Luis M. Espinoza Bardales

Welcome to my web page. I am a Ph.D. candidate in Economics at the University of Michigan and I will be on the 2023/24 job market.

My research interests are in International Trade and Economic Development.  

My current research focuses on the role that foreign affiliates of multinational firms can play in the economic development of  their host economies.

e-mail: lespino[at]umich[dot]edu

Working papers:

I explore how contracting frictions and geography influence the trade costs faced by multinationals in their affiliates located in Mexico relative to domestic firms. I document two key facts. First, distance to firm’s home countries influences firms’ sourcing patterns. Second, sectors with a larger presence of foreign affiliates are more intensive in relationship-specific inputs. I develop a small open economy model with multiple sectors, imperfect contracting, input relationship-specificity, global sourcing and multinational production. I compute a set of counterfactual equilibria to gauge the relative importance of contracting frictions, trade costs, and productivity in the price advantage of multinationals over domestic firms. My findings show that, contrary to priors, foreign firms seem to have a disadvantage relative to domestic firms in trade costs and contracting frictions. Eliminating differences in contracting frictions between foreign and domestic firms leads to a reduction in real GNP of 2.7 percent, while doing so only for productivity reduces real GNP by 2.2 percent.

I explore  to what extent the positive effect that imported inputs has on domestic firm's productivity is accounted by an (indirect) access to foreign contract enforcement institutions. Based on the identifying assumption that customized inputs are affected by contracting frictions but homogeneous inputs are not, I can separately identify this channel from a more broad “quality” effect (foreign inputs are vertically differentiated from domestic ones) by combining a rich microdata from Mexico at the firm-input-source level and a theoretical model of contracting frictions and international trade. 

I study the role of specialization in economic growth in the context of Great Divergence period in the 19th and early 20th centuries. This paper builds on the findings of Pascali (2017), who documented that the reduction in trade costs during this period (due to the expansion of steamships), contributed to the divergence in income among countries. This paper fills that void by revisiting Pascali’s findings in the light of a two-sector model of endogenous growth with non-homothetic preferences and learning by doing (LBD). If LBD only exists in the “modern” sector, a trade-induced specialization in the traditional sector lowers economic growth. To test the model empirically, I digitized and standardized a dataset of international trade at the product-level using data from the United Kingdom, France, Germany and the U.S.

Pre doctoral papers: