Working papers
Job Market Paper
Abstract: In this paper, I study the net foreign asset positions of economies with differing aggregate profit shares. I show that if firms compete oligopolistically, then economies which host a large number of very large — `superstar’ — firms enjoy higher aggregate profit shares. Embedding this setup in a two-country model with heterogeneous agents and non-homothetic saving behavior, I show that economies with more profitable firms feature lower autarkic interest rate and hold positive net foreign assets under financial liberalization. Calibrating the model to Germany and a Rest-of-Europe aggregate, I show that the profit share gap can explain a quarter of European imbalances in 2019.
Abstract: This paper studies the role of trade and international borrowing in driving structural change. I decompose the change in manufacturing shares into contributions by sectoral expenditure shares, trade shares, and aggregate trade imbalances, and map these into structural primitives in a quantitative trade model with endogenous borrowing. Using data from twenty economies, I show that trade specialization and international borrowing explain 34% of the average change in the manufacturing share, half of the cross-country heterogeneity in the patterns of industrialization, half the dynamics in high-technology subsectors of manufacturing, and much of the China-driven deindustrialization and `miracle’ industrialization in South Korea.
The Rise of Business Services with Andrew Bernard and Banu Demir