@article{Implications:1627,
      recid = {1627},
      author = {Kikkawa, Ayumu},
      title = {Essays on Aggregate Implications of Trade},
      publisher = {The University of Chicago},
      school = {Ph.D.},
      address = {2018-06},
      pages = {230},
      abstract = {Gains from trade and the sovereign bond market

The  empirical literature shows that when sovereigns default  trade volumes collapse, suggesting that trade openness of a  country discourages defaults. I construct a simple two  country model and show that this is not necessarily the  case. Upon default, two opposing forces operate: an  improvement in the terms of trade, which increases the  sovereign's share of the gains from trade, and a reduction  in the size of the total gains from trade. I show that  under reasonable parameter values, the latter effect  dominates: default costs are higher when the country is  more open to trade. This leads to a lower interest rate in  the sovereign bond market. By opening up to trade, the  country enjoys not only the traditional gains from trade  but also additional welfare gains, because the sovereign is  now able to borrow more. Simple calibration implies that  the additional gains are non-negligible in magnitude. This  shows that a country may well achieve welfare gains in  markets other than the goods trading market upon trade  liberalization. 

Imperfect Competition and the  Transmission of Shocks: The Network Matters (joint with  Emmanuel Dhyne and Glenn Magerman)

This paper studies the  aggregate implications of the firm-to-firm production  network structure. Using a dataset on all domestic  transactions between Belgian firms, we establish two facts:  firms charge higher markups if they have higher input  shares within their customers, and firms experience larger  churn of suppliers if they face a larger reduction in  foreign goods' prices. Motivated by these two facts, we  build a model where firms compete as oligopolies to supply  inputs to each customer and where firms optimally choose  their suppliers. The network structure becomes irrelevant  in a benchmark case where we impose perfect competition and  hold the network fixed. In this case, firm-level variables  are sufficient to compute the welfare response to a large  fall in import prices. Allowing for oligopolistic  competition generates two counteracting forces within  supplier-customer pairs. A supplier raises its markup to a  customer when its costs decline, but it reduces the markup  if other firms supplying the same customer receive the  shock. Further, allowing for endogenous networks amplifies  the impact of the shock as firms begin importing and begin  sourcing from other firms exposed to the import shock. Due  to the omission of these dynamics, the aggregate response  in the benchmark case is less than one quarter of those in  the full estimated model. 

Trade and Domestic Production  Networks (joint with Felix Tintelnot, Magne Mogstad and  Emmanuel Dhyne)

We use administrative data from Belgium  with information on domestic firm-to-firm sales and foreign  trade transactions to study how international trade affects  firm efficiency and real wages. The data allow us to  construct the buyer-supplier network of the Belgian  economy. We document that most firms that do not directly  import or export still have large indirect exposure to  foreign trade, and that a firm's output is affected by  idiosyncratic shocks to its buyers and suppliers. These  empirical findings motivate and guide the development of a  model with domestic production networks and international  trade. We obtain new sufficient statistics results for the  effects of trade in a model with fixed network structure,  and we develop a tractable model of endogenous domestic  production networks. Comparing our results to those we  obtain using existing approaches highlights the importance  of data on and modeling of domestic production networks in  studies of international trade.},
      url = {http://knowledge.uchicago.edu/record/1627},
      doi = {https://doi.org/10.6082/uchicago.1627},
}