Working Papers

“Multi-brand Firms and Brand Acquisition: the Impact of Trade Liberalization on Reallocation of Brand Equity,” (with Meeryung La)

This paper develops a general equilibrium model of multi-brand firms, which allows brand transaction among heterogeneous firms. In the presence of within-brand cannibalization, the analysis shows that trade liberalization induces more productive firms to expand their product scope by acquiring other firms’ brands, instead of expanding the product variety within their existing brands. This reallocation of brand equity from less productive to more productive firms reveals a new channel of intra-industry resource reallocation, namely, cross-firm transaction of intangible assets. The empirical study based on the trademark transaction data of the US Patent and Trademark Office provides supportive evidence for our theoretical prediction on how trade liberalization affects the cross-firm transaction of brand equity.

“Snowballing alongside Domino on Proliferation of Preferential Trade Agreements,” (with Jaeyoun Roh)

With regard to the third-country effects on bilateral incentives to sign new preferential trade agreements (PTAs), we develop a theory-based empirical approach that enables the assessment of how a country’s pre-existing PTAs affect her formation of a new PTA. Assessment of this effect is not trivial because a country’s pre-existing PTAs are also the pre-existing PTAs of her potential PTA partner’s partner, generating two counter-acting effects on the bilateral incentives to sign a new PTA. Our empirical analysis shows that a country’s pre-existing PTAs generate a positive effect on her incentive to sign a new PTA (i.e., Own PTA effect) but they generate a negative effect on her new partner’s incentive to sign a PTA (i.e., Partner’s PTA effect), as our theory predicts. The analysis also reveals that members of a CU are less likely to sign a new PTA than non-CU member countries as the Partner’s PTA effect is magnified by the CU’s joint negotiation requirement for a new PTA. Based on our n-country model of PTA proliferation, we conduct some calibration exercises that yield a varying degree of predictive power.

“Contracting with Enemies?: Vertical FDI with Outsourcing Contracts” (with Jaebin Ahn).

An exploration of Korean MNCs’ foreign affiliate-level data reveals that a significant portion of manufacturing foreign affiliates sell both to related and unrelated firms at the same time. We refer to this as hybrid vertical FDI. We rationalize the presence of hybrid vertical FDI by modifying the otherwise standard property-rights model of global sourcing with the subsidiary level option of supplying inputs to unrelated customers in addition to related firms. Given the positive production externality from serving additional customers (that is proportional to the MNC’s productivity) and the costs of getting such benefit (that are increasing in relationship-specificity of the outsourced inputs), the model generates testable hypotheses that are robustly confirmed by our subsequent empirical analysis. ysis.