Job Market Paper - Click title for PDF, updated regularly
How does openness to trade and multinational production affect aggregate growth? One channel through which trade and multinational production may impact aggregate growth is via the incentives that they create for firms to engage in research and development (R&D). To explore potential links among R&D, multinational production, and trade, I build a dynamic general equilibrium growth model with international technology competition. I then calibrate this model to match several aggregate moments of the US economy from 2000 to 2007. A key feature of the model is that incumbent firms face both a sunk export cost and a sunk cost associated with establishing a foreign affiliate. These sunk costs, combined with iceberg trade costs, determine how open the economy is to international trade and investment. In my calibration, I recover these costs and then consider two counterfactual exercises: (1) I examine a world where the countries operate in complete autarky, (2) I consider a world where firms can trade but are not permitted to set up foreign affiliates. In the first exercise, I find that the long-run growth rate of TFP in the US would drop significantly from an average of 0.86 percentage points in the data to 0.36 percentage points in complete autarky. However, I find that, conditional on the current level of trade openness, openness to multinational production has a relatively modest effect on growth. The long-run growth rate of TFP in the US would only drop from an average of 0.86 percentage points as observed in the data to 0.78 percentage points in the counterfactual world where only multinational production is prohibited.
How Do Firms Build Market Share? with Doireann Fitzgerald
NBER Working Paper No. 24794, July 2018
The question of how firms build market share matters for firm dynamics, business cycles, international trade, and industrial organization. Using Nielsen Retail Scanner data for the United States, we document that in the consumer food industry, brands experience substantial growth in market share in the first four years after successful entry into a regional market. However, markups are flat with respect to brand tenure. This finding is at odds with a large literature on customer markets which argues that firms acquire customers by temporarily offering low markups, and later raise markups once customers are locked in. However, it is consistent with a literature which emphasizes the importance of marketing and advertising activities for building market share.
A Note on Optimal Compound Tariffs and Firm Selection
Work in Progress
In this paper, I analyze the optimal compound tariff in a two-country version of a single industry Melitz (2003) model. The only source of heterogeneity I consider is productivity heterogeneity, which directly affects the prices that firms set. I restrict the available set of instruments to a uniform compound tariff and find that the optimal compound tariff is non-degenerate. That is, the optimal compound tariff employs a non-degenerate linear combination of specific and ad valorem tariffs. Importantly, a non-zero specific tariff discriminates against high productivity, low price producers in favor of low productivity, high price producers. In contrast, when I consider a representative firm with no fixed trade costs à la Krugman (1980), the optimal compound tariff becomes degenerate, i.e. the optimal mix puts full weight on the ad valorem tariff.