“Priors and Posteriors: Implications for Exporters”
While many new exporters cease exporting activity quickly, those that survive tend to thrive in their initial destination markets, and may expand to new markets. I develop a simple model that seeks to explain the dynamic export behavior of firms by incorporating uncertainty regarding product demand, which is resolved by entry into markets. My paper contributes to the literature on international trade by extending the work of Albornoz et al (2012), allowing for greater number of markets.
I assume that the demand for a firm's product is positively correlated across markets, such that while uncertainty regarding a prospective destination market can only be fully resolved through entry into the market, outcomes from other markets are informative. Firm productivity, however, is constant across markets and known to the producer. Consequently, the expansion behavior of a firm is driven by both the information value of an additional observation, as well as the expected profitability. As a result, the expansion speed of a firm will be related to beliefs regarding profitability: highly profitable firms will be more likely expand to multiple markets simultaneously, in contrast to other firms who choose to expand sequentially.
A key result is that sequential nature of expansion places great emphasis on the ranks of the destination markets: being more attractive than a similar market leads to more entry and different outcomes for entrants. While a reduction in trade barriers typically increases entry in all other markets, there are circumstances where entry increases at the expense of markets in close proximity.
“Capabilities and Input Choice”
This paper develops a model in which firms vary by both labor productivity and the quality of their output, with intermediate inputs of heterogeneous quality required in the production process. This paper contributes to the literature by building upon Sutton (2007), as well as Kugler Verhoogen (2012), to analyze the impact of an increased availability of intermediate inputs.
The model shows how input choice is affected by a firm's exogenously determined characteristics, more specifically the productivity and caliber (ability to produce quality output),
and how the distribution of firms responds to changes in factor prices. In doing so, this paper extends Sutton (2007), by allowing heterogeneous inputs, and a stark difference between the models is seen for low wage economies. Further, this paper examines the determinants of correlation between usage of high quality inputs and productivity, finding that, unlike Kugler Verhoogen (2012), a positive correlation need not exist for a given economy.
“Hit or Miss? Test Taking Behavior in Multiple Choice Exams”, with Pelin Akyol and Kala KrishnaThis paper models and estimates students' decision to guess/attempt or skip the question in a multiple choice test in order to understand the role that student characteristics play. We do this using data from the Turkish University Entrance Exam, a highly competitive, high stakes exam. In particular, we investigate students' behavior according to their gender, predicted score and experience in the exam. Our results show that students' attitudes towards risk differ according to their gender, predicted score and exam experience: female students behave in a more risk averse manner relative to male students, and high scoring students are more risk averse. However, our counterfactual analysis suggests that although different testing regimes can lead to different score distributions, the relationships between exam score percentiles and student characteristics are relatively invariant.