Thibault FALLY

Updated March 2009

Assistant Professor at the University of Colorado-Boulder starting August 2009

PhD candidate in Economics at EHESS and Paris School of Economics (PSE), under the supervision of Thierry Verdier

CV   

Research Interests
Primary field: International Economics, Economic Growth
Secondary field: Development Economics

Job Market Paper

Global Sourcing under Imperfect Capital Markets
with Juan Carluccio (October 2008)

We develop a simple model to study the interactions between a supplier's financial constraints and contract incompleteness in a vertical relationship. Production complexity increases the extent of contract incompleteness and the hold-up problem, which generates a cost when the supplier needs financial participation from the downstream firm. Vertical integration alleviates the impact of financial constraints but reduces the supplier's incentives. We apply the model to an analysis of multinational firms' sourcing strategies and predict that (1) complex and specific inputs are more likely to be sourced from financially developed countries and (2) multinationals are more likely to integrate suppliers located in countries with poor financial institutions, especially when trade involves complex goods. We examine and validate these predictions using firm-level trade data on multinational firms with operations in France. We provide evidence that financial development generates a comparative advantage in the supply of complex goods. Moreover, we find higher shares of intra-firm imports of complex inputs from countries with a lower level of financial development. The findings are robust to different measures of complexity and specificity, and are not driven by industry differences in fixed costs or traditional measures of external financial dependence. Quantitatively, we find that financial development is as important as contract enforcement in alleviating hold-up problems.

Publication

Credit Constraints as a Barrier to the Entry and Post-Entry Growth of Firms
with Philippe Aghion and Stefano Scarpetta
Economic Policy vol. 52 (October 2007)
Latest working paper version (December 2007)

Advanced market economies are characterized by a continuous process of creative destruction. Market forces and technological developments play a major role in shaping this process, but institutional and policy settings also influence firms' decision to enter, to expand if successful and to exit if competition becomes unbearable. In this paper, we focus on the effects of financial development on the entry of new firms and the expansion of successful new businesses. Drawing from harmonized firm-level data for 16 industrialized and emerging economies, we find that access to finance matters most for the entry of small firms and in sectors that are more dependent upon external finance. This finding is robust to controlling for other potential entry barriers (labor market regulations and entry regulations). On the other hand, financial development has either no effect or a negative effect on entry by large firms. Access to finance also helps new firms expand if successful. Both private credit and stock market capitalization are important for promoting entry and post entry growth of firms. Altogether, these results suggest that, despite significant progress over the past decade, many countries, including those in Continental Europe, should improve their financial markets so as to get the most out of creative destruction, by encouraging the entry of new (especially small) firms and the post-entry growth of successful young businesses.

Working Papers

Economic Geography and Wages in Brazil: Evidence from Micro-Data
with Rodrigo Paillacar and Cristina Terra (June 2008)
Under (second) revision, Journal of Development Economics

This paper estimates the impact of market and supplier access on wage disparities across Brazilian states, incorporating the control of individual characteristics to the new economic geography methodology. We estimate market and supplier access disaggregated by industry, and we compute separately access to international and internal markets. We find a strong correlation between market access and wages differentials, even after controlling for individual characteristics, firm productivity, the source of market access (international, national or local), and using instrumental variables. Furthermore, market access turns out to be more important than supplier access.

Multinationals, Technological Incompatibilities and Spillovers
with Juan Carluccio (June 2008)
Submitted

Empirical studies provide evidence of positive spillovers from multinational firms to upstream suppliers coupled with negative spillovers to firms in the same industry. This paper shows that these empirical regularities can be rationalized in a model with incompatibilities between foreign and domestic technologies. When foreign technologies require specialized inputs, some local suppliers self-select into production for multinational firms. This "technological segmentation" in the upstream industry magnifies the productivity advantage of multinationals by restricting backward and forward linkages to groups of firms using the same technology. In this setting we study the role of heterogeneity among domestic firms. We show that only the best suppliers adopt the foreign technology and cater to multinationals. In the long run, technology adoption by the most productive downstream firms creates complementarities with multinationals that can offset the negative impact of segmentation.

Unequal Exchange within Countries - An Analysis of Firm-level Productivity Differences in Indonesia, Morocco and France
with Daniel Cohen and Cécile Valadier (July 2006)

In Favor of a Fund to Stabilize Commodity Exporters' Income
with Daniel Cohen and Sébastien Villemot (March 2006)
CEPR Discussion Paper no. 5550

Contact
Bureau A 113
Tél. : + 33 (0)1 43 13 63 11
Email : fally "at" pse.ens.fr