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Author:Alessandria, George 

Working Paper
Do falling iceberg costs explain recent U.S. export growth?

Superseded by Working Paper 12-20 ; The authors study the rise in U.S. manufacturing exports from 1987 to 2002 through the lens of a monopolistically competitive model with heterogeneous producers and sunk costs of exporting. Using the model, they infer that iceberg costs fell nearly 27 percent in this period. Given this change in iceberg costs, the authors use the model to calculate the predicted increase in trade. Contrary to the findings in Yi (2003), they find that the exports should have grown an additional 70 percent (78.7 vs. 46.4). The model overpredicts export growth partly because ...
Working Papers , Paper 10-10

Journal Article
Trade deficits aren’t as bad as you think

Although the amount of U.S. imports and exports has varied greatly over time, in recent years, the U.S. has been running trade deficits. Some people react to such trade deficits with doom and gloom; others cite them as evidence that foreign governments are not playing fair in U.S. markets; still others argue that deficits demonstrate that we are living beyond our means. In ?Trade Deficits Aren?t as Bad as You Think,? George Alessandria offers an alternative view: Trade deficits have benefits. They shift worldwide production to its most productive locations, and they allow individuals to ...
Business Review , Issue Q1 , Pages 1-10

Journal Article
Understanding exports from the plant up

Some companies export their products abroad, while others choose to sell only in their home market. Similarly, over time, some nonexporters become exporters and some exporters stop exporting. The decision to export is a big, important decision for an organization, one that takes time and resources but one that can lead to an expansion of sales and profits. Policymakers recognize that although exporting isn?t easy, it can boost sales and create jobs when successful. To help in this process, many states devote substantial resources to encouraging exports, including loans, trade missions, and ...
Business Review , Issue Q4 , Pages 1-11

Working Paper
Establishment heterogeneity, exporter dynamics, and the effects of trade liberalization

The authors study the effects of tariffs in a dynamic variation of the Melitz (2003) model, a monopolistically competitive model with heterogeneity in productivity across establishments and fixed costs of exporting. With fixed costs of starting to export that are on average 3.7 times as large as the costs incurred to continue as an exporter, the model can match both the size distribution of exporters and annual transition in and out of exporting among US manufacturing establishments. The authors find that the tariff equivalent of these fixed costs is nearly 30 percentage points. They use the ...
Working Papers , Paper 11-19

Working Paper
Export dynamics in large devaluations

We study the source and consequences of sluggish export dynamics in emerging markets following large devaluations. We document two main features of exports that are puzzling for standard trade models. First, given the change in relative prices, exports tend to grow gradually following a devaluation. Second, high interest rates tend to suppress exports. To address these features of export dynamics, we embed a model of endogenous export participation due to sunk and per period export costs into an otherwise standard small open economy. In response to shocks to productivity, the interest rate, ...
International Finance Discussion Papers , Paper 1087

Working Paper
Do sunk costs of exporting matter for net export dynamics?

Not all firms export every period. Firms enter and exit foreign markets. Previous research has suggested that these export participation decisions have significant aggregate implications. In particular, it has been argued that these export decisions are important for the comovements of net exports and the real exchange rate. In this paper, the authors evaluate these predictions in a general equilibrium environment. Specifically, assuming that firms face an up-front, sunk cost of entering foreign markets and a smaller period-by-period continuation cost, they derive the discrete entry and exit ...
Working Papers , Paper 05-20

Working Paper
Trade wedges, inventories, and international business cycles

The large, persistent fluctuations in international trade that cannot be explained in standard models by changes in expenditures and relative prices are often attributed to trade wedges. We show that these trade wedges can reflect the decisions of importers to change their inventory holdings. We find that a two-country model of international business cycles with an inventory management decision can generate trade flows and wedges consistent with the data. Moreover, matching trade flows alters the international transmission of business cycles. Specifically, real net exports become ...
Working Papers , Paper 12-16

Working Paper
Inventories, lumpy trade, and large devaluations

Fixed transaction costs and delivery lags are important costs of international trade. These costs lead firms to import infrequently and hold substantially larger inventories of imported goods than domestic goods. Using multiple sources of data, we document these facts. We then show that a parsimoniously parameterized model economy with importers facing an (S, s)-type inventory management problem successfully accounts for these features of the data. Moreover, the model can account for import and import price dynamics in the aftermath of large devaluations. In particular, desired inventory ...
Working Paper Series , Paper 2008-24

Working Paper
Violating purchasing power parity.

This paper demonstrates that deviations from the law of one price are an important source of violations of absolute PPP across countries. Using highly disaggregated U.S. export data, we document evidence of systematic international price discrimination based on the local wage of consumers in the destination market. We show that most violations from absolute PPP can also be explained by international differences in wages. We find very little additional explanation is due to differences in income per capita. Developing and calibrating a model of pricing-to-market based on search frictions and ...
Working Papers , Paper 04-19

Working Paper
Trade adjustment dynamics and the welfare gains from trade

We build a micro-founded two-country dynamic general equilibrium model in which trade responds more to a cut in tariffs in the long run than in the short run. The model introduces a time element to the fixed-variable cost trade-off in a heterogeneous producer trade model. Thus, the dynamics of aggregate trade adjustment arise from producer-level decisions to invest in lowering their future variable export costs. The model is calibrated to match salient features of new exporter growth and provides a new estimate of the exporting technology. At the micro level, we find that new exporters ...
Working Papers , Paper 14-14

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