Katharina Erhardt

I am a Professor of Economics at Heinrich Heine University Düsseldorf, the Düsseldorf Institute for Competition Economics (DICE) and at the Kiel Institut where I am leading the Industrial Policy Lab. I am also a Research Affiliate at CESifo and a member of the Managing Board of the European Trade Study Group.

My research lies at the intersection of international trade and economic geography. I analyze how global economic integration affects firms and industries, with a particular focus on the role of trade and industrial policies in shaping patterns of production, specialization, and the integration of firms into international production networks. Furthermore, my work examines the distributional consequences of globalization for firms, regions, and labor markets.

You can find my CV here.

erhardt@dice.hhu.de

Photo Credits: Susanne Schmidt-Dominé

Publications

Egger, Peter and Katharina Erhardt (2024): Heterogeneous Effects of Tariff and Nontariff Trade-Policy Barriers in Quantitative General Equilibrium. Quantitative Economics, 15: 453-487.

Egger, Peter, Katharina Erhardt, and Gerard Masllorens (2023): Backward versus Forward Integration of Firms in Global Value Chains. European Economic Review (153).

Erhardt, Katharina and Simon Haenni (2022): The Cultural Roots of Firm Entry, Exit, and Growth. The Economic Journal 132 (686), pp. 2767–2814.

[Media Coverage: NZZ am Sonntag, L'AGEFI, RTS, 20 Minutes]

[Best Paper Award at the 18th GEP/CEPR Annual Postgraduate Conference, Best Paper Award at the Annual Congress of the SSES 2019]

Egger, Peter, Katharina Erhardt and Christian Keuschnigg (2020): Heterogeneous Tax Sensitivity of Firm-level Investments, Journal of Economic Behavior and Organization (176), pp. 512-538.

Raphael Auer, Ariel Burstein, Katharina Erhardt and Sarah Lein (2019): Exports and Invoicing: Evidence from the 2015 Swiss Franc Appreciation, American Economic Review Papers & Proceedings (109), pp. 533-538.

Egger, Peter, Katharina Erhardt and Andrea Lassmann (2019): Immigration and Firms' Integration in International Production Networks, European Economic Review (111), pp. 1-34.

Erhardt, Katharina (2017): On Home Market Effects and Firm Heterogeneity, European Economic Review (98), pp. 316-340.

Egger, Peter, Katharina Erhardt and Andrea Lassmann (2015): Productivity and R&D as Drivers of Exports and Domestic Sales - Semi-parametric Evidence from French Firm-level Data, World Economy 38 (7), pp. 1115-1129.

Working Papers

Arni, Patrick, Peter Egger, Katharina Erhardt, Matthias Gubler, and Philip Sauré: Heterogeneous Impacts of Trade Shocks on Workers. (Revise and Resubmit at the Review of Economics and Statistics)

[CEPR Discussion Paper 19017] [CESifo Working Paper 11041] [IZA DP 16895]

Abstract: This paper identifies the causal effects of trade shocks on worker outcomes. We exploit a unique setting based on three pillars: (i) a large, unanticipated appreciation of the Swiss franc in 2015, (ii) detailed data with firm-level exposure to trade via output markets (both domestic and foreign) and imported inputs (distinguished by their foreign labor content), which we match to (iii) worker-level panel data with rich information on labor-market outcomes. We find that increased competition in output markets induces negative effects on earnings for workers of affected firms. Conversely, a price drop of foreign inputs generates positive effects for workers of importing firms, but less so the higher the labor content of these imported inputs. All these patterns are consistent with a parsimonious model of task-based production. Moreover, positive and negative earnings effects are especially strong for workers in the lower tail of the within-firm wage distribution and, in particular, for workers who change their employer, pointing at involuntary (voluntary) job separations from firms that are negatively (positively) affected by the exchange rate appreciation.

Erhardt, Katharina and Apoorva Gupta: Go wide or go deep: Margins of new trade flows. (Revise and Resubmit at AEJ:Micro)

[CESifo Working Paper 11269][DICE Discussion Paper 415]

Abstract: This paper aims to understand the pathways by which exporters become entities that sell multiple goods to multiple customers. To understand firms' export strategies, we analyse new trade flows -- new seller-buyer-product combinations -- of individual exporters. Our first finding highlights that these new trade flows are an important margin for firms of all size classes, accounting for approximately 62% of their overall trade flows. Classifying new trade flows into going-wide (introducing new products) and going-deep (reaching new buyers for existing products), we find that the dominant margin of export expansion depends on the size and life-cycle stage of exporters; smaller firms rely relatively more on going-wide and large firms more on going-deep. We also demonstrate that selling new products is different from selling existing products: Firms target new products to a single, often new, buyer. To rationalize these facts, we propose a conceptual framework where firms allocate scarce sales personnel between selling existing products to more buyers and matching with new buyers for introducing new products. We empirically test and confirm the model's key predictions. In particular, we use the 2015 Swiss exchange rate shock and show that going-deep is more pronounced as an export strategy when a firm's effective market size is relatively larger. The findings suggest varying scope and size for firms born in different phases of globalisation.

Egger, Peter, Katharina Erhardt, and Sergey Nigai: Empirical Productivity Distributions and International Trade. (Revise and Resubmit at Quantitative Economics)

[CEPR Discussion Paper 15160]

Abstract: This paper reassesses the question of the importance of comparative advantage in a model of international trade with heterogeneous firms where productivity is distributed nonparametrically. This assessment rests on a method of isolating empirical productivity distributions for 15 countries and 17 sectors using a combination of firm-level and macroeconomic data together with the structure of the model. In this setting, the effects of technology on trade are substantial and cannot be captured by a small set of technology parameters. On average, comparative advantage accounts for 23% of the observed variation in trade or 70% in the absence of selection effects.

Egger, Peter, Katharina Erhardt, and Davide Suverato: How Aggregate Uncertainty Shapes the Spatial Economy.

[CEPR Discussion Paper 19016]

Abstract: This paper develops a dynamic spatial general equilibrium model of a multi-region multi-sector open economy in which heterogeneous agents choose optimally where to locate and work, by making forward-looking decisions under aggregate uncertainty about future realizations of economic fundamentals and idiosyncratic risk of aging. To address the role of aggregate uncertainty in interaction with spatial determinants of the equilibrium, we solve the system of individual dynamic optimal-control problems under rational expectations as a Mean Field Game, in discrete time, over the discrete state space, preserving the full non-linear structure of the problem. With a calibration for France, we demonstrate that households behave substantially differently between uncertainty and perfect foresight. By affecting the continuation value of jobs -- differently by location and age -- uncertainty alters the patterns of labor reallocation in transition as well as in the long run. The impact of uncertainty alone on individual lifetime welfare is negative on average, but it triggers heterogeneous welfare changes: substantial portions of the population lose much more than the average (are stuck in less attractive jobs) while some agents actually gain (since others did not reallocate). Consequently, the spatial distribution of economic activity deviates ceteris paribus systematically when agents make decisions under uncertainty compared to perfect foresight. In that sense, aggregate uncertainty per se shapes the spatial economy.

Dibiasi, Andreas and Katharina Erhardt: Young Firms under Pressure: Heterogeneous Investment Responses to a Trade Shock

[CESifo Working Paper 12098][DICE Discussion Paper 426]

Abstract: This paper studies heterogeneous firm responses to a sudden trade-induced profitability shock -- the 2015 Swiss franc appreciation. Using firm-level investment data and a novel measure of exposure, we document that this trade shock causes large and persistent investment declines among affected firms. Examining heterogeneous responses among firms with similar exposure, we find that differences in responsiveness are not explained by economic fundamentals but are strongly linked to firm age and managerial experience. Younger firms and those led by less experienced managers react substantially more strongly. We argue that these empirical patterns are consistent with a model of Bayesian learning, in which firms update their beliefs about profitability over time. The results provide important insights into the long-lasting effects of trade shocks on business dynamism, capital investment, and local employment.

Work in progress

Egger, Hartmut, Peter Egger, Katharina Erhardt, and Leandro Navarro: Exchange rate pass-through and the mode of foreign market entry

Abstract: International transactions show diverse patterns of invoicing currencies. Currency choice is an important feature of firms’ exporting decisions, in particular when they face uncertainty about future exchange rates under nominal price rigidities. Using transaction-level data on Swiss manufacturing firms, we observe that the entry mode of firms in foreign markets affects their invoicing-currency choices in those markets. To explain the observed empirical pattern, we set up a multi-country model with oligopolistic market structure, in which firms can serve foreign consumers either by exporting or by foreign investment and local supply. Our model is well equipped to accommodate the empirical finding that foreign investors more likely choose consumer-country currency for invoicing. In our model, we also show that in an environment with exchange rate uncertainty nominal price rigidities increase the attractiveness of choosing multinational production instead of exporting.

Erhardt, Katharina, Andreas Lichter and Max Loeffler: The Role of Comparative Advantage in Shaping Economic Geography - Evidence from East Germany

Abstract: This paper investigates the role of comparative advantage in shaping the industrial structure of East Germany after reunification. Using product-level trade data from the 1980s, we estimate the comparative advantage of East German manufacturing industries relative to West Germany. A standard Ricardian framework predicts that, following market reintegration, regions should expand in industries where East Germany held a comparative advantage and contract in those where it did not. The evidence confirms this prediction: regional industrial composition is strongly aligned with pre-reunification comparative advantage. Regions specialized in less competitive industries lost manufacturing share and shifted toward services. Two key lessons emerge. First, comparative advantage is highly localized and cannot be easily replicated across regions. Second, productivity gaps between East and West Germany are smaller in services than in manufacturing. We extend the standard framework to incorporate external economies of scale in order to account for these regional patterns.

Erhardt, Katharina and Jonas Keck: Unbundling Multiproduct Exporters: What Do They Actually Sell?
Erhardt, Katharina, Giulia Sabbadini and Joel Stiebale: Vertical Integration and Market Access: Evidence from the Production Network

Chapters in books

Erhardt, Katharina and Andrea Lassmann (2023): Immigration and international trade in Oxford Research Encyclopedia of Economics and Finance
Baltagi, Badi, Peter Egger and Katharina Erhardt: The Estimation of Gravity Models in International Trade in The Econometrics of Multi-dimensional Panels - Theory and Applications edited by Laszlo Matyas, Springer, 2017.

Publications in non-peer-reviewed journals

Egger, Peter and Katharina Erhardt (2016): EU-Swiss Trade Integration via Input-Output Linkages, Aussenwirtschaft, 67 (03), pp. 1-23.

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