Rethinking revealed comparative advantage with micro and macro data

The Balassa's index of revealed comparative advantage does not necessarily reveal Ricardian comparative advantage. We propose an alternative sufficient statistics approach based on a quantitative standard trade model incorporating firm and product selection. We show that the model's micro foundations do not necessarily imply that the relevant data for the proposed sufficient statistics must include micro information, but its micro structure is needed to understand how only macro information can be used instead. Applying our approach to Chinese micro data and cross-country macro data, we find that firm behavior has far-reaching implications for understanding aggregate productivity and revealed comparative advantage

Robot adoption, worker-firm sorting and wage inequality: evidence from administrative panel data

Leveraging the geographic dimension of a large administrative panel on employer-employee contracts, we study the impact of robot adoption on wage inequality through changes in worker-firm assortativity. Using recently developed methods to correctly and robustly estimate worker and firm unobserved characteristics, we find that robot adoption increases wage inequality by fostering both horizontal and vertical task specialization across firms. In local economies where robot penetration has been more pronounced, workers performing similar tasks have disproportionately clustered in the same firms ('segregation'). Moreover, such clustering has been characterized by the concentration of higher earners performing more complex tasks in firms paying higher wages ('sorting'). These firms are more productive and poach more aggressively. We rationalize these findings through a simple extension of a well-established class of models with two-sided heterogeneity, on-the-job search, rent sharing and employee Bertrand poaching, where we allow robot adoption to strengthen the complementarities between firm and worker characteristics

Has financial fair play changed European football?

In 2011 UEFA, the governing body of European football, introduced the Financial Fair Play Regulation (FFPR), consisting of a set of financial restraints to be met by clubs as a prerequisite for participation to its competitions. The aim of the FFPR was to introduce financial discipline into the clubs' decision-making processes, and ultimately protect the long-term viability of the European football industry. The reform was criticized because of possible unintended detrimental consequences. In particular, Peeters and Szymanski 2014 provided a model-based ex-ante simulation analysis showing that the reform would increase the profitability of clubs, but also tilt the competitive balance in favor of the top teams, thus reducing the interest of fans and investors as one of the main attractions in sports is precisely that the best team does not always win. Exploiting an original dataset between the seasons 2007-2008 and 2019-2020, we provide an ex-post econometric evaluation of the effects of the introduction of the FFPR revealing causal evidence that largely vindicates those ex-ante predictions

Dynamic and strategic considerations in international and interregional trade

Doctorat - UCL

Contract Enforcement, Comparative Advantage and Long-Run Growth

The effects of the quality of institutions on economic development and comparative advantage have been so far investigated separately. This paper proposes a theoretical framework in which trade patterns and growth rates are jointly determined by international differences in contract enforcement that affect firms' organizational decisions. In a two-country dynamic Ricardian model with endogenous innovation and hold-up problems, the value chain consists of two activities, innovation and production. Entry in the market happens through R&D and entrants face two decisions. The 'location decision' determines where to place R&D laboratories and production plants. Through the 'ownership decision' firms choose whether to perform innovation and production within the same vertically integrated structure or not. In this framework, the quality of contract enforcement drives the ownership decision, which affects R&D returns, research intensity and growth. Balance of payments adjustments cause movements in relative wages, which affect the location decision and, therefore, the pattern of sectoral specialization and international trade.economic growth; incomplete contracts; innovation; theory of the firm

Outsourcing, Contracts and Innovation Networks

We study the decision of firms between vertical integration and outsourcing in a dynamic setting with product innovation. In so doing, we model an industry in which R&D is performed by independent research labs and outsourcing production requires complementary upstream and downstream inventions. In the presence of search friction and incomplete outsourcing contracts, we show that the ex-post bargaining power of upstream and downstream parties at the production stage feeds back to R&D incentives, thus affecting the emergence and the performance of labs specialized in complementary inventions.incomplete contracts; innovation; outsourcing

Cultural Identity and Knowledge Creation in Cosmopolitan Cities

We study how the city system is affected by the possibility for the members of the same cultural diaspora to interact across different cities. In so doing, we propose a simple two-city model with two mobile cultural groups. A localized externality fosters the productivity of individuals when groups interact in a city. At the same time, such interaction dilutes cultural identities and reduces the consumption of culture-specific goods and services. We show that the two groups segregate in different cities when diaspora members find it hard to communicate at distance whereas they integrate in multicultural cities when communication is easy. The model generates situations in which segregation is an equilibrium but is Pareto dominated by integration.cosmopolitan cities; cultural diaspora; cultural identity; knowledge creation

The District and the Global Economy: Exporting versus Foreign Location

This Paper studies the welfare implications of the location decisions of innovative newcomers that, though spinning off an industrial district, may choose whether to locate inside or outside its borders. Even if this choice has always been relevant, globalization has turned the issue, whether to locate inside or outside the district, from an intra- to an inter-national issue. The fear is delocation, that is, the implosion of the district due to the flight of innovative newcomers to distant locations. This negative effect could offset the benefits that the district reaps both in terms of cost reduction through foreign production in low wage countries and in terms of access to new markets. We address these issues by depicting the industrial district as a centre of innovation where positive local spillovers sustain the endogenous invention of new goods by profit-seeking firms. After invention firms face a crucial choice between reaching distant markets by export or plant delocation. By focusing on market-seeking rather than cost-reducing location choices, we argue that, by the very nature of the district, the equilibrium distribution of firms is bound to be inefficient from the point of view of the district as a whole. In particular, firms’ attempts to circumvent trade barriers through delocation slow down the pace of innovation and harm the welfare of the district.delocation; fixed exchange rates; industrial district; regional development; stabilization