Research

Peer Reviewed Working Papers:

International Trade, Non-Trading Firms and Their Impact on Productivity, with S. Millard and A. Nicolae, Bank of England Staff Working Paper No. 787 (2019)

Abstract:

In this paper we examine the impact of non-trading firms on labour productivity and its persistence in response to macroeconomic shocks, through their entry and exit into the domestic market, in a model with monopolistic competition and heterogeneous firms. We quantify the effects of various macroeconomic shocks on labour productivity and we demonstrate that non-trading domestic firms’ entry and exit into the domestic market explains the persistence of labour productivity in response to transitory shocks. We also show that the model successfully replicates the sluggish recovery of labour productivity in the United Kingdom since the Great Recession. 

Working Papers:

Variable Trade Costs and the Dynamics of International Trade  - New Version January 2024

Abstract:

What is the optimal specification for variable trade costs? Existing research has compared the ability of alternative specifications for variable trade costs, including the canonical 'Iceberg' costs, to match long run trends in the data, as well as the long-run welfare responses to trade liberalisation. We extend the previous static analysis to a dynamic framework to examine the optimal specification of variable trade costs when matching key moments in US trade data. We show that the choice of specification has significant implications for the matching of key moments as well as dynamic welfare implications above and beyond static welfare differences.

Job Security and Politician's Effort - New Version  January 2024

Abstract:

The relationship between job security and politician's effort is bi-directional, making isolating the impacts, and the mechanisms underlying them, in either direction difficult. Increased effort usually increases politician's job security, as they are considered to be more desirable by voters, but increased job security can change the incentives to engage in productive activity. We analyse the behaviour of UK Members of Parliament (MPs) from 1997 to 2019 to examine the mechanisms driving any impact of job security on effort, in a setting where effort may have little impact on job security. We show that this impact is primarily driven by an opportunity cost of time allocation mechanism, with MPs who are less secure in their job allocating less of their time towards legislative activities. This opportunity cost increases with the breadth of their legislative effort, and is primarily driven by individuals with lower outside options, who face a greater cost of electoral defeat. We provide reduced form evidence that this opportunity cost is primarily driven by the maintenance of non-parliamentary human capital by MPs, rather than activities designed to improve their electoral prospects.

Intermediate Inputs and the Transmission of Macroeconomic Shocks - New Version April 2023

Abstract:

In this paper I examine the role of horizontal and vertical trade in intermediate inputs in driving the intra-national and international transmission of macroeconomic shocks in a DSGE macroeconomic model of international trade with monopolistic competition, endogenous productivity and heterogeneous firms. I show that the redistribution of production between firms, industries and countries introduces a new channel through which macroeconomic shocks propagate within and between countries. This channel is quantitatively important, and helps to explain why shocks in certain industries have a greater impact, even when the industries are of a similar size. I show that the new channel eliminates the 'Trade Comovement Puzzle', and can help to explain the dynamics of UK trade in the immediate aftermath of the UK's exit from the EU.

Gravity, Inter-Industry Heterogeneity and the Patterns of International Trade Revisited - Latest Version March 2022

Abstract:

The Gravity model is widely used to analyse international trade, with most existing studies analysing goods trade at a sector level. Previous gravity analysis concluded that changes in the composition of trade between industries play a smaller role than variations within industries in explaining the changing relationship between distance and trade. We revisit the industry level relationship between distance and trade, utilising the substantial methodological advances in Gravity trade modelling since the previous analysis. We show that, once the impact of distance at an industry level is correctly estimated, compositional changes can further our understanding of both the 'Distance Puzzle', where, despite falling trade costs, the impact of distance on trade has stagnated over time, and also the uneven effect of globalisation on trade across countries. We therefore conclude that trade composition has significant implications for the uneven potential for countries to use trade as an engine of development.

The Interaction of Labour Market Frictions and Heterogeneous Firms:  Implications for Productivity, Unemployment and Vacancies, with S. Millard and A. Nicolae 

Abstract:

The inability of Mortensen-Pissarides search and matching labour market models to match the observed volatility of unemployment, vacancies and the vacancy to unemployment ratio, the `Shimer (2005) Puzzle', remains one of the most significant puzzles in macroeconomics. We show that endogenous fluctuations in vacancy posting and unemployment that result from the entry and exit of less productive firms into and out of the market, generates significant volatility in unemployment, vacancies and the vacancy to unemployment ratio. Thus, we offer a potential solution for the Shimer (2005) Puzzle.