New Research

Firm Size Distributions and Vertical Differentiation (H. Vandenbussche together with William Connell)
Abstract
The dispersion of firm size distributions vary strongly across sectors. Until now, sectoral variations in intra-industry heterogeneity were attributed to sectoral differences in the exogenous dispersion of  the productivity of firms, differences in sectoral horizontal differentiation, sectoral trade openness and country characteristics. In this paper, we build on this result by additionally examining the role of the sectoral scope for quality differentiation. Our theoretical and empirical findings reveal that whenever there is room for quality differentiation, the role of large firms is even stronger and inequality in firm size is exacerbated. (KU Leuven working paper 2020, forthcoming).

Consumer Taste in trade (H. Vandenbussche together with Bee Aw, Penn State - and - Yi Lee,  Taiwain, National Tsing Hua University)
Abstract
 This paper documents the importance of consumer taste for the food industry using firm-product level customs data by destination country. We identify consuer taste through the use of a control function approach and estimate it jointly with other demand parameters using a flexible demand specification. We find that, on average, consumer taste explains as much of the variation in export revenue as marginal costs. The contribution of consumer taste to export revenue variation, ranges between 2- 30% depending on the product category in the food industry. Our results also show that consumer taste decreases in distance but this relationship is non-monotonic.(CEPR paper 2020, n° 14941).


Global Value Chains, Trade Shocks and Jobs. An Application to Brexit (with William Connell and Wouter Simons)

Abstract

We develop a network trade model with country-sector level input-output linkages. It includes (1) domestic and global value chain linkages between all country-sectors, (2) direct as well as indirect shipments (via other sectors and countries) to a final destination, (3) value added rather than gross trade flows. The model is solved analytically and we use the sectoral World Input Output Database (WIOD) to predict the impact of Brexit for every individual EU country by aggregating up the country-sector effects. In contrast to other studies, we find EU-27 job losses to be substantially higher than hitherto believed as a result of the closely integrated EU network structure. Upstream country-sectors stand to lose more from Brexit due to their network centrality in Europe. (CES IFO working paper 2019, n° 7473)


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