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I am a Researcher in the Center for Business and Productivity Dynamics at the Halle Institute for Economic Research (IWH) and an Assistant Professor in Macroeconomics and Productivity Dynamics at the Friedrich Schiller University Jena.
My research examines how market power shapes innovation, inequality, and resource allocation at the aggregate level, combining microdata analysis with heterogeneous agent models to capture the interactions between market structures and macroeconomic outcomes.
I hold a PhD in Economics from Fordham University. For more information, please see my CV.
E-mail: pedro.armada@iwh-halle.de.
Research
Financial Frictions, Market Power, and Innovation
Abstract:
This paper investigates how financial frictions and market power interact in shaping firms' incentives to innovate. I document stylized facts about innovation using a comprehensive firm-level dataset from Portugal, a country with relatively underdeveloped financial markets. Motivated by the empirical evidence, I augment a general equilibrium framework of heterogeneous producers with imperfect competition and innovative technology. Since innovation is costly, a firm's ability to exercise market power determines how quickly it can overcome financial constraints and engage in innovation. Improving financial markets allows firms to expand and innovate, whereas intensifying competition may come at the cost of lower innovation if borrowing constraints are sufficiently severe. These findings underscore the importance of tailoring a country's competition policy to its level of financial development.
Working Paper
Market Power and Wealth Inequality
Abstract:
Since the 1980s, the U.S. economy has experienced a sharp increase in both market concentration and markups, alongside a rise in wealth concentration. This paper develops a general equilibrium model of entrepreneurial choice with imperfect competition between firms to quantify the aggregate and distributional impacts of rising market power. I find that changes in the economy's market structure between 1989 and 2016 are associated with significant macroeconomic costs, including declines of 5% in output, 9% in employment, and 18% in investment. On the distributional side, the shift in market structure accounts for up to 18% of the observed rise in income inequality and up to 28% of the rise in wealth inequality. The model predicts a modest decline in the labor income share and little change in the overall wealth share held by entrepreneurs, suggesting that most of the rise in inequality reflects a reallocation of gains among entrepreneurs.
Working Paper
Between Sector Misallocation
Abstract:
Structural change typically triggers shifts in sectoral composition with lasting effects on aggregate productivity, yet the underlying drivers can vary significantly across episodes, leading to different policy prescriptions. This paper develops a unified framework to quantify the contribution of sector-specific frictions in explaining sectoral reallocation and its macroeconomic implications. The model features rich heterogeneity at both the firm and sector levels, including differences in production technologies, competitive environments, risk exposure, and financial frictions. I apply the framework to Spain over the period 1992-2008, when capital inflows and falling interest rates following European integration coincided with a shift from tradable to nontradable sectors and a decline in total factor productivity. Using a simulated method of moments, I find that capital frictions--specifically, capital adjustment and sectoral mobility costs, estimated to be about 50% higher in the tradable sector--played a central role in the observed dynamics, highlighting the importance of policies aimed at easing capital frictions in order to improve allocative efficiency.
Working Paper
Teaching
Friedrich Schiller University Jena
Assistant Professor
- Computational Methods for Economists (Winter 2025)
Fordham University
Teaching Fellow
- Principles of Macroeconomics (Fall 2021, Spring 2022, Fall 2022, Spring 2023, Fall 2024, Spring 2025)
- Principles of Microeconomics (Fall 2020, Spring 2021, Fall 2021)
Graduate Assistant
- Teaching Assistant for Microeconomic Theory II (Spring 2020)
- Tutor for Principles of Microeconomics, Principles of Macroeconomics, Statistics 1, Statistical Decision Making and Math for Economists (Fall 2019)
University of Minho
Assistant Lecturer
- Topics in Financial Economics (Fall 2017) – Master’s Program in Monetary, Banking and Financial Economics