“The Birth of a Multinational: Innovation and Foreign Acquisition” (2026)
with Jim Goldman, Maria Guadalupe and Christian Roerig
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Baby_MNC.pdfThis paper studies how the option of multinational expansion shapes innovation and productivity at the domestic headquarters. Unlike exporting, multinational expansion relocates production—affiliate sales substitute for headquarters’ exports—so its effect on the incentive to innovate at home is ambiguous: the loss of exports lowers the return to innovating, while the transferability of technology within the firm enlarges the market its innovations serve, raising it. We use a rich panel of Spanish manufacturers (2000–2022) to document new stylized facts on
the joint dynamics of innovation, growth, productivity, and foreign investment. These empirical dynamics discipline a continuous-time model in which the firm chooses when to innovate and whether and when to expand abroad. Through the lens of the model, transferability dominates: becoming a multinational raises domestic headquarters’ productivity by 16%. This gain is hidden in standard comparisons: because firms make their first investment abroad after a run of
strong growth that later reverts, comparing the same firm before and after entry understatesthe gain from expanding—and can even show a decline where the true effect is positive.
PerfectMatch241122.pdf“The Perfect Match: Assortative Matching in Mergers and Acquisitions” (2024)
with Maria Guadalupe, Bernard Salanie and Catherine Thomas.
Revise and Resubmit at Journal of Political Economy
We interpret M&A deals in Western Europe during the 2010s as the equilibrium of a matching model. Merger surplus arises from complementarities between multiple firm pre-merger characteristics. Large, productive firms prefer to merge with similarly productive but smaller partners, suggesting positive complementarity in productivities and negative cross complementarity between productivity and scale. We use post-merger data to show that estimated complementarities are strong predictors of merged firm performance. Our results inform the empirical relevance of different theories of mergers.
Demir-Rappoport ARE 2026.pdf“Credit and Exports: Lessons from Micro-Level Data” (2026)
with Banu Demir
Annual Review of Economics, vol. 118 (forthcoming).
This article reviews recent evidence on how credit availability shapes exports. Advances in empirical strategies and the increasing availability of detailed firm- and transaction-level data shed light on mechanisms linking firms’ financial conditions to their entry, survival, and growth in export markets. Emerging work on the interaction between bank and trade credit highlights additional channels affecting export contracts. We conclude by outlining open questions and directions for future research.
TradeShock.pdf“Trade Shocks and Credit Reallocation” (2025)
with Stefano Federico and Fadi Hassan.
American Economic Review, vol. 115(4), pp. 1142-2085
This paper identifies a credit-supply contraction that arises endogenously after trade liberalization. Banks with loan portfolios concentrated in sectors exposed to competition from China face an increase in non-performing loans after China’s entry into the World Trade Organization. As a result, they reduce the supply of credit to firms, irrespective of the firm’s sector of operation. This cut in credit translates into lower employment, investment, and output. Through this mechanism, the financial channel amplifies the shock to firms already hit by import competition from China and passes it on to firms in sectors expected to expand upon trade liberalization.
Specialization_paper.pdfSpecialization_Appendix.pdf“Specialization in Bank Lending: Evidence from Exporting Firms” (2023)
with Daniel Paravisini and Philipp Schnabl
The Journal of Finance, vol. 78 (4), pp. 2049-2085
Brattle Group Prize 2023. First Prize Paper
We develop an empirical approach for identifying specialization in bank lending with granular data on borrower activities. We use it to analyze export market specialization with loan and export data for all exporters in Peru. We measure a bank’s market of specialization using its relative concentration of lending towards exporters to a given country. A bank’s country of specialization strongly predicts the correlation between an exporter’s credit from the bank and its volume of exports to the country. Also, new borrowers from a specialized bank are more likely to begin exporting to the country of specialization (and vice-versa). Finally, exports demand and credit supply shocks disproportionately affect borrowing from the specialized bank and exports to the specialization country, respectively. The results imply that bank specialization substantially curtails competition and augments the real economy effect of bank credit supply disruptions.
UK trade and FDI.pdf“UK trade and FDI: A post-Brexit perspective” (2018)
with Swati Dhingra, Gianmarco Ottaviano, Thomas Sampson, and Catherine Thomas.
Papers in Regional Science, 97 (1). pp. 9-24.
Leaving the EU will reshape the UK's economic relations with the rest of the world. This paper summarizes the findings of recent research studying the UK's role in the global economy, and the con- sequences of Brexit for UK trade, investment, and living standards. We emphasize that international integration affects investment and labour flows as well as trade in goods and services. There are important interdependencies between different forms of integration that should be accounted for when evaluating policy changes. Brexit is likely to make the UK poorer by reducing trade and investment flows, but the magnitude of the economic decline will depend upon the nature of the UK's post‐Brexit economic relations with the EU and the rest of the world. We conclude by considering options for UK‐EU relations after Brexit and how the UK should approach future trade negotiations.
RiskAversion.pdfAppendix_RiskAversion.pdf"Risk Aversion and Wealth: Evidence from Person-to-Person Lending Portfolios" (2017)
with Daniel Paravisini and Enrichetta Ravina
Management Science 63(2), pp. 279-297.
We estimate risk aversion from investors’ financial decisions in a person-to-person lending plat- form. We develop a method that obtains a risk aversion parameter from each portfolio choice. Since the same individuals invest repeatedly, we construct a panel dataset that we use to disentangle heterogeneity in attitudes towards risk across investors, from the elasticity of risk aversion to changes in wealth. We find that wealthier investors are more risk averse in the cross section, and that investors become more risk averse after a negative housing wealth shock. Thus, investors exhibit preferences consistent with decreasing relative risk aversion and habit formation.
Intrafirm_Trade.pdfAppendix_Intrafirm.pdfAppendix_Intrafirm.xlsx”Intrafirm Trade and Vertical Fragmentation in U.S. Multinational Corporations” (2016)
with Natalia Ramondo and Kim Rhul.
Journal of International Economics 98(1), pp. 51-59.
Using firm-level data, we document two new facts regarding intrafirm trade and the activities of the foreign affiliates of U.S. multinational corporations. First, intrafirm trade is concentrated among a small number of large affiliates within large multinational corporations; the median affiliate ships nothing to the rest of the corporation. Second, we find that the input-output coefficient linking the parent’s and affiliate’s industries of operation — a characteristic commonly associated with production fragmentation — is not related to a corresponding intrafirm flow of goods.
Dissecting.pdfDissecting_OnLineAppendix.pdf"Dissecting the Effect of Credit Supply on Trade: Evidence from Matched Credit-Export Data" (2015)
with Daniel Paravisini, Daniel Wolfenzon, and Philipp Schnabl.
The Review of Economic Studies 82(1), pp. 333-359.
We estimate the elasticity of exports to credit using matched customs and firm-level bank credit data from Peru. To account for non-credit determinants of exports, we compare changes in exports of the same product and to the same destination by firms borrowing from banks differentially affected by capital-flow reversals during the 2008 financial crisis. We find that credit shocks affect the intensive margin of exports but have no significant impact on entry or exit of firms to new product and destination markets. Our results suggest that credit shortages reduce exports through raising the variable cost of production, rather than the cost of financing sunk entry investments.
ProximityConcentration.pdf"The Proximity-Concentration Tradeoff under Uncertainty" (2013)
with Natalia Ramondo and Kim Ruhl.
The Review of Economic Studies 80(4), pp. 1582-1621.
This paper analyzes the firm’s choice between serving a foreign market through exports or through foreign affiliate sales in an environment characterized by country-specific shocks to the cost of production. Our model predicts that country pairs with less correlated output fluctuations trade more, relative to affiliate sales, while countries with more volatile fluctuations are served relatively more by exporters than by foreign affiliates selling abroad. Using detailed data on trade from Feenstra, Romalis and Schott (2002) and affiliate sales from the Bureau of Economic Analysis, we find empirical support for our model’s predictions.
RoleMultinationals.pdfMatlabRole.pdf"The Role of Multinational Production in a Risky Environment" (2010)
with Natalia Ramondo.
Journal of International Economics 81, pp. 240-252.
This paper explores the aggregate consequences of Foreign Direct Investment (FDI) on the opportunities for risk diversification available to consumers. The crucial difference between FDI and other international financial flows is that the former involves technology flows across countries. We present a model where firm-embedded productivity can be transferred costly across countries through the activity of multinational firms. We find that risk patterns affect multinationals’ location decisions, and, in turn, these decisions change the scope for international risk diversification even in a world with complete financial markets.
Dollarization.pdf"Persistence of Dollarization after Price Stabilization" (2009)
Journal of Monetary Economics 56, pp. 979-989
Credit contracts in developing countries are often denominated in foreign currencies, even after many of these economies succeeded in controlling inflation. This paper proposes a new interpretation of this apparent puzzle based on the demand for insurance against real shocks: the fact that devaluations occur more frequently in adverse states of the world provides a motive for holding dollar assets. This approach implies a complementarity between the optimal monetary policy and the currency denomination of contracts. When a large proportion of liabilities is denominated in a foreign currency, the optimal exchange rate volatility is low, which reinforces the demand for dollar assets.
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