"Monitoring Costs and Offshoring with Heterogeneous Firms" (August 2008 - In progress)Abstract:
We present a model in which monitoring costs determine firms' outsourcing and offshoring decisions. We predict that the most productive firms outsource in the South, while the least productive produce in-house in the North. Within the range of intermediate productivities, firms with lower productivity outsource in the North, and those with higher productivity perform in-house production in the South. Offshoring gives rise to higher average world productivity, but an overall loss of variety. Exit of Southern firms following offshoring is sufficient to offset any change in the number of Northern firms producing ex post. Inequality between Northern entrepreneurs and Northern workers rises, while that between Northern workers and Southern workers falls. Inequality between Northern entrepreneurs and everyone else rises.
Natural Resource Windfalls, Consumption Booms and Endogenous GrowthAbstract:
This paper examines the `resource curse' in a model of a small open economy in receipt of a resource windfall, in which growth is explicitly profit-driven. A given level of resource revenue is accompanied by a consumption boom and a growth reduction where the representative agent is `impatient', which is shown to have detrimental welfare consequences. A resource boom under `impatience' exacerbates existing growth externalities and moves the economy away from the first best allocation. Growing resource revenue also unambiguously crowds out private sector innovation, lowering growth. The policymaker can tax the windfall on impact and achieve the first best if she can correctly identify the nature of the representative agent's time preference. But the policymaker can also cause a resource curse if she taxes the windfall when the agent is `patient'. Allowing the economy to lend and borrow internationally prevents the curse.
Trade Flows, Multilateral Resistance, and Firm Heterogeneity(with Alberto Behar)
Abstract:
We derive, estimate and perform comparative statics on a
gravity equation that unites two recent strands of the literature on international trade: that stressing the importance of multilateral resistance, and that stressing the importance of firm heterogeneity and country-selection into trade. Ignoring either can lead to erroneous results. Combining the two features gives rise to important interactions between country size and export responses to trade liberalisations. We find that (a) if all countries reduce their trade frictions, the impact of multilateral resistance is so strong that bilateral trade falls in many cases. (b) we find that elasticities at the extensive margin of trade are larger for smaller countries. This undermines the positive relationship between country size and trade responses suggested by multilateral resistance effects alone for small traders. Comparative statics therefore must account for both multilateral resistance and firm heterogeneity in all cases. (c) we find for isolated bilateral reductions in trade frictions, multilateral resistance has a small effect on the average country. This is not the case however for large countries or those with few trading partners, for which multilateral resistance effects are important even when considering isolated bilateral changes in trade frictions.
Logistics and Exports - In progress(with Alberto Behar and Phil Manners)
Oligopolistic Banks, Leverage, and Managerial Incentives(In progress)