NYU – Columbia Trade Day #3
10 March 2023
New York University
KMC 3-80 (Stern)
44 West 4th Street
New York, NY 10012
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| Event Schedule | |
| 1:15 PM – 2:30 PM |
Paper Title: “Dynamic Gains from Trade Agreements with Intellectual Property Provisions“ Abstract: I develop a quantitative multi-country trade model of innovation and technology licensing to study the short – and long – term effects of trade agreements with intellectual property (IP) provisions. A trade agreement involves determining the level of tariffs and IP protection as Nash bargaining between a developed and a developing country. The agreement increases welfare, innovation, and growth in the long run. However, gains accrue differently across countries along the transition. Developing countries experience short-run losses, as they now pay higher licensing prices. An agreement designed by a politically-motivated government could mitigate these losses but at the expense of lower growth and welfare. |
| 3:00 PM – 4:15 PM |  Ilse Lindenlaub
Paper: “Firm Sorting and Spatial Inequality“ (joint with Ryungha Oh and Michael Peters) Abstract: We study the importance of firm sorting for spatial inequality. If productive locations are able to attract the most productive firms, then firm sorting acts as an amplifier of spatial inequality. We develop a novel model of spatial firm sorting, in which heterogeneous firms first choose a location and then hire workers in a frictional local labor market. Firms’ location choices are guided by a fundamental trade-off: Operating in productive locations increases output per worker, but sharing a labor market with other productive firms makes it hard to poach and retain workers, and hence limits firm size. We show that sorting between firms and locations is positive—i.e., more productive firms settle in more productive locations—if firm and location productivity are complements and labor market frictions are sufficiently large. We estimate our model using administrative data from Germany and find that highly productive firms indeed sort into the most productive locations. In our main application, we quantify the role of firm sorting for wage differences between East and West Germany, which reveals that firm sorting accounts for 17%-27% of the West-East wage gap.
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| 4:45 PM – 6:00 PM |  Farid Farrokhi
Paper: “Can Trade Policy Mitigate Climate Change?“ (joint with Ahmad Lashkaripour) Trade policy is often cast as a solution to the freeriding problem in international climate agreements. This paper uncovers the extent to which trade policy can deliver on this promise. We introduce abatement technology and carbon externality into a multi-country, multi-industry quantitative trade model. Our framework accommodates a rich set of policy considerations, including firm delocation, multilateral carbon leakage, and returns to scale in production and abatement. By deriving simple analytical formulas for optimal carbon, production, and border taxes, we are able to quantify the reduction in CO2 emissions under two prominent proposals that combine carbon pricing with trade policy. First, we show that carbon border taxes can replicate at most 1% of the CO2 reduction attainable under global climate cooperation. By comparison, Nordhaus’s (2015) climate club proposal can foster global climate cooperation and reduce global CO2 emissions by up to 61%. This successful outcome hinges on both the US and EU committing to the climate club as core members, using their collective trade penalties to enforce climate cooperation by reluctant governments. |
Ana Maria Santacreu