Working Papers
Has the Euro Shrunk the Band? Relative PPP Convergence in a Currency Union. January, 2019, revise and resubmit at Scandinavian Journal of Economics
Online Appendix
I study the effects of the European Monetary Union (EMU) on relative PPP convergence using monthly disaggregated price indexes from 32 European countries from 1999 to 2016. I apply Heckscher's insight that transaction costs create bands of inaction in which price differences are not arbitraged away, and I estimate the bands of inaction using a threshold autoregressive model. My findings suggest that the being a member of the EMU is associated with a reduction in transaction costs: the bands of inaction between countries in the EMU are 17% lower than the average band. Time series evidence from the entry in the EMU of selected countries further confirms the result.
I study the effects of the European Monetary Union (EMU) on relative PPP convergence using monthly disaggregated price indexes from 32 European countries from 1999 to 2016. I apply Heckscher's insight that transaction costs create bands of inaction in which price differences are not arbitraged away, and I estimate the bands of inaction using a threshold autoregressive model. My findings suggest that the being a member of the EMU is associated with a reduction in transaction costs: the bands of inaction between countries in the EMU are 17% lower than the average band. Time series evidence from the entry in the EMU of selected countries further confirms the result.
Quality Heterogeneity and Misallocation: The Welfare Benefits of Raising your Standards. December, 2018 (under review) (with Ariel Weinberger)
The Planner's Allocation The CES case Other VES Preferences
Domestic regulations on product standards are a key point of contention in modern trade agreements, but frameworks generally ignore their heterogeneous impact across domestic firms. Using data from Chile, we find that more restrictive domestic standards are associated with a reallocation of domestic sales from low- to high-quality firms. Guided by this evidence, we study the welfare effects of quality standards in a model with monopolistically competitive, heterogeneous firms, and a general demand system. Raising the quality standard forces low-quality firms to exit. Welfare improves if low-quality firms over-produce in the market allocation relative to the efficient allocation. A reduction in trade costs reduces the optimal restrictiveness of a standard in a cooperative equilibrium across countries. We calibrate our model across Chilean industries and find that in several instances the imposed standard is too restrictive relative to a theoretical upper bound. There is suggestive evidence that a rise in openness has reduced restrictiveness, which supports the efforts to improve agreements on product standards along with traditional trade policy tools.
Domestic regulations on product standards are a key point of contention in modern trade agreements, but frameworks generally ignore their heterogeneous impact across domestic firms. Using data from Chile, we find that more restrictive domestic standards are associated with a reallocation of domestic sales from low- to high-quality firms. Guided by this evidence, we study the welfare effects of quality standards in a model with monopolistically competitive, heterogeneous firms, and a general demand system. Raising the quality standard forces low-quality firms to exit. Welfare improves if low-quality firms over-produce in the market allocation relative to the efficient allocation. A reduction in trade costs reduces the optimal restrictiveness of a standard in a cooperative equilibrium across countries. We calibrate our model across Chilean industries and find that in several instances the imposed standard is too restrictive relative to a theoretical upper bound. There is suggestive evidence that a rise in openness has reduced restrictiveness, which supports the efforts to improve agreements on product standards along with traditional trade policy tools.
Large Multiproduct Exporters Across Rich and Poor Countries: Theory and Evidence.
November, 2018 (under review)
Online Appendix
Large multiproduct exporters dominate trade flows and their scope decisions have new implications for the welfare gains from trade. Guided by new evidence from the Exporter Dynamics Database, I build a model in which income and cannibalization effects drive the scope decisions of large firms. I derive a new formula for the welfare gains from trade where the change in welfare depends on the change and on the ex-ante level of the domestic market share of the typical domestic firm. Ignoring income or cannibalization effects causes mismeasurement of the US welfare gains by 20%.
Large multiproduct exporters dominate trade flows and their scope decisions have new implications for the welfare gains from trade. Guided by new evidence from the Exporter Dynamics Database, I build a model in which income and cannibalization effects drive the scope decisions of large firms. I derive a new formula for the welfare gains from trade where the change in welfare depends on the change and on the ex-ante level of the domestic market share of the typical domestic firm. Ignoring income or cannibalization effects causes mismeasurement of the US welfare gains by 20%.
Flexibility and Productivity: Towards the Understanding of Firm Heterogeneity for Multi-product Exporters. October, 2018 (with Mingzhi Xu) (under review)
We study the heterogeneity in scope and sales across multi-product exporters. Guided by new firm-level evidence using China's customs data, we build a general-equilibrium model featuring firm heterogeneity in productivity and in flexibility, namely the ability to introduce new varieties in a destination at low costs. We estimate our model, finding suggestive evidence of a trade-off between productivity and flexibility: more productive firms are likely to be less flexible, as they pay higher fixed costs to introduce new varieties. The properties of such trade-off between productivity and flexibility are heterogeneous across industries. In the spirit of Hottman et al. (2016), we find firms' flexibility accounts for 65 to 75% of the total variation in scope across firms and destinations, and 12 to 16% of the total variation in sales.
Oligopoly and Oligopsony in International Trade. October, 2018 (with Vladimir Tyazhelnikov)
Large firms dominate final goods markets, in which they have oligopoly power, and also input markets, in which they have oligopsony power. Using data on market concentration, we find that both oligopoly and oligopsony power increase unit prices of export goods. We investigate the effects of international trade on the two sources of firms' market power and prices, in a theoretical model in which firms are oligopolists in the market for final goods and oligopsonists in the market for inputs. International integration in final goods markets reduces oligopoly power but it has the opposite effect on oligopsony power. Similarly, input market integration reduces oligopsony power, but it increases oligopoly power.
Work in Progress
International Regulatory Protectionism (with Ariel Weinberger)
Multiproduct Firms and Consumer Niches: Theory and Evidence (with Mingzhi Xu)
Publications - Pre Ph.D.
Exchange Rate Devaluation and Reshuffling of Global Jobs (with F. Sdogati). Journal of Economic Integration, 2013; 28(2):241-268. Awarded the Dae-Yang Prize for best article in 2013.
Other work
Published on ISPI (Italian Institute For International Political Studies)
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