In this paper, we provide a detailed analysis of a mechanism that distorts production towards too much use of primary factors like labor and too little use of intermediate inputs. The distortion results from two ingredients that are cornerstones of modern quantitative trade theory: monopolistic...

Country-specific business cycle fluctuations are potentially very costly for member states of currency unions because they lack monetary autonomy. The actual costs depend on the extent to which consumption is shielded from these fluctuations and thus on the extent of risk sharing across member...

Recent decades have seen a fragmentation of production processes across borders, as firms find it increasingly profitable to organize production on a global scale. This fragmentation occurs across national borders as well as across firm boundaries; companies must decide not only the location of...

We revisit Grossman and Rossi-Hansberg's (2008) famous result, that under certain conditions offshoring of low-skilled labor tasks raises the domestic wage for low-skilled workers. Our re-examination features a less benign environment where Rybczynski-type reallocation of factors to absorb...

Acknowledging individuals' distaste for low relative income renders trade less appealing when trade is viewed as a technology that integrates economies by merging separate social spheres into one. We define a "trembling trade" as a situation in which gains from trade are overtaken by losses of...

We develop a theoretical framework to explain firms' offshoring decisions in the presence of uncertainty. This model highlights the role of labor market institutions in shaping a firm's ability to effectively react upon future shocks, yielding a sharp prediction of the prevalence of offshoring...

Acknowledging individuals' distaste for low relative income renders trade less appealing when trade is viewed as a technology that integrates economies by merging separate social spheres into one. We define a "trembling trade" as a situation in which gains from trade are overtaken by losses of...