All of my completed papers since I became a Research Associate at the NBER in 2008 my be found here: National Bureau of Economic Research
For a description of published work and the themes around which that work is organized, please visit my Research Narrative page.
On What States Do Prices Depend? Answers from Ecuador. (with Craig Benedict and Anthony Landry). October 2014.
An important challenge for macroeconomics is to understand the reasons that retail prices change infrequently and the implications of this pricing behavior for economic welfare and allocative efficiency. This paper develops a menu cost model of pricing in which retail firms intermediate trade between manufacturers of goods and final consumers. In particular, retail firms purchase manufactured goods in a competitive global market and employ workers to sell the goods in retail outlets at a markup over marginal cost. An important facet of our analysis is that the labor-cost share of retail production differs across goods in the consumption basket. Consequently, firms with different cost structures will change prices by different amounts and at different frequencies despite facing a common menu cost. This allows us to account for some of the cross-sectional differences observed in the frequency of price changes across goods. We apply this model to Ecuador to take advantage of a rich database of monthly retail prices of more than 200 goods and services across 12 Ecuadorian cities. Ecuador is also an interesting case study for menu cost pricing because it underwent a number of dramatic changes in inflation and exchange rate regimes, with a currency crisis and hyperinflation followed by adoption of the US dollar as the unit of account.
Distribution capital and the short- and long-run import demand elasticity. (with J. Scott Davis), September 2014.
Abstract. The elasticity of substitution between home and foreign goods is one of the most important parameters in international economics. The international macro literature, which is primarily concerned with short-run business cycle fluctuations, assigns a low value to this parameter. The international trade literature, which is more concerned with long-run changes in trade flows following a change in relative prices, assigns a high value to this parameter. This paper constructs a model where this discrepancy between the short- and long-run elasticities is due to frictions in distribution. Goods need to be combined with a local non-traded input, distribution capital, which is good specific. Home and foreign goods may be close substitutes, but if distribution capital is slow to adjust then agents cannot shift their consumption in the short run following a change in relative prices, and home and foreign goods appear as poor substitutes in the short run. In the long run this distribution capital can be reallocated, and agents can shift their purchases following a change in relative prices. Thus the observed substitutability gets larger as time passes.
Trends and Cycles in Small Open Economies: Making The Case For A General Equilibrium Approach. (with Kan Chen), September 30, 2014.
Abstract. Economic research into the causes of business cycles in small open economies is almost always undertaken using a partial equilibrium model. This approach is characterized by two key assumptions. The first is that the world interest rate is unaffected by economic developments in the small open economy, an exogeneity assumption. The second assumption is that this exogenous interest rate combined with domestic productivity is sufficient to describe equilibrium choices. We demonstrate the failure of the second assumption by contrasting general and partial equilibrium approaches to the study of a cross-section of small open economies. In doing so, we provide a method for modeling small open economies in general equilibrium that is no more technically demanding than the small open economy approach while preserving much of the value of the general equilibrium approach.
Geographic Barriers to Commodity Price Integration: Evidence from US Cities and Swedish Towns, 1732–1860 (with Gregor Smith). September 8, 2014
Abstract. We study the role of distance and time in statistically explaining price dispersion for 14 commodities from 1732 to 1860. The prices are reported for US cities and Swedish market towns, so we can compare international and intranational dispersion. Distance and commodity-specific fixed effects explain a large share—roughly 60%—of the variability in a panel of more than 230,000 relative prices over these 128 years. There was a negative “ocean effect”: international dispersion was less than would be predicted using distance, narrowing the effective ocean by more than 3000 km. Price dispersion declined over time beginning in the 18th century. This process of convergence was broad-based, across commodities and locations (both national and international). But there was a major interruption in convergence in the late 18th and early 19th centuries, at the time of the Napoleonic Wars, stopping the process by two or three decades on average.