Job Market Paper:
Do economies of scope within firms transmit macro shocks across industries? I exploit exogenous variation in foreign demand faced by US multi-industry manufacturers to identify this mechanism. I find that a positive demand shock in one industry of a firm increases its sales in another only when both industries use the same intangible inputs. I develop a general equilibrium model of multi-industry firms and estimate that scope economies are driven by the scalability and non-rivalry of intangible inputs under joint production. Cross-industry spillovers due to scope economies account for 20 percent of the equilibrium response of productivity to market size. Applied to US trade, the model predicts large productivity spillovers from industry shocks, particularly across industries that use more intangible inputs.
“Structural Change Within Versus Across Firms: Evidence from the United States” (joint with Teresa Fort, Steve Redding, and Pete Schott)
US manufacturing's employment share fell from 27 to 9 percent between 1977 and 2016. A third of this reallocation is driven by a shift towards services—particularly professional services and retail— within continuing manufacturers. We show that firms with in-house professional service establishments are larger, grow faster, more likely to survive, and more diversified than firms without such plants. These trends motivate a model of within-firm structural transformation in which non- manufacturing workers complement physical production, and where physical input price reductions induce firms to reallocate towards services. This mechanism is consistent with US firms' responses to growing trade with China.
“The Costs of Market Disintegration: Evidence from the India-Pakistan Border” (joint with Robin Burgess, Dave Donaldson, and Steve Redding)