Research

Licensing, Technology and Multinational Production  (JMP, new draft coming soon)

Abstract: How flexible are multinational production networks when assembly technologies are specialized and costly to reconfigure? Using detailed data on the global automotive industry from 2000-2023, I document that production is organized around discrete technologies (platforms) that constrain where each product can be assembled and that firms overcome this constraint by sharing technologies via licensing. Exploiting the 2011 Tohoku earthquake as a quasi-natural experiment, I show that platform compatibility constrains firms' ability to reallocate production after local shocks. To account for this, I develop and estimate a structural model of multinational production with discrete technology choices and inter-firm licensing. Both technology constraints and licensing have important effects on firms' expected costs and profits, shaping the global allocation of production and consumer surplus. These new margins alter our understanding of conventional trade policy. Traditional frameworks abstracting from production technologies overstate the reallocation induced by tariff increases and correspondingly understate the price incidence borne by the tariffing country's consumers. Beyond quantifying these novel margins, the model introduces new policy instruments, targeting the access to technologies directly. Such technology restrictions, which no conventional MP framework can represent, produce reallocation comparable in size to a broad tariff war. Their incidence, however, is different: the burden concentrates on the specific firms and locations bound by the affected technologies, rather than distributing across every producer at a tariffed origin.

The U.S.-China Trade War and the Geography of Global Production, with Harald Fadinger, Lei Li & Jan Schymik

[CEPR Discussion Paper No. 21855, VoxEU column]

Abstract:  We study how the U.S.-China trade war affected manufacturing activity in third countries using a novel plant-level dataset covering millions of establishments in 50 major economies, including affiliates of more than 200,000 multinational enterprises (MNEs). Combining establishment-level data with detailed tariff information, we estimate the effects of U.S. and Chinese punitive bilateral output and input tariffs on sales, employment, and establishments across countries, industries, and stages of production. We find that third-country effects of the trade war are highly heterogeneous and largely offsetting, yielding moderately negative net effects overall. Most of the adjustment is driven by multinational enterprises reallocating activity across affiliate networks, while domestic firms respond much less.

Flooded with Uncertainty: Data and Design Pitfalls in Measuring the Granular Impact of Natural Disasters, with Thierry Mayer and Michele Fioretti (draft upon request)

Abstract:  Extreme weather events pose a growing risk to global production. The growing body of literature on the impacts of natural disasters, such as floods, on households, firms, and economic development largely relies on event study designs exploiting publicly available climate data. This paper documents the challenges and pitfalls associated with this approach using a commonly used database of floods. To do so, we study the responses and adaptations to flood exposure of firms in the automotive industry. We show that, in our setting, (i) floods are often missing or spatially / temporarily misallocated in the data; (ii) canonical Difference-in-Differences methods are sensitive to the design and lead to qualitatively different conclusions. We explore the mechanisms behind this dispersion and provide guidance on how to apply the methods to these datasets to deliver credible results.

Heterogeneous Regulations Harmonization in Global Production, with Monika Mrázová & Céline Carrère