My research evolves around the following areas and topics:
- International Trade
Global value chains
Firm trade dynamics
Institutional reform and trade policy
- Industrial Organization
Firm pricing strategies
Optimal Payment Contracts in Trade Relationships
R&R, International Economic Review
Abstract. In buyer-seller trade relationships, long-term collaboration and payment contract selection are mutually dependent: While the provision of trade credit to buyers increases the stability of trade relationships, its availability varies systematically as relationships evolve. To explain this reciprocity, we model the optimal provision dynamics of trade credit when the seller's information about the buyer's type is incomplete and parties can sign contracts with limited enforceability. We investigate how self-enforcing relational contracts and formal contracts complement each other and show how their interaction determines optimal payment contract choice. We find that payment contracts can be interpreted as screening technologies and imply distinct learning opportunities for the seller about the buyer's type. When buyers are stochastically liquidity-constrained and sellers can observe their liquidity status, in line with empirical evidence the model predicts that all transitions between payment terms lead to the provision of seller trade credit in the long run.
- Institutional Reform and Global Value Chains (with Hartmut Egger)
Abstract. This paper sets up a model of trade, in which two countries with differing levels of technology specialize on the production of subsets of the global value chain. In the open economy equilibrium, the technologically backward country exports intermediates in exchange for imports of a homogeneous consumption good from the technologically advanced country. This vertical specialization pattern gives the two countries access to different instruments for appropriating rents in the open economy. The technologically advanced country can impose an import tariff on intermediates to lower foreign wages and increase national welfare. An import tariff is ineffective for the technologically backward economy, which can instead lower institutional quality and allow its workers to partially expropriate firms and directly consume intermediate goods at a utility discount. In a non-cooperative policy equilibrium, welfare levels of the two countries will fall to their autarky levels. This gives scope for a trade agreement that conditions tariff reductions on institutional quality improvements and is beneficial for both countries. A beneficial trade agreement may not exist if the import tariff has an upper bound.