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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
Learning, Prices, and Firm Dynamics
We document new facts about the evolution of firm performance and prices in international markets, and propose a theory of firm dynamics emphasizing the interaction between learning about demand and quality choice to explain the observed patterns. Using data from the Portuguese manufacturing sector, we find that: (1) firms with longer spells of activity in export destinations tend to ship larger quantities at lower prices; (2) older exporters tend to use more expensive inputs; (3) revenue growth within destinations (conditional on initial size) tends to decline with market experience; and (4) ...
Working Paper
International technology Diffusion: A Gravity Approach
This paper investigates, empirically, the determinants of international technology diffusion. To do that, I set up a multi-country model of innovation and diffusion with perfect enforcement of intellectual property rights (IPR). The model yields a gravity equation for bilateral royalty payments that is estimated using methods from empirical trade. I investigate discrepancies between model’s predictions and observed royalty payments to identify the role of fundamentals vs. other factors such as imperfect IPR protection. Fundamentals account for most of the variation in royalty payments, ...
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 ...
Report
Banking across borders with heterogeneous banks
Individual banks differ substantially in their foreign operations. This paper introduces heterogeneous banks into a general equilibrium framework of banking across borders to explain the documented variation. While the model matches existing micro and macro evidence, novel and unexplored predictions of the theory are also strongly supported by the data: The efficiency of the least efficient bank active in a host country increases the greater the impediments to banking across borders and the efficiency of the banking sector in the host country. There is also evidence of a tradeoff between ...
Report
The Opportunity Costs of Entrepreneurs in International Trade
We show that a trade model with an exogenous set of heterogeneous firms with fixed operating costs has the same aggregate outcomes as a span-of-control model. Fixed costs in the heterogeneous-firm model are entrepreneurs' forgone wage in the span-of-control model.
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 ...
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
Spoils of War: Trade Shocks and Segmented Labor Markets in Spain during WWI
How does intranational factor mobility shape the welfare effects of a trade shock? I provide evidence that during WWI, a demand shock emanated from belligerent countries and affected neutral Spain. Within Spain, labor predominantly reallocated locally, while the most affected provinces experienced drastic increases in wages and consumer prices. Embedding imperfect labor mobility in an economic geography model, I show that external demand shocks can improve allocative efficiency, but asymmetric shocks cause localized increases in wages and consumer prices instead of reallocation. Adjusting an ...
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 ...