Working Papers

Trade, Labor Reallocation Across Firms, and Wage Inequality. 

(version with extended appendix, PDF)

 

Abstract: This paper develops a framework for studying the effects of higher trade openness on the wage distribution in which strong skill-productivity complementarities in production imply that inequality rises as workers reallocate toward more-productive (skill-intensive) firms in the same industry. The model features a large number of skill groups and weaker and more empirically relevant restrictions on firm selection into exporting than standard heterogenous-firms models. An autarkic economy that opens to trade always experiences a pervasive rise in wage inequality under no firm entry, with wage polarization being another possibility under free entry. Theoretically, more outcomes are possible following a trade liberalization in a trading economy. In a calibrated version of the framework, any increase in trade openness always leads to pervasively higher wage inequality. The analysis highlights the importance of properly accounting for the role of new exporters (extensive margin) in shaping the aggregate relative demand for skills, a channel controlled by assumptions affecting selection into exporting.

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Publications

Comparative Advantage in Innovation and Production, American Economic Journal: Macroeconomics, 13(3): 357-96, 2021.

Online Appendix (A-B). Additional Appendix (C).

 

Abstract: This paper develops a dynamic model of innovation and international trade in which agents can direct their research efforts to specific goods in the economy. Trade affects the direction of innovation through its impact on the expected market size for an invention, leading to a two-way relationship between trade and technology absent in standard quantitative Ricardian models. Following a theory-consistent strategy to estimate the extent of endogenous adjustments in technology, I find that they can account for about a half of the observed variance in comparative advantage in production in a sample of 29 countries and 18 manufacturing industries. In addition, the model suggests that standard Ricardian models overestimate the reductions in real income from increases in trade costs, and underestimate the rise in real income due to trade liberalizations.

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Policy Writings

A Sourcing Risk Index for U.S. Manufacturing Industries (with Andrea De Michelis), FEDS Notes. Washington: Board of Governors of the Federal Reserve System, September 08, 2023, https://doi.org/10.17016/2380-7172.3367. 

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Abstract: In this note, we quantify the risks to U.S. manufacturing industries arising from their reliance on inputs form foreign suppliers. Specifically, we develop a sourcing risk index that examines risks to input access across three dimensions: general exposure to foreign shocks (such as disruptions in global transportation networks), geopolitical risks, and geographical concentration of suppliers. As some inputs can be critical and hard to substitute, we use the index to assess the risks that the sourcing of each intermediate input poses to each industry.

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Detecting Tariff Effects on Consumer Prices in Real Time (with Robbie Minton), FEDS Notes. Washington: Board of Governors of the Federal Reserve System, May 09, 2025, https://doi.org/10.17016/2380-7172.3786. 

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Abstract: In this note, we propose a methodology to detect tariffs' effects on personal consumption expenditure (PCE) prices in real time. We first construct theoretical predictions of tariffs' effects on individual PCE categories based on implemented tariff changes, the prevalence of imports in each category, and specific assumptions about pass-through from tariffs to consumer prices. We then assess whether our predicted tariff effects are able to explain observed changes in incoming PCE prices. We apply our methodology to evaluate the impact of US import tariffs implemented in 2018-19, and then we turn to the impact of tariffs implemented in February and March of 2025.  In both periods, we find that US import tariffs led to a statistically significant increase in consumer goods prices.

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Detecting Tariff Effects on Consumer Prices in Real Time – Part II (with Madeleine Ray and Robbie Minton), FEDS Notes. Washington: Board of Governors of the Federal Reserve System, April 03, 2026, https://doi.org/10.17016/2380-7172.4040. 

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Abstract: In this note, we build on Minton and Somale (2025) to assess consumer price effects of tariffs implemented in 2025. Our estimates indicate that tariff effects on prices gradually build over time, with cumulative effects seven months after implementation consistent with our theoretical measures of full dollar-for-dollar pass-through. We estimate that the tariffs implemented through November of 2025 can explain the entirety of excess inflation in core goods PCE prices through February 2026 relative to pre-pandemic inflation rates. Moreover, the data so far suggest that pass-through of these tariffs is effectively complete. We make three methodological advances relative to Minton and Somale (2025): we use more disaggregated and recent consumption data, we construct a detailed tariff dataset on tariffs enacted in 2025, and we adopt a new regression methodology to estimate pass-through dynamics that allows consumer prices in each month to be affected by multiple tariff waves simultaneously.

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Older Working Papers

Trade, Matching and Inequality 

 

Abstract: This paper develops a general equilibrium model to study the effect of trade on the wage distribution that emphasizes within-industry reallocation and heterogeneity of firms and workers. The exit of the least productive firms and the selection into trade of the most productive ones induce labor reallocations in which workers experience "firm" upgrading driving up the high-to-low wage.