My working papers

Quantifying a vertical differentiation trade model

We build a trade model that simultaneously incorporates vertical product differentiation, within-country income heterogeneity, heterogeneous goods, and multiple countries. Under a particular specification of costs and preferences, we establish the existence of a general equilibrium and derive a highly tractable quantitative model. We estimate the model's parameters using its theoretical properties and data from OECD countries. Finally, we quantify the effects of trade costs and economic shocks, such as Brexit, on each country's share of high-quality goods.

DEM Discussion Paper Series 23-13, 2023

Welfare implications of trade sanctions against Russia

with Pierre M. Picard

Since the beginning of Russia's war against Ukraine in 2022, Western countries have discussed and implemented new trade sanctions on Russian fossil fuels. This paper quantifies the trade and welfare effects of these policies using a general equilibrium model covering 92 countries, 65 intermediate products, and sectoral linkages. It distinguishes between bans on gas, crude oil, refined oil, and coal and examines the effects of alternative coalitions of sanctioning countries. In the most stringent scenario, the model predicts welfare losses of approximately 16.8% in Russia and 0.42% across the sanctioning countries. These losses vary substantially among sanctioning countries. OECD participation plays an important role because it significantly affects the expected outcomes in Russia. If only EU countries were to impose fossil-fuel sanctions, their average predicted welfare loss would be 3.3%.

DEM Discussion Paper Series 23-19, 2023

The impact of public-private partnership on facility management costs: Evidence from healthcare in England

with Alena Podaneva

Private Finance Initiatives (PFIs) are a form of public-private partnership (PPP) that has been widely used in England since the 1990s. This study uses the 2018–2021 ERIC panel dataset to evaluate how hospital procurement arrangements affect hard and soft facility-management (FM) costs. OLS and 2SLS estimations, followed by propensity-score matching and Hausman-Taylor estimations, show that PFIs are associated with increases of up to 37.1% in hard FM costs and 20.3% in soft FM costs. The effect is more pronounced at sites with buildings that predate the signing of the PFI contract, although the pattern is reversed for soft FM costs. Partially PFI-financed hospital sites have higher costs than sites procured entirely through PFIs. However, the results suggest some potential for cost savings when moderate- and low-risk backlog-maintenance costs and capital investment in new construction are considered.

Mimeo, 2024

Risk- and Cost-Sharing in Firm-to-Firm Trade

with Cristina Herghelegiu

Firms face substantial risks and costs when trading across borders. Using a set of standardized rules known as Incoterms, firms decide in advance how to divide responsibilities throughout the shipping process and thereby reduce contractual frictions. This paper examines how sellers and buyers share risks and costs in international trade transactions according to the characteristics of the products being exchanged. We use a highly detailed dataset covering all Russian exporters and their foreign customers from 2012 to 2015. Our results suggest that buyers are more likely to assume responsibility for goods that are (a) further from final use and (b) less tailored to their specific needs. These effects are stronger for products that are important inputs for buyers but are reversed when the buyer is larger than the seller.

DEM Discussion Paper Series 20-24, 2020