I am an Assistant Professor of Finance at University of Maryland's Robert H. Smith School of Business. Welcome to my research webpage!

I do research in (International) Macroeconomics and Finance, with a secondary interest in Industrial Organization.

bpellegr [at]

+1 (312) 257-8888

RESEARCH (Working Papers)

Product Differentiation and Oligopoly: a Network Approach

  • European Economic Association (EEA) - Best Job Market Paper Award (2019)

  • UCLA - Xavier Drèze Prize, for Outstanding Research Paper (2020)

  • Unicredit Foundation Job Market Bootcamp - Best Presentation Award (2019)

Abstract: Industry concentration and corporate profit rates have increased, in the United States, over the past two decades. This paper investigates the welfare implications of economic activity concentrating within a few firms that hold market power. I develop a general equilibrium model that features granular firms that compete in a network game of oligopoly, alongside a competitive fringe of atomistic firms with endogenous entry. To capture the degree of product differentiation among the oligopolists, I introduce a Generalized Hedonic-Linear (GHL) demand system. I show how to identify this demand system using a publicly-available dataset that measures product similarity among all public corporations in the US. Using my model, I estimate a large deadweight loss from oligopolistic behavior, equal to 11% of the total surplus produced by public firms. This loss would increase to 20% if all these firms were allowed to collude. The distributional effects of oligopoly are quantitatively important as well: under perfect competition, consumer surplus would double with respect to the oligopolistic equilibrium. I also estimate that the deadweight loss has increased by at least 2.5 percentage points since 1997. The share of surplus that accrues to producers as profits also has increased. Finally, I show how the dramatic rise in startups' proclivity to sell off to incumbents (rather than go public) may have contributed to these trends.

Graphs: [Figure 3] — Press Coverage: [Pro-Market @Stigler Center]

Presentations: NBER Mega-Firms Conference, Society for Economic Dynamics 2021 (scheduled), American Economic Association, NBER Summer Institute, Econometric Society World Congress [video], University of Maryland Smith, University of Cambridge, Northwestern Kellogg (Finance), Northwestern Kellogg (MEDS), University of Southern California (Economics Dept.), Texas A&M Mays, Bank of Italy, Stockholm IIES, Einaudi Institute for Economics and Finance (EIEF), EPFL-Swiss Finance Institute, Bocconi University, UCLA, Finance Organizations and Markets (FOM), European Economic Association

*This paper has previously been circulated with the title "Product Differentiation, Oligopoly and Resource Allocation"

Barriers to Global Capital Allocation (NEW!)

Bruno Pellegrino, Enrico Spolaore and Romain Wacziarg

Abstract: We quantify the aggregate impact of barriers to international investment, using a novel multi-country overlapping generations model with heterogeneous investors and imperfect capital mobility. Our model yields a gravity equation for foreign asset demand, which we estimate using recently-developed foreign investment data that has been restated to account for the presence of offshore investment and financing vehicles. We show that a parsimonious implementation of the model, with four barriers (capital controls, geographic distance, institutional distance and cultural distance) can account for a large share of the observed variation in bilateral Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) positions. Our model predicts a significant home bias and higher rates of return on capital in emerging markets. In our benchmark calibration, we estimate that capital misallocation induced by these barriers reduces World GDP by 8.8%, compared to a situation without barriers. We also find that barriers to global capital allocation contribute significantly to cross-country inequality: the standard deviation of log capital per employee is 70% higher than it would be in a world without barriers to international investment, while the dispersion in output per employee is 39% higher.

Presentations: Yale Junior Finance Conference (scheduled), UT Austin McCombs (Scheduled), FIW Conference, ASSA 2021 (Video stream by Virtual International Trade & Macro Seminar), UCLA, University of Maryland Smith

Measuring The Cost of Red Tape: a Survey Data Approach (NEW!)

Bruno Pellegrino and Geoffery Zheng

Abstract: Identifying and measuring distortions to firms' investment is a major research question in economics and finance. In this paper, we make two contributions. The first is methodological: we introduce a novel framework that leverages enterprise survey data to quantify the distortionary impact of specific distortions. The second contribution that we make is to apply our method to estimate the aggregate GDP loss induced by the distortionary impact of red tape, across eighty-five countries. Our estimates are based on a dynamic general equilibrium model with heterogenous firms whose capital investment decisions are distorted by red tape. Our survey-based method leverages enterprise survey micro-data to calibrate the model. Our key methodological innovation is to explicitly model the firms' decisions to report the investment distortions induced by red tape in the survey. We find that the average cost of red tape varies widely across the countries in our dataset, with an average is 1.8 to 2.1% of GDP and a total of 1.56 trillion dollars. Our framework opens up a new range of applications of enterprise survey data in calibrating macroeconomic models with firm-level frictions.

Presentations: UChicago Booth, CSEF-DISES (scheduled), London Business School (TADC), UCLA, Econometric Society Asia Meetings, Econometric Society European Meetings, ESCOE Economic Measurement Conference, UCLA-UCBerkeley Political Economy Workshop

*This paper has previously been circulated with the title "What is the Cost of Misallocation?"

Diagnosing the Italian Disease

Bruno Pellegrino and Luigi Zingales

Abstract: Italy’s aggregate productivity abruptly stopped growing in the mid-1990s. This stop represents a puzzle, as it occurred at a time of stable macroeconomic conditions. In this paper, we investigate the possible causes of this “disease” by using sector and firm-level data. We find that Italy’s productivity disease was most likely caused by the inability of Italian firms to take full advantage of the ICT revolution. While many institutional features can account for this failure, a prominent one is the lack of meritocracy in the selection and rewarding of managers. Unfortunately, we also find that the prevalence of loyalty-based management in Italy is not simply the result of a failure to adjust, but an optimal response to the Italian institutional environment. Italy’s case suggests that familism and cronyism can be serious impediments to economic development even for a highly industrialized nation.

Non-technical summaries: [VoxEU] [Pro-Market] - Wikipedia Entry: [Economic history of Italy] Press Coverage: [Bloomberg] [Washington Post] [Project Syndicate] [II Sole 24 Ore] [Barron's] [Corriere della Sera] [LaRepubblica] [Frankfurter Allgemeine]

Presentations: American Economic Association, European Economic Association, UCLA Anderson-UCBerkeley Haas Political Economy Workshop, UCLA (Econ Dept.)