Capital Services in Global Value Chains
(Updated Oct 2023)
Revise and resubmit, Quarterly Journal of Economics
Abstract: This paper constructs the first global dataset on inter-sectoral capital service flows. Capital assets are used in different relative proportions across sectors and countries. I use a dynamic general equilibrium model to quantify the importance of disaggregated capital in global production. Output prices in every country are sensitive to foreign shocks through a feedback loop between the cost of capital services and the cost of intermediate inputs. The per-period gains from trade in steady state are 8 to 36 percent higher than existing dynamic models and more than double that in static models. This amplification effect is higher in more capital-intensive countries. Under trade liberalization, output in each country reallocates towards sectors with the largest respective declines in capital service costs, disproportionately raising capital incomes. This mechanism in my model explains six percent of changes in sectoral market shares between 1997 and 2007.
Winner of the 2024 Philippe Martin Award
Presentations (in early stages):
Virtual International Trade and Macro Seminar, May 2022
National Academy of Sciences Workshop on Innovation GVCs, and Globalization, May 2021
Industry Linkages from Joint Production
(Updated Jan 2023)
Revise and resubmit, American Economic Review
Abstract: I develop a theory of joint production to quantify aggregate economies of scope. In US manufacturing data, increased export demand in one industry raises a firm’s sales in its other industries that share knowledge inputs like R&D and software. I estimate that knowledge inputs contribute to economies of scope through their scalability and partial non-rivalry within the firm. On average a 10 percent increase in output in one industry lowers prices in other industries by 0.4 percent. Such economies of scope manifest disproportionately among knowledge-proximate industries and imply large spillover impacts of recent US-China trade policy on producer prices.
Winner of the 2020 WTO Essay Award for Young Economists
Media coverage: Colloquy
Structural Change within versus Across Firms: Evidence from the United States
(Updated May 2022, joint with Teresa Fort, Stephen Redding, and Peter Schott)
Abstract: We document the role of intangible capital in manufacturing firms’ substantial contribution to non-manufacturing employment growth from 1977-2019. Exploiting data on firms’ “auxiliary” establishments, we develop a novel measure of proprietary in-house knowledge and show that it is associated with increased growth and industry switching. We rationalize this reallocation in a model where firms combine physical and knowledge inputs as complements, and where producing the latter in-house confers a sector-neutral productivity advantage facilitating within-firm structural transformation. Consistent with the model, manufacturing firms with auxiliary employment pivot towards services in response to a plausibly exogenous decline in their physical input prices.
The Costs of Market Disintegration: Evidence from the India-Pakistan Border
(in progress, joint with Robin Burgess, Dave Donaldson, and Stephen Redding)