joint with Beverly Mendoza and Joseph Westenberg; Economics & Politics. 2023;1–34.
The Trump administration imposed tariffs on Chinese imports starting in 2018. American firms that rely on Chinese imports were allowed to apply for exclusions for products. In this paper, we investigate political factors affecting the approval rates for these tariff exclusions. We also consider factors that may impact this estimate, such as firm selection into requesting and legitimacy of request. We find that tariff exclusion is increasing in the Republican vote share. Counties with a 10 percentage point higher Republican vote share experience a 10% higher probability of tariff exclusion approval.
joint with Arielle Knudsen; Quarterly Review of Economics and Finance, 87 (2023) 132–141
We identify an effect of deep trade agreements that is previously not studied in the literature. The 2012 US-Colombia Trade Promotion Agreement caused Colombia to liberalize its financial markets, providing greater access to foreign financial services. We show that this financial market liberalization effectively reduced credit constraints faced by Colombian firms. We merge balance sheet data with export transaction data, allowing us to analyze changes in export decisions of more than 7000 firms over the span of 10 years. As a result of the reforms, in sectors that rely more on external financing, exports have increased to the rest of the world. That is, the trade-diversion effects of the agreement were reduced due to improved access to external financing by foreign capital. Thus, we demonstrate a new channel for potential welfare gains from trade agreements.
International Journal of Economics and Financial Issues Vol 10, No 1 (2020)
This paper examines the role of export market uncertainty in the financing decisions of firms. To evaluate the effect of uncertainty reduction, I use the free trade agreement between Colombia and the USA that came into force in May 2012. Using firm-level data, and a diff-in-diff methodology, I find empirical evidence that Colombian firms that exported agricultural products to the USA experienced a decline in their leverage after the agreement’s implementation. I further disaggregate the composition of liabilities to find that the source of decline was borrowing from financial institutions. I develop an oligopoly competition model with product market uncertainty where the source of uncertainty is embedded in a firm’s profit function. The model predicts that the reduction in uncertainty leads to the decline in borrowing. The results of this paper suggest that trade agreements can benefit exporters in developing countries with imperfect capital markets where borrowing is costly.
joint with Hameed Marie
This paper investigates the impact of the liquidity shock on the exporting behavior of firms. Using the natural experiment, brought by the reform to the Colombian short-term financing legislation in 2011, we study how the liquidity constraints have impacted Colombian exporters. Our sample includes over 3600 firms that exported before and after the reform took place. Using a difference-in-differences methodology, we establish that the liquidity shock has resulted, on average, in a 10% decline in exports following the reform. The results are robust to both monetary and weight measures of export, as well as to the relative share of export in the sales and ratio of exports to domestic sales. Our findings strengthen the argument that access to liquidity financing is extremely important for facilitating trade. (draft available on request)
joint with Beverly Mendoza & Jose Manuel Paz y Miño