My research focuses on the effect of firms' strategic behavior and market power on international trade.

Working papers

Price Discrimination and Competition in International Transportation

Best Paper Award at the 24th Spring Meeting of Young Economists, 2020

This paper uses uniquely detailed freight price data to study the determinants of transportation costs and their implications as a trade friction. I document empirical regularities violating both the Law of One Price in the shipping industry and the "iceberg" trade cost assumption. I show that conditional on the shipment's value, freight prices fall with the shipment's and exporter's size within narrowly defined routes. I then develop a trade model that integrates both economies of scale and price discrimination as mechanisms generating these findings. Finally, I test the model and provide causal evidence of competition affecting price dispersion using an exogenous weather-related shock as an instrument to competition. This shows price discrimination affects transportation costs. The implication is that competition increases the extent of quantity discounts thus giving further advantage to larger firms in international trade.

Countervailing Power of Firms in International Trade

Price dispersion across buyers within product categories is commonly explained by quality differences in international trade. I use a uniquely fine-grained trade dataset which includes seller names and product descriptions to decompose price dispersion while accounting for quality. Surprisingly, I find substantial residual price variation across buyers of nearly identical products from the same seller. I show these price residuals are strongly negatively correlated with buyer size, which explains 25% of price dispersion across buyers. This is not driven by scale economies or intra-firm trade and suggests market-power mechanisms. To rationalize this finding, I integrate basic industrial organization models into an international trade framework. I show classic oligopolistic price discrimination and oligopsony both imply a positive buyer size - price relationship and cannot explain my findings. However, the data is consistent with price discrimination if larger buyers have outside options that allow them to demand discounts from their suppliers. This has three implications. First, by countervailing the market power of sellers, larger buyers can increase pass-through of global shocks along value chains. Second, countervailing power upstream gives further advantage to initially more productive firms downstream thus increasing firm heterogeneity. Third, larger buyers gain more from output trade liberalization through additional input price reductions.

Vertical FDI and Global Sourcing Strategies of Multinational Firms

I study global organization of production by multinational firms along two dimensions - geography of their inputs suppliers and their ownership structure. I build a multi-country general equilibrium model of trade in intermediate goods, which features two vertically related industries with heterogeneous firms. Importantly, when making their sourcing decisions, final goods producers face fixed costs of importing and fixed costs of vertical integration with their suppliers. As a result, the model shows that ownership over inputs suppliers magnifies any exogenous differences in firms productivity and thus affects their endogenous outcomes, such as prices and sales. The proposed framework allows to study the determinants of intra-firm trade between countries and quantify the effects of trade liberalization or increased protectionism on both intra-firm and between-firm trade. Moreover, it provides rational for investment climate as separate margin of welfare gains from trade.

Works in progress

The Effect of Competition on Prices in Firm-to-Firm Trade: Evidence from the Russian Food Embargo (Preliminary slides)

Motivated by the global trends towards higher market concentration and production fragmentation, I study how international competition affects firms' strategic interactions in global value chains. I develop a model of international trade with oligopolistic sellers, who can vary prices across their heterogeneous buyers and in response to competition. It predicts a negative relationship between a price charged to a buyer and the buyer size and allows me to study how competition among sellers affects this relationship. I test the model's predictions using firm-to-firm transactions of relatively homogeneous food products imported to Russia in 2013 - 2016. I exploit a retaliatory food embargo imposed on these products in 2014 in response to international sanctions against Russia as a plausibly exogenous shock to international competition. I find that when faced with fewer competitors, sellers offer smaller discounts to larger buyers. This finding has implications for distributional effects of trade. They suggest that all else equal, consumers purchasing imported goods from larger importers can gain more from trade.

Policy-related work

Global Value Chains: What are the Benefits, and Why Do Countries Participate? (with Faezeh Raei and Borislava Mircheva) IMF Working Papers, 19/18, 2019