Job Market Paper

“Input-Output Structure and Trade Elasticity”  pdf

Abstract:  This paper studies how disaggregated input-output interactions shape trade and welfare responses to changes in trade costs. I consider a model with a large number of products linked through a general "snakes and spiders" network. The central feature of the model which also makes it highly complex is endogenous formation of comparative advantage. To overcome this challenge, I obtain a perturbation solution in terms of intuitive summary statistics. I find that, in contrast to the composite intermediate good structure often employed in the literature, imperfect supplier diversification transforms fundamental comparative advantage in two ways. First, as exogenous productivity differences accumulate along supply chains when trade is restricted, endogenous variation in relative costs is increasing in the level of trade frictions. Second, comparative advantage of upstream and downstream industries becomes positively correlated. The first effect generates larger welfare gains from trade and also raises the average product-level import share. The second effect, however, is trade-reducing:  the tendency of comparative-advantage industries to source disproportionately from each other increases the aggregate home bias. Such comparative advantage spillovers are relatively strong for moderate trade costs, dominating the average import share effect, but decay fast closer to autarky. As a result, the elasticity of trade is generally non-monotone in the level of trade costs.


Working Papers

“Structural Change, Increasing Returns, and the Growth of Trade”  pdf

Abstract: This paper links the growth of trade to structural transformation in the major economies over the last several decades which have seen steadily declining manufacturing employment. The theoretical finding is that, under increasing returns, falling employment in manufacturing amplifies comparative advantage forces relative to trade barriers, specialization deepens to offset losses in scale in the marginal industries, and trade increases. I establish this result in a model based on Dornbusch, Fischer, and Samuelson (1977) to which I add exogenously nontraded services and fixed costs in manufacturing. Structural change tightens specialization, inducing reallocation of resources towards industries with stronger comparative advantage. This suggests a new channel behind significant extensive margin movements in the data which the previous studies could not fully attribute to tariff reductions. As a consequence of structural transformation, trade becomes a larger fraction of manufacturing output and consumption for the same level of trade costs.


Work in Progress

Optimal Trade Policy with Comparative Advantage and Supply Chains

Capital Misallocation and Income Redistribution

Intra-Firm Capital Rivalry and Equilibrium Assignment of Workers

structural_change_increasing_returns_and_growth_of_trade.pdf318 KB
jmp_razhev.pdf581 KB