Publications
Large Firms, Consumer Heterogeneity and the Profit Share. November 2023
Forthcoming at American Economic Journal: Macroeconomics
with Robert C. Feenstra and Mingzhi Xu
[Published Version] [Video (older version)] [NBER]
Forthcoming at American Economic Journal: Macroeconomics
with Robert C. Feenstra and Mingzhi Xu
[Published Version] [Video (older version)] [NBER]
International Spillovers of Quality Regulations.
International Economic Review, 2024; 66 453-484
with Ariel Weinberger
[Published Version] [CESifo] [Video (older version)]
International Economic Review, 2024; 66 453-484
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
Making America Great Again? The Economic Impacts of Liberation Day Tariffs. June 2025
NBER Working Paper No. 33771, CEPR Discussion Paper No. 20225, CESifo Working Paper No. 11890.
Revise and Resubmit at Journal of International Economics
with Anna Ignatenko, Ahmad Lashkaripour, and Ina Simonovska
[NBER] [CEPR] [CESifo]
Press Coverage (in Italian): Ansa, Quotidiano Nazionale, La Statale News
On April 2, 2025, President Trump declared “Liberation Day,” announcing broad tariffs to reduce trade deficits and revive U.S. industry. We analyze the long-term economic impacts of these tariffs. If trading partners do not retaliate, the tariffs could decrease the U.S. trade deficit and improve its terms of trade, yielding modest welfare gains when tariff revenues reduce the income tax burden for American workers. However, reciprocal retaliation results in net welfare losses for the U.S. economy. We derive the unilaterally optimal tariff policy and find that the USTR proposed tariffs, based on bilateral trade deficits, diverge markedly from the optimal design. The optimal tariff is 19%, uniformly applied across all trading partners, and determined solely by the aggregate trade deficit, rather than bilateral imbalances. Under optimal foreign retaliation to the USTR tariffs, U.S. welfare declines by up to 3.4% when accounting for input-output linkages, while global employment contracts by 0.58%.
NBER Working Paper No. 33771, CEPR Discussion Paper No. 20225, CESifo Working Paper No. 11890.
Revise and Resubmit at Journal of International Economics
with Anna Ignatenko, Ahmad Lashkaripour, and Ina Simonovska
[NBER] [CEPR] [CESifo]
Press Coverage (in Italian): Ansa, Quotidiano Nazionale, La Statale News
On April 2, 2025, President Trump declared “Liberation Day,” announcing broad tariffs to reduce trade deficits and revive U.S. industry. We analyze the long-term economic impacts of these tariffs. If trading partners do not retaliate, the tariffs could decrease the U.S. trade deficit and improve its terms of trade, yielding modest welfare gains when tariff revenues reduce the income tax burden for American workers. However, reciprocal retaliation results in net welfare losses for the U.S. economy. We derive the unilaterally optimal tariff policy and find that the USTR proposed tariffs, based on bilateral trade deficits, diverge markedly from the optimal design. The optimal tariff is 19%, uniformly applied across all trading partners, and determined solely by the aggregate trade deficit, rather than bilateral imbalances. Under optimal foreign retaliation to the USTR tariffs, U.S. welfare declines by up to 3.4% when accounting for input-output linkages, while global employment contracts by 0.58%.
Tariffs Tax the Poor More: Evidence from Household Consumption During the US-China Trade War. May 2025
CESifo Working Paper No. 11610
with Hong Ma, Jingxin Ning, and Mingzhi Xu
[SSRN] [CESifo]
Using disaggregated US household expenditure data, we study the distributional consequences of the US-China trade war. We estimate a highly flexible demand system to compute household-specific price indexes. The increases in US tariffs on Chinese products between 2018 and 2019 led to an average price index increase of 1.09%, with a disproportionately larger impact on low-income households. Specifically, we document a 0.9 percentage point smaller increase in the household price index for the top 20% income households compared to the bottom 20%. The difference stems from wealthier households' greater expenditure adjustments and smaller reductions in product variety.
CESifo Working Paper No. 11610
with Hong Ma, Jingxin Ning, and Mingzhi Xu
[SSRN] [CESifo]
Using disaggregated US household expenditure data, we study the distributional consequences of the US-China trade war. We estimate a highly flexible demand system to compute household-specific price indexes. The increases in US tariffs on Chinese products between 2018 and 2019 led to an average price index increase of 1.09%, with a disproportionately larger impact on low-income households. Specifically, we document a 0.9 percentage point smaller increase in the household price index for the top 20% income households compared to the bottom 20%. The difference stems from wealthier households' greater expenditure adjustments and smaller reductions in product variety.
Wage Setting in Multiproduct Firms. February 2025
CESifo Working Paper No. 11674
with Jackie M.L. Chan, Michael Koch, and Michael Irlacher
[CESifo]
This paper reveals a new determinant of wage markdowns at the firm level, namely, the product scope. Using matched employer-employee data on Danish manufacturing firms, we document a negative elasticity between wages and firm scope, which is of a similar magnitude but opposite sign as the firm-size wage premium. We rationalize the wage discount using a theory where workers value the opportunity to switch product lines as an amenity. Multiproduct firms exercise their monopsony power to offer lower wages. Our findings have important implications for understanding labor market dynamics in times of rising concentration from the contribution of large multiproduct firms.
CESifo Working Paper No. 11674
with Jackie M.L. Chan, Michael Koch, and Michael Irlacher
[CESifo]
This paper reveals a new determinant of wage markdowns at the firm level, namely, the product scope. Using matched employer-employee data on Danish manufacturing firms, we document a negative elasticity between wages and firm scope, which is of a similar magnitude but opposite sign as the firm-size wage premium. We rationalize the wage discount using a theory where workers value the opportunity to switch product lines as an amenity. Multiproduct firms exercise their monopsony power to offer lower wages. Our findings have important implications for understanding labor market dynamics in times of rising concentration from the contribution of large multiproduct firms.
Shocks to the Organization of the Firm: the Case of Foreign Takeovers. November 2024
CESifo Working Paper No. 11525
with Michael Koch and Angelina Odintsova
[CESifo]
This paper studies how foreign acquisitions affect firms' internal labor organization, particularly occupational switching. This focus is inspired by new stylized facts we document using linked employer-employee data from Denmark: while the total number of occupations and hierarchical layers in firms remains stable, a significant share of firms simultaneously add and drop occupations and layers each year. Applying a dynamic two-way fixed effects matching estimator, we find that foreign acquisitions lead to significant reorganization within firms: though the number of layers or occupations remains unchanged, firms exhibit substantial occupational churning among existing workers, especially among higher-paid employees.
CESifo Working Paper No. 11525
with Michael Koch and Angelina Odintsova
[CESifo]
This paper studies how foreign acquisitions affect firms' internal labor organization, particularly occupational switching. This focus is inspired by new stylized facts we document using linked employer-employee data from Denmark: while the total number of occupations and hierarchical layers in firms remains stable, a significant share of firms simultaneously add and drop occupations and layers each year. Applying a dynamic two-way fixed effects matching estimator, we find that foreign acquisitions lead to significant reorganization within firms: though the number of layers or occupations remains unchanged, firms exhibit substantial occupational churning among existing workers, especially among higher-paid employees.
Firms in Product Space: Adoption, Growth, and Competition. October 2024
CEPR Discussion Paper No. 18800; CEP Discussion Paper No. 1978; CESifo Working Paper No. 11398
with John Morrow and Vladimir Tyazhelnikov
[CEPR] [CEP] [ESCOE] [ESCOE Blog] [CESifo]
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; CESifo Working Paper No. 11398
with John Morrow and Vladimir Tyazhelnikov
[CEPR] [CEP] [ESCOE] [ESCOE Blog] [CESifo]
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.
Testing the Waters: How Firms Enter New Markets. September 2024
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.
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.
Revise and Resubmit at Journal of the European Economic Association
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.
Revise and Resubmit at Journal of the European Economic Association
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.
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
Straight from the Apple Tree: Gravity Shapes the Production Network at the Firm-Level
with Gustavo Gonzáles and Guzman Ourens
with Gustavo Gonzáles and Guzman Ourens
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]