Mauricio Larrain

Sources of Growth and Behavior of TFP in Chile

Chile has exhibited sharp cyclical and trend variation in its GDP and TFP growth rates during the last half century. This paper presents new estimates of the sources of Chile’s growth and new measures for factor inputs and TFP during 1960- 2005. Capital s

Capital Account Opening and Wage Inequality

Opening the capital account allows financially constrained firms to raise capital from abroad. Since capital and skilled labor are relative complements, this increases the relative demand for skilled labor versus unskilled labor, leading to higher wage inequality. Using aggregate data and exploiting variation in the timing of capital account openings across 20 mainly European countries, I find that opening the capital account increases aggregate wage inequality. In order to identify the mechanism, I use sectoral data and exploit variation in external financial dependence and capital-skill complementarity across industries. I find that capital account opening increases sectoral wage inequality, particularly in industries with both high financial needs and strong complementarity.

Capital Account Liberalization and Aggregate Productivity: The Role of Firm Capital Allocation

We study the effects of capital account liberalization on firm capital allocation and aggregate productivity in ten Eastern European countries. Using a large firm-level dataset, we show that capital account liberalization decreases the dispersion of the return to capital across firms, particularly in sectors more dependent on external finance. We provide evidence that capital account liberalization improves capital allocation by allowing financially-constrained firms to demand more capital and produce at a more efficient level. Finally, we use a model of misallocation and document that capital account liberalization increases aggregate productivity through a more efficient firm capital allocation by 10% to 16%.