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Working Paper
Intellectual Property Rights, Technology Transfer and International Trade
I study the short- and long-term effects of regional trade agreements (RTA) with strict intellectual property (IP) provisions. An empirical analysis using gravity methods suggests that regions signing these agreements share more technology in the form of technology licensing following the year of enforcement. I set up a multi-country model with endogenous productivity through innovation and adoption to quantify the effect of such agreements on innovation, growth and welfare. Adopters pay royalties to innovators for the use of their technology; the model allows for various degrees of IP rights ...
Report
How did China’s WTO entry benefit U.S. prices?
We analyze the effects of China?s rapid export expansion following World Trade Organization (WTO) entry on U.S. prices, exploiting cross-industry variation in trade liberalization. Lower input tariffs boosted Chinese firms? productivity, lowered costs, and, in conjunction with reduced U.S. tariff uncertainty, expanded export participation. We find that China?s WTO entry significantly reduced variety-adjusted U.S. manufacturing price indexes between 2000 and 2006. For the Chinese components of these indexes, one-third of the beneficial impact comes from Chinese exporters lowering their prices, ...
Working Paper
On the Origins of the Multinational Premium
How do foreign direct investment (FDI) dynamics relate to the risk premium of a firm? To answer this question, we compare the stock returns of US firms with different FDI and mergers and acquisitions (M&A) exposure to study the evolution of stock returns as firms expand into foreign markets. We document three empirical regularities. First, there are cross-sectional risk premia associated with both multinational activity and mergers and acquisitions. Second, firm-level stock returns decline when a firm undertakes M&A activity and with merger deepening. Third, future multinational acquirers ...
Working Paper
Goods-Market Frictions and International Trade
We present a tractable framework that embeds goods-market frictions in a general equilibrium dynamic model with heterogeneous exporters and identical importers. These frictions arise because it is time consuming and expensive for exporters and importers to meet. We show that search frictions lead to an endogenous fraction of unmatched exporters, alter the gains from trade, endogenize entry costs, and imply that the competitive equilibrium does not generally result in the socially optimal number of searching firms. Finally, ignoring search frictions results in biased estimates of the effect of ...
Working Paper
Firms in international trade
Firms play a critical role in the global economy. In this paper, we survey the behavior of firms in the international economy, both in theory and in the data. We first summarize the key empirical facts that motivate the study of firms in trade. Then, we detail recent theoretical developments on the micro-foundations of firm behavior in an international context, focusing on how firms select into exporting, and how firms respond to international shocks. Finally, we turn to a ?real world,? empirically focused view of exporting, beginning with the growth dynamics of firms expanding to global ...
Working Paper
Variety, globalization, and social efficiency
This paper puts recent work on the benefits of variety into the context of a more complete quantitative analysis of the Dixit-Stiglitz-Krugman model of monopolistic competition. We show how the gains from globalization are reflected in the increase in variety and the exploitation of economies of scale, and that the social efficiency question is quantitatively insignificant. These results follow from examining a Bertrand-Nash equilibrium that allows for a finite number of varieties to affect the elasticity of demand facing each firm. We develop a precise expression for per capita real income ...
Working Paper
Trade Credit, Markups, and Relationships
Trade credit is the most important form of short-term finance for firms. In 2019, U.S. non-financial firms had about $4.5 trillion in trade credit outstanding equaling 21 percent of U.S. GDP. This paper documents two striking facts about trade credit use. First, firms with higher markups supply more trade credit. Second, trade credit use increases in relationship length, as firms often switch from cash in advance to trade credit but rarely away from trade credit. These two facts can be rationalized in a model where firms learn about their trading partners, sellers charge markups over ...
Working Paper
Knowledge Diffusion, Trade and Innovation across Countries and Sectors
We provide a unified framework for quantifying the cross country and cross-sector interactions among trade, innovation, and knowledge diffusion. We study the effect of trade liberalization in a multi-country, multi-sector endogenous growth model in which comparative advantage and the stock of knowledge are determined by innovation and diffusion. A reduction in trade costs induces a re-allocation of comparative advantage in production and innovation across sectors, which translates into higher growth along the counterfactual balanced growth path (BGP). Heterogeneous knowledge diffusion across ...
Working Paper
Dynamic Gains from Trade Agreements with Intellectual Property Provisions
I develop a quantitative multi-country trade model of innovation and technology licensing to study the short- and long-term effects of trade agreements with intellectual property (IP) provisions. A trade agreement involves determining the level of tariffs and IP protection as Nash bargaining between a developed and a developing country. The agreement increases welfare, innovation, and growth in the long-run. However, gains accrue differently across countries along the transition. Developing countries experience short-run losses, as they now pay higher licensing prices. An agreement designed ...
Working Paper
Dynamic Gains from Trade Agreements with Intellectual Property Provisions
I develop a quantitative theory of bilateral trade agreements with intellectual property (IP) provisions in a multi-country growth model. The model’s dynamics are driven by innovation and technology licensing. Imperfect IP enforcement leads to reduced royalty payments and growth. Governments negotiate tariffs and IP enforcement through Nash bargaining. Gains from the trade agreement vary along the transition. Developing countries experience short-term losses, while developed countries gain in both the short and long run. A government with short-term goals may reduce losses but at the cost ...