This paper examines the equity–efficiency tradeoff by showing that changes in the joint distributions of factor income and household expenditure influence aggregate productivity (TFP). I develop a general equilibrium aggregation and incidence theory for a distorted production network economy with heterogeneous households, deriving a sufficient-statistic decomposition of TFP. I define and decompose the positional terms of trade (PTT) — a household-specific efficiency wedge that maps shocks into real-consumption incidence. The model ranks factors, households, and firms by distortion, expenditure, and revenue centralities, showing that changes in who earns and who spends are generically non-neutral. Allocative efficiency rises when factor income shifts from high to low distortion centrality factors and when demand reallocates from high to low expenditure centrality households or revenue centrality firms, thereby alleviating bottlenecks. Benchmarking against a constrained social planner allocation that internalizes reallocation externalities, I show that decentralization lacks the planner’s balancing property and generates first-order externalities for aggregate efficiency and welfare. Estimating the model on U.S. data (1997–2021), I find that changes in the income distribution explain approximately 20% of TFP variation. Finally, budget-neutral, progressive lump-sum transfers targeted by expenditure centrality raise aggregate TFP and improve the PTTs of lower- and middle-income households, aligning efficiency gains with favorable equity outcomes.

• 2023
• North American Summer Meeting of the Econometric Society - Los Angeles, California
• Asian Meeting of the Econometric Society - Singapore
• Australasia Meeting of the Econometric Society - Sydney, NSW
• Canadian Economic Association Conference - Winnipeg, Manitoba
• Lacea Lames 2023 - Bogota, Colombia
• Universidad del Rosario - Bogota, Colombia
• Labor, Firms, and Macro Reading Group - Online
• Banco de La Republica - Bogota, Colombia
• 2024
• ASSA 2024 - San Antonio, Texas
• University of Hawai’i at Manoa
• Universidad Diego Portales - Online
• Bank of Canada - Ottawa, Canada
• Tecnologico de Monterrey - Online
• Fundacao Getulio Vargas - Sao Paulo, Brazil
• Tilburg University - Tilburg, Netherlands
• 2025
• Midwest Macro Meeting - Federal Reserve Bank of Kansas
• ECINEQ 2025 - Society for the Study of Economic Inequality - World Bank, Washington D.C.
• 2025 World Congress of the Econometric Society - Seoul, Korea
• 10th Annual International Conference in Hawaiʻi - Navigating Global Challenges

In this paper, I provide the first nonparametric decomposition for the variations in the labor share for a production network economy with distortions. This decomposition uncovers the firm-level granular sources of variations for the labor share and segments them in supply and demand shocks. The firms’ share of revenue that reaches directly or indirectly labor compensation, or payment centralities, act as sufficient statistics that measure the strength of the response of the aggregate labor share to specific supply and demand shocks at the firm level. Using the input-output tables for the United States, I estimate sectoral payment centralities, showing that they are positively correlated with sectoral markdowns, negatively correlated with sectoral intermediate input intensity, and have fallen over the last two decades. Variations in sectoral payment centralities explain 99.1% of the labor share volatility, and stronger sectoral distortions in a handful of industries (e.g., credit intermediation and computers and electronics) drove the reductions in the labor share in the United States over the XXIst century.

In this paper, I develop a general aggregation theory that explains the role of production networks in country-level TFP. This theory applies to a distorted production network open economy with endogenous factor supply. My main contribution is to provide decompositions for the country-level TFP variation that account for the possibility that factors of production and dividends cross national boundaries. The country-level TFP depends on sufficient statistics that characterize the effect on domestic real GDP from (i) firm-level productivity and markdown shocks in domestic and foreign firms and (ii) variations in the global income distribution. These decompositions do not require quantity measures of variations, facilitating their empirical implementation, as price data is no longer necessary. Additionally, for an efficient economy, a Hulten type of decomposition exists for each country, and the global sales distribution is a sufficient statistic to characterize the first-order propagation of global shocks on country-level TFP. These results support a theory of economic spillovers and contagion through industrial networks, corroborating the essential role of global value chains in creating strong complementarities and commonalities in business cycles across countries.

• 2024
• Hawaii-Hitotsubashi-Keio (H2K) Workshop on International Economics
• 2025
• Western Economic Association 100th Annual Conference - San Francisco, California

In this paper, we estimate how changes in the structure of global input-output networks have influenced growth. Using an open economy production network model, we identify sufficient statistics that characterize how productivity shocks across domestic and foreign firms influence country-level TFP. We estimate these sufficient statistics using data on input-output networks and sectoral productivity shocks. Structural changes in global input-output networks between 1965 and 2000 were advantageous for developing countries and unfavorable for advanced economies. Holding the global input-output network fixed, TFP growth in China and India would have been 26.6% and 9.7% lower between 1965 and 2000. Whereas for the US and Australia, TFP growth would have been 4.0% and 16.8% higher. Finally, we show that the dynamics of the domestic intermediate input cost share capture the importance that the structure of the global input-output network has on the amplification of shocks on TFP. Our analysis illustrates the importance of industrial linkages and robust domestic intermediate input markets for economic growth.

We offer the first non-linear analysis of how microeconomic disruptions in an inefficient production network economy impact aggregate TFP. Our decompositions, applicable to any general equilibrium economy, provide non-parametric insights. We identify essential general equilibrium metrics for capturing the non-linear repercussions of microeconomic fluctuations through network connections. Our findings encompass firm-level productivity shocks, wasted distortions, and rebated distortions. We reveal that substantial shocks or high production process complementarity/substitution introduce substantial bias in the linear approximation of distortions and productivity shocks found in the literature. Our non-linear second-order effects substantially mitigate this bias.

• 2025
• 32nd Annual Symposium of the Society for Nonlinear Dynamics and Econometrics - San Antonio, Texas