Santiago Justel V.

Research Interests

International Trade, Macroeconomics, International Economics, Empirical Industrial Organization

Working Papers

• Disrupting Employment. The Effects of Natual Disasters in Mexico, with José Jerónimo Olvera León (draft)

Abstract: Climate change significantly impacts the global economy, with natural disasters causing extensive damage, especially in developing countries like Mexico. This study investigates the effects of hydrometeorological events on employment in Mexico, using data from the Mexican Institute of Social Security (IMSS) and the Mexican National Center for Prevention of Disasters (CENAPRED), covering 2000 to 2020. Natural disasters result in a 1% decrease in pre-disaster employment, with impacts lasting up to two months. Female employment is particularly affected compared to male jobs, and low-wage positions suffer initially, while high-wage positions are negatively impacted four months post-disaster. Small businesses face employment losses five months after a disaster, whereas large companies experience positive employment effects. Young workers benefit employment-wise post-disaster, while older workers see significant declines. Sectoral impacts are varied: utilities, commercial services, transportation, communication, and extractive industries face adverse effects, while agriculture, commerce, construction, and social services experience positive impacts after six months. Regionally, central and southern regions in Mexico are more exposed to and affected by these climatic events, with effects of around 6%. These findings have crucial implications for formulating tailored and climate-conscious policies for disaster management and labor market resilience, particularly in vulnerable regions, sectors, and demographic groups. They also highlight the need for future research to confirm these emerging trends and understand the underlying drivers, ensuring effective preparedness and response to natural disasters.

• Quality Guarantee and Trade Credit. Evidence from Chilean Exporters (JMP / submitted)

Abstract: What explains the provision and maturity of trade credit contracts? The existing literature has focused mainly on explaining the empirical regularity that firms consistently use trade credit, but has struggled to explain why one side of the market – sellers – systematically provide most of the credit. This paper develops a model where trade credit is used by sellers to signal product quality and documents empirical support for predictions of the model. In an equilibrium of the model, by offering products on credit, the producer is signaling that her products are of high quality. In addition, through the duration of credit, the seller provides a quality guarantee by allowing the buyer to certify the quality of the product before payment. The theory predicts a positive relationship between product quality, the likelihood of providing credit, and the maturity of trade credit. Furthermore, the model predicts positive correlations between credit maturity and other factors such as better legal institutions, product market competition, and difficulty of quality assessments. Using the universe of Chilean transaction-level customs data, I confirm these predictions. Finally, the paper considers the model's implications for recent policy changes in the U.S., France, and Chile to limit the maturity of trade credit.

• Trade Credit and Markups,  with  Álvaro García-Marín and Tim Schmidt-Eisenlohr CESifo Working Paper Series. 

Abstract: Trade credit is the most important form of short-term finance for U.S. firms. In 2017, non-financial firms had about $3 trillion in trade credit outstanding equaling 20 percent of U.S. GDP. Why do sellers lend to their buyers in the presence of a well-developed financial sector? This paper proposes an explanation for the puzzling dominance of trade credit: When sellers charge markups over production costs and financial intermediation is costly, then buyer-seller pairs can save on their overall financing costs by utilizing trade credit. We derive a model of trade credit and markups that captures this mechanism. In the model, the larger is the markup and the larger is the difference between the borrowing and the deposit rate, the more attractive is trade credit. The model also implies that trade credit use increases with repeated interactions and that this effect is stronger for complex products. Using Chilean data at the firm-level to estimate markups and at the trade-transaction level to analyze payment choices, we find strong support for the model.

• Firm Heterogeneity and Trade Credit. Evidence from Chile. (preliminary draft)

Publications (Pre doctoral studies)

"Financial Frictions and the Transmission of Foreign Shocks in Chile," in Raddatz, Saravia, and Ventura (eds.) Global Liquidity, Spillovers to Emerging Markets and Policy Responses, Central Bank of Chile, 2015, with Markus Kirchner and Javier García-Cicco.

“Real effects of changes in the Price of energy” (in Spanish), Working Papers Central Bank of Chile, No. 759, June 2015. in García, C. (eds.)  Economía y Energía: La Experiencia Chilena, Ch. 10, Chile, 2016, with Lucas Bertinatto, Javier García-Cicco and Diego Saravia. 

“Exchange rate pass-through to prices: VAR evidence for Chile”, Journal Economía Chilena (The Chilean Economy) 19.1 (2016): 20-37, with Andrés Sansone.