Research

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Publications (peer-reviewed)

"Examining the economic impact of COVID-19 in India through electricity consumption and night time light" , World Development   (with R. Beyer and V. Galdo)

World Development, Volume 140, April 2021                                                   The Economist's article                                                   World Bank's Policy Research Working Paper 9291

Abstract: The COVID-19 pandemic has disrupted economic activity in India. Adjusting policies to contain transmission while mitigating the economic impact requires an assessment of the economic situation in near real-time and at high spatial granularity. This paper shows that daily electricity consumption and monthly nighttime light intensity can proxy for economic activity in India. Energy consumption is compared with the predictions of a consumption model that explains 90 percent of the variation in normal times. Energy consumption declined strongly after a national lockdown was implemented on March 25, 2020 and remained a quarter below normal levels throughout April. It recovered subsequently, but electricity consumption remained lower even in September. Not all states and union territories have been affected equally. While electricity consumption halved in some, it declined very little in others. Part of the heterogeneity is explained by the prevalence of COVID-19 infections, the share of manufacturing, and return migration. During the national lockdown, higher COVID-19 infection rates at the district level were associated with larger declines in nighttime light intensity. Without effectively reducing the risk of a COVID-19 infection, voluntary reductions of mobility will hence prevent a return to full economic potential even when restrictions are relaxed. Together, daily electricity consumption and nighttime light intensity allow monitoring economic activity in near real-time and high spatial granularity.

"Reduced "Border effects", FTAs and Manufacturing GVCs", The World Economy  (with Erik Frohm)

The World Economy, 45, 1112-1139                                           European Central Bank Working Paper No 2410 / May 2020

Abstract: This paper studies the impact of ‘border effects’ and the implementation of Free Trade Agreements (FTAs) on international trade in manufacturing goods. We take advantage of the time dimension in a panel setting to capture the rise of trade in final goods and intermediate inputs that are a distinguishing feature of Global Value Chains (GVCs). Our results suggest that reduced border effects account for the bulk of the increase in international manufacturing trade. The cost of a national border is estimated to have fallen by around 4.3% per year for trade in final goods and 2.8% for trade in intermediate inputs. Moreover, we show that it is important to control for different border effects for final goods and intermediate inputs when estimating the trade impact of FTAs in gravity equations. With this enhancement, our results suggest that FTAs increase trade in final goods by 52% after ten years, with no statistically significant difference for trade in intermediate inputs. We also find evidence that FTAs that more comprehensive FTAs like the European Union have a greater trade effect than the average FTA.

"The Proximity-Concentration Trade-off with Multi-product Firms"     (with J.C. Bricongne  and M. Lopez-Forero)

                              The World Economy, 46, 1264– 1289                                    Working Paper                                                                                                                                                                                               

Abstract: Standard horizontal FDI models predict substitutability between FDI and exports in light of the proximity- concentration trade-off, nonetheless, empirical literature finds, almost invariably, a complementarity effect. We argue that given the multi-product nature of the vast majority of firms, FDI and exports can coexist even at the level of the firm. We use detailed French firm-level data over 2002 and 2009 to show that the question of whether FDI and exports are complements or substitutes depends on whether the product belongs to the core competency of the firm and the demand in the destination market. We provide new evidence on the substitutability relation between FDI and exports, which takes place in the best performing products of the firm and in high demand markets when the size of the investment is sufficiently high. In turn, foreign presence generates "proximity advantages" which generates exports of products further away of the firms’ core competency.

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Working papers

"From goods to people: An integrated framework for globalization assessment"    

Very preliminary version

Abstract: This paper carries out a multidimensional analysis of globalization dynamics through the lens of a common structural gravity framework. We leverage cross- country bilateral and domestic data on trade in manufactured goods and services, foreign direct investment (FDI) and migration, as well as state-of-the-art estimation techniques to examine globalization trends. Using 1985 as a reference year, our es- timates suggest that globalization have increased trade in manufacturing goods by 136% and 61% for trade in services by 2021, and with dynamics plateauing around 2006-2008. However, globalization have continuously exerted a strong positive influ- ence on FDI, increasing by 893% by 2019. On the contrary, globalization have been weak and even negative for migration in recent years, decreasing by 18% in 2015–2020 compared to 1980–1985. Our rigorous definition and exhaustive data across the different dimensions of globalization allow us to put into context the current headwinds and risks facing globalization while navigating the nexus between trade, investment, and migration.

"Measuring Globalization When It Is Needed the Most: A Long-Run Analysis"    

World Bank Policy Research Working Paper 10451

Abstract: This paper studies globalization dynamics over 1965–2021 across various dimensions. Based on the definition that refers to globalization as an extension beyond national borders of the same market forces that operate at all levels of economic activity, globalization dynamics is estimated as the growth of international trade relative to domestic trade. This measure of globalization shows more intuitive dynamics for the world economy and across countries. The results show that while globalization dynamics for the world economy peaked around 2011–14, no evidence suggests that the world economy has entered an era of deglobalization. Also, China’s role as a globalization leader started in the mid-1980s and has outperformed the world economy since then, contrary to what standard measures like the trade-to-GDP ratio suggest. This paper builds on recent contributions in the structural gravity literature and adopts a long-run perspective to gain deep insights. It makes comparisons across countries over time, offering an analytical toolkit for the current debate around globalization. integration.

"Trade Agreements in South Asia: Toward a Successful Story in the Developing World"    

World Bank Policy Research Working Paper 10211

Abstract: This paper quantifies the trade creation effects of South Asia’s trade agreements within the region and with the rest of the world. The paper uses an extensive database of bilateral trade covering the manufacturing, agriculture, and service sectors in 190 countries over 1990–2015. The estimates of various specifications of a structural gravity model, including domestic trade flows, capture the potential heterogeneous effects. The main finding is that these effects are in general stronger for trade agreements signed by South Asian countries and even stronger in the case of intraregional agreements. The effects of free trade agreements vary substantially among countries and sectors and between final and intermediate goods. The paper shows that the trade policy implemented in South Asia in the previous decades has been successful, but at the same time the results point toward the existence of clear missing opportunities for the region. The opportunities lay in (i) better backward integration with the rest of the world to improve efficiency and help strengthen exports, and (ii) further deepening of intraregional agreements to continue making progress in regional integration.

"Rising Protectionism and Global Value Chains: Quantifying the General Equilibrium Effects"     (with R. Cappariello, V. Gunnella and G. Ottaviano)

CEPR Working Paper DP14423                    ECB Working Paper No 2360             Banca d'Italia  Working Paper  No. 1263

Abstract: Quantifying the effects of trade policy in the age of 'global value chains' (GVCs) requires an enhanced analytical framework that takes the observed international input-output relations in due account. However, existing quantitative general equilibrium models generally assume that industry-level bilateral final and intermediate trade shares are identical, and that the allocation of imported inputs across sectors is the same as the allocation of domestic inputs. This amounts to applying two proportionality assumptions, one at the border to split final goods and inputs, and another behind the border to allocate inputs across industries. In practice, neither assumption holds in available input-output data sets. To overcome this limitation of existing models, we consider a richer input-output structure across countries and sectors that we can match with the actual structure reported in input-output tables. This allows us to investigate the relation between the effects of changes in trade policies and GVCs. When we apply the enhanced quantitative general equilibrium model to the assessment of the effects of Brexit, we find trade and welfare losses that are substantially larger than those obtained by previous models. This is due to the close integration of UK-EU production networks and implies that denser GVCs amplify the adverse effects of protectionist trade policies.

"Inflation Dynamics and GVCs"    (with François de Soires)

World Bank’s WDR 2020 Policy Research Working Paper 9090  

Abstract: The global economy has witnessed a decline in inflation and an increase in inflation synchronization since the early 1980s. This paper investigates the relationship between inflation synchronization and trade integration, and documents the strong link between inflation co-movement and Global Value Chain (GVC) participation. Using 35 years and both gross and value-added trade flows, evidence shows that an increase in production linkages, as proxied by trade in intermediate inputs, is strongly associated with higher inflation correlation. Moreover, backward GVC participation is associated with an increase in bilateral inflation co-movement while forward participation is linked with a higher correlation between domestic and worldwide inflation. The paper also finds evidence of the effect of trade integration in decreasing inflation levels.

"Exporters dynamics and the role of imports in Argentina"       (with  Matias Arnoletto and Daniel Reyes)

World Bank Policy Research Working Paper Series 9218

Abstract: This paper examines the performance of globally engaged firms in Argentina in the past decade. Using highly disaggregated firm-level customs transaction data for imports and exports, the paper documents the progressive retreat of Argentine firms from global markets. Between 2007 and 2017, the number of exporters decreased by 30 percent. Benchmarking the characteristics of these exporters with similar countries reveals that Argentine exporters are disproportionally fewer and individually larger, with export value extremely concentrated in a few firms. Firm churning rates are disproportionately low and survival rates of entrants are high. These findings reflect exceptionally high entry costs of export, which are the result of anti-export bias and import substitution policies that sought unsuccessfully to develop the local industry. The paper shows that exporters that import directly intermediate and capital goods have better export outcomes than other exporters.

"Drivers of Firms’ Compliance with Environmental Regulation in India"     (with M. Mani)

World Bank Policy Research Working Paper 9468 

Abstract: Regulatory compliance is key in the fight against climate change and other environmental challenges. But regulatory agencies, especially in developing countries, are often hampered by their capacity to monitor and enforce standards and regulations against recalcitrant firms. There is now a big push toward self-reporting whereby the firms monitor and report on their compliance levels vis-à-vis the standards. This is seen as a way around the costs that agencies must incur if they were to scale up their inspections. In this paper, extensive firm-level data from India are used to compare the compliance level of firms when they are inspected by agencies versus the times when they self-report. Other factors that may determine regulatory compliance, such as age, size, sector, location, and so forth, are also examined. The results indicate that compliance rates are higher in the case of self-reporting than in the case of inspection, suggesting that there is a need to reform the self-report mechanism. Newer and privately owned firms are more compliant. There are also differences between complying with air and water pollution. Finally, the paper examines whether environmental monitoring through inspections leads to improvement in compliance levels, to assess the effectiveness of the regulations and inspections. The findings suggest that the increase in compliance is limited to a few industries.

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Recent policy work

"Beaten or Broken? Informality and COVID-19"   SAEF Fall 2020, World Bank

"Import Duties and Performance : Some Stylized Facts for Pakistan"    Report 2020, World Bank

"The impact of global value chains on the euro area economy"     Occasional Paper Series 221, European Central Bank

"The Cursed Blessing of Public Banks",  South Asia Economic Focus, Spring 2020     SAEF Spring 2020, World Bank 

"Making (De)centralization Work",  South Asia Economic Focus, Fall 2019   SAEF Fall 2019, World Bank 

"Exports Wanted", South Asia Economic Focus, Spring 2019   SAEF Spring 2019, World Bank