Publications in peer-reviewed Journals
Skill Scarcity and Export Intensity, 2023, Canadian Journal of Economics/Revue canadienne d'économique, 56: 719-757.
(joint work with Carlo Perroni) Citation (bibtex)
Abstract. We describe a model of trade with skills-based product differentiation and non-proportional trade costs that predicts a positive correlation between firms' export intensity, the price of their exports and the wages they pay to their workers. In equilibrium, firms that employ workers with comparatively scarcer skills export a larger proportion of their output, pay higher wages and charge higher prices. In line with empirical evidence, the model predicts that trade liberalization can cause the distribution of earnings to become more polarized, with patterns that reflect the heterogeneous effects of trade liberalization on firms' export performance.
Capital Allocation Within Firms and International Trade, 2024, Journal of International Economics, conditionally accepted, forthcoming.
(joint work with Sebastian Doerr, Dalia Marin and Thierry Verdier) Citation (bibtex)
Abstract. This paper introduces an internal capital market into a two-factor model of multi-segment firms that features managers' empire building and informational frictions within the organization. Our novel theory shows that international trade imposes discipline on managers and improves capital allocation across divisions, thereby lowering the conglomerate discount. The theory can explain why exporters exhibit a lower conglomerate discount than non-exporters (a new fact we establish). We exploit the China shock as an exogenous shock to competition to confirm the model's predictions with data on US companies.
(a current version of this working paper is available upon request at [email protected])
Publications in working paper series
Fantastic Beasts and Where to Find Them, 2024, CEPR Discussion Paper No. 18935.
(joint work with Gianmarco Ottaviano) Citation (bibtex)
Abstract. Fantastic beasts are magical creatures that cannot be seen unless one looks for them with the eye of the wizard, but that still play a significant role in the world. The fantastic beasts we hunt and find in the present paper are welfare changes induced by resource shocks that are invisible in quantitative trade models with monopolistic competition and heterogeneous firms if one relies on the pervasive assumption of demand exhibiting constant elasticity of substitution. We argue that, for fantastic beasts to materialize, markups have to vary across firms and firm heterogeneity has to vary across sectors. This is shown both theoretically and empirically exploiting a panel of 76 countries and 17 manufacturing industries for the period 1995-2020.
(a current version of this working paper is available upon request at [email protected])
How Aggregate Uncertainty Shapes the Spatial Economy, 2024, CEPR Discussion Paper No. 19016.
(joint work with Peter Egger and Katharina Erhardt) Citation (bibtex)
Abstract. This paper develops a dynamic spatial general equilibrium model of a multi-region multi-sector open economy where heterogeneous agents choose optimally their job, making forward-looking decisions under aggregate uncertainty. We solve the system of individual dynamic optimal-control problems under rational expectations as a Mean Field Game, in discrete time and state space, preserving the full non-linear structure of the problem. With a calibration for France, we demonstrate that households behave substantially differently between uncertainty and perfect foresight. Uncertainty alters the patterns of labor reallocation in transition as well as in the long run.
(a current version of this working paper is available upon request at [email protected])
Mis-allocation Within Firms: Internal Finance and International Trade, 2020, CEPR Working paper No. DP14478
(joint work with Sebastian Doerr, Dalia Marin and Thierry Verdier) Citation (bibtex)
Abstract. We develop a novel theory of mis-allocation within firms (rather than between firms) due to managers' empire building. We introduce an internal capital market into a two-factor model of multi-segment firms. We show that more open markets impose discipline on competition for capital within firms, which explains why exporters exhibit a lower conglomerate discount than non-exporters (a fact that we establish). Testing our model with data on US companies, we establish that import competition reduces mis-allocation within firms. A one standard deviation increase in Chinese imports lowers the conglomerate discount by 32% and over-reporting of costs by up to 15%.
(a current version of this working paper is available upon request at [email protected])
Trade and the Labor Market: a Dynamic Model with on-the-job Search, 2014, Centro Studi Luca d'Agliano, University of Milan, Working paper No. 2014-368 Citation (bibtex)
Abstract. This paper develops a dynamic general equilibrium model of trade with heterogeneous firms and homogeneous workers who search for a job also when they are employed; on the job search (OJS). The model is able to predict the short-run costs due to labor market adjustment and the long-run gains from increased trade exposure. The model shows how the destruction of jobs, caused by trade-induced rm exit, determines a rise in unemployment and a reduction in the probability to find a job. As a result, welfare decreases in the short-run. However, this allocation is unstable. The excessively low labor market tightness triggers the recovery. During the adjustment, the probability of receiving a wage o er grows, the wages increase and new exporters expand employment also at the expenses of relatively low productivity firms which shrink. In the long-run, trade increases welfare; not only because of a greater aggregate productivity, but also because the initial loss of jobs is o set and the average wage is higher.
(a current version of this working paper is available upon request at [email protected])
Income and Wealth Distributions in a Population of Heterogeneous Agents, 2014, Munich Discussion Paper No. 2014-21
(joint work with Pietro Muliere) Citation (bibtex)
Abstract. This paper develops a simple framework to characterize the distribution of income and wealth in a real business cycle model. Agents are of two types depending on the human factor of production they own and they are located in separated markets,cities. In each city the two types of agent match to produce a composite factor, human service. We show that if the population is an exchangeable sequence of agents’ types generated according to a Pòlya urn then (i) the share of agents’ type follows a Beta distribution and (ii) the functional form of the matching function belongs to the family of the constant elasticity of substitution, with agent shares that depend on the composition of the population.
(a current version of this working paper is available upon request at [email protected])
Work in progress, selected list
Markup distortions and optimal non-discriminatory industrial policy
(joint work with Marc Melitz, Mikhail Oshmakashvili, and Gianmarco Ottaviano)
Started in 2023, Bocconi University, mimeo.
Solving Large Spatial Dynamic Economy Models with Aggregate Uncertainty in Discrete Time
(joint work with Peter Egger and Katharina Erhardt)
Started in 2022, recently presented by Peter Egger at Yale International Trade Workshop, New Haven, November 8, 2023.
Technological Change, Market Power and Wage Inequality in the Global Economy
(joint work with Gianmarco Ottaviano).
Started in 2018, and recently presented by Gianmarco Ottaviano at Jerusalem Advanced School in Economic Theory, organized by Harvard University and Hebrew University of Jerusalem, Jerusalem, June 30, 2022.