Research

Trade Policy on a Buyer-Seller Network

The welfare effects of trade policy are shaped by the outcomes of imports re- allocation and price changes. In this paper, I show that these outcomes crucially depend on whether importing firms are matched with multinational suppliers or with single-country producers. I study an antidumping duty imposed by Colom- bia on the imports of Chinese truck tires. In the data I observe the full network of Colombian importers and global exporters, some of which are multi-origin and some of which are single-origin. Due to the policy, approximately 75% of imports of tires originated in China were reallocated into other origins, and the bulk of this realloca- tion was undertaken by importers matched with multi-origin exporters. I estimate a quantitative trade framework to match the reallocation and price changes in the data. I find that under a counterfactual network without multinational suppliers, the increase in the price index from the policy would have been almost twice the size of the actual change. The analysis suggests that ignoring the network structure could lead to sizable biases for the prediction of the welfare effects of tariffs.


Export Dynamics and Market Exploration: Evidence From Mexican Exporters


This paper explores the dynamics of Mexican exporters upon entry to foreign markets. I document a decline in average growth and failure rates as firms enter new export destinations. These patterns reflect that in their initial set of destinations, exporters adjust their sales more than they do in subsequent markets. I develop a model of multi-market demand learning that rationalizes this behavior through knowledge accumulation and the delay in expansion to new destinations. Under the assumption that knowledge can be carried over destinations according to their market similarity, a trade-off arises. A larger number of destinations targeted upon entry can provide firms with a faster understanding of foreign market conditions. However, such strategies might be prohibitively expensive to some exporters. Therefore, few initial destinations might be used by exporters to “test the grounds” for subsequent similar markets. The patterns of entry and market similarities between destinations in the data suggest the possibility that a learning mechanism is an underlying part of the dynamics that we observe.