research papers by frederic robert-nicoud

Research papers by Frederic Robert-Nicoud


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Working Papers series


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Working papers: Abstracts and links

Survival of the fittest in cities: Agglomeration, selection, and polarisation

with Kristian Behrens
Abstract. Empirical studies consistently report that labour productivity and TFP rise with city size. The reason is that cities attract the most productive agents, select the best of them, and make the selected ones even more productive via various agglomeration economies. This paper provides a microeconomically founded model of vertical city differentiation in which the latter two mechanisms (`agglomeration' and `selection') operate simultaneously. Our model is both rich and tractable enough to allow for a detailed investigation of when cities emerge, what determines their size, and how they interact through the channels of trade. We then uncover stylised facts and suggestive econometric evidence that are consistent with the most distinctive equilibrium features of our model. We show, in particular, that larger cities are both more productive and more unequal (`polarised'), that inter-city trade is associated with higher income inequalities, and that the proximity of large urban centres inhibits the development of nearby cities. [PDF] [back to top]

The emulator effect of the Uruguay Round on U.S. regionalism

with Marco Fugazza
Abstract. In this paper we investigate whether multilateral trade liberalisation undermines or encourages preferential trade liberalisation. We use highly disaggregated data at the tariff-line level and find an emulator effect of multilateral trade liberalisation on preferential trade agreements. Indeed, our regression results show that products for which the U.S. agreed to cut its MFN rate substantially between the end of the Tokyo and Uruguay Rounds of GATT negotiations (1979-1994) are also the products for which subsequent tariff cuts on a preferential basis are boldest. In this sense, regionalism complements multilateralism. Our empirical investigations also reveal that sectoral differences are important determinants of the preference margin, as well as the identity of trading partners. When crossed with the results of Limao (2006) and others on the causal link between regionalism and multilateral liberalisations in the realm of the GATT/WTO institutional framework, our results establish that the multilateral trading system and the incentives to expand regionalism interact in complex ways. [PDF] [back to top]

A simple model of the Juggernaut effect of trade liberalisation

with Richard Baldwin
Abstract. This paper posits a formal political economy model where the principle of reciprocity in multilateral trade talks results in the gradual elimination of tariffs. Reciprocity trade talks turn each nation’s exporters into anti-protectionists at home; they lower foreign tariffs by convincing their own government to lower home tariffs. Due to the new array of political forces, each government finds it politically optimal to remove tariffs that it previously found politically optimal to impose. The one-off global tariff cut then reshapes the political economy landscape via entry and exit, reducing the size/influence of import-competing sectors and increasing that of exporters. In the next round of trade talks governments therefore find it politically optimal to cut tariffs again. The process may continue until tariffs are eliminated. [PDF] [back to top]

Offshoring: General equilibrium effects on wages, production and trade

with Richard Baldwin
Abstract. A simple model of offshoring, which depicts offshoring as shadow migration, permits parsimonious derivation of necessary and sufficient conditions for the effects on wages, prices, production and trade. We show that offshoring requires modification of the four classic international trade theorems. We also show that offshoring is an independent source of comparative advantage and can lead to intra-industry trade in a Walrasian setting. The model is extended to allow for two-way offshoring between similar nations and to allow for monopolistic competition. We also show that, unlike trade in goods, trade in tasks typically makes all types of workers better off in both the host and home countries (with some proviso). [PDF] [Click here to download the paper presented under another title by Richard Baldwin on December 13th, 2006, at the Hitotsubashi COE/RES Conference on International Trade and FDI. The paper has evolved a lot since.] [back to top]

Homeownership and land use control: A dynamic model with voting and lobbying

with Christian Hilber
Abstract. Homeowners have incentives to control and limit local land development and anecdotic evidence suggests that homevoters indeed actively support restrictive measures. Yet, US metro area level homeownership rates are strongly negatively related to corresponding measures of the restrictiveness of land use regulation. To shed light on these seemingly contradictory stylized facts, we present a dynamic model with a planning board that maximizes a weighted social welfare function (SWF). The SWF can be interpreted as the reduced form of various political economy models of voting and lobbying. We consider three special cases: a median voter model, a probabilistic voting model, and an "influence for sale" model. In all three cases conditions exist that predict outcomes which are consistent with the presented stylized facts. Generally, our model predicts that the homeownership rate has an ambiguous effect on the regulatory restrictiveness. [PDF] [back to top]

Owners of Developed Land versus Owners of Undeveloped Land: Why Land Use is More Constrained in the Bay Area than in Pittsburgh

with Christian Hilber
Abstract. We model residential land use constraints as the outcome of a political economy game between owners of developed and owners of undeveloped land. Land use constraints are interpreted as shadow taxes that increase the land rent of already developed plots and reduce the amount of new housing developments. In general equilibrium, locations with nicer amenities are more developed and, as a consequence, more regulated. We test our model predictions by geographically matching amenity, land use, and historical Census data to metropolitan area level survey data on regulatory restrictiveness. Using amenities as instrumental variables, we demonstrate that metropolitan areas with better amenities are indeed more developed and more tightly regulated. Moreover, consistent with theory, metropolitan areas that were more regulated in the 1980s observed a greater slowdown in the growth rate of new housing construction from the 1980s to the 1990s. [PDF] [back to top] [NEW VERSION COMING SOON (with new title); for overheads, click here]

Papers recently accepted for publication: Abstracts and links


Labor market reforms, job insecurity and the flexibility of the unemployment relationship

with Niko Matouschek and Paolo Ramezzana

Abstract. We endogenize separation in a search model of the labor market and allow for bargaining over the continuation of employment relationships following productivity shocks to take place under asymmetric information. In such a setting separation may occur even if continuation of the employment relationship is privately efficient for workers and firms. We show that reductions in the cost of separation, owing for example to a reduction in firing taxes, lead to an increase in job instability and, when separation costs are initally high, may be welfare decreasing for workers and firms. We furthermore show that, in response to an exogenous reduction in firing taxes, workers and firms may switch from rigid to flexible employment contracts, which further amplifies the increase in job instability caused by policy reform.[PDF] [doi] [back to top].

Trade and growth with heterogenous firms

with Richard Baldwin
Abstract. This paper explores the impact of trade on growth when firms are heterogeneous. We find that greater openness produces anti-and pro-growth effects. The Melitz-model selection effects raises the expected cost of introducing a new variety and this tends to slow the rate of new-variety introduction and hence growth. The pro-growth effect stems from the impact that freer trade has on the marginal cost of innovating. The balance of the two effects is ambiguous with the sign depending upon the exact nature of the innovation technology and its connection to international trade in goods and ideas. We consider five special cases (these include the Grossman-Helpman, the Coe-Helpman and Rivera-Batiz-Romer models) two of which suggest that trade harms growth; the others predicting the opposite. [PDF] [doi] [back to top]

Offshoring of routine tasks and deindustrialisation : Threat or opportunity -and for whom?

Abstract. Offshoring, or overseas sourcing of routine tasks, generates efficiency gains that benefit consumers and workers with skills similar to those whose very jobs are threatened by offshoring. Essentially, the interaction between offshoring, footloose capital and agglomeration economies locks the comparative advantage of advanced nations in complex or strategic functions while labour services in routine tasks, the coordination of which is easily codified, are provided by low-wage developing nations through the fibre optic cable. In this framework, the partial-equilibrium view that offshoring is necessarily detrimental to workers in advanced nations is misguided because the implicit counterfactual (that keeping the off-shored jobs would have no macroeconomic impact on the economy) is not warranted. In addition, inasmuch as routine tasks create few positive feedbacks, trade in tasks can be an impediment to income convergence, unlike trade in goods. In short, this paper qualifies the views that offshoring hurts workers in the North and accelerates income convergence between the North and the South. [PDF (paper + appendix)]. [Revised version of CEPR dp 5617 and CEP dp 0734] [back to top]

Entry and asymmetric lobbying: Why governments pick losers

with Richard Baldwin

Abstract. Governments frequently intervene to support domestic industries, but a surprising amount of this support goes to ailing sectors. We explain this with a lobbying model that allows for entry and sunk costs. Specifically, policy is influenced by pressure groups that incur lobbying expenses to create rents. In expanding industry, entry tends to erode such rents, but in declining industries, sunk costs rule out entry as long as the rents are not too high. This asymmetric appropriablity of rents means losers lobby harder. Thus it is not that government policy picks losers, it is that losers pick government policy. [PDF] [doi] [back to top] The Financial Times Deutschland's "Kommentar" column of February 2, 2002 discusses this paper.

Can South-South trade liberalisation stimulate North-South trade?

with Marco Fugazza

Abstract. This paper uses a combination of Ethier (1982) and Melitz (2003) models to show that liberalizing trade among developing countries, so-called South-South trade, could contribute to improve the access to international markets of would-be exporters of developing countries. Lower trade barriers among developing countries has the effect of lowering the price of intermediate inputs and eventually allows exporters in those countries to serve international markets. We also compare unilateral and multilateral South-South trade liberalization and find that the latter unambiguously reduces the price of intermediates in all participating countries, whereas the former has ambiguous effects. [PDF] [back to top]

Agglomeration and trade with input-output linkages and capital mobility

Abstract. This paper put forth a model that nests the trade model due to Flam and Helpman (1987) and Martin and Rogers (1995) and an original 'New Economic Geography' model a-la Krugman (1991). Agglomeration is driven by input-output linkages among firms together with capital mobility. Both the positive and normative implications of the model are studied. In terms of the positive implications, the NEG model exhibits the same dynamic properties as a wide class of models based on other agglomeration mechanisms (labour migration, human capital accumulation); thus the model is well suited to study issues regarding industry location, trade in goods and capital mobility. In terms of normative implications, when input-output linkages are strong, agglomeration might Pareto dominate dispersion because agglomeration lowers producer prices: efficiency and equity do not necessarily conflict in this model. When vertical linkages are weak, the market is biased in favour of agglomeration if the planer has a strong aversion to inequalities.[PDF] [back to top]