logo   Edinburgh School of Economics


Bilateral Trade Imbalances, R&R Review of Economic Studies, August 2019 (joint with A. Cuņat).

There is a lot of variation in countries' bilateral imbalances with their trade partners - much more than in their aggregate net exports. We combine a many-country, many-sector dynamic trade model with sectoral-level data on production, spending and trade flows for 40 major economies to explore quantitatively why some country pairs have bigger imbalances than others. Large pairwise asymmetries in trade wedges are needed for the model to match the data. They account for 60% of the variation in bilateral imbalances. A counterfactual move to symmetric trade wedges would have sizeable effects on trade patterns and welfare. However, it would leave aggregate net exports virtually unchanged.

International Value-Added Linkages in Development Accounting, Submitted, December 2019 (joint with A. Cuņat).

We show that, in addition to factor endowments and productivity, relative factor costs are a source of real-income variation among open economies. In turn, these are shaped by bilateral trade determinants (which underpin the patterns of "international value-added linkages") and the global distribution of factor endowments and final expenditures. We use trade theory and data on international trade in value added to back out countries' relative factor costs. Introducing them into development accounting reduces the variation in "residual" productivity required to explain per-capita income differences by more than one half.

CESifo WP 7196; VoxEU article (non-technical); Uni Wien Medienportal (non-technical, in German)

Gravity across Space and Time, Submitted, December 2015 (joint with M. Klasing and P. Milionis).

This paper provides the first systematic attempt to assess how well the standard gravity equation can account for the evolution of global trade flows between 1870 and 2005. Our findings highlight two major puzzles: (i) the standard gravity model can only explain a small share of the variation in trade flows over time, and (ii) it requires very large time-invariant trade costs to match the average value of trade flows between country pairs. We also provide evidence that relaxing the assumption of a constant trade elasticity may go a long way in resolving these puzzles and reconciling the gravity equation with the experience of globalisation history.

Input Trade Over the Cycle, April 2012.

The value of total input purchases relative to total output is strongly procyclical in the U.S. economy. This cyclical pattern of intermediates purchases is at odds with the predictions of standard real business cycle models. I show that it can be explained in a setting in which labour and intermediate goods are substitutes in the production of final goods, and firms cannot adjust the size of their workforce instantaneously.