Department of Economics
University of Maryland
College Park, MD 20742

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Trade Liberalization and Industrial Concentration (Job Market Paper)

I examine the interrelationship between industrial concentration and trade liberalization. I develop a hybrid model that augments the standard monopolistic competition approach in trade to include an oligopolistic margin: a set of heterogeneous granular firms competing in quantities. This margin predicts novel effects of trade liberalization on trade, consumer welfare and industrial concentration. Specifically, trade liberalization generates (i) lower imports when the foreign oligopoly margin is larger, (ii) lower consumer gains when foreign firms are more concentrated than domestic, and (iii) higher domestic industrial concentration of granular firms. I derive a gravity equation where the trade cost elasticity is attenuated by foreign firm concentration and find support for this prediction using detailed data from Colombia. Foreign concentration heterogeneity across origin countries suggests that there is a fundamental heterogeneity in the first-order impact of trade liberalization: imports from countries in the top decile of concentration had 13 log points lower growth on average than imports from countries in the bottom decile during a period in which average imports growth was 36 log points.

Brexit Uncertainty and Trade Disintegration

NBER Working Paper No. 25334, 2018, revise and resubmit Economic Journal , with Kyle Handley and Nuno Limão

We estimate the uncertainty effects of preferential trade disagreements. Increases in the probability of Britain's exit from the European Union (Brexit) reduce bilateral export values and trade participation. These effects are increasing in trade policy risk across products and asymmetric for UK and EU exporters. We estimate that a persistent doubling of the probability of Brexit at the average disagreement tariff of 4.5% lowers EU-UK bilateral export values by 15 log points on average, and more so for EU than UK exporters. Neither believed a trade war was likely.

Endogenous Border Times

IDB Working Paper Series No. IDB-WP-702, 2016, with Jeronimo Carballo, Georg Schur and Christian Volpe Martincus

We examine transaction-level Peruvian import data to show that firms are subject to significa nt costs of port-of-entry delays. At the transaction level, we observe the time it takes a shipment to clear each step in the entry process. Our theory shows conditions under which observed entry times are endogenous. As a result, total entry delays potentially lead to biased policy conclusions and non-informative efficiency rankings of countries' entry procedures. We make three empirical contributions that help unbundle sources for time costs in trade and border effects. First, we provide evidence that at least part of the total port-entry-time is endogenous. Second, we identify the effect of entry delays on imports based on exogenous necessary entry processing. Third, we provide evidence that trade costs due to entry delays are heterogeneous across firm types. New and large importersare more elastic with respect to entry delays. This information allows researchers and policymakers to interpret aggregate port of entry delay data and their costs across different types of firms.

Transit Trade

IDB Working Paper Series No. IDB-WP-704, 2016, with Jeronimo Carballo, Georg Schur and Christian Volpe Martincus

In this paper, we estimate the effects of transit systems that substantially streamline administrative processing of trade flows. In so doing, we use a unique dataset that consists of the entire universe of El Salvador's export transactions over the period 2007-2013 and includes information on the transactions channeled under a new transit regime established with neighboring countries over the same period. Results suggest that this new transit system has been associated with decreased order servicing and variable trade costs. As a consequence, firms' exports increased primarily through higher shipping frequencies. Furthermore, the effects have been strong on foreign sales of time-sensitive goods. This evidence informs one of the main policies covered in the 2013 WTO Agreement of Trade Facilitation.

The Border Labyrinth: Information Technologies and Trade in the Presence of Multiple Agencies

IDB Working Paper Series No. IDB-WP-706, 2016, with Jeronimo Carballo, Georg Schur and Christian Volpe Martincus

Firms selling products abroad usually have to interact with several border agencies that develop multiple trade regulations and oversee their compliance. These regulations establish the procedures that these firms have to follow and the documents that they have to obtain, fill in, and submit for their exports to be authorized. In this paper, we estimate the effects of introducing information technologies as a new means to complete such trade-related procedures. In particular, we use highly disaggregated firm-level export data from Costa Rica over the period 2007-2013 and exploit the gradual phase-in of an electronic trade single window scheme across groups of products and ports. Results suggest that this new system has been associated with both an expansion in the number of exporting firms and increased firms' exports along the shipment extensive margin and the buyer extensive and intensive margins.

Labor Provisions in Preferential Trade Agreements: Are They a Source of Uncertainty?

Work in progress

In recent work, trade policy uncertainty (TPU) has been identiffed as a factor that negatively affects the export performance of countries by decreasing the entry of firms. In this paper, I address the question of whether the enforceability of non-trade related provisions in Preferential Trade Agreements (PTAs) that depend on firms' decisions have as a consequence raising uncertainty. In the model firms can decide whether to commit to labor standards. Not doing so increases the probability of losing industry-specific preferences, an externality for the whole industry. I identify a situation in which two countries have received two different levels of enforceability and scope of labor provisions in PTAs with the US and test whether their entry into force eliminated uncertainty. I find that in Peru, the country with the allegedly highest enforceability level, uncertainty was not eliminated. Moreover, I find suggestive evidence that sectors that are negatively affected are those facing a higher threat.