Search Results
Working Paper
Determinants of trade margins: insights using state export data
We adapt the heterogeneous firm trade models of Helpman, Melitz, and Rubinstein (2008) and Lawless (2010) to analyze extensive and intensive trade margins using state-level exports to foreign nations. Our theoretical analysis provides definitive predictions for the effects of changes in fixed costs, variable costs, and foreign income on the extensive margin, while for the intensive margin the predictions regarding changes in fixed costs are definitive, but the effects of changes in variable costs and foreign income are not. The number of exporting firms of a state is used to measure the ...
Report
Quantitative Trade Models: Developments and Challenges
Applied general equilibrium (AGE) models, which feature multiple countries or regions, multiple sectors, and input-output linkages across sectors in a Walrasian general equilibrium framework, have been the dominant tool for evaluating the impact of trade liberalization since the 1980s. We provide an overview of the historical development of AGE models and a guide as to how they are used to perform policy analysis. We then review and document shortcomings in the performance of AGE models in predicting the sectoral effects of past trade reforms, that is, we show that AGE models often perform ...
Working Paper
Demand Uncertainty, Selection, and Trade
This paper examines the role of uncertainty on elasticities of trade flows with respect to variable trade costs in a canonical model of trade with monopolistic competition and heterogeneous firms. We identify two channels through which uncertainty impacts trade: through export participation thresholds (the selection effect) and the distribution of shocks governing export selection (the dispersion effect). While the selection effect dampens trade elasticities under uncertainty, the dispersion effect is ambiguous. We develop a methodology for using customs firm-level data to quantify trade ...
Working Paper
Offshore Production and Business Cycle Dynamics with Heterogeneous Firms
To examine the effect of offshoring through vertical FDI on the international transmission of business cycles, I propose a two-country model in which firms endogenously choose the location of their production plants over the business cycle. Firms face a sunk cost to enter the domestic market and an additional fixed cost to produce offshore. As such, the offshoring decision depends on the firm-specific productivity and on fluctuations in the relative cost of effective labor. The model generates a procyclical pattern of offshoring and dynamics along its extensive margin that are consistent with ...