Research Papers
Credit and the Labor Share: Evidence from U.S. States, FRB Dallas Globalization and Monetary Policy Institute Working Paper No. 326 (2017), new version coming soon, (with Asli Leblebicioglu).
R&R at The Economic Journal
Abstract: We analyze the role of credit markets in explaining the changes in the U.S. labor share by evaluating the effects of state-level banking deregulation, which resulted in improved access to cheaper credit. Utilizing a difference-in-differences strategy, we provide causal evidence showing labor share declined following the interstate banking deregulation. We show that the lower cost of credit, increase in the availability of credit, and greater bank competition in each state are mechanisms that led to the decline in the labor share. We use this evidence to obtain the elasticity of labor share with respect to borrowing costs, which itself is informative about the aggregate elasticity of substitution between capital and labor. Finally, we focus on manufacturing and services to show that the impact of banking deregulation is particularly important in capital intensive and external finance dependent industries.
Exporter Heterogeneity and Price Discrimination: A Quantitative View, NBER Working Paper No. 21408 (2015), revised March 2018 (with Ina Simonovska and Jae Wook Jung).
R&R at Journal of International Economics
Abstract: We quantify a general equilibrium model of international trade and pricing-to-market that features firm-level heterogeneity and consumers with non-homothetic preferences---generalized CES (GCES). We demonstrate theoretically that, relative to existing frameworks, the GCES model exhibits features of the data that are essential to conduct quantitative analysis. The framework can reconcile the documented price dispersion across firms and markets, while maintaining consistency with cross-sectional observations on firm productivity, markups, and sales. We estimate the model's parameters to match bilateral trade flows across 66 countries as well as moments from the markup and sales distributions of Chilean firms. The model reconciles both micro and macro facts quantitatively, and yields trade elasticity estimates that are in line with the existing literature. Hence, we conclude that the GCES model constitutes a plausible and parsimonious quantitative workhorse framework that can be used to analyze gains from trade.
Markups and Misallocation with Evidence from an Exchange Rate Appreciation, FRB Dallas Globalization and Monetary Policy Institute Working Paper No. 251 (2015), revised November 2017.
Submitted
Abstract: With non-homothetic preferences, a monopolistic competition equilibrium is inefficient. In a setting with heterogeneous firms that charge variable markups, this paper finds a sufficient statistic for changes in allocative efficiency that can be directly measured with data. The model also predicts differential effects of competition and cost shocks on the reallocation across domestic firms, which I test empirically with firm and industry-level data in Chile, a country that has experienced large exchange rate shocks. I find important changes in misallocation over time due to the way firms pass-through productivity gains into markups. From industry-year variation, there is evidence that industries that import a larger share of their inputs become more misallocated as a result of exchange rate appreciations compared to “open” sectors whose output competition becomes fiercer. The observations of markup responses at the firm level are consistent with the aggregate measure of allocative efficiency.
Export Tax Rebates and Resource Misallocation: Evidence from a Large Developing Country, FRB Dallas Globalization and Monetary Policy Institute Working Paper No. 302 (2017), (with Qian Xuefeng and Mahmut Yasar).
R&R at Canadian Journal of Economics
Abstract: The export tax rebate (ETR) policy is one of the most frequently used policy instruments by Chinese policy makers. This paper therefore provides a vital analysis of its allocation effects. To motivate our empirical analysis for the allocation effects of the ETR policy, we first add a tax rebate to the Melitz and Ottaviano (2008) model and examine the impact of this policy on firms' markup size and resource allocation between eligible and non-eligible firms for the rebates. We use customs transactions, tax administration, and firm-level data to measure the effect of variation in export tax rebates, taking advantage of the large policy change in 2004. A difference-in-difference approach allows us to compare the production and pricing decisions of eligible versus non-eligible firms and the distributional implications. We find that an increase in tax rebates shifts production to eligible firms and that tax rebates increase allocative efficiency.
Importing, Productivity and the Exchange Rate.
Available upon request
Abstract: This paper investigates the productivity effects of importing in an application with a volatile exchange rate. I find that importing industries have large gains in revenue productivity which is consistent with cost decreases from importing a larger variety of inputs. It provides a mechanism for the results in Weinberger (2015), who finds that the industries most affected by the terms of trade appreciation in Chile were those most exposed to the market for imported intermediate inputs. Additionally, the change in the cost of sourcing from abroad has an amplified effect on aggregate productivity due to the joint distribution of firm productivity and decision to import. I draw on the methods of recent papers by Gopinath and Neiman (2014) and Blaum, Lelarge, and Peters (2014) that consider the firm-specific productivity effects from international sourcing of inputs to apply them to the case of Chile during a period of large exchange rate volatility.
R&R at The Economic Journal
Abstract: We analyze the role of credit markets in explaining the changes in the U.S. labor share by evaluating the effects of state-level banking deregulation, which resulted in improved access to cheaper credit. Utilizing a difference-in-differences strategy, we provide causal evidence showing labor share declined following the interstate banking deregulation. We show that the lower cost of credit, increase in the availability of credit, and greater bank competition in each state are mechanisms that led to the decline in the labor share. We use this evidence to obtain the elasticity of labor share with respect to borrowing costs, which itself is informative about the aggregate elasticity of substitution between capital and labor. Finally, we focus on manufacturing and services to show that the impact of banking deregulation is particularly important in capital intensive and external finance dependent industries.
Exporter Heterogeneity and Price Discrimination: A Quantitative View, NBER Working Paper No. 21408 (2015), revised March 2018 (with Ina Simonovska and Jae Wook Jung).
R&R at Journal of International Economics
Abstract: We quantify a general equilibrium model of international trade and pricing-to-market that features firm-level heterogeneity and consumers with non-homothetic preferences---generalized CES (GCES). We demonstrate theoretically that, relative to existing frameworks, the GCES model exhibits features of the data that are essential to conduct quantitative analysis. The framework can reconcile the documented price dispersion across firms and markets, while maintaining consistency with cross-sectional observations on firm productivity, markups, and sales. We estimate the model's parameters to match bilateral trade flows across 66 countries as well as moments from the markup and sales distributions of Chilean firms. The model reconciles both micro and macro facts quantitatively, and yields trade elasticity estimates that are in line with the existing literature. Hence, we conclude that the GCES model constitutes a plausible and parsimonious quantitative workhorse framework that can be used to analyze gains from trade.
Markups and Misallocation with Evidence from an Exchange Rate Appreciation, FRB Dallas Globalization and Monetary Policy Institute Working Paper No. 251 (2015), revised November 2017.
Submitted
Abstract: With non-homothetic preferences, a monopolistic competition equilibrium is inefficient. In a setting with heterogeneous firms that charge variable markups, this paper finds a sufficient statistic for changes in allocative efficiency that can be directly measured with data. The model also predicts differential effects of competition and cost shocks on the reallocation across domestic firms, which I test empirically with firm and industry-level data in Chile, a country that has experienced large exchange rate shocks. I find important changes in misallocation over time due to the way firms pass-through productivity gains into markups. From industry-year variation, there is evidence that industries that import a larger share of their inputs become more misallocated as a result of exchange rate appreciations compared to “open” sectors whose output competition becomes fiercer. The observations of markup responses at the firm level are consistent with the aggregate measure of allocative efficiency.
Export Tax Rebates and Resource Misallocation: Evidence from a Large Developing Country, FRB Dallas Globalization and Monetary Policy Institute Working Paper No. 302 (2017), (with Qian Xuefeng and Mahmut Yasar).
R&R at Canadian Journal of Economics
Abstract: The export tax rebate (ETR) policy is one of the most frequently used policy instruments by Chinese policy makers. This paper therefore provides a vital analysis of its allocation effects. To motivate our empirical analysis for the allocation effects of the ETR policy, we first add a tax rebate to the Melitz and Ottaviano (2008) model and examine the impact of this policy on firms' markup size and resource allocation between eligible and non-eligible firms for the rebates. We use customs transactions, tax administration, and firm-level data to measure the effect of variation in export tax rebates, taking advantage of the large policy change in 2004. A difference-in-difference approach allows us to compare the production and pricing decisions of eligible versus non-eligible firms and the distributional implications. We find that an increase in tax rebates shifts production to eligible firms and that tax rebates increase allocative efficiency.
Importing, Productivity and the Exchange Rate.
Available upon request
Abstract: This paper investigates the productivity effects of importing in an application with a volatile exchange rate. I find that importing industries have large gains in revenue productivity which is consistent with cost decreases from importing a larger variety of inputs. It provides a mechanism for the results in Weinberger (2015), who finds that the industries most affected by the terms of trade appreciation in Chile were those most exposed to the market for imported intermediate inputs. Additionally, the change in the cost of sourcing from abroad has an amplified effect on aggregate productivity due to the joint distribution of firm productivity and decision to import. I draw on the methods of recent papers by Gopinath and Neiman (2014) and Blaum, Lelarge, and Peters (2014) that consider the firm-specific productivity effects from international sourcing of inputs to apply them to the case of Chile during a period of large exchange rate volatility.
Work In Progress
The Welfare Effects of International Regulatory Protectionism (with Luca Macedoni)
Openness and the Factor Shares: Is Globalization Always Bad for Labor? (with Asli Leblebicioglu)
Housing Booms, Trade Shocks, and International Student Migration (with Kevin Shih and Mingzhi Xu)
The Pass-Through of Productivity Gains from Offshoring
Openness and the Factor Shares: Is Globalization Always Bad for Labor? (with Asli Leblebicioglu)
Housing Booms, Trade Shocks, and International Student Migration (with Kevin Shih and Mingzhi Xu)
The Pass-Through of Productivity Gains from Offshoring