Max Brès

Research

Future versus Today's Improvements: The Trade-off of Place-Based Policies (with Philipp Kircher and David Koll)

(working paper)

This paper provides causal evidence on the impact of subsidy re-allocation between high-technology sectors and low-skill sectors on local labor markets. We exploit a policy targeting under-performing employment areas, France’s Aides à Finalité Régionale, which relaxes rules governing the allocation of firm subsidies while keeping their level constant. In response, policy makers re-allocate subsidies away from research and development to mainly low-skilled manufacturing and service sectors. It triggers a persistent improvement of employment, mainly through increased low-skilled manufacturing employment and at the expense of R&D related occupations. In the long term, though, labor income and productivity decrease. Finally, at the individual level, workers employed in manufacturing at the time of the treatment benefit on average of 2% higher hourly wage even 10 years after the policy was lifted.

Aging Consumers, Market Structures and Growth (with Daniele Angelini)

(draft)

Abstract: Consumption behaviors differ across age categories. Hence, population aging changes the characteristics of demand, which, in turn, modifies the market structures and aggregate trends. In this paper, we analyze the effect of population aging on economic growth through its effect on competition in the goods market. We instrument changes in the age composition of demand with unpredicted foreign demographics shocks through the global value chain. We find that middle-aged consumers reduce competition relative to younger and older peers, materializing into a concomitant drop in average productivity. We rationalize our results in a general equilibrium heterogeneous agent model in which firms compete within and between varieties. While younger consumers increase competition between varieties due to a higher elasticity of substitution, older consumers increase competition within varieties thanks to a lower opportunity cost of time. A larger share of middle-aged consumers reallocates demand to the profit of less productive firms and reduces the overall incentive to post low prices and improve productivity. We estimate that this \textit{age demand} channel contributed to a reduction of the US GDP growth of 8.7% in the period 1995-2004 and an increase of 10.3% in the period 2005-2019.

Customer Loyalty and the Rise of Large Firms

(draft to come)

Abstract:  In this paper, I develop a model of multi-product firm dynamics with competitive search on goods market. With buyers subject to preference shocks, firms expand beyond their core product in order to attract and retain customers. The model provides micro-foundations to the existence of within-firm heterogeneity in terms of prices, sales and markups. In line with empirical evidence, I show that a firm does not exploit incumbent customers' loyalty by increasing markups over the growth path, but instead deepens buyer's loyalty with a larger range of products and, therefore, profits extracted from each buyer.  A drop in search costs pushes the largest firms to further expand their product range, increasing aggregate profits and reducing entry.

Leading Firms and the Future of Work (with Fabrizio Colella, Philipp Kircher, David Koll and Vinzenz Ziesemer)

(work in progress)

Estimating the Costs and Benefits of Price Search (with Lukas Nord)

(work in progress)