Financial Frictions and New Exporter Dynamics
(with David Kohn and Michal Szkup)
International Economic Review , forthcoming.
Abstract: This paper studies the role of financial frictions as a barrier to international trade. We study new exporter dynamics to identify how these frictions affect export decisions. We introduce a borrowing constraint and working capital requirements into a standard model of international trade, with exports more working capital intensive than domestic sales. Our model can quantitatively account for new exporter dynamics, in contrast to a model with sunk export entry costs. We provide additional evidence in support of our mechanism. We find that financial frictions reduce the impact of a trade liberalization, suggesting that they constitute an important trade barrier.
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Quality of Life, Firm Productivity, and the Value of Amenities across Canadian Cities
(with David Albouy and Casey Warman)
Canadian Journal of Economics , 2013, 46(2), pp.379-411.
Abstract: We estimate quality of life and productivity differences across Canada's metropolitan areas in a hedonic general equilibrium framework. These are based on the estimated willingness to pay of heterogeneous households and firms to locate in various cities, which differ in their wage levels, housing costs, and land values. Using 2006 Canadian Census data, our metropolitan quality of life estimates are somewhat consistent with popular rankings, yet find Canadians care more about climate and culture. Quality of life is highest in Victoria for anglophones, Montreal for francophones, and Vancouver for allophones, and lowest in more remote cities. Toronto is Canada's most productive city; Vancouver is the overall most valuable city.
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Financial Development and International Trade
Abstract: This paper studies the industry-level and aggregate implications of financial development on international trade. I set up a multi-industry general equilibrium model of international trade with heterogeneous firms subject to export entry costs and financial frictions, in which industries differ in their dependence on external finance. The model is parametrized to match key features of plant-level data. I find that financial frictions have a large effect on the extent of international trade across industries, but a negligible impact at the aggregate-level. I show that these findings are consistent with estimates from cross-country industry- and aggregate-level data.
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International Trade and Intertemporal Substitution
(with Michael Waugh )
Abstract: This paper studies dynamic extensions of international trade models and their ability to explain the behavior of imports at business-cycle frequencies. Our premise is that because international trade is time-intensive, variation in the rate at which agents are willing to substitute across time affects how trade volumes respond to changes in output and prices. We formalize this idea and find that our calibrated model is quantitatively consistent with cyclical properties of U.S. imports. We then show that given the behavior of output and relative prices during the 2008-2009 crisis, our model goes a long way toward explaining the collapse in U.S. imports.
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