Elasticity optimism

Estimates of the elasticity of substitution between domestic and foreign varieties are small in macroeconomic data, and substantially larger in disaggregated studies. This may be an artifact of heterogeneity. We use disaggregated multilateral trade data to structurally identify elasticities of substitution in US goods. We spell out a partial equilibrium model to aggregate them adequately at the country level. We compare aggregate elasticities that impose equality across sectors, to estimates allowing for heterogeneity. The former are similar in value to conventional macroeconomic estimates; but they are more than twice larger -up to 7- with heterogeneity. The parameter is central to calibrated models in most of international economics. We discuss the difference our corrected estimate makes in various areas of international economics, including the dynamics of external balances, the international transmission of shocks, international portfolio choice and optimal monetary policy.Trade Elasticities, Aggregation, Calibration, Global Imbalances, International Transmission, International Portfolio, Monetary Policy.

Location decisions and Minimum Wages

The paper contributes to the living debate on the controversial effects of minimum wage policy on economic performances, focusing on its impact on firms’ location choice. The question is investigated through a theoretical model, that incorporates features from the new trade literature (Krugman (1991)) and the labor-market literature. In a two-country framework, we model endogenous entry of firms under wage rigidity. In this setting, the impact of an unilateral increase in the home country’s minimum wage is analyzed. The policy shock is shown to have a twofold influence on the relative attractiveness of the home country, simultaneously affecting its relative cost competitiveness and the aggregate demand addressed to firms. Both effects do not necessarily go in the same direction, hence the final effect on firms’ location decisions is ambiguous. We show that it notably depends on the adjustments that occur on the skilled and unskilled labor markets. Our overall results suggest that the design of labor-market policies should take into account their impact on firms’ location decisions, if willing to evaluate their whole consequences in the national economy.Minimum wage, Home Market Effect, Firms location decisions

Price Convergence in the European Union: Within Firms or Composition of Firms?

In this paper we use data on French export prices at the disaggregated firm and product level to evaluate the effect of economic integration on price convergence. We use the European integration ‘experiment' and firm-level data on export prices to distinguish between two possible margins of adjustment: At the intensive margin economic integration induces different pricing strategies within the firm, whereas at the extensive margin it affects the composition of firms with different pricing strategies. In our sample price convergence is 40 percent faster in the European Union than in an appropriately defined control group. 30 percent of this effect can be attributed to the fact that a higher share of firms with a low propensity to price discriminate serve European markets

The location of domestic and foreign production affiliates by French multinational firms

In this paper we combine two traditions in the analysis of firms’ location patterns. One led by trade economists who try to understand why do firms invest abroad, and another one led by urban/regional economists, who frequently use patterns of inter-regional or inter-city choices to estimate agglomeration economies. We contribute to the trade-motivated set of papers on location choices by adding the domestic country in the choice set, while accounting for firm’s heterogeneity in the choices. Our econometric results using French firm-level data show an important ‘‘home bias” in manufacturing investment decisions. A crucial finding, which bridges with our contribution to the agglomeration literature, is that the spatial clustering of affiliates belonging to the same industrial group accounts for the lion’s share of this home bias

Role of the Single-Stranded DNA–Binding Protein SsbB in Pneumococcal Transformation: Maintenance of a Reservoir for Genetic Plasticity

Bacteria encode a single-stranded DNA (ssDNA) binding protein (SSB) crucial for genome maintenance. In Bacillus subtilis and Streptococcus pneumoniae, an alternative SSB, SsbB, is expressed uniquely during competence for genetic transformation, but its precise role has been disappointingly obscure. Here, we report our investigations involving comparison of a null mutant (ssbB−) and a C-ter truncation (ssbBΔ7) of SsbB of S. pneumoniae, the latter constructed because SSBs' acidic tail has emerged as a key site for interactions with partner proteins. We provide evidence that SsbB directly protects internalized ssDNA. We show that SsbB is highly abundant, potentially allowing the binding of ∼1.15 Mb ssDNA (half a genome equivalent); that it participates in the processing of ssDNA into recombinants; and that, at high DNA concentration, it is of crucial importance for chromosomal transformation whilst antagonizing plasmid transformation. While the latter observation explains a long-standing observation that plasmid transformation is very inefficient in S. pneumoniae (compared to chromosomal transformation), the former supports our previous suggestion that SsbB creates a reservoir of ssDNA, allowing successive recombination cycles. SsbBΔ7 fulfils the reservoir function, suggesting that SsbB C-ter is not necessary for processing protein(s) to access stored ssDNA. We propose that the evolutionary raison d'être of SsbB and its abundance is maintenance of this reservoir, which contributes to the genetic plasticity of S. pneumoniae by increasing the likelihood of multiple transformation events in the same cell

Can Firms' Location Decisions Counteract the Balassa-Samuelson Effect ?

International audienceThis paper examines the determinants of relative prices in a model combining a Harrod–Balassa–Samuelson (HBS) mechanism and an endogenous location of traded good producers. Besides the standard HBS effect, asymmetric productivity improvements in the traded good sector push new firms to enter the market. This benefits local consumers who save on trade costs and exerts an upward pressure on relative wages. As a consequence, relative prices in the traded good sector either increase or fall in general equilibrium. In a panel cointegration framework, the wage effect is shown to dominate. This means the HBS effect is strengthened by the relocation of traded good producers

Invoicing currency, firm size and hedging Invoicing Currency, Firm Size, and Hedging *

Abstract We use the results of a survey conducted on a sample of 3,013 exporting firms located in 5 EMU countries to explore the link between the invoicing currency of exports, firm size, and hedging. About 90% of firms in the sample invoice exports in their (producer) currency. Large firms are more likely to use another currency. The aggregate use of the euro is thus 15 percentage points lower when firms are weighted by their size than for the average firm. This heterogenity is robust to controlling for determinants of the invoicing choice stressed by the literature. We however show that large firms and firms pricing in another currency as the euro are also more likely to hedge against exchange rate risk. An IV estimation shows the causal impact of access to hedging on the choice of the invoicing currency. We find (large) firms having access to hedging being more likely to invoice in the importer's currency