This paper is a contribution to the literature on rational design of trade agreements. The World Trade Organization (WTO) is an incomplete contract among sovereign states. Incomplete contracts contain gaps. Ex post, contractual gaps may leave gains from trade unrealized; they may create...

Using NAFTA’s effect on Mexico’s exports as a natural experiment, this paper conducts an empirical analysis on the explanatory power of the two strands of heterogeneous firms trade models: the heterogeneous firms trade (HFT) model and the quality heterogeneous firms trade (QHFT) model. The...

We develop a model of foreign direct investment (FDI) in which financially liquid foreign firms acquire liquidity-constrained target firms. Using a large dataset of emerging-market acquisitions, we find evidence supporting three central predictions of the model: (i) firms in external finance...

A growing share of the world population is getting access to a formal bank account. This allows a move from cash to account based payments. Grounding our hypothesis in behavioral economics, we conjecture that being paid on an account instead of in cash can play a major role in encouraging...

This paper studies the determinants of pricing-to-market at the firm-level, with a particular focus on the role of firm-specific and policy-induced market power. We use a large dataset containing export values and quantities by product and destination for all exporting firms in 12 developing and...

Global Value Chains (GVCs) have become a central topic in trade and development policy but little is known about their actual impact on economic performance because data availability has been limited. Using a new unique set of Inter- Country Input-Output tables with extensive country coverage, I...

This paper provides evidence that learning about demand is an important driver of firms' dynamics. We present a simple model with Bayesian learning in which firms are uncertain about their idiosyncratic demand parameter in each of the markets they serve, and update their beliefs as noisy...

We measure the response of household consumption of different income groups to social spending during the 2002-2012 period using the aggregated Household Budget Survey Data. We find that households respond more strongly to changes in pensions than to changes in allowances and in-kind transfers....