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luca david opromolla

Research Department, Banco de Portugal



Working Papers (back to home)


The Cross Sectional Dynamics of Heterogeneous Trade Models (with Alfonso Irarrazabal) (Under revision, new version coming soon)
abstract bibTex citation

In this paper we propose a framework for studying export dynamics and market specific flows in a multicountry model of trade with heterogenous firms. Countries are asymmetric in terms of their size, the size distribution of potential entrants, properties of firms idiosyncratic shocks, and trade barriers. The model has predictions in terms of cross-sectional moments and exporters dynamics. We show that persistent productivity shocks are enough to account for, qualitatively, many features of the data. In particular, the model is consistent with observed patterns of entry and exit across markets, export sales distribution, and the life cycle of new exporters.


@article{imo09,
  title={The Cross Sectional Dynamics of Heterogeneous Trade Models},
  author={Irarrazabal, A. and L.D. Opromolla},
  type={manuscript},
  year={2009},
}

Trade Reforms in a Global Competition Model: the Case of Chile (with Alfonso Irarrazabal)
abstract bibTex citation

We use a global competition model of international trade to characterize the effects of trade reforms occurred in Chile at the end of the 70s. We calibrate the model and evaluate its results using a comprehensive plant-level dataset for the period 1979-96. The model is able to explain many of the effects of liberalization reforms on industry performance. We proceed by exploring the impact of preferential trade agreements negotiated by Chile in recent years with the European Union and the North American Free Trade Agreement.


@article{imo09,
  title={Trade Reforms in a Global Competition Model: the Case of Chile},
  author={Irarrazabal, A. and L.D. Opromolla},
  type={working paper},
  year={2005},
}

Submitted Papers or Under Revision (back to home)


Managers' Mobility, Trade Performance, and Wages (with Giordano Mion)(Revision requested by the Journal of International Economics)
abstract bibTex citation

Knowledge is key to the competitiveness and success of an organization and in particular of a firm. Firms and their managers acquire knowledge via a variety of different channels which are often difficult to track down and quantify. By matching employer-employee data with trade data at the firm level we show that the export experience acquired by managers in previous firms leads their current firm towards higher export performance, and commands a sizable wage premium for the manager. Moreover, export knowledge is decisive when it is market-specific: managers with experience related to markets served by their current firm receive an even higher wage premium; firms are more likely to enter markets where their managers have experience; exporters are more likely to stay in those markets, and their sales are on average higher. Our findings are robust to controlling for unobserved heterogeneity and, more broadly, endogeneity and indicate that managersí export experience is a first-order feature in the data with an impact on a firmís export performance that is, for example, of the same order of magnitude of firm productivity.


@article{imo09,
  title={Managers' Mobility, Trade Performance, and Wages},
  author={Mion, G. and L.D. Opromolla},
  type={Mimeo},
  year={2013},
}

Why Ex(Im)porters Pay More: Evidence from Matched Firm-Worker Panels (with Pedro Martins)(Revision requested by Labour Economics)
abstract bibTex citation

This paper provides robust evidence that the wage premium paid by importers is sizeable and is largely associated to time-invariant unobserved characteristics of their employees, which could therefore be considered as more able than the workforce of non-importers. We use an extremely rich matched employer-employee data set for firms located in Portugal in the 1995-2005 period, and employ a new decomposition methodology to quantify the individual contribution of an extensive set of worker- and firm-level observable and unobservable characteristics to the wage gap paid by importers and exporters. We find that, while firm size and sales are, to different extents, important components of the wage gap both for exporters and importers, workers' fixed effects account for about half of the importers 24.3% unconditional wage premium but play no role at all in explaining the exporters 2.8% unconditional wage premium. This result is robust to the introduction of firms' fixed effects, workers' qualification fixed effects, job title fixed effects, as well as fixed effects for the top exported or imported product. Our analysis provides an important guidance for all theories that aim at explaining firms' participation both in export and import markets and including non-neoclassical labor market features into trade models.


@TechReport{MO09,
  title={Exports, Imports and Wages: Evidence from Matched Firm-Worker-Product Panels},
  author={Martins, P. and L.D. Opromolla},
  type={mimeo},
  year={2011},
}

NEW VERSION The Tip of the Iceberg: A Quantitative Framework for Estimating Trade Costs (with Alfonso Irarrazabal and Andreas Moxnes)(Revision requested by the Review of Economics and Statistics, 2nd round)(this version: July 2012)
This is a substantially revised version of a paper previously circulated under the title "The Tip of the Iceberg: Modeling Trade Costs and Implications for Intra-Industry Reallocation" (September 2010)
abstract bibTex citation

Casual empiricism suggests that additive trade costs, such as quotas, per-unit tariffs, and, in part, transportation costs, are prevalent. In spite of this, we have no broad and systematic evidence of the magnitude of these costs. We develop a new empirical framework for estimating additive trade costs from standard firm-level trade data. Our results suggest that additive barriers are on average 34 percent, expressed relative to the median price. The point estimates are strongly correlated with common proxies for trade costs, and they explain a large share of variation of global trade flows. We focus on two theoretical implications of our empirical findings. First, gains from trade can be much larger than the relatively modest gains predicted by the class of models considered in Arkolakis et al. (2012a). Second, the presence of additive trade costs can help explain the large number of zeros in bilateral trade flows.


@article{imo09,
  title={The Tip of the Iceberg: A Quantitative Framework for Estimating Trade Costs},
  author={Irarrazabal, A. and Moxnes, A. and L.D. Opromolla},
  type={mimeo},
  year={2012},
}

Publications (back to home)


The Margins of Multinational Production and the Role of Intra-firm Trade (with Alfonso Irarrazabal and Andreas Moxnes) Journal of Political Economy, (2013), 121(1), pp. 74-126 Online Appendix
abstract bibTex citation

Multinational production (MP) can lead to large gains through international technology sharing. However, empirical evidence suggests that geography matters for MP: Affiliate sales fall in distance from the headquarters. We introduce intra-firm trade into a standard model of exports and MP, and show that the model is consistent with firm-level and aggregate evidence. Using a maximum likelihood estimator, we find that intra-firm trade plays a crucial role in shaping the geography of MP. An implication of our work is that MP and exports are very similar activities. Consequently, shutting down MP leads to relatively small welfare losses.


@Article{IMO2013,
  title={The Margins of Multinational Production and the Role of Intra-firm Trade},
  author={Irarrazabal, A. and Moxnes, A. and L.D. Opromolla},
  journal={Journal of Political Economy},
  volume={121},
  number={1},
  year={2013},
  pages={74-126}
}

NEW VERSION A Theory of Entry into and Exit from Export Markets (with Giammario Impullitti and Alfonso Irarrazabal) Journal of International Economics, (2013) 90(1), pp.: 75-90.
abstract bibTex citation

This paper introduces idiosyncratic firm efficiency shocks into a continuous-time general equilibrium model of trade with heterogeneous firms. The presence of sunk export entry costs and efficiency uncertainty gives rise to hysteresis in export market participation. A firm will enter into the export market once it achieves a given size, reflecting its efficiency, but may keep exporting even after its efficiency has fallen below its initial entry level. Some exporters will not be selling as much in the domestic market as other firms that never entered the foreign market. The model captures the qualitative features of firm birth, growth, export market entry and exit, and death found in the empirical literature. We calibrate the model to match relevant statistics of firms' turnover and export dynamics in the United States, and show that the mode of globalization (a reduction in sunk costs as opposed to overhead costs), matters for a firm's selection and persistence in export status. Trade liberalization via a reduction in sunk export entry costs reduces a firm's export status persistence, while the opposite happens when liberalization takes place through a reduction in overhead export costs.


@Article{IIO2013,
  title={A Theory of Entry into and Exit from Export Markets},
  author={Impullitti, G. and A. Irarrazabal and L.D. Opromolla},
  journal={Journal of International Economics},
  volume={90},
  number={1},
  year={2013},
  pages={75-90}
}

NEW VERSION Product and Destination Mix in Export Markets (with João Amador) Review of World Economics (Weltwirtschaftliches Archiv), (2013), 149(1): pp. 23-53
abstract bibTex citation

This article studies the joint destination-product strategies of exporters, using the universe of export transactions for firms located in Portugal in the period 1995-2005. The article breaks-down the annual growth rate of total exports along different margins and details choices made by multi-product, multi-destination firms regarding their export portfolio. In addition, the article looks at similar features for the sub-sample of new exporters. We find that both the firm-level extensive and intensive margins are important in driving the year-to-year variation in aggregate exports. However, variation over time in the sales of continuing exporters is mainly driven by their sales in continuing destinations. In addition, a product's export tenure within a firm varies largely across currently exported products in the context of an intense activity of product and destination switching. Moreover, the higher the importance of a product, the more its sales are concentrated in the firm's top destination. Finally, the article finds that, while continuing exporters enter new markets mainly by selling old products, new exporters access new destinations mainly by exporting new products.


@Article{AO2013,
  title={Product and Destination Mix in Export Markets},
  author={Amador, J. and L.D. Opromolla},
  journal={Review of World Economics},
  volume={149},
  number={1},
  year={2013},
  pages={23-53}
}

Policy Papers (back to home)


Trade and Wage Inequality Banco de Portugal Economic Bulletin, Spring, 2013

Product Switching or Re-classification? An Application to Portuguese International Trade (with Rúben Branco) Banco de Portugal Economic Bulletin, Fall, 2012

The Margins of Exports: Firms, Products and Destinations (with João Amador) Banco de Portugal Economic Bulletin, Spring, 2010

Textiles and Clothing Exporting Sectors in Portugal - Recent Trends (with João Amador) Banco de Portugal Economic Bulletin, Spring, 2009