Research

My main topics of interest in International Trade are: cross-border e-commerce, trade policy and global value chains.

I am available for referee duties. I have reviewed papers for the "Review of International Economics", "International Economics" and "Latin American Economic Review".

Participating to Compete: Do Small Firms in Developing Countries Benefit from Global Value Chains?, with Marion Jansen and Olga Solleder

(Economies, 2021), published version here

Abstract

Standard trade theory suggests that the profile of exporting firms is characterized by large firms which dominate domestic productivity distribution. Large manufacturing multinationals have increased their productivity by participating, creating and shaping global production networks. In recent decades, trade flows have become increasingly dominated by trade-in-tasks within global production networks. Given the importance of pro-competitive effects in establishing the gains from trade following trade liberalizations, it is important to look at the link between participation in global value chains and a firm’s competitiveness. The paper does so by using the International Trade Centre’s competitiveness index, for small, medium-sized and large firms, coupled with global value chain participation measures extracted from multi-regional input-output tables, and together forming a panel dataset at country and firm category level. The main finding establishes that the gains from integration into value chains are greater for small firms than for large firms. In particular, at the sample median, an increase of participation by 2.5% reduces the competitiveness gap between small and large firms by 1.25%. In addition, the analysis suggests that it is the use of foreign inputs that drives the result. In contrast, the domestic value in intermediate goods matters only in cases where value chains respond to domestic demand needs. The identification strategy relies on a fractional probit model allowing for unobserved effects, and a causal framework using the depth of trade agreements as instrument, in order to mitigate potential reverse causality.

Time, uncertainty and trade flows, with José Ansón, Jean-François Arvis,Matthias Helble, Ben Shepherd

(The World Economy, 2020), published version here

Abstract

This paper quantifies the impact of international transport time on bilateral trade flows in goods using previously unexploited information drawn from a large data set on international parcel delivery times. In line with previous work, we find that an extra day spent in international transit reduces bilateral trade by just under 1% at the sample median. In addition, and for the first time in the literature, we examine the impact of time-related uncertainty, which requires traders to hold costly inventories or build costly redundancies into supply chains. We find that a one day increase in international transport time uncertainty reduces bilateral trade flows by just over 1%. Splitting the sample into developing and developed countries shows that international transit time matters primarily for south–south trade, whereas uncertainty is relatively more important for north–north trade. Using new data on trade in intermediate versus final goods, we also find some evidence that time and uncertainty both matter more for movements of intermediates of the type that takes place within global value chains.

Do we need deeper trade agreements for GVCs or just a BIT?, with Marion Jansen and Olga Solleder

(The World Economy, 2019), published version here

Abstract

The paper investigates two policies geared towards stimulating and shaping global value chains (GVCs), namely deep regional trade agreements (DRTAs) and bilateral investment treaties (BITs). In an augmented gravity model, we test the impact of both policies on a variety of trade in value added indicators. We find that both policies are likely to increase GVC trade, although their transmission channels differ. While backward linkages are stimulated through both BITs and DRTAs, forward linkages respond only to DRTAs. The estimates suggest that negotiating a DRTA with investment provisions has a higher impact on trade in value added than signing a shallow RTA and a separate BIT.

Consumer arbitrage in cross-border e-commerce, with José Anson and Matthias Helble

(Review of International Economics, 2019), published version here

Abstract

In today’s internet markets consumers can search for, find and compare prices worldwide. Online, information circulates faster than offline and arbitrage opportunities such as the ones arising from currency shocks are easily unveiled. In this paper, we estimate for the first-time exchange rate elasticities for cross-border e-commerce transactions. Exploiting a new high-frequency database on international transactions of parcels, we find that a 1% appreciation of the domestic currency increases e-commerce imports by 0.7%. Comparing the result with traditional estimates in offline markets, this implies a 50% exchange rate pass-through online.

Evaluating export promotion agencies: does one size fit all? with Matteo Fiorini and Bernard Hoekman

(work in progress, 2019).

Abstract

Governments generally evaluate the performance of export promotion agencies on the basis of specific criteria such as total exports or customer satisfaction. In this paper we argue that the performance evaluation criteria that apply to EPAs will affect their behavior, including the selection of clients (firms) and the services that are supplied. We analyze the two most prevalent performance evaluation criteria (total exports and customer satisfaction) in the framework of a simple multitasking principal-agent model with heterogeneous firms. A key feature of the model is that working with small firms is highly scalable for EPAs, whereas support provided to large firms is idosyncratic. We use the theoretical framework to evaluate the incentive effects of the most commonly observed performance evaluation criteria that are applied to EPAs and show that the use of different criteria has implications for activities of EPAs and the realization of their export promotion objectives.

E-commerce and the cost of waiting

(work in progress, 2019), click here for the latest version.

Abstract

The paper studies the expenditure switching effect of exchange rate changes in a model where trade takes time and consumers face waiting costs. In the model, the maximum premium that the typical consumer would be willing to pay in exchange for an immediate delivery is a function of prices and shipping times. I test the trade-off between lengthier delivery times and cheaper goods in the context of internet markets, where waiting costs are particularly important. Using a database on worldwide postal exchanges, I estimate the average cost of waiting to be 30 % of the value of the shipped good.

Trade policy substitution: theory and evidence, with Cosimo Beverelli and Alexander Keck

(Review of World Economics, 2019), published version here.

Abstract

With the help of a political economy model, we show that the extent of ‘trade policy substitution’—namely, substitution of tariffs with non-tariff measures (NTMs)—depends on the cost differential between domestic and foreign firms in complying with product standards. The model suggests the prevalence of trade policy substitution in developed economies, where the costs of compliance are relatively low. We test and validate this prediction using a database on NTMs that identifies actual trade restrictions. We further examine the possible protectionist use of trade policy substitution exploiting information on the end of the Multifibre Arrangement (MFA) and on WTO notifications.

Integration and Price Transmission in Key Food Commodity Markets in India, with Gonzalo Varela

(World Bank Policy Research Working Paper, 2019), click here for the latest version.

Abstract

This paper examines patterns of market integration for food commodities in India. First, it tests the extent of domestic spatial market integration for retail and wholesale markets in 2006–14 and 2008–15, respectively, and looks at patterns of price transmission of shocks from international sources. Second, it measures vertical integration from wholesale to retail markets and tests for asymmetric speed of adjustment to shocks. Third, it examines the determinants of spatial integration. The results reveal that in India, food markets are imperfectly integrated across space, with the law of one price being systematically rejected, with heterogeneities across states and products. There is substantial co-movement between wholesale and retail prices, although integration is still imperfect in all commodities but one: rice, for which perfect vertical integration cannot be rejected. Retail prices adjust faster when wholesale prices rise than when wholesale prices fall. The analysis of the determinants of spatial integration reveals that prior to implementation of the Goods and Services Tax, the mere act of crossing a state border increased prices; unexploited gains from arbitrage persisted after considering the effects of transport costs; and information frictions and menu costs reduced market integration.

Reducing Connectivity Costs: Air Travel Liberalization between India and Sri Lanka, with Sanjay Kathuria, Nadeem Rizwan, Raveen Ekanayake, Visvanathan Subramaniam and Janaka Wijayasiri

(in A Glass Half Full: The Promise of Regional Trade in South Asia, 2018) published version here.

Abstract

Chronicles the evolution of the commercial aviation market between India and Sri Lanka to draw lessons for South Asia, where regional air connectivity is restricted and connectivity poor between capitals. The bilateral air connectivity between India and Sri Lanka is a result of the progressive liberalization of air services between the two countries since their first air services agreement (ASA) of 1948. Both countries were committed to opening their civil aviation markets progressively to facilitate travel, thereby encouraging firm competition, easing logistics, and stimulating trade. Amendments in the 1990s, in 2003, and the major liberalization push in 2011 produced a beneficial impact of air services, with reforms translating into increases of 16 flights a week and 2,442 seats a week between India and Sri Lanka. The substantial gains from air services liberalization between India and Sri Lanka suggest that other South Asian countries can adopt an incremental approach to liberalization, especially if the process is accompanied by supporting reforms.

Trade linkages between the Belt and Road Economies

(World Bank Policy Research Working Paper, 2018), click here for the latest version.

Abstract

This paper studies the production and trade linkages between a selected group of economies belonging to the Belt and Road Initiative (BRI). After defining a group of Belt and Road Economies, the paper uses three standard trade databases to analyze trade and production linkages among these economies. With the help of state of the art economic decompositions of input-output tables, coupled with standard international trade statistics, the analysis quantifies the amount of production sharing between the economies of the area. The main finding is that trade integration among Belt and Road Economies has largely increased: Intraregional exports went from 30.6 percent in 1995 to 43.3 percent in 2015. Since the increase in gross exports was driven mostly by intermediate goods, the study investigates the evolution of regional production networks across Belt and Road Economies.

From China with love, with Gianluca Santoni and Daria Taglioni (2016)

Abstract

China plays a key role in determining the course of international trade patterns. In the period 1995-2010, the increased availability of Chinese exports of goods and services is thought to have put pressure on employment in import competing sectors. However, in the context of shared international production, the fact that China provides cheaper intermediate goods offers competitive opportunities in key sectors. Using the OECD-WTO Inter Country Input-Output (ICIO) tables, we show that there are two mechanisms at work. China’s trading partners benefit, in terms of value added and output, if their production structure is complementary to China’s. This appears to be the case for most developing countries. In contrast, high income countries see their output and value added shrink because of their higher exposure to Chinese imports that represent fierce competition.

Protectionism during the crisis: tit-for-tat or chicken games, with Marcelo Olarreaga

(Economic Letters, 2012), published version here.

Abstract

During the recent global financial crisis many countries resort to protectionist measures to try to boost domestic aggregate demand. In this paper we explore the extent to which the adoption of protectionist measures led to retaliationby other countries undermining the increase in aggregate demand. To do so we use data on trade measures adopted since the start of the financial crisis, andavailable through the Global Trade Alert database. We find no evidence ofretaliation. On the contrary, there is strong evidence of chicken-games being played.