arXiv subjects

Alessandro Ferrari

Publications and source records attributed to Alessandro Ferrari.

8 recordsLinked to original sources

arXiv2025

Not-so-Cleansing Recessions

Recessions are periods in which the least productive firms in the economy exit, and as the economy recovers, they are replaced by new and more productive entrants. These cleansing effects improve the average firm productivity. At the same time, recessions induce a loss of varieties. In an economy with Homothetic Single Aggregator technology, we show that their long-run welfare effects trade off these two forces. This trade-off is governed by love-of-variety and the elasticity of substitution in aggregate production. If industry output is aggregated using the standard CES aggregator, recessions do not improve long-run GDP or welfare. If the economy features more love-of-variety than CES, the social planner optimally subsidizes economic activity both in steady state and even more so in recessions to avoid firm exit. We use the model and quasi-exogenous variation in demand to estimate love-of-variety. We find it to be significantly higher than implied by CES aggregation, suggesting that even the long-run effects of recessions are negative. Finally, we quantitatively characterize the optimal policy response both along the transition and in the steady state.

econ.GN↗

arXiv2025

Specialization, Complexity & Resilience in Supply Chains

We study how product specialization choices affect supply chain resilience. We propose a theory of supply chain formation in which only compatible inputs can be used in final production. Intermediate producers choose how much to specialize their goods, trading off higher value added against a smaller pool of compatible final producers. Final producers operate complex supply chains, requiring multiple complementary inputs. Specialization choices determine how quickly final producers can replace suppliers after disruptions, and thus supply chain resilience. In equilibrium, production inputs are over-specialized due to a novel network externality. Intermediate producers fail to internalize how their specialization choices affect the likelihood that final producers source all required inputs, and therefore the lost value added from complementary inputs if production halts. As a result, supply chains are more productive in normal times but less resilient than socially desirable. We characterize the optimal transfer that restores the efficient allocation and show that non-fiscal interventions, such as compatibility standards, are generally welfare-enhancing.

econ.GN↗

arXiv2025

The Cost of Delivery Delays

Since 2018, there has been a consistent decline in the distance traveled by U.S. manufacturing imports, reaching a level not observed since 2008. This trend is the result of the substitution away from imports from China and towards imports from closer countries. At the same time, U.S. manufacturing inventory-to-sales ratio has continued to rise. These trends are at odds with the literature, which finds that reductions in the distance of imports are associated with a decline in inventories. We argue that a rise in delivery time risk, driven by longer and more frequent delays and supply disruptions, can reconcile these trends. We do so in the context of a model of global sourcing with stochastic delivery times and inventories. Firms trade off the lower price of farther inputs with the increase in exposure to demand volatility and longer delays. In response, firms increase their inventories. Yet, as delivery delays rise, firms need to carry more inventories per unit of the input used. We calibrate the model for the period from 2018 to 2024 using data on the increase in tariffs for inputs from China, and the rise in inventories over sales. We find an increase in delivery delays for foreign inputs of 21 days across the period. The rise in delays and tariffs had an output loss of 7.3% and a price increase of 1.8%. Of these, the rise in delivery delays alone generated a 2.6% drop in output and a 0.4% increase in prices.

econ.GN↗

arXiv2022

Profit Shifting and International Tax Reforms

International taxation rules are outdated, allowing multinationals to shift profits to tax havens. This paper examines how tax reforms affect profit shifting and cross-country welfare. We propose a model that separates real economic profits from paper profits, introducing 'triangle identities' to estimate bilateral profit-shifting flows. Using macro- and firm-level data, paper profits' elasticity is three times that of the tax base. Global minimum tax reforms improve welfare by increasing public goods funding and reducing tax competition. We also identify optimal minimum rates under various taxing-right scenarios and demonstrate that unilateral destination-based-cash-flow-tax reforms' welfare effects depend highly on trade imbalances.

econ.GN↗

arXiv2022

TINYCD: A (Not So) Deep Learning Model For Change Detection

In this paper, we present a lightweight and effective change detection model, called TinyCD. This model has been designed to be faster and smaller than current state-of-the-art change detection models due to industrial needs. Despite being from 13 to 140 times smaller than the compared change detection models, and exposing at least a third of the computational complexity, our model outperforms the current state-of-the-art models by at least $1\%$ on both F1 score and IoU on the LEVIR-CD dataset, and more than $8\%$ on the WHU-CD dataset. To reach these results, TinyCD uses a Siamese U-Net architecture exploiting low-level features in a globally temporal and locally spatial way. In addition, it adopts a new strategy to mix features in the space-time domain both to merge the embeddings obtained from the Siamese backbones, and, coupled with an MLP block, it forms a novel space-semantic attention mechanism, the Mix and Attention Mask Block (MAMB). Source code, models and results are available here: https://github.com/AndreaCodegoni/Tiny_model_4_CD

cs.CV↗

arXiv2022

Risk Sharing and the Adoption of the Euro

This paper empirically evaluates whether adopting a common currency has changed the level of consumption smoothing of euro area member states. We construct a counterfactual dataset of macroeconomic variables through the synthetic control method. We then use the output variance decomposition of Asdrubali, Sorensen and Yosha (1996) on both the actual and the synthetic data to study if there has been a change in risk sharing and through which channels. We find that the euro adoption has reduced risk sharing and consumption smoothing. We further show that this reduction is mainly driven by the periphery countries of the euro area who have experienced a decrease in risk sharing through private credit.

econ.GN↗

arXiv2022

Inventories, Demand Shocks Propagation and Amplification in Supply Chains

I study the role of industries' position in supply chains in shaping the transmission of final demand shocks. First, I use a novel shift-share design leveraging destination-specific final demand shocks and a new measure of destination exposure accounting for direct and indirect linkages. I find that demand shocks amplify significantly as they propagate upstream, with upstream industries experiencing output elasticities up to three times larger than final good producers, consistent with the bullwhip effect. To rationalize these empirical results, I develop a tractable production network model with inventories and study how the properties of the network and the cyclicality of inventories interact to determine whether final demand shocks amplify or dissipate upstream. I test the mechanism by directly estimating the model-implied relationship between output growth and demand shocks, mediated by network position and inventories. I find that the presence of inventories increases output elasticities by 18% on average, highlighting the macroeconomic significance of this channel. Finally, I use the model to quantitatively study the effects of long-run trends of lengthening supply chains and rising inventories on the volatility of the economy.

econ.GN↗

arXiv2022

Firm Heterogeneity, Market Power and Macroeconomic Fragility

We study how firm heterogeneity and market power affect macroeconomic fragility, defined as the probability of long slumps. We propose a theory in which the positive interaction between firm entry, competition and factor supply can give rise to multiple steady-states. We show that when firms are highly heterogeneous in terms of productivities, even small temporary shocks can trigger firm exit and make the economy spiral in a competition-driven poverty trap. We calibrate our model to incorporate the well-documented trends on rising firm heterogeneity in the US economy, and show that they significantly increase the likelihood and length of slow recoveries. We use our framework to study the 2008-09 recession and show that the model can rationalize the persistent deviation of output and most macroeconomic aggregates from trend, including the behavior of net entry, markups and the labor share. Post-crisis cross-industry data corroborates our proposed mechanism. We conclude by showing that firm subsidies can be powerful in preventing long slumps and can lead to welfare gains between 10% and 50%.

econ.GN↗