Research
Working Papers
Entry, Exit, and Capital Choice: How Collateral Constraints Shape Firm Dynamics
Abstract
The entry/exit model with a new-vs-used Capital margin shows that tighter collateral limits and higher entry costs push entrants toward used equipment, compress startup scale, raise early exit, and reduce TFP. I develop a heterogeneous-firm model with entry, exit, and an explicit choice between new and used capital Two frictions—collateral limits and entry costs—govern market access, startup scale, vintage at birth, leverage, and survival. The used stock evolves realistically: each period, some new capital transitions into the used pool, and some used equipment retires. I solve and simulate the model in MATLAB (collocation plus large-panel simulations) and build calibration targets in Stata from Vietnam’s 2005–2015 manufacturing data, including the used-investment share, debt-to-GDP, output volatility, and short- to medium-run persistence. The framework quantifies how tighter finance and higher entry fees push marginal entrants toward cheaper used capital and smaller initial scale, increasing early-life exit and lowering TFP through composition and scale distortions.Heterogeneous Firms, Collateral Constraints, and Used Capital: A General Equilibrium Analysis of Capital Misallocation
Abstract
A general equilibrium model shows that access to used capital reduces misallocation by relaxing collateral constraints, improving capital allocation, and productivity. Firm-level evidence confirms that financially constrained firms make greater use of used capital. This study examines how used capital helps reduce the productivity losses created by financial frictions in developing economies. Drawing on Vietnamese manufacturing data, it develops a general equilibrium model in which heterogeneous firms rent both new and used capital while facing collateral constraints. Because used capital is cheaper to rent and requires less collateral, constrained firms can operate closer to their efficient scale, which improves aggregate efficiency. The model shows that when used capital is available, misallocation losses are markedly lower than in an economy restricted to new capital. Firm-level evidence further confirms that financially constrained firms rely more heavily on used capital, in line with the theoretical predictions. Together, these findings suggest that secondary markets for used capital serve as a key channel for relaxing borrowing constraints and enhancing resource allocation in economies with underdeveloped financial systems.Shadow Cost of Funds, Collateral Constraints, and Used Capital: A Model of Capital Misallocation
Abstract
Firms can choose new vs. used capital. The lower purchase price of used capital relaxes financing for constrained firms, letting them scale earlier with more self-financing, improve short-run survival, and reduce the mass of chronically small firms. This shifts the vintage mix and aggregate misallocation. This paper builds a firm-dynamics model without an entry margin. Firms face a collateral-style affordability cap and a shadow cost of funds that captures financing tightness. The key feature is a vintage choice between new and used capital, treated as two distinct goods: a unit bought as new remains new, and a unit bought as used remains used. There is no conversion from new to used and no additional within-type quality downgrading beyond standard (type-specific) depreciation. Mechanism: Because used capital has a lower upfront price, constrained firms can expand capacity sooner with less external finance, while self-financing builds assets. Large, unconstrained firms change their vintage mix little.Publication
Master Project: Geoeconomics of Global Energy Transformation: Oil Prices, Polyethylene Costs, and Shale Gas in the U.S.
Published August 2022 —
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Research Experience
Research Assistant
- York University(2023 – Present) — Supervisors: Tasso Adamopoulos and Chaoran Chen
- Electricity Industry Project (2021) — Supervisor: Jeremy Lin
- University of Tehran (2018) — Supervisor: Farkhondeh Jabal Ameli