Embedded Files
Working Papers
The Pro-Competitive Gains and Losses from Trade around the World, with Hamid Firooz and Gunnar Heins (Sep 2024)
Revise and Resubmit, Journal of Political Economy (Macroeconomics)
Abstract: How do pro-competitive gains from trade vary across countries? We develop a multi-country, multi-sector model featuring rich cross-sector-country heterogeneity in (i) demand elasticities, (ii) the elasticity of import and export markups with respect to the extent of competition, and (iii) productivity, trade costs, market shares, and the number of firms. We find significant cross-country variation in the pro-competitive gains, which crucially depend on import and export shares as well as how elastic demand is for imports compared to exports. The pro-competitive gains from trade are mostly negative, positive for large countries only, and highly sensitive to sectoral tariff variation.
2. R&D Tax Credit and Product Quality vs Scope , with P.Chakraborty, S.Sircar and R.Verma - (submitted)
Abstract: Do firms with heterogeneous in-house R&D capacity respond discordantly in terms of product development to an industrial policy aimed at boosting R&D expenditure? We utilize a phased introduction of a R&D tax credit policy started in 1998 by the Indian Govt. which was aimed at firms with in-house R&D units in certain groups of industries. We find that the policy led to an increase in R&D expenses for all firms, but the effect on product development is quite different. Small and medium-sized firms spend their new R&D investments to expand product scope, while large firms invest in improving the quality of the products. These effects are largely driven firms in industries with high cannibalization elasticity. We rationalize our findings using a nested multi-product firm model in which we compare the within-firm demand cannibalization from quality and scope improvements. Lastly, our results show significant welfare gains as the aggregate price index decreased by about 93%. To our knowledge, ours is one of the first to show that the R&D tax credit policy can promote industrial development through gains from increased product quality and variety.
3. Who Lends When It Floods? Banks vs Non Banks, with R.Sarma (submitted)
Abstract: We examine whether non-banks fill credit gaps following climate shocks. Using the August 2017 floods in two Indian states, Uttar Pradesh and Bihar, as a plausibly exogenous shock, we combine geo-referenced flood-extent data with a novel, near-universe panel of Indian retail credit data. A difference-in-differences design, comparing non-banks and banks across flooded and unaffected zipcodes, reveals that non-banks expand lending by 5.75% in affected areas relative to banks, alongside broader borrower outreach. Product-level estimates show particularly strong responses in agricultural and consumption credit. While overall delinquency rates remain comparable to those of banks, we detect a rise in default rates for consumption loans. By linking flood exposure to high-frequency originations, this paper provides the first large-scale evidence of non-banks’ countercyclical role in disaster recovery—delivering rapid, last-mile liquidity to vulnerable households and small firms, albeit with elevated risk in unsecured credit.
4. Protectionism in a Green Suit? Carbon Tariffs, Market Power and Profit-Shifting (Submitted)
Abstract: Carbon tariffs have received widespread support as a second-best policy tool to regulate foreign emissions indirectly. In this paper, I document novel evidence suggesting that carbon-intensive sectors have higher market power and thus charge higher markups. Thus, carbon tariffs lead to sizable profit-shifting across countries. I build a multi-industry structural model of international trade with input-output linkages to analyze the welfare implications of a carbon-based trade policy reform. I study the nature of profit shifting in response to the carbon-embodied tariffs and quantify the aggregate and distributional effects on welfare and emissions. The findings suggest that accounting for market power increases the effectiveness of trade policy in reducing global emissions. However, it generates heterogeneous effects across countries where countries may lose as high as four percentage points after accounting for profits with the counterfactual trade policy reform.
Work in Progress
Economic Sentiments and Household Consumption: The Role of Temperature Shocks, with R. Mukherjee
Pro-Competitive Gains from Trade with Endogenous Labor Markets, with H. Firooz, G. Heins, and Y.Jung
Internal Trade and Industrial Policy, with M. Shekhar and P.Verma
Market Power in Banking: A Structural Approach, with S. Halder and N.Kulkarni
Economic Implications of Directed Credit, with V. Soundararajan
Climate Stress and Household Finance, with V. Acharya, A. Bharadwaj and N.Kulkarni
Climate Shocks, FinTech Credit, and Labor Market Resilience, with A. Matthew
Page updated
Google Sites
Report abuse