Working-papers | Alejandro Rojas Bernal

Inequality and Misallocation under Production Networks - New Draft (December 2025)

This paper examines the equity–efficiency tradeoff by showing that changes in the joint distributions of factor income and household expenditure influence aggregate productivity (TFP). I develop a general equilibrium aggregation and incidence theory for a distorted production network economy with heterogeneous households, deriving a sufficient-statistic decomposition of TFP. I define and decompose the positional terms of trade (PTT) — a household-specific efficiency wedge that maps shocks into real-consumption incidence. The model ranks factors, households, and firms by distortion, expenditure, and revenue centralities, showing that changes in who earns and who spends are generically non-neutral. Allocative efficiency rises when factor income shifts from high to low distortion centrality factors and when demand reallocates from high to low expenditure centrality households or revenue centrality firms, thereby alleviating bottlenecks. Benchmarking against a constrained social planner allocation that internalizes reallocation externalities, I show that decentralization lacks the planner’s balancing property and generates first-order externalities for aggregate efficiency and welfare. Estimating the model on U.S. data (1997–2021), I find that changes in the income distribution explain approximately 20% of TFP variation. Finally, budget-neutral, progressive lump-sum transfers targeted by expenditure centrality raise aggregate TFP and improve the PTTs of lower- and middle-income households, aligning efficiency gains with favorable equity outcomes.

2023
North American Summer Meeting of the Econometric Society - Los Angeles, California
Asian Meeting of the Econometric Society - Singapore
Australasia Meeting of the Econometric Society - Sydney, NSW
Canadian Economic Association Conference - Winnipeg, Manitoba
Lacea Lames 2023 - Bogota, Colombia
Universidad del Rosario - Bogota, Colombia
Labor, Firms, and Macro Reading Group - Online
Banco de La Republica - Bogota, Colombia
2024
ASSA 2024 - San Antonio, Texas
University of Hawai’i at Manoa
Universidad Diego Portales - Online
Bank of Canada - Ottawa, Canada
Tecnologico de Monterrey - Online
Fundacao Getulio Vargas - Sao Paulo, Brazil
Tilburg University - Tilburg, Netherlands
2025
Midwest Macro Meeting - Federal Reserve Bank of Kansas
ECINEQ 2025 - Society for the Study of Economic Inequality - World Bank, Washington D.C.
2025 World Congress of the Econometric Society - Seoul, Korea
10th Annual International Conference in Hawaiʻi - Navigating Global Challenges
2026
University of Hawai’i at Manoa - Math Department

Alejandro Rojas-Bernal

Last updated on Jan 21, 2026

The Labor Share in a Production Network Economy

In this paper, I provide the first nonparametric decomposition for the variations in the labor share for a production network economy with distortions. This decomposition uncovers the firm-level granular sources of variations for the labor share and segments them in supply and demand shocks. The firms’ share of revenue that reaches directly or indirectly labor compensation, or payment centralities, act as sufficient statistics that measure the strength of the response of the aggregate labor share to specific supply and demand shocks at the firm level. Using the input-output tables for the United States, I estimate sectoral payment centralities, showing that they are positively correlated with sectoral markdowns, negatively correlated with sectoral intermediate input intensity, and have fallen over the last two decades. Variations in sectoral payment centralities explain 99.1% of the labor share volatility, and stronger sectoral distortions in a handful of industries (e.g., credit intermediation and computers and electronics) drove the reductions in the labor share in the United States over the XXIst century.

Alejandro Rojas-Bernal

Last updated on Jun 15, 2024

International Misallocation and Comovement under Production Networks

In this paper, I develop a general aggregation theory that explains the role of production networks in country-level TFP. This theory applies to a distorted production network open economy with endogenous factor supply. My main contribution is to provide decompositions for the country-level TFP variation that account for the possibility that factors of production and dividends cross national boundaries. The country-level TFP depends on sufficient statistics that characterize the effect on domestic real GDP from (i) firm-level productivity and markdown shocks in domestic and foreign firms and (ii) variations in the global income distribution. These decompositions do not require quantity measures of variations, facilitating their empirical implementation, as price data is no longer necessary. Additionally, for an efficient economy, a Hulten type of decomposition exists for each country, and the global sales distribution is a sufficient statistic to characterize the first-order propagation of global shocks on country-level TFP. These results support a theory of economic spillovers and contagion through industrial networks, corroborating the essential role of global value chains in creating strong complementarities and commonalities in business cycles across countries.

2024
Hawaii-Hitotsubashi-Keio (H2K) Workshop on International Economics
2025
Western Economic Association 100th Annual Conference - San Francisco, California

Alejandro Rojas-Bernal

Last updated on Nov 26, 2025

Growth Through Industrial Linkages

In this paper, we estimate how changes in the structure of global input-output networks have influenced growth. Using an open economy production network model, we identify sufficient statistics that characterize how productivity shocks across domestic and foreign firms influence country-level TFP. We estimate these sufficient statistics using data on input-output networks and sectoral productivity shocks. Structural changes in global input-output networks between 1965 and 2000 were advantageous for developing countries and unfavorable for advanced economies. Holding the global input-output network fixed, TFP growth in China and India would have been 26.6% and 9.7% lower between 1965 and 2000. Whereas for the US and Australia, TFP growth would have been 4.0% and 16.8% higher. Finally, we show that the dynamics of the domestic intermediate input cost share capture the importance that the structure of the global input-output network has on the amplification of shocks on TFP. Our analysis illustrates the importance of industrial linkages and robust domestic intermediate input markets for economic growth.

Alejandro Rojas-Bernal, Xiaojun Guan

Last updated on Nov 27, 2023

Nonlinearities in Production Network Economies with Distortions

We offer the first non-linear analysis of how microeconomic disruptions in an inefficient production network economy impact aggregate TFP. Our decompositions, applicable to any general equilibrium economy, provide non-parametric insights. We identify essential general equilibrium metrics for capturing the non-linear repercussions of microeconomic fluctuations through network connections. Our findings encompass firm-level productivity shocks, wasted distortions, and rebated distortions. We reveal that substantial shocks or high production process complementarity/substitution introduce substantial bias in the linear approximation of distortions and productivity shocks found in the literature. Our non-linear second-order effects substantially mitigate this bias.

2025
32nd Annual Symposium of the Society for Nonlinear Dynamics and Econometrics - San Antonio, Texas

Alejandro Rojas-Bernal, Ali Karimirad

Last updated on Nov 26, 2025

Stairway To Haven

This paper attempts to identify the main channels for the propagation of the macroeconomic effects from corporate profit shifting into tax havens. This question is answered by building a general equilibrium model that introduces firm profit shifting to tax havens in a multi-country environment with production networks. In this model, haven jurisdictions specialize and compete for shifted profits by trading concealment assets in a differentiated oligopolistic environment, and non-haven countries defend these profits by setting enforcement levels over capital flows. The central point of the model is that profit shifting introduces two classes of optimal distortions, first, rebated distortions that by modifying the terms of trade and the effective marginal tax rate alter the decision of firms, but also wasted distortions that optimally squander resources via enforcement policies and the corporate costs that firms have to incur in order to access and develop concealment strategies. I show that the main transmission channels for the propagation of these distortions occurs by increasing corporate dividends, the tax base, and wages in tax havens; while non-haven countries are affected by opposite effects in addition to the wasted distortions. We confirm these results in a three country one sector global economy that additionally provides evidence about the relevance of the structure of the production network and the consumption bundle in the magnitude of the effect from introducing profit shifting.

Alejandro Rojas-Bernal

Last updated on Nov 27, 2023