacturing companies. We find that firms that experienced tougher competition shifted their expenditures towards investments with a shorter durability. We find this effect to be larger for firms with lower total factor productivity.
Trade in Tasks and the Organization of Firms
with Dalia Marin and Alexander Tarasov
[Abstract], [Data and Code], [Media Coverage], [Working Paper Version]
European Economic Review, Vol. 107, p. 99-132, Aug. 2018
Abstract: In this paper, we incorporate trade in tasks into Marin and Verdier (2012) to examine how offshoring affects the way firms organize. We show that offshoring of production tasks and of managerial tasks can lead to more decentralized management and to larger executive wages in open economies. We study the predictions of the model with original firm level data and find that offshoring firms are 18% more decentralized than non-offshoring firms. We also find that offshoring of managers increases the level of decentralized management in open industries, but reduces the level of decentralized management in sufficiently closed industries.
Globalization and the Evolution of Corporate Governance
[Abstract], [Data and Code] [Media Coverage], [Working Paper Version]
European Economic Review, Vol. 102, p. 39-61, Feb. 2018.
Abstract: How does globalization affect the balance of power between managers and firm owners? This paper studies the effect of economic integration on governance practices within firms. I propose a theory of endogenous corporate governance investments in industry equilibrium with monopolistic competition. Firms can use investments into better corporate governance as a cheap substitute to performance compensation to mitigate agency problems. International integration alters the demand for managers in the economy such that firms may reduce their corporate governance investments and offer higher performance payments. This globalization-induced deterioration of corporate governance in the economy diminishes the welfare gains from globalization. Using data on governance practices in U.S. manufacturing corporations, I provide empirical evidence that conforms to the model predictions. Firms in industries that experienced substantial trade liberalization between 1990 and 2006 have changed their governance practices allowing for more managerial slack and offered higher equity payments to their CEOs. These effects are particularly large in relatively dynamic industries that are characterized by large exit rates.
Democratization, Contracts and Comparative Advantage
with Felix Samy Soliman
[Abstract], [Working Paper Version]
Economics Letters, Vol. 173, p. 73-77, Dec. 2018.
Abstract: We study how the international spread of democracy shaped the comparative advantage of countries. Using data on the "Third Wave of Democratization" between 1976 and 2000 we find that democratizing countries shifted their exports towards more contract intensive goods that require a larger portion of relationship-specic inputs. This shift is observed on the intensive margin (volumes of industry-level exports) as well as the extensive margin of trade (number of goods a country exports). Using an instrumental variable strategy based on democracy waves, alternative proxy variables and subsamples suggests that the effects of democratization on trade specialization are causal.
Firms in the Aggregate Economy M.Sc. Economics, University of Mannheim
Organizational Economics Undergraduate Economics, University of Mannheim
Topics in International Trade M.Sc. Economics, University of Munich