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: Natural disasters pose significant challenges to developing economies, with Mexico being highly exposed to hydrometeorological events such as tropical storms and hurricanes. This paper analyzes the short-term effects of these disasters on formal employment in Mexico, using high-frequency, municipality-level data from the Mexican Institute of Social Security (IMSS) and the National Center for Disaster Prevention (CENAPRED) from 2000 to 2020. We find that natural disasters lead to an average 1% decline in formal employment, with effects persisting for up to two months. The impacts are heterogeneous: female and low-wage workers experience larger and more immediate employment losses, while high-wage jobs and small businesses are affected with a delay. In contrast, young workers and large firms often see employment gains in the aftermath. Sectoral analysis reveals that utilities, commercial services, transport, communication, and extractive industries are negatively affected, whereas agriculture, commerce, construction, and social services show positive effects within six months. Regionally, central and southern Mexico, areas with higher exposure and vulnerability, suffer the most severe employment losses, reaching up to 6%. These findings underscore the need for targeted, climate-sensitive labor and disaster policies to protect vulnerable groups and regions, and highlight the importance of further research into the mechanisms driving these effects.

• 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.