Research

Job Market Paper

"Bank Competition, Capital Misallocation, and Industry Concentration: Evidence from Peru" [PDF]

with Nikita Céspedes

We estimate the effects of bank competition on economic development relying on a merger episode that involved the two largest banks competing over small firms in Peru. By exploiting differences in the banks’ geographical footprint, we measure how the merger changed the degree of competition in local banking markets, and how it affected credit, economic activity, and the allocation of resources across firms. We find an aggregate decline in credit, labor, capital, and sales of small firms after the merger. Moreover, we find that low bank competition discourages entry decisions, favoring incumbent firms over potential entrants, and reducing business dynamism. The decline in bank competition has substantial distributional effects. The contraction of capital is concentrated among small firms with high marginal returns, which increases capital misallocation. In equilibrium, large firms expand by taking over the market share previously attended by small firms, leading to higher levels of concentration in the real economy.

Work in Progress

"Covid-19 Relief Fund Programs in Developing Economies: Evidence from Reactiva Perú"

with Walter Cuba, Eduardo Díaz, and Elmer Sánchez

We estimate the effects of Reactiva Perú, a Covid-19 relief fund program implemented by the Peruvian government to provide loans to firms at low interest rates through the banking sector. We find that banks with high participation in the program, expand total loans and reduce non-Covid-19 loans relative to less exposed banks, which significantly reduces their risk since Covid-19 loans are collateralized by the government. We document that lending relationships are crucial for firms to participate in the program, regardless of their industry exposure to Covid-19 restrictions. Lastly, we find that, upon receiving a Covid-19 credit, the probability of default declines significantly only among small firms operating in industries that were strongly affected by Covid-19 restrictions such as trade and services.

The Financing Channel of Gains From Trade

with Chenzi Xu and Adrien Matray

Pension Funds, Economic Growth, and Limits in Foreign Investment

with Francisco Cabezón

Lending Rate Caps and Credit Reallocation

with Rafael Nivin and Diego Yamunaqué