Working Papers

Abstract: This paper shows that inventories buffer the transmission of shocks through domestic and international production networks. Using sectoral trade and production data, I demonstrate that increased upstream and downstream linkages in production networks intensify shock propagation, while inventory holdings mitigate these effects. I develop a multi-country, multi-sector international real business cycle model that integrates inventory investment, production networks, and sector-level productivity shocks. I show that the model is consistent with empirical evidence on the amplifying effects of production networks and the dampening effects of inventory holdings. Furthermore, incorporating inventory investment enhances the model's ability to accurately capture production comovement, volatility, and cyclicality across countries and sectors.

Abstract: We disentangle the intertwined roles of sales adjustment frictions and production adjustment frictions. We develop a dynamic general equilibrium heterogeneous firm model of international trade to study labor dynamics and export dynamics jointly. To export, heterogeneous plants pay sunk costs as well as variable trade costs, which depend on the history of exporting status. Plants' employment decisions are subject to convex and non-convex labor adjustment costs. Matching the model to the salient features on employment, sales and exports in Colombian plant-level data, we recover measures of a range of export and labor adjustment frictions. We relate these measures to those from models that abstract from either export frictions or labor adjustment frictions. We find that both export frictions and labor adjustment costs are essential for capturing the labor growth distribution, labor dynamics, churnings in export market, and labor growth premiums around the export margin.

Abstract: Recent studies on the U.S.-China trade dispute suggest that the increase in U.S. import tariffs was fully borne by U.S. importers. However, leveraging more disaggregated data from the U.S. Census, our analysis reveals incomplete tariff pass-through for firms that continue importing from the same product-country pairs (i.e., surviving pairs), with large importers facing more pass-through and accounting for a larger import share after the tariff increase. Furthermore, extensive margin adjustments of the product-country pairs indicate that entering pairs pay higher prices than surviving pairs, with large firms that pay higher prices more likely to have entering pairs than small firms after the tariff increase. Thus, the complete tariff pass-through in recent studies is mainly driven by the import reallocation towards firms that face more pass-through and the entering pairs.

Work in Progress

Abstract: During the U.S.-China trade dispute, trade flows between the two nations are redirected through an intermediary country. I develop a novel merged dataset encompassing China-Intermediary trade and U.S.-Intermediary trade. I construct a trade dispute tariff exposure measure for the intermediate country, utilizing the average U.S. import tariff on China weighted by U.S. import from the intermediary. Through a Difference-in-Difference analysis, I document that the high-tariff-exposed countries experience a larger increase in the export to U.S. and the import from China than the countries with low exposure. The intensity of rerouting is heterogeneous across industries. Agriculture, being more challenging to relocate and involving fewer production stages, exhibits lower rerouting intensity than non-agriculture. Additionally, this rerouting phenomenon acts as a mitigating factor against the adverse impact of U.S. tariffs on Chinese imports. Notably, the trade elasticity of Chinese exports is overstated by 0.2 when not accounting for trade rerouting.