Publications
International Spillovers of Quality Regulations.
International Economic Review, 2024
with Ariel Weinberger
[Published Version] [CESifo] [Video (older version)]
International Economic Review, 2024
with Ariel Weinberger
[Published Version] [CESifo] [Video (older version)]
Oligopoly and Oligopsony in International Trade.
Canadian Journal of Economics, 2024; 57,401-429
with Vladimir Tyazhelnikov
[Published Version] [Replication Package]
Canadian Journal of Economics, 2024; 57,401-429
with Vladimir Tyazhelnikov
[Published Version] [Replication Package]
Pricing in Firm-to-Firm Trade. Evidence from a Danish Multinational.
Review of World Economics, 2024; 160, 311-375
with Elena Mattana
[Published Version] [Online Appendix]
Review of World Economics, 2024; 160, 311-375
with Elena Mattana
[Published Version] [Online Appendix]
Large Multiproduct Exporters Across Rich and Poor Countries: Theory and Evidence.
Journal of Development Economics, 2022; 156, 10283
[Published Version] [Online Appendix]
Journal of Development Economics, 2022; 156, 10283
[Published Version] [Online Appendix]
Asymmetric Information, Quality, and Regulations.
Review of International Economics, 2022; 30(4), 1180-1198
[Published Version]
Review of International Economics, 2022; 30(4), 1180-1198
[Published Version]
Flexibility and Productivity: Towards the Understanding of Firm Heterogeneity.
International Economic Review, 2022; 63: 1055-1108
with Mingzhi Xu
[Published Version] [Online Appendix]
International Economic Review, 2022; 63: 1055-1108
with Mingzhi Xu
[Published Version] [Online Appendix]
Quality Heterogeneity and Misallocation: The Welfare Benefits of Raising your Standards.
Journal of International Economics, 2022; 134, 103544
with Ariel Weinberger
[Published Version] [Replication Package] [The Planner's Allocation] [The CES case] [Other VES Preferences]
Journal of International Economics, 2022; 134, 103544
with Ariel Weinberger
[Published Version] [Replication Package] [The Planner's Allocation] [The CES case] [Other VES Preferences]
Monopsonistic Competition, Trade, and the Profit Share.
Scandinavian Journal of Economics, 2022; 124: 488-515
[Published Version] [Replication Package]
Scandinavian Journal of Economics, 2022; 124: 488-515
[Published Version] [Replication Package]
Has the Euro Shrunk the Band? Relative PPP Convergence in a Currency Union.
Scandinavian Journal of Economics, 2021; 123(2), 593–620
[Published Version] [Online Appendix]
Scandinavian Journal of Economics, 2021; 123(2), 593–620
[Published Version] [Online Appendix]
Working Papers
Firms in Product Space: Adoption, Growth, and Competition. October 2024 (Under Review)
CEPR Discussion Paper No. 18800; CEP Discussion Paper No. 1978
with John Morrow and Vladimir Tyazhelnikov
[CEPR] [CEP] [ESCOE] [ESCOE Blog]
Which products are potentially produced together? When demand for a product increases, which firms will supply it? Using multi-product production patterns within and across firms, we recover a continuous cost-based distance between firms and unproduced products. Higher product distance implies decreasing adoption frequency. When export demand induces domestic product adoption, closer firms provide this supply. Potential costs imply measures of Revenue and Competition Potential. These predict firm sales and scope growth. If all firms produced all products linked by co-production, consumer welfare could increase by 16-30% under constant markups, rising to 46-86% under variable markups.
CEPR Discussion Paper No. 18800; CEP Discussion Paper No. 1978
with John Morrow and Vladimir Tyazhelnikov
[CEPR] [CEP] [ESCOE] [ESCOE Blog]
Which products are potentially produced together? When demand for a product increases, which firms will supply it? Using multi-product production patterns within and across firms, we recover a continuous cost-based distance between firms and unproduced products. Higher product distance implies decreasing adoption frequency. When export demand induces domestic product adoption, closer firms provide this supply. Potential costs imply measures of Revenue and Competition Potential. These predict firm sales and scope growth. If all firms produced all products linked by co-production, consumer welfare could increase by 16-30% under constant markups, rising to 46-86% under variable markups.
Lobbying for Regulations: When Big Business Says Yes. September 2024
with Ariel Weinberger
Do firms universally oppose regulations that raise production costs, or do their stances depend on intrinsic characteristics that create uneven outcomes across businesses? This question is vital for understanding firms’ behavior in regulatory lobbying. We extend a standard general equilibrium model with firm heterogeneity in productivity by incorporating two key elements: (1) governments can impose regulations, and (2) firms can lobby for either stricter or more lenient regulations. While regulations aim to address consumption externalities, they also raise both marginal and fixed production costs. This can drive less productive firms out of the market, and leave surviving firms potentially better off. Our model shows that large firms are likely to lobby for stricter regulations when these regulations primarily increase fixed costs. To test these predictions, we use a guided machine learning algorithm to classify US firms’ positions on regulatory issues based on their lobbying reports. Our findings reveal that larger firms, particularly in concentrated industries, tend to support more stringent regulations. Additionally, we identify a negative relationship between capital intensity, leverage, and regulatory support, suggesting that a firm's operational flexibility plays a key role in shaping its stance on regulatory changes.
with Ariel Weinberger
Do firms universally oppose regulations that raise production costs, or do their stances depend on intrinsic characteristics that create uneven outcomes across businesses? This question is vital for understanding firms’ behavior in regulatory lobbying. We extend a standard general equilibrium model with firm heterogeneity in productivity by incorporating two key elements: (1) governments can impose regulations, and (2) firms can lobby for either stricter or more lenient regulations. While regulations aim to address consumption externalities, they also raise both marginal and fixed production costs. This can drive less productive firms out of the market, and leave surviving firms potentially better off. Our model shows that large firms are likely to lobby for stricter regulations when these regulations primarily increase fixed costs. To test these predictions, we use a guided machine learning algorithm to classify US firms’ positions on regulatory issues based on their lobbying reports. Our findings reveal that larger firms, particularly in concentrated industries, tend to support more stringent regulations. Additionally, we identify a negative relationship between capital intensity, leverage, and regulatory support, suggesting that a firm's operational flexibility plays a key role in shaping its stance on regulatory changes.
Shocks to the Organization of the Firm: the Case of Foreign Takeovers. September 2024
with Michael Koch and Angelina Odintsova
This paper studies the impact of foreign acquisitions on firms' internal labor organization, with an emphasis on occupational switching. This focus is inspired by new stylized facts we document using linked employer-employee data from Denmark. Our analysis reveals that, although the total number of occupations and hierarchical layers within firms remains stable over time, a significant proportion of firms simultaneously add and drop occupations and layers each year. To assess the effects of foreign acquisitions, we employ a dynamic two-way fixed effects matching estimator. Our findings indicate that, although firms expand after an acquisition, the overall number of layers or occupations remains unchanged. However, we observe significant reorganization of existing employees across occupations, as firms add and drop occupations post-acquisition. This occupational churning is not driven by the introduction or removal of layers and is predominantly observed among higher-paid workers.
with Michael Koch and Angelina Odintsova
This paper studies the impact of foreign acquisitions on firms' internal labor organization, with an emphasis on occupational switching. This focus is inspired by new stylized facts we document using linked employer-employee data from Denmark. Our analysis reveals that, although the total number of occupations and hierarchical layers within firms remains stable over time, a significant proportion of firms simultaneously add and drop occupations and layers each year. To assess the effects of foreign acquisitions, we employ a dynamic two-way fixed effects matching estimator. Our findings indicate that, although firms expand after an acquisition, the overall number of layers or occupations remains unchanged. However, we observe significant reorganization of existing employees across occupations, as firms add and drop occupations post-acquisition. This occupational churning is not driven by the introduction or removal of layers and is predominantly observed among higher-paid workers.
Testing the Waters: How Firms Enter New Markets. September 2024 (Under Review)
CEPR Discussion Paper No. 19485; CESifo Working Paper No. 11340
with Carsten Eckel, Ina Jäkel, and Raymond Riezman
[CEPR] [CESifo]
Using firm-level data on production and trade from Denmark, we document that firms frequently employ a strategy of entering new export markets with Carry-Along Trade (CAT), i.e., with products manufactured by other firms. This strategy is surprising because, empirically, CAT products have below average market shares and mark-ups, and trade models predict firms to focus on core products with large sales in export markets with additional fixed and variable costs. To rationalize this new stylized fact, we propose a model where CAT plays a pivotal role in enabling firms to learn about market conditions and assess market viability. In our framework, exporting own-produced core products requires upfront sunk entry investments that create a benefit of knowing the exact market conditions. Firms can learn these market conditions by either investing first based on expected market conditions, or by exporting CAT products that do not require additional investments. We provide empirical evidence in support of our mechanism by showing that entering with CAT is particularly prevalent (i) among small firms, (ii) in distant markets, and (iii) among firms with no prior exporting experience.
CEPR Discussion Paper No. 19485; CESifo Working Paper No. 11340
with Carsten Eckel, Ina Jäkel, and Raymond Riezman
[CEPR] [CESifo]
Using firm-level data on production and trade from Denmark, we document that firms frequently employ a strategy of entering new export markets with Carry-Along Trade (CAT), i.e., with products manufactured by other firms. This strategy is surprising because, empirically, CAT products have below average market shares and mark-ups, and trade models predict firms to focus on core products with large sales in export markets with additional fixed and variable costs. To rationalize this new stylized fact, we propose a model where CAT plays a pivotal role in enabling firms to learn about market conditions and assess market viability. In our framework, exporting own-produced core products requires upfront sunk entry investments that create a benefit of knowing the exact market conditions. Firms can learn these market conditions by either investing first based on expected market conditions, or by exporting CAT products that do not require additional investments. We provide empirical evidence in support of our mechanism by showing that entering with CAT is particularly prevalent (i) among small firms, (ii) in distant markets, and (iii) among firms with no prior exporting experience.
Tariffs Tax the Poor More: Evidence from Household Consumption During the US-China Trade War. August 2024
with Hong Ma, Jingxin Ning, and Mingzhi Xu
[SSRN]
Using disaggregated household expenditure data, we provide novel evidence on how the US-China trade war has differentially affected US households across income groups. The analysis is based on a highly flexible, nested CES framework with time-varying, household-specific demand shifters. We estimate the key parameters of the model to recover household-specific price indexes. The increases in US tariffs on Chinese products between 2018 and 2019 led to a 1. 09% increase in the cost of living of households, with a relatively larger impact on low-income households. In fact, we document a 0.88 percentage point smaller increase in the cost of living for the top 20% income households relative to the bottom 20%. This differential effect is attributed to wealthier households' greater ability to adjust their expenditure shares across products and to face a smaller reduction in product variety.
with Hong Ma, Jingxin Ning, and Mingzhi Xu
[SSRN]
Using disaggregated household expenditure data, we provide novel evidence on how the US-China trade war has differentially affected US households across income groups. The analysis is based on a highly flexible, nested CES framework with time-varying, household-specific demand shifters. We estimate the key parameters of the model to recover household-specific price indexes. The increases in US tariffs on Chinese products between 2018 and 2019 led to a 1. 09% increase in the cost of living of households, with a relatively larger impact on low-income households. In fact, we document a 0.88 percentage point smaller increase in the cost of living for the top 20% income households relative to the bottom 20%. This differential effect is attributed to wealthier households' greater ability to adjust their expenditure shares across products and to face a smaller reduction in product variety.
Fight or Flight? How Do Firms Adapt their Product Mix in Response to Demand and Competition. May 2024 (Under Review)
CESifo Working Paper No. 11144
with Frederic Warzynski and Rui Zhang
[CESifo]
We propose a new model of multi-product firms in international trade, where firms choose their product mix based on the products' attractiveness and endogenous competition. The model is motivated by two novel stylized facts using Danish manufacturing data, which demonstrate the importance of product-specific characteristics in understanding firms' product mix choices. The model predicts that as a larger number of firms want to supply products with high attractiveness, these products also feature the toughest competition. Depending on the strength of competition, two sorting patterns are possible: one in which only the most productive firms produce the most attractive products and another in which all firms produce the most attractive products. Our model can generate both sorting patterns depending on the value of a key preference parameter. By quantifying our model, we find that product-specific differences in attractiveness and competition explain a quarter of the variation in sales. Furthermore, we find that the most attractive products tend to be produced by all firms, while the least attractive products are made only by the most productive firms.
CESifo Working Paper No. 11144
with Frederic Warzynski and Rui Zhang
[CESifo]
We propose a new model of multi-product firms in international trade, where firms choose their product mix based on the products' attractiveness and endogenous competition. The model is motivated by two novel stylized facts using Danish manufacturing data, which demonstrate the importance of product-specific characteristics in understanding firms' product mix choices. The model predicts that as a larger number of firms want to supply products with high attractiveness, these products also feature the toughest competition. Depending on the strength of competition, two sorting patterns are possible: one in which only the most productive firms produce the most attractive products and another in which all firms produce the most attractive products. Our model can generate both sorting patterns depending on the value of a key preference parameter. By quantifying our model, we find that product-specific differences in attractiveness and competition explain a quarter of the variation in sales. Furthermore, we find that the most attractive products tend to be produced by all firms, while the least attractive products are made only by the most productive firms.
Large Firms, Consumer Heterogeneity and the Profit Share. November 2023 (Under Review)
Revise and Resubmit at American Economic Journal: Macroeconomics
NBER Working Paper No. 29646
with Robert C. Feenstra and Mingzhi Xu
[Video (older version)] [NBER]
We examine the relationship between large firms and the profit share in a model that features oligopolistic competition and consumer heterogeneity. Conditional on the sales distribution, the presence of consumer heterogeneity increases the profit share because it increases firm-level markups. Using data on purchases at the household-barcode level from Nielsen, we quantify the role of consumer heterogeneity, finding that the average markup and the aggregate profit share are 20 and 6.4 percentage points larger than those predicted by a model of a representative consumer. Based on our evidence from 2004 to 2018, and extrapolating it to 1990 through 2021, we predict that the profit share in retailing could have increased by over 4 percentage points over this longer period due to rising income inequality across consumers.
Revise and Resubmit at American Economic Journal: Macroeconomics
NBER Working Paper No. 29646
with Robert C. Feenstra and Mingzhi Xu
[Video (older version)] [NBER]
We examine the relationship between large firms and the profit share in a model that features oligopolistic competition and consumer heterogeneity. Conditional on the sales distribution, the presence of consumer heterogeneity increases the profit share because it increases firm-level markups. Using data on purchases at the household-barcode level from Nielsen, we quantify the role of consumer heterogeneity, finding that the average markup and the aggregate profit share are 20 and 6.4 percentage points larger than those predicted by a model of a representative consumer. Based on our evidence from 2004 to 2018, and extrapolating it to 1990 through 2021, we predict that the profit share in retailing could have increased by over 4 percentage points over this longer period due to rising income inequality across consumers.
Work in Progress
Explorations in Product Space: Multi-product Firms and their Product Portfolios
with Carsten Eckel, Ina Jäkel, and Raymond Riezman
with Carsten Eckel, Ina Jäkel, and Raymond Riezman
Pricing to Heterogeneous Consumers and Firm Market Power: Evidence from the United States and China
with Mingzhi Xu and Yumin Hu
with Mingzhi Xu and Yumin Hu
Publications - Pre Ph.D.
Exchange Rate Devaluation and Reshuffling of Global Jobs
Journal of Economic Integration, 2013; 28(2):241-268. Awarded the Dae-Yang Prize for best article in 2013.
with F. Sdogati
[Published Version]
Journal of Economic Integration, 2013; 28(2):241-268. Awarded the Dae-Yang Prize for best article in 2013.
with F. Sdogati
[Published Version]