projects

I empirically study the trade-off between efficiency and foreclosure arising from vertical integration in the context of Monsanto's 2007 acquisition of Delta and Pine Land, the leading provider of genetically engineered (GE) cotton seeds in the United States. I leverage publicly available information to show that Monsanto increased the price of an essential genetic technology it licensed to downstream rival firms after the merger. Using farm survey data, I find that cotton farmers' seed costs increased by at least 30% relative to farmers growing crops unaffected by the merger. I argue that these facts are consistent with a rising rivals' costs strategy, given that these price effects are observed only in states where the vertically integrated firm's downstream affiliate had low pre-merger market shares. Finally, I show that the vertically integrated firm introduced products with higher yields relative to its competitors post-merger, a pattern consistent with merger induced efficiencies. I then develop and estimate a structural model to quantify the welfare impact of merger remedies put in place by the Department of Justice in 2007. I find that DOJ mandated divestitures increased consumer surplus by 0.5%.

Regulating technology prices can raise adoption yet deter innovation. In India, price controls on genetically engineered (GE) cotton seeds induced this trade-off. Leveraging the policy’s differential timing across states, we show that mandated price reductions accelerated adoption of GE seeds by farmers. Although seed supply kept pace, innovation stalled: fewer new varieties were introduced. Using newly assembled data from experimental field trials across India, we show that agronomic yields of new varieties fell in price-controlled states. To quantify the welfare implications of price and yield effects, we develop and estimate a structural model of demand and supply for seeds with endogenous product attributes. While the policy raised farmers’ surplus, especially among the poor, ignoring innovation responses in equilibrium vastly overstates their welfare gains. We use the estimated model to assess alternative policies that better balance adoption and innovation incentives. For a given public budget, incentives for seed developers tied to the productivity of new varieties achieve the highest welfare for farmers.

This paper adds to the ongoing debate on the effects of public funding programmes on business innovation. This policy instrument, based upon a simple but a robust rationale, has been applied in an almost homogeneous manner in different contexts, but evidence from such experiences shows heterogeneous effects. The main contribution of this paper is that it shows the limitations faced by public funding instruments in affecting a traditionally low innovative pattern. Using panel data techniques, we find heterogeneous effects of public funding on the innovation behaviour of Uruguayan firms between 2001 and 2015. Our results show that, after a strong public policy effort, the critical mass of innovative firms has hardly changed. Input additionality effects of public funding in private innovation investment are found, but only for innovation activities based on the acquisition of embodied knowledge. Moreover, we obtain some evidence of behavioural additionality in process and organizational innovation leading to higher productivity levels, but we find no effects on interaction for innovation.

This article studies the impact of entry regulation on the market structure of the retail sector. I show that a reform that increased the statutory cap on the number of pharmacies in Italian cities is not sufficient to remove the distortions brought about by entry regulation; the new cap becomes binding two semesters after the reform. I exploit variation in the reform’s intensity to provide suggestive evidence that regulation shielded incumbents from additional competitors. Using a structural model of entry, I find that full liberalization would increase the number of firms by 60% and increase the number of cities with more than one pharmacy by 130%. I assess the model’s predictive accuracy by comparing postreform outcomes with simulated ones to find that it correctly forecasts market structure in half of the cities affected by the reform.

This paper combines a spatial discontinuity design with differences-in-differences to evaluate the effects of a program which grants place-based subsidies to residential construction on the location of housing developments in Montevideo, the Uruguayan capital, using administrative municipal data over the period 2007-2015. The results reveal that the policy has a sizeable and statistically significant impact on the location of residential construction. Also, findings indicate that the policy increases the average size of residential projects. The policy's impact on the densification of the city, however, is heterogeneous. Finally, the evidence on spillovers on non-subsidized zones is mixed.