| Summary: | The first chapter focuses on the role of government purchases in firm growth. New businesses are small because demand for its product is low, and demand is low because of reputational or other frictions. Can a demand shock lead firms to overcome those constraints and grow? I identify temporary and exogenous demand shocks in government purchases. Korean public procurement market has a unique auction mechanism where the allocation of contract is random. I find that being randomly allocated a short-term contract induces long-term changes in growth, especially among small, young, and financially constrained firms. I show that firms grow their private operations in response to the shock, not just to fulfill the public contract. I investigate three potential mechanisms behind the persistent growth: (i) building a customer base, (ii) overcoming financial constraints, and (iii) learning by doing. I argue that the first two mechanisms explain how public demand provides an opportunity to grow for young and productive but constrained entrepreneurs. I further find that the effect is higher during recessions, which justifies the need for fiscal expansion to encourage new entrepreneurs and stabilize the economy.
The second chapter is about cross-country productivity differences. The disparities in cross-country labor productivity are greater in agriculture than in other industries. I propose that the misallocation of female talent across sectors distorts productivity. I formalize the theory by using a general equilibrium Roy model with gender-specific frictions. If female workers experience higher frictions in non-agricultural sectors, then unproductive female workers will select into agricultural sector. From a sample of 69 countries, I find that low-income countries have higher frictions in non-agricultural industries. By setting frictions to US levels, agricultural labor productivity increases by 20.6 percent and GDP per capita increases by 6.0 percent, primarily in low-income countries.
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