Skilled Worker Migration and Trade: Inequality and Welfare

We develop a two-sector, two-country model where trade is driven by technological differences. Each country is populated by large number of heterogeneous workers distinguished by their level of skills. Given that one country has a technological advantage in the skilled intensive good when we allow for both trade and migration skilled workers migrate to that country. We analyze the consequences of this migration for both inequality and welfare for the source and the host country.skilled labor, migration, welfare, political economy

The Impact of Financial Market Frictions on Trade Flows, Capital Flows and Economic Development

We introduce financial frictions in a two sector model of international trade with heterogeneous agents. The level of specialization in the economy (economic development) depends on the quality of financial institutions. Underdeveloped financial markets prohibit an economy to specialize in sectors where finance is important. Capital flows and international trade are complements when countries differ in the degree of development of their financial sectors. Capital flows to countries with more robust financial institutions which in turn allow their economies to develop sectors that are financially dependent.trade flows, capital flows, financial frictions, economic development

Skilled Worker Migration and Trade: Inequality and Welfare

We develop a two-sector, two-country model where trade is driven by technological differences. Each country is populated by large number of heterogeneous workers distinguished by their level of skills. Given that one country has a technological advantage in the skilled intensive good when we allow for both trade and migration skilled workers migrate to that country. We analyze the consequences of this migration for both inequality and welfare for the source and the host country.Skilled Labor, Migration, Welfare, Political Economy

Market Entry Costs, Underemployment and International Trade

We develop a small, open economy, two-sector model with heterogeneous agents and endogenous participation in a labor matching market. We analyze the implications of asymmetric market entry costs for the patterns of international trade and underemployment. Furthermore, we examine the welfare implications of trade liberalization and find that under certain conditions the patterns of trade are not optimal. We also examine the robustness of our results when we allow for complementarities in the production function and for alternative matching mechanisms.Entry Costs, Patterns of Trade, Underemployment.

Market Entry Costs, Underemployment and International Trade

We develop a small, open economy, two-sector model with heterogeneous agents and endogenous participation in a labor matching market. We analyze the implications of asymmetric market entry costs for the patterns of international trade and underemployment. Furthermore, we examine the welfare implications of trade liberalization and find that under certain conditions the patterns of trade are not optimal. We also examine the robustness of our results when we allow for complementarities in the production function and for alternative matching mechanisms.entry costs, patterns of trade, underemployment

The Impact of Financial Market Frictions on Trade Flows, Capital Flows and Economic Development

We document that, at business cycle frequencies, fluctuations in nominal variables, such as aggregate price levels and nominal interest rates, are substantially more synchronized across countries than fluctuations in real output. To the extent that domestic nominal variables are largely determined by domestic monetary policy, this might seem surprising. We ask if a parsimonious international business cycle model can account for this aspect of cross-country aggregate fluctuations. It can. Due to spillovers of technology shocks across countries, expected future responses of national central banks to fluctuations in domestic output and inflation generate movements in current prices and interest rates that are synchronized across countries even when output is not. Even modest spillovers produce cross-country correlations such as those in the data.International business cycles, prices, interest rates.

Trade and the Distribution of Human Capital

We develop a two-country, two-sector model of trade where the only difference between the two countries is their distribution of human capital endowments. We show that even if the two countries have identical aggregate human capital endowments the pattern of trade depends on the properties of the two human capital distributions. We also show that the two distributions of endowments also completely determine the effects of trade on income inequality. Then, we prove that there are long-term gains from trade if the marginal utility of income is constant or as long as losers from trade are compensated by winners. Finally, we look at a simple majority voting model. It turns out depending on the distribution of human capital, autarky and free trade with and without compensation may be the outcome of majority voting.patterns of trade, income distribution, welfare, political economy

Organizational Forms for Global Engagement of Firms

Global engagement of firms can take a variety of forms. We argue that there are considerable advantages of developing models that allow for a wide set of alternatives of organizational form. We illustrate this firstly using plant level data which allows us to distinguish firms that serve only the domestic market, firms that export final goods abroad, firms that outsource abroad the production of some of the intermediate inputs abroad, firms that own foreign plants abroad, and firms that do more than one of those activities. In our estimation we consider the relationship between productivity all the choice of organizational form. We then present a simple model of the firm that is flexible enough to capture the trade-offs between a great variety of organizational forms.Organizational Forms, Multinationals

The Inventory Channel of Trade Credit: Theory and Evidence

We develop a simple theoretical model with a stochastic demand framework that captures the trade-off between inventories and trade credit. The essence is that the firm is in the middle of a credit chain, and produces goods for sale, holding inventories of goods that were produced but unsold at a cost. In the face of uncertain demand for its products the firm extends trade credit to its financially constrained customers to obtain additional sales. Our model provides directly testable predictions to identify the response of accounts payable and accounts receivable to changes in the cost of inventories, profitability, risk and liquidity, and importantly, this influence operates through a production channel. Our results support the model and complement many existing studies focused on explaining the financial terms of trade credit

Financial Constraints, the Distribution of Wealth and International Trade

We develop a simple theoretical model to examine the impact of the distribution of wealth on the patterns of trade when capital markets are imperfect. Our model predicts that the dispersion of wealth can be a determinant of comparative advantage for low-income countries with poor financial institutions. We find support for these prediction using export and financial panel data from a large sample of countries.