Essays on Macroeconomics

Economists have thought very deeply about why productivity varies across firms and across countries. Complementary to this are the industry projects published by consultancy firms which identify several frictions faced by firms in developing countries. These frictions generate misallocation, as resources (like capital, labor) are not directed to the most productive firms of the economy. In my dissertation, I focus on analyzing the adverse effects of capital, labor market and behavioral frictions on firm/entrepreneurial growth and welfare. I use both a quantitative model-based approach and firm-level data from a large, developing country to understand this theory deeper. Through my research, I show that corporate diversification strategies, overborrowing are adequate mechanisms to reduce the effect of these frictions.