Publication

• Transportation Infrastructure and Trade, with Li Hongtao, published at Japan and the World Economy

Abstract: This paper offers a variant of the Ricardian model able to structurally interpret the estimate of country-specific variable — transportation infrastructure. Guided by this new theoretical framework, this paper shows that transportation infrastructure enhances international trade more than internal trade. Further quantitative analysis suggests 10% increase in transportation infrastructure induces 3.9% increase in real income and more than 95% of the gains concentrate on the infrastructure improving country. This paper also suggests that transportation infrastructure improvement increases real income mostly through internal trade cost reduction. All the above results suggest that better infrastructure leads to sizable gains providing additional empirical support to policies aiming to improve transportation infrastructure. 

Working Papers

• Heterogeneous Internal Trade Cost and Implications for Quantitative Trade Models, Single Authored (Job Market Paper)

Previous title: Heterogeneous Internal Trade Cost and Its Implications in Trade 

Abstract: Quantitative models of international trade typically assume that trade cost within a country (internal trade cost) is the same across countries. This paper presents evidence for heterogenous internal trade costs across countries and incorporates them into a standard quantitative trade model. Allowing heterogeneous internal trade costs improves the model’s ability to predict prices and technology in data. This model also offers a novel answer to the question why small countries export less than large ones. That is small countries trade more with themselves because of lower internal trade costs they have. 

• (NEW!) Trade and Attitude: Evidence from the Israeli-Palestinian Conflict, with Wu Yanan

Abstract: Using the current Israeli-Palestinian conflict as a quasi-experiment, this study provides evidence supporting the claim that close trade ties enhance international relations toward the trade partner. This finding offers an affirmative answer to the classical yet enduring inquiry on whether trade ties facilitate peace, an issue characterized by divergent theoretical viewpoints and empirical evidence. Both this pacifying effect and the trade ties decrease alongside the distances imply that the most contentious country would be neither too far nor too close. This study also suggests that close trade relations can contribute to breaking the self-fulfilling vicious cycle between hatred and conflicts, a result that is particularly thought-provoking in a world where deglobalization is on the rise.

• Nonlinear Pricing in the Transport Industry and the Gains from Trade, Single Authored

Abstract: Recent empirical research documented that there exists a nonlinear pricing phenomenon in the shipping industry. This paper strives to show that the nonlinear pricing phenomenon in the shipping industry would lower the evaluation of the gains from trade relative to standard trade models, whereas pure inclusion of a competitive shipping industry would not change the gains from trade assessment. In addition, the model built in this paper offers micro foundations for the additive trade cost and features an endogenous response of shipping charges to the iceberg trade cost, an empirical finding consistent with recent empirical evidence. Using both macro level transport costs and micro firm level data, this paper finds robust and significant empirical results supporting the implications of this new theoretical model.

• Price Discrimination in the Transport Industry and the Gains from Trade, Single Authored, Under review at The World Economy

Abstract: Shipping companies often charges nonlinear and discriminatory pricing for transportation. This paper shows that this nonlinear and discriminatory pricing in the shipping industry could hamper the welfare gains from trade due to within-industry allocation across heterogeneous firms. I extend a standard heterogeneous firm trade model with variable markups by incorporating monopolistically competitive shipping companies that charge nonlinear and discriminatory pricing against manufacturers. In a standard setting, shipping companies optimally charge a higher transport price to the more productive firms, weakening within-industry reallocation toward productive firms. Elimination of this discriminatory practice could potentially increase the gains from trade.