Working Papers

 

[1] Information Frictions, Investment Promotion and Multinational Production: Firm-Level Evidence

(with Jerónimo Carballo and Christian Volpe Martincus)      

Revise and Resubmit at Journal of Development Economics 

Multinational companies face a complex problem when deciding the location of their affiliates abroad. Investment promotion agencies (IPAs) aim to reduce this information asymmetry. This paper analyzes the impact of investment promotion policies using firm-level data on location decisions and detailed service-specific information from Costa Rica’s IPA. We find that support from the agency significantly increases the probability that a multinational firm establishes its first affiliate in the country but has generally no impact on its expansion thereafter. We then show that this effect is primarily driven by the resolution of information asymmetries. 

Last WP version:  ECARES WP 2023-02Older WP version: CESIFO WP 9043.

 

[2] Automatic Product Classification in International Trade: Machine Learning & Large Language Models

(with Franco Riottini Depetris  and Christian Volpe Martincus)

Revise and Resubmit at Review of International Economics

Accurately classifying products is essential in international trade.  In this paper, we apply and assess several different algorithms to automatically classify products based on text descriptions. We find that while traditional machine learning models tend to perform well within their training dataset, their precision drops dramatically when implemented outside. In contrast, large language models show a consistently good performance across all datasets, with accuracy rates between 60 and 90%. Our analysis highlights the value  of LLMs in product classification at scale and at enhancing the categorization of unstructured data. 

Last version available here. Older WP version:  IDB WP 01494  

Work in Progress

[1]  Linkages with Multinationals: The Effects on Domestic Firms’ Exports 

(with Jerónimo CarballoGianmarco Ottaviano and Christian Volpe Martincus)

In this project we examine whether and how linking up with multinational firms results in improved export performance for domestic firms, using a unique dataset from Uruguay that includes data on firm-to-firm purchases and sales both within and across countries. Our estimation results indicate that selling to a multinational firm is associated with a significant increase in the probability that a domestic firm starts to export, especially to a country where the respective multinational firm is headquartered or has an affiliate. This estimated effect is larger when the multinational firms themselves sell abroad and when the linkage intensity is higher.

[2] Financial Constraints to Exporting: Evidence from Rwanda’s Export Growth Fund

(with Jie Bai, Lauren Bergquist and Christian Lippitsch)

Export-led growth has long been seen as a key to unlocking structural transformation. In pursuance of this goal, governments often enact industrial policies to encourage firms to overcome barriers to exporting. Despite their prevalence, we have little rigorous empirical evidence of the impact of these policies. In this project, we propose one of the first randomized control trials of industrial policy. We evaluate Rwanda’s Export Growth Fund (EGF), which provides large subsidized loans to exporters and potential exporters at preferential interest rates. We aim to generate exogenous variation in loan take-up through a randomized door-to-door marketing campaign.

 

[3]  Multinational Companies as Talent Hubs

Multinational firms disproportionately hire highly educated workers and tend to pay more for similar occupations than their domestic counterparts. In this paper I study how opening up to foreign investment leads to a sharp reallocation of skilled workers towards multinational firms, which effectively arise as «talent hubs» due to production complementarities. For this purpose, I explore the impact of the unilateral FDI liberalization in Brazil in the 1990s, which led to a sharp increase in the share of workers employed in multinational companies. 


[4] The Value of Organic Certifications

(with Franco Riottini Depetris, Gabriel Scattolo, Christian Volpe Martincus and Lucas Zavala)

Consumer taste for organic products has grown, increasing demand and costs along agricultural value chains. We estimate the impact of the world’s largest agricultural certification system – USDA organic – on exporters from one of the world’s most important organic production regions – Latin America. Our results indicate that certified firms increase exports to the USA relative to non-certified firms. Spillover effects are positive within firms, as certified firms increase exports of certified products to other destinations and non-certified products to the USA. Spillover effects are negative across firms: the more firms are already certified in the USA, the less that exports increase following certification.

IDB Blog Post  on early version.

[5] Information Constraints in Supplier Linkages in Rwanda

(with Jie Bai, Vittorio Bassi, Lauren Bergquist and Christian Lippitsch)

In low-income countries multinational firms often do not source from local suppliers, importing a very high share of their inputs. Informational frictions likely deepen existing capacity constraints: large corporations are often unaware of local supplier availability and cannot easily verify their reliability. In this project, we aim to examine the key constraints that prevent large firms from sourcing domestically in Rwanda. We will focus on the role of information constraints related to: (i) identifying reliable suppliers AND (ii) assessing the quality standards of potential suppliers. Our final aim is to conduct a randomized controlled trial (RCT) of a firm-matching platform to connect multinational buyers established in Rwanda with local suppliers.