Estimating Armington Elasticities using Scanner Data (with Colin Hottman)
The degree of substitution between goods produced in different countries, known as the Armington elasticity, is a key parameter in international macroeconomics. This parameter determines the magnitude of the relative demand response to changes in international relative prices from trade or monetary policy. This paper is the first to combine U.S. retail scanner data with barcode-level data on country of origin. We use this novel data set for 14 narrow product categories from 2001 to 2012 to study substitution between domestic products and imports. We develop a novel generalization of Feenstra (1994) for a nested demand system, and our results provide clear evidence that the macro elasticity of substitution (between U.S. and foreign goods) is significantly smaller than the micro elasticity (within U.S. and foreign goods) for essentially all product categories. Finally, we find little evidence of income-induced expenditure switching.
Consumption Patterns in US Import Goods (draft available upon request)
The effects of trade policy may vary dramatically across subsets of the population depending on how people differ in their consumption baskets. Because trade policy often targets particular countries and product groups, it has a greater impact on individuals concentrating their spending in products from affected countries or sectors. This occurs due to changes in the prices of those products, relative to the prices of unaffected products. This paper combines U.S. consumer expenditure data with barcode-level country of origin data to document heterogeneous spending patterns on domestic goods and imports across income groups, education levels, metropolitan statistical areas, and rural/urban areas. The degree to which households with different characteristics vary in their expenditure shares of domestic products and imports, as well as products from different countries, is then used to estimate households' exposure to tariff and exchange rate shocks.
Works in Progress:
Firm-Level Upgrading in Pharmaceuticals (with Eric Verhoogen, Gianluca Antonecchia, and Ajay Bhaskarabhatla)
Patent protections in the pharmaceutical sector spur innovation in the United States, but serve as barriers to entry in developing countries. By giving firms market power, patents raise the prices of pharmaceutical drugs, as well as block entrants in the market. For developing countries, this inhibits access to potentially life-saving medications and affects local firms’ ability to adopt and diffuse technology. We combine data on pharmaceutical patent expirations, factory-level manufacturing inputs and outputs, and pharmaceutical sales to identify how patent expirations in the US affect Indian drug manufacturers. We identify the firms and products that are most closely affected by a patent expiration through their proximity to the patented drug. Supply-side proximity is identified by chemical composition, and demand-side proximity is identified by therapeutic usage. We then evaluate the effects of a patent expiration on the number of products these firms manufacture, the variety of markets they enter, and how they upgrade their technology and productivity
Social Networks and Internal Migration