OxTalks will soon move to the new Halo platform and will become 'Oxford Events.' There will be a need for an OxTalks freeze. This was previously planned for Friday 14th November – a new date will be shared as soon as it is available (full details will be available on the Staff Gateway).
In the meantime, the OxTalks site will remain active and events will continue to be published.
If staff have any questions about the Oxford Events launch, please contact halo@digital.ox.ac.uk
Most of the world’s firms are small, particularly in poor economies. We argue that the existence of indivisibilities of inputs is a key driver of capacity underutilisation in small firms, leading to the endogenous emergence of slack. We present a monopoly model of capacity choice in which one of the inputs is subject to an integer constraint and show how pricing, input choices and investment are non-trivial functions of firm size, with important implications for aggregate economic outcomes in spatial general equilibrium. We validate the model using experimental field data from a large-scale clustered cash transfer RCT in Western Kenya. Building on novel measures of capacity utilisation, we uncover four moments: (1) Slack is larger in small firms, (2) supply curves are highly elastic, particularly where utilization is low, (3) aggregate inflation in response to the fiscal shock is low, (4) there exists some inflation in high-utilisation regions. Our findings can rationalise large multipliers in poor economies.
