My working papers

Quantifying a vertical differentiation trade model

with Pierre M. Picard

We build a trade model that simultaneously embeds vertical product differentiation, within-country heterogeneous income, heterogeneous goods, and many countries. Under some specification of costs and preferences, we can establish the existence of the general equilibrium and obtain a very tractable quantification model. We estimate all of the model parameters by applying the model properties on OECD countries. We finally quantify the effect of trade costs and economic shocks – like Brexit – on each country’s share of high quality goods.

Welfare implications of trade sanctions against Russia

with Pierre M. Picard

Since the beginning of the war between Russia and Ukraine in 2022, Western countries have been discussing and then implementing new trade sanctions against Russian fossil fuels. This paper quantifies such policies’ trade and welfare effects using a general equilibrium model with 92 countries and 65 intermediate products and sectoral linkages. The paper breaks down the effects of the bans on gas, crude and refined oil, and coal, and discusses the impact of alternative coalitions of sanctioning countries. In the most stringent case, the model predicts welfare losses of about 16.8% in Russia and 0.42% in the sanctioning countries. These losses are very heterogeneous across sanctioning countries. The OECD countries have an important role as their participation in sanction policies significantly influences expected outcomes in Russia. Meanwhile, should only EU countries implement fossil fuel sanctions, their welfare losses are predicted to be 3.3% on average.

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

with Alena Podaneva

Private Finance Initiatives (PFI) represent a form of Public-Private Partnership (PPP) extensively used in England since the 1990s. This study employs the ERIC panel dataset from 2018-2021 to evaluate how hospital procurement type affects hard and soft Facility Management (FM) costs. Employing OLS and 2SLS estimations, followed by propensity score matching and Hausman-Taylor estimations, the findings reveal that PFI is associated with increases in both hard and soft FM costs of up to 37.1% and 20.3%, respectively. This effect is more pronounced for sites with pre-existing buildings before PFI contract signatures, while the trend reverses for soft FM costs. Partial PFI financing is associated with higher costs compared to entirely PFI-procured hospital sites. However, this study suggests the potential for limited cost savings by considering moderate- and low-risk backlog maintenance costs, as well as capital investments in new construction.

Draft available upon request

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

with Cristina Herghelegiu

Firms are exposed to important risks and costs when trading across borders. Based on a set of standardized rules known as Incoterms, firms decide ex ante how to delimit their responsibilities throughout the shipping process, so as to reduce the inherent contractual frictions. This paper investigates how sellers and buyers share risks and costs in international trade transactions depending on the characteristics of the exchanged product. We rely on a highly detailed dataset involving all Russian exporters and their foreign customers during 2012-2015. Our results suggest that buyers are more likely to bear responsibilities for goods that are (a) more distant from final use and (b) less tailored to their specific needs. These results are reinforced for products that constitute important inputs for buyers, but reversed when there is a positive difference between the buyer and the seller size.