Person: Alfaro, Laura
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Alfaro
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Laura
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Alfaro, Laura
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Publication Health Externalities and Policy: The Role of Social Preferences(Institute for Operations Research and the Management Sciences (INFORMS), 2022-09) Alfaro, Laura; Faia, Ester; Lamersdorf, Nora; Saidi, FarzadSocial preferences facilitate the internalization of health externalities, for example, by reducing mobility during a pandemic. We test this hypothesis using mobility data from 258 cities worldwide alongside experimentally validated measures of social preferences. Controlling for time-varying heterogeneity that could arise at the level at which mitigation policies are implemented, we find that they matter less in regions that are more altruistic, patient, or exhibit less negative reciprocity. In those regions, mobility falls ahead of lockdowns, and remains low after the lifting thereof. Our results elucidate the importance, independent of the cultural context, of social preferences in fostering cooperative behavior.Publication Corporate Debt, Firm Size and Financial Fragility in Emerging Markets(Elsevier BV, 2019-05) Alfaro, Laura; Asis, Gonzalo; Chari, Anusha; Panizza, UgoThe post-Global Financial Crisis period shows a surge in corporate leverage in emerging markets and a number of countries with deteriorated corporate financial fragility indicators (Altman’s Z-score). Firm size plays a critical role in the relationship between leverage, firm fragility, and exchange rate movements in emerging markets. While the relationship between firm leverage and distress scores varies over time, the relationship between firm size and corporate vulnerability is relatively time invariant. All else being equal, large firms in emerging markets are more financially vulnerable and also systemically important. Consistent with the granular origins of aggregate fluctuations in Gabaix (2011), idiosyncratic shocks to the sales growth of large firms are positively and significantly correlated with GDP growth in our emerging markets sample. Relatedly, the negative impact of exchange rate shocks has a more acute impact on the sales growth of the more highly levered large firms.Publication The Real Exchange Rate, Innovation and Productivity(Oxford Academic, 2023-04) Alfaro, Laura; Cuñat, Alejandro; Fadinger, Harald; Liu, Yan-PingWe build a dynamic heterogeneous-firm model in which real depreciations raise export demand and the cost of importing intermediates, and also affect borrowing constraints and the profitability of engaging in research and development (R&D). A number of stylized facts on manufacturing firms for a large set of countries discipline our estimation: Firms in emerging East Asia are very export oriented and rely little on imported intermediates, whereas the opposite holds for Latin America and Eastern Europe; firms from industrialized countries export as much as they import. Exporters experience an increase in cash flow, R&D, and productivity growth in response to real exchange rate (RER) depreciations; importers experience the opposite outcomes. In counterfactual simulations of temporary RER movements, the effects on innovation and productivity growth are heterogeneous across regions, sizeable and persistent. In emerging Asia, real depreciations are associated with higher probabilities to engage in R&D, faster growth of average firm-level productivity and cash flow, and higher export entry rates; we find negative average effects on these outcomes for firms in other emerging economies, and no significant average effects for firms in industrialized economies.Publication On the Direct and Indirect Real Effects of Credit Supply Shocks(Elsevier BV, 2021-03) Alfaro, Laura; García-Santana, Manuel; Moral-Benito, EnriqueWe explore the real effects of bank-lending shocks and how they permeate the economy through buyer-supplier linkages. We combine administrative data on all Spanish firms with a matched bank-firm-loan dataset of all corporate loans from 2003 to 2013 to estimate firm-specific credit supply shocks for each year. We compute firm-specific measures of exposure to bank lending shocks of customers (upstream propagation) and suppliers (downstream propagation). Our findings suggest that credit supply shocks have sizable direct and downstream propagation effects on employment, investment, and output, especially during the 2008-2009 crisis, but no significant impact on employment during the expansion. We provide evidence that both trade credit extended by suppliers and price adjustments in general equilibrium explain downstream propagation of credit shocks.Publication Sovereign Debt Restructuring: Evaluating the Impact of the Argentina Ruling(2015-02-19) Alfaro, LauraRecent rulings in the ongoing litigation over the pari passu clause in Argentinian sovereign debt instruments have generated considerable controversy. Some official-sector participants and academic articles have suggested that the rulings will disrupt or impede future sovereign debt restructurings by encouraging holdout creditors to litigate for full payment instead of participating in negotiated exchange offers. This paper critically examines this claim and argues that the incentives for holdout litigation are limited because of (1) significant constraints on creditor litigation, (2) substantial economic and reputational costs associated with such litigation, and (3) the availability of contractual provisions and negotiating strategies that mitigate the debtor's collective action problems. It also argues that the fact-specific equitable remedy in the Argentina case was narrowly tailored to Argentina's unprecedented disregard for court opinions and for international norms of negotiating sovereign debt restructurings and is therefore unlikely to be used in future debt restructurings.Publication Foreign Direct Investment: Effects, Complementarities, and Promotion(2014-11-06) Alfaro, LauraIn 1996, Intel Corporation announced the construction of a semiconductor assembly plant in Costa Rica. Production started in 1998. Intel’s investment was six times what had been the annual foreign direct investment (FDI) in this Central American country of 3.5 million people (see Spar, 1998) and it marked the expansion of FDI in electronics, medical devices, and business services by companies such as Boston Scientific, Hewlett Packard, IBM, and Procter & Gamble. But Intel’s investment in Costa Rica was also emblematic of the desire of Central American countries to move away from textile and clothing manufacturing into higher-end manufacturing and services, in hopes of boosting development efforts by promoting technology upgrades, knowledge spillovers, and linkages of foreign with domestic firms. In 2014, the company announced the restructuring of the facilities. Intel’s Global Services Center as well as the company’s Engineering and Design Center will remain in their current location in Costa Rica. These operations will gain relevance in Research & Development related activities. As part of its global strategy, the company will relocate its assembly and test operation to Asia, where these activities will be concentrated. Headcount for R&D services operations currently reaches 1200 people and new positions were recently been announced.Publication The Real Effects of Capital Controls: Financial Constraints, Exporters, and Firm Investment(2014-11-06) Alfaro, Laura; Chari, Anusha; Kanczuk, FabioIn aftermath of the global financial crisis of 2008–2009, emerging-market governments have increasingly restricted foreign capital inflows. The data show a statistically significant drop in cumulative abnormal returns for Brazilian firms following capital control announcements. Large firms and the largest exporting firms appear less negatively affected compared to external-finance- dependent firms, and capital controls on equity have a more negative announcement effect than those on debt. Real investment falls following the controls. Overall, the results suggest that capital controls segment international financial markets, increase the cost of capital, reduce the availability of external finance, and lower firm-level investment.Publication Do Prices Determine Vertical Integration?(Oxford University Press (OUP), 2015-12-01) Alfaro, Laura; Conconi, Paola; Fadinger, Harald; Newman, Andrew F.What is the relationship between product prices and vertical integration? While the literature has focused on how integration affects prices, this paper provides evidence that prices can affect integration. Many theories in organizational economics and industrial organization posit that integration, while costly, increases productivity. It follows from firms' maximizing behavior that higher prices induce more integration. The reason is that at low prices, increases in revenue resulting from enhanced productivity are too small to justify the cost, whereas at high prices the revenue benefit exceeds the cost. Trade policy provides a source of exogenous price variation to assess the validity of this prediction: higher tariffs should lead to higher prices and therefore to more integration. We construct firm level indices of vertical integration for a large set of countries and industries and exploit cross-section and time-series variation in import tariffs to examine their impact on firm boundaries. Our empirical results provide strong support for the view that output prices are a key determinant of vertical integration.Publication Surviving the Global Financial Crisis: Foreign Ownership and Establishment Performance(American Economic Association, 2012) Alfaro, Laura; Chen, MaggieWe examine the differential response of establishments to the recent global financial crisis with particular emphasis on the role of foreign ownership. Using a worldwide establishment panel dataset, we investigate how multinational subsidiaries around the world responded to the crisis relative to local establishments. We find that first, multinational subsidiaries fared on average better than local counterfactuals with similar economic characteristics. Second, among multinational subsidiaries, establishments sharing stronger vertical production and financial linkages with parents exhibited greater resilience. Finally, in contrast to the crisis period, the effect of foreign ownership and linkages on establishment performance was insignificant in non-crisis years.Publication The Global Agglomeration of Multinational Firms(Elsevier, 2014) Alfaro, Laura; Chen, Maggie XiaoyangThe explosion of multinational activities in recent decades is rapidly transforming the global landscape of industrial production. But are the emerging clusters of multinational production the rule or the exception? What drives the offshore agglomeration of multinational firms in comparison to the agglomeration of domestic firms? Using a unique worldwide plant-level dataset that reports detailed location, ownership, and operation information for plants in over 100 countries, we construct a spatially continuous index of pairwise-industry agglomeration and investigate the patterns and determinants underlying the global economic geography of multinational firms. Our analysis presents new stylized facts that suggest the emerging offshore clusters of multinationals are not a simple reflection of domestic industrial clusters. Agglomeration economies including capital-good market externality and technology diffusion play a more important role in the offshore agglomeration of multinationals than the agglomeration of domestic firms. These findings remain robust when we address potential reverse causality by exploring the regional pattern and process of agglomeration.