Working Papers

"Home-Bias Patterns and the Strategic Gains of Domestic Leaders: Theory and Evidence"

In this paper, I formalize and quantify a first-mover advantage for domestic firms that generates home-bias patterns. I extend firms' choices to include demand-enhancing investments and show that, relative to a benchmark where all firms invest simultaneously, there is an overinvestment by domestic firms. Thus, firms skew resources to their local markets and crowd out foreign firms. To analyze the mechanism theoretically, I develop a tractable framework that incorporates large firms making multiple choices and accounts for extensive-margin adjustments and firm heterogeneity. Unlike standard two-stage oligopolies with no entry, the result is independent of the type of competition (prices or quantities). For the empirics, I adapt the general model to a structural one and estimate it using a rich dataset at the firm-product level of all the Danish manufacturing industries. The results indicate that first-mover advantages are important in shaping the structure of the economy and as explanation of home-bias patterns, exhibing pronounced heterogeneity across industries and firms. 

"New Trade Models and the Absence of the Pro-Competitive Effects of Import Competition"

Tougher import competition is expected to reduce domestic markups and force the least-productive firms to exit. I study the occurrence of this phenomenon in a setting à la Melitz (2003) with monopolistic competition, free entry and firms uncertain of their productivity prior to entry. The main finding is that, under standard demand systems, the setup is unable to capture these pro-competitive effects: import competition only affects the mass of incumbents but it does not change the domestic prices or the domestic survival productivity cutoff. Thus, in this regard, embedding standard alternative demands to the CES into a Melitz model do not represent a richer framework. The insensitivity to import competition also applies to any other non-price choices, such as quality and number of products, and is independent of the productivity distribution, the foreign supply structure, and the nature (finite or infinite) of the demand choke price.

Work in Progress

"Oligopolistic Competition and Trade: A Quantitative Framework in General Equilibrium" 
"Patterns of North-South Trade under Income Constraints: Theory and Evidence" (with David Lander)