Aggregating from micro to macro patterns of trade

We develop a new framework for aggregating from micro to macro patterns of trade. We derive price indexes that determine comparative advantage across countries and sectors and the aggregate cost of living. If firms and products are imperfect substitutes, we show that these price indexes depend on variety, average demand/quality and the dispersion of demand/quality-adjusted prices, and are only weakly related to standard empirical measures of average prices, thereby providing insight for elasticity puzzles. Of the cross-section (time-series) variation in comparative advantage, 50 (90) percent is accounted for by variety and average demand/quality, with average prices contributing less than 10 percen

Ranking Mammal Species for Conservation and the Loss of Both Phylogenetic and Trait Diversity

The \u27edge of existence\u27 (EDGE) prioritisation scheme is a new approach to rank species for conservation attention that aims to identify species that are both isolated on the tree of life and at imminent risk of extinction as defined by the World Conservation Union (IUCN). The self-stated benefit of the EDGE system is that it effectively captures unusual \u27unique\u27 species, and doing so will preserve the total evolutionary history of a group into the future. Given the EDGE metric was not designed to capture total evolutionary history, we tested this claim. Our analyses show that the total evolutionary history of mammals preserved is indeed much higher if EDGE species are protected than if at-risk species are chosen randomly. More of the total tree is also protected by EDGE species than if solely threat status or solely evolutionary distinctiveness were used for prioritisation. When considering how much trait diversity is captured by IUCN and EDGE prioritisation rankings, interestingly, preserving the highest-ranked EDGE species, or indeed just the most threatened species, captures more total trait diversity compared to sets of randomly-selected at-risk species. These results suggest that, as advertised, EDGE mammal species contribute evolutionary history to the evolutionary tree of mammals non-randomly, and EDGE-style rankings among endangered species can also capture important trait diversity. If this pattern holds for other groups, the EDGE prioritisation scheme has greater potential to be an efficient method to allocate scarce conservation effort

A unified approach to estimating demand and welfare

The measurement of price changes, economic welfare, and demand parameters is currently based on three disjoint approaches: macroeconomic models derived from time-invariant utility functions, microeconomic estimation based on time-varying utility (demand) systems, and actual price and real output data constructed using formulas that differ from either approach. The inconsistencies are so deep that the same assumptions that form the foundation of demand-system estimation can be used to prove that standard price indexes are incorrect, and the assumptions underlying standard exact and superlative price indexes invalidate demand-system estimation. In other words, we show that extant micro and macro welfare estimates are biased and inconsistent with each other as well as the data. We develop a unified approach to demand and price measurement that exactly rationalizes observed micro data on prices and expenditure shares while permitting exact aggregation and meaningful macro comparisons of welfare over time. We show that all standard price indexes are special cases of our approach for particular values of the elasticity of substitution, constant preferences for each good, and a constant set of goods. In contrast to these standard index numbers, our approach allows us to compute changes in the cost of living that take into account both changes in the preferences for individual goods and the entry and exit of goods over time. Using barcode data for the U.S. consumer goods industry, we show that allowing for the entry and exit of products, changing preferences for individual goods, and a value for the elasticity of substitution estimated from the data yields substantially different conclusions for changes in the cost of living from standard index numbers

Feedback controlled optics with wavefront compensation

The sensitivity model of a complex optical system obtained by linear ray tracing is used to compute a control gain matrix by imposing the mathematical condition for minimizing the total wavefront error at the optical system's exit pupil. The most recent deformations or error states of the controlled segments or optical surfaces of the system are then assembled as an error vector, and the error vector is transformed by the control gain matrix to produce the exact control variables which will minimize the total wavefront error at the exit pupil of the optical system. These exact control variables are then applied to the actuators controlling the various optical surfaces in the system causing the immediate reduction in total wavefront error observed at the exit pupil of the optical system

What is 'firm heterogeneity' in trade models? The role of quality, scope, markups and cost

We estimate a structural model of heterogeneous multiproduct firms to examine the sources of firm heterogeneity emphasized in the recent trade and macro literatures. Using Nielsen barcode data on prices and sales, we estimate elasticities of substitution within and between firms, and use the estimated model to recover unobserved qualities, marginal costs and markups. We find that variation in firm quality and product scope explains at least four fifths of the variation in firm sales. Most firms are well approximated by the monopolistic competition benchmark of constant markups, but the largest firms that account for most of aggregate sales depart substantially from this benchmark. Although the output of multiproduct firms is differentiated, cannibalization is quantitatively important for the largest firms. This imperfect substitutability of products within firms, and the fact that larger firms supply more products than smaller firms, implies that standard productivity measures are not independent of demand system assumptions and probably dramatically understate the relative productivity of the largest firms

Who’s paying for the U.S. tariffs? A longer-term perspective

Using data from 2018, a number of studies have found that recent U.S tariffs have been passed on entirely to U.S. importers and consumers. These results are surprising given that trade theory has long stressed that tariffs applied by a large country should drive down foreign prices. Using another year of data including significant escalations in the trade war, we find that U.S. tariffs continue to be almost entirely borne by U.S. firms and consumers. We show that the response of import values to the tariffs increases in absolute magnitude over time, consistent with the idea that it takes time for firms to reorganize supply chains. We find heterogeneity in the responses of some sectors, such as steel, where tariffs have caused foreign exporters to drop their prices substantially, enabling them to export relatively more than in sectors where tariff passthrough was complete

The Impact of the 2018 Trade War on U.S. Prices and Welfare

This paper explores the impacts of the Trump administration’s trade policy on prices and welfare. Over the course of 2018, the U.S. experienced substantial increases in the prices of intermediates and final goods, dramatic changes to its supply-chain network, reductions in availability of imported varieties, and complete passthrough of the tariffs into domestic prices of imported goods. Overall, using standard economic methods, we find that the full incidence of the tariff falls on domestic consumers, with a reduction in U.S. real income of $1.4 billion per month by the end of 2018. We also see similar patterns for foreign countries who have retaliated against the U.S., which indicates that the trade war also reduced real income for other countries