Yoshiki Ando
Welcome!
I am a PhD candidate in Economics at the University of Pennsylvania.
My research interests are in macroeconomics, focusing on innovation, firm dynamics, and heterogeneous-agent models with financial frictions.
My job market paper studies the role that venture capital plays in helping promising startups achieve high growth.
Working Papers
Abstract: I examine the role that venture capital (VC) plays in helping promising startups achieve high growth. Three facts are documented from administrative US Census data and proprietary VC datasets. First, VC-backed firms achieve substantial growth in employment and payroll compared to non-VC-backed firms. Although only around 0.2% of all firms in the US raise VC financing, VC-backed firms account for 10.6% and 15.8% of aggregate growth in employment and payroll, respectively. Second, VC-backed firms typically raise funding more than 10 times their revenue at age 0, while Angel-backed firms raise around 3.4 times their revenue. Third, venture capitalists acquire around 3.3% extra equity stakes relative to Angel investors. Based on the evidence, I develop a firm dynamics model with endogenous firm productivity and choice of financing from VC, Angel (non-VC-equity) investors, and banks. Venture capitalists provide equity-based funding and managerial advice, but they are in limited supply. The model shows the benefit of VC and Angel financing over bank financing for high-potential firms because of their large investment in innovation, which creates a debt repayment issue with bank financing when innovation is unsuccessful. VC-backed firms achieve substantial growth as a result of endogenous sorting, equity-based funding, and managerial advice. The calibrated model implies that venture capitalists' advice accounts for around 24% of the growth of VC-backed firms. Finally, policy experiments predict that subsidies to innovation expenditures or equity investments enhance aggregate output and consumption in the steady state in contrast to bank loan subsidies.
Abstract: In this paper, we study the neoclassical growth model with idiosyncratic income risk and aggregate risk in which risk sharing is endogenously constrained by one-sided limited commitment. Households can trade a full set of contingent claims that pay off depending on both idiosyncratic and aggregate risk, but limited commitment rules out that households sell these assets short. The model results, under suitable restrictions of the parameters of the model, in partial consumption insurance in equilibrium. With log-utility and idiosyncratic income shocks taking two values, one of which is zero (e.g., employment and unemployment), we show that the equilibrium can be characterized in closed form, despite the fact that it features a non-degenerate consumption and wealth distribution. We use the tractability of the model to study, analytically, inequality over the business cycle and asset pricing, and derive conditions under which our model has identical, as well as conditions under which it has lower/higher risk premia than the corresponding representative agent version of the model.
Work in Progress
"Technifying Ventures"
(with Emin Dinlersoz, Jeremy Greenwood, and Ruben Piazzesi)
The role that venture capital plays in stimulating startups that adopt advanced technologies, such as artificial intelligence and robotics, is examined. Using the Census Bureau's 2018 Annual Business Survey, the relationship between technology adoption, VC-backed status, and firm performance is investigated. There is a disproportionate presence of advanced technology among VC-backed firms. Additionally, among startups that adopt advanced technologies, VC-backed firms outperform non-VC-backed ones, measured in terms of employment and revenue. A general equilibrium model is developed of advanced technology usage and VC finance. Consistent with the data, the model predicts that firms adopting advanced technologies are more likely to raise VC finance. The ex post productivity distribution of advanced technology firms stochastically dominates the productivity distribution of non-advanced technology firms. Additionally, the ex post productivity distribution of VC-backed firms stochastically dominates the productivity distribution of non-VC-backed firms due to both selection and synergy effects.