Research

Working Papers

1. "Opening Up in the 21st Century: A Quantitative Accounting of Chinese Export Growth"

with Loren Brandt

(Previously circulated as Accounting for Chinese Exports)

Revision Requested, Journal of International Economics

Abstract: China’s rapid export growth has spurred extensive research investigating its effects on other economies. The exact causes of the boom as well as the slowdown in Chinese exporting after 2007 are less well-understood. We quantify the drivers of Chinese export growth using a general equilibrium model estimated with detailed trade and production data that capture rich heterogeneity across destinations, firm ownership types, production locations, and sectors. We find that the three key drivers of Chinese export growth overall are rising foreign demand, improvements in access to imported intermediates, and factor productivity growth within China. Weakening foreign demand and a lack of further improvements in imported inputs access largely explain the slowdown in exporting after 2007. Furthermore, important differences especially across sectors and firms of different ownership types caution against any single narrative.

2. "Earnings Inequality in Production Networks"

with Federico Huneeus and Kory Kroft

Abstract: We develop a quantitative model in which heterogeneous firms hire heterogeneous workers in an imperfectly competitive labor market and source intermediates from suppliers in a production network. We use the model to investigate how the production network shapes three key labor market outcomes: the passthrough of firm-level productivity, demand, and cost shocks into worker earnings; the distribution of firm effects on worker earnings; and firm heterogeneity in labor shares of value-added. We establish identification of model parameters and estimate them using linked employer-employee and firm-to-firm transactions data from Chile. Reduced-form evidence based on export demand and import cost shocks support the predictions of our model regarding the passthrough of these shocks to earnings. Counterfactual simulations show that heterogeneity in network linkages explains 21% of earnings variance, while labor value-added shares are less dispersed and less negatively correlated with firm size under the observed production network than under a random network.

3. "Endogenous Production Networks and the Business Cycle" (Online Appendix available here)

(Previously circulated as Firm-to-firm Trade in Sticky Production Networks)

Revision Requested, Econometrica

Abstract: This paper develops a structural model of trade between heterogeneous firms in which the network of firm-level input-output linkages is endogenously determined. Firms vary in the size of their customer and supplier bases and adjust their sets of trade partners over time. Using data on buyer-seller relationships between US firms, I structurally estimate the model's key parameters, and apply the theory to quantify how important the endogenous adjustment of the production network is for US business cycles. Simulations of the model show that extensive margin adjustments of the production network over horizons of one year account for around 4% of observed real gross output and welfare, while adjustments over longer horizons account for larger components of these outcomes. Furthermore, adjustment of the production network is quantitatively important primarily as a response to idiosyncratic shocks at the relationship level rather than the firm level.

4. "Looking Backward, Innovating Forward: A Theory of Competitive Cascades"

with Daniel Trefler and Miaojie Yu

Abstract: Innovation depends on exporting and, in particular, on scale and competition in export markets. We develop a theory featuring (1) quality-segmented markets, (2) step-by-step innovation that moves firms forward along the quality ladder, and (3) escape-the-competition motives for innovation. We derive four predictions about the impact on innovation of scale and competition: a firm with a large and less competitive quality segment ahead or forward of it will have strong incentives to innovate into this profitable segment, while a firm with a small and more-competitive quality segment behind it will also have strong incentives to innovate for fear of facing firms in this segment in the future. We take these predictions to Chinese firm level data during a period of explosive export growth (2000–2006). Using information about scale and competition by quality segment in China’s export markets, we confirm all four hypotheses. By implication, and unlike in standard CES models, the impact of trade on innovation depends critically on how it drives scale and competition in high- versus low-quality segments.