Welcome to my website

I am an Associate Professor of International Economics at the University of Mannheim and a Research Fellow at the Centre for Economic Policy Research (CEPR), London. I hold a PhD in Economics (2008) from Pompeu Fabra University. My main research interests are international trade, macroeconomics and development economics.
For further information see my curriculum vitae.

Contact information

Harald Fadinger
Department of Economics
University of Mannheim
L7 3-5
D-68131 Mannheim

+49 (0) 621 181 3505

Current research

Offshoring and Skill-Upgrading in French Manufacturing: A Heckscher-Ohlin-Melitz View

with Juan Carluccio, Alejandro Cuñat and Christian Fons-Rosen, new version, September 2016, submitted.
Featured in a Vox column

Using French manufacturing firm-level data for the years 1996 to 2007, we uncover a novel set of stylized facts about offshoring behavior: (i) Low-productivity firms obtain most of their inputs domestically. (ii) Firms with higher productivity offshore skill-intensive inputs to skill-abundant countries and are more labor intensive than non-importers in their domestic production. (iii) Firms with even higher productivity also import labor-intensive inputs from labor-abundant countries and are more skill intensive than non-importers. Inspired by these findings, we produce a model in which heterogeneous firms, subject to fixed costs, can offshore intermediate inputs of different skill intensities to countries with different skill premia. Heckscher-Ohlin-like forces operate at the within-industry level, leading to endogenous variation in domestic skill intensities across firms. We provide econometric evidence supporting the factor-proportions channel through which reductions in offshoring costs to labor-abundant countries have increased firm-level skill intensities of French manufacturers.

Income Differences and Input-Output Structure

with Mariya Teteryatnikova and Christian Ghiglino, new version, September 2016, submitted.
Supplementary Appendix
Video of my presentation at the CEPR-Worldbank Conference on Global Value Chains

We consider a multi-sector general equilibrium model with input-output (IO) linkages and sector-specific productivities to investigate how the IO structure interacts with sectoral productivities in determining cross-country differences in aggregate income per worker. Using tools from network theory, we show that aggregate income can be approximated as a simple function of the first and second moments of the joint distribution of the IO multipliers and sectoral productivities. We then estimate the parameters of the model to fit their joint empirical distribution. Poor countries have few high-multiplier sectors, while most sectors have very low multipliers; by contrast, rich countries have more sectors with intermediate multipliers. Moreover, the correlations of sectoral IO multipliers with productivities are positive in poor countries, while being negative in rich ones. The estimated model predicts cross-country income differences extremely well and significantly better than a multi-sector model without IO linkages. Finally, we perform a number of counterfactuals and compute optimal tax rates.

All Together Now: Integration, Delegation and Management

with Laura Alfaro, Nick Bloom, Paola Conconi, Patrick Legros, Andrew Newman, Raffaella Sadun and John Van Reenen, November 2016.

Little is known theoretically, and even less empirically, about the relationship between firm boundary choices and the allocation of decision rights within firms. We develop a model in which firms choose which suppliers to integrate, whether to delegate decisions to integrated suppliers or keep them centralized, and the quality of central management. The final good producer discovers the productivity of a supplier only after integration. In this setting, integration has an option value, since it allows the final good producer to choose whether to delegate decisions to the suppliers or to keep control. We test the predictions of this model using a matched dataset that combines measures of vertical integration, decentralization, and management practices for a large set of firms in twenty countries and eighty industries. In line with the model's predictions, we find that integration and decentralization co-vary, that this effect vanishes once management is controlled for, and that suppliers from sectors with greater productivity variation are more likely to be integrated with their downstream customers.

The Real Exchange Rate, Innovation and Productivity Growth: A Cross-country Firm-level Analyis

with Laura Alfaro, Alejandro Cuñat and Yanping Liu.

In progress.

Endogenous Heterogeneity, Integration and Management

with Laura Alfaro, Patrick Legros and Andrew Newman.

In progress.

Trade Policy in Models with Monopolistic Competition

with Alessia Campolmi and Chiara Forlati.

In progress.

Oligopoly and Trade

with Holger Breinlich, Volker Nocke and Nicolas Schutz.

In progress.


Do Prices Determine Vertical Integration?

with Laura Alfaro, Paola Conconi and Andrew Newman.
Review of Economic Studies, 2016, 83 (3), pp. 855-888 (lead article).

A number of theories in organizational economics and industrial organization suggest that vertical integration, while costly, increases productivity. It follows from firms' maximizing behaviour that higher prices in the product market ought to induce more integration. Trade policy provides a source of exogenous price variation to assess this prediction: higher tariffs should lead to higher prices and, therefore, to more integration. We construct firm-level vertical integration indices for a large set of countries and industries and exploit variation in applied most-favoured-nation tariffs to examine the impact of tariffs on firm boundaries. The empirical results provide strong support for the view that higher output prices generate more vertical integration. Our estimates of the average price elasticity of vertical integration are in the range 0.4-2.

Skill-biased Technological Change, Unemployment and Brain Drain

with Karin Mayr. Journal of the European Economic Association, 2014, 12(2), pp. 397-431.

We develop a model of directed technology adoption, frictional unemployment and migration to examine the effects of a change in skill endowments on wages, employment rates and emigration rates of skilled and unskilled workers. We find that, depending on the elasticity of substitution between skilled and unskilled workers and the elasticity of the matching function, an increase in the skill ratio can reduce the relative unemployment rate of skilled workers and decrease the relative emigration rate of skilled workers (brain drain). We provide empirical estimates and simulations to support our findings and show that effects are empirically relevant and potentially sizable.

Trade Policy: Home Market Effect versus Terms-of-Trade Externality

with Alessia Campolmi and Chiara Forlati.
Journal of International Economics, 2014, 93(1), 92-107.

We study trade policy in a two-sector Krugman (1980) trade model, allowing for wage, import and export subsidies/taxes. We study non-cooperative trade policies, first for each individual instrument and then for the situation where all instruments can be set simultaneously, and contrast those with the efficient allocation. We show that in this general context there are four motives for non-cooperative trade policies: the correction of monopolistic distortions; the terms-of-trade manipulation; the delocation motive for protection (home market effect); the fiscal-burden-shifting motive. The Nash equilibrium when all instruments are available is characterized by first-best-level wage subsidies, and inefficient import subsidies and export taxes, which aim at relocating firms to the other economy and improving terms of trade. Thus, the dominating incentives for non-cooperative trade policies are the fiscal-burden-shifting motives and terms-of-trade effects.

Check out the working paper version for a quite different perspective on the same issue.

Incomplete Contracts, Learning and Export Dynamics: Theory and Evidence from French Firms

with Romain Aeberhardt and Ines Buono
European Economic Review, 2014, 68, pp. 219-249.

We consider a model in which exporting requires finding a local partner in each market. Contracts are incomplete and exporters must learn the reliability of their partners through experience. Export behavior is state-dependent due to matching frictions. Better legal institutions alleviate contracting frictions especially in sectors with large contracting problems, thereby increasing state dependence and reducing hazard rates by more in those sectors. Moreover, hazard rates decline with the age of the relationship, as unreliable partners are weeded out. We find strong evidence in favor of the model's predictions when testing them with French firm-level data.

Trade and Sectoral Productivity

with Pablo Fleiss. The Economic Journal, 2011, 121 (554).
» Supplementary Appendix
» Dataset

Cross-country differences in sectoral total factor productivity (TFP) are at the heart of Ricardian trade theory and of many models of growth and development. Our knowledge of the magnitude and the characteristics of cross-country differences in sectoral TFP is still limited however. This study fills the gap by showing how sectoral TFP differences can be backed out from bilateral trade data using a hybrid Ricardo-Heckscher-Ohlin model. This approach allows us to overcome the data problems that constrained previous studies and to provide a comparable set of sectoral productivities for twenty-four manufacturing sectors in more than sixty countries at all stages of development. Our results imply that TFP differences in manufacturing sectors between rich and poor countries are substantial and far more pronounced in skilled labor and R&D intensive sectors than in others. We also apply our productivity estimates to test development theories that have implications for cross-country industry-level productivity patterns.

Productivity Differences in an Interdependent World

Journal of International Economics, 2011, 84 (2), pp. 221-232.
» Supplementary Appendix

This paper studies cross-country differences in productivity from an open economy perspective by using a Helpman-Krugman-Heckscher-Ohlin model that embraces the single-cone model and a one-sector economy with factor deepening as particular cases. To estimate the model, I combine tools from development accounting and the factor content of trade literature. When simultaneously fitting data on income, factor prices and the factor content of trade, I find that the one-sector model is by far better supported by the data than the single-cone model. Rich countries have far higher productivities of human capital than poor ones, while differences in physical capital productivity are not related to income per worker. Finally, I estimate an aggregate elasticity of substitution between human and physical capital that is significantly below one.

The Micro-Dynamics of Exporting: Evidence from French Firms

with Ines Buono. Banca d'Italia - Temi di Discussione, 2012, Nr. 880.

This paper investigates the dynamics of export relationships -- defined as shipments by a given firm to a given destination in a given year -- using a panel of almost 25,000 French exporters over the five-year period 1995-1999. We describe how these export relationships evolve over time and present a number of stylized facts, which we relate to different theories of export dynamics, such as a dynamic sunk-cost model and the recent literature on exporting and learning.
We find that export relationships are very dynamic: a large fraction of export relationships are created or destroyed every year and export values within relationships fluctuate substantially. Most of these dynamics are explained by relationship-specific shocks rather than by supply and/or demand shocks. Moreover, upon entry, export values are small but they gradually expand as relationships mature. Finally, while many export relationships are volatile, others are persistent. Having previously exported to a given destination substantially increases the probability of exporting there in the current period. We argue that, taken together, these facts are more in line with a learning model than with the sunk-cost hypothesis.


Input-output linkages and income differences across countries: New evidence

with Christian Ghiglino and Mariya Teteryatnikova. www.voxeu.org, 24 December 2016.

Economists are just starting to understand how observed input-output linkages and productivity differences are connected. This column investigates how differences in the distribution of sectoral input-output multipliers interact with sectoral productivities to determine cross-country differences in aggregate income. It finds that the impact of the linkages on productivity are substantial, which in turn has significant implications for policy.

Macht, Kontrolle und die Optionen der ÖVP.

Commentary on the Austrian presidential election in the Austrian newspaper der Standard (in German).
der Standard, 24 November 2016.

Britisches Rosinenpicken kann die EU nicht zulassen.

Commentary on Brexit in the Austrian newspaper die Presse (in German).
die Presse, 30 June 2016.

Offshoring and unskilled labour demand: new evidence

with Juan Carluccio, Alejandro Cunat and Christian Fons-Rosen. www.voxeu.org, 14 December 2015.

The increase in the skill premium - wages of skilled workers relative to unskilled workers - has prompted research on its causes and potential remedies. This column presents new evidence suggesting that the impact of globalisation on the income distribution in industrialised countries is much stronger than initially thought. The productivity gains from having access to cheaper inputs through offshoring are not being distributed equally between the different economic actors in our rich societies.

Die Troika muss Griechenland mehr anbieten

Commentary on the economic crisis in Greece in the Austrian newspaper derStandard (in German).
derStandard, 9 July 2015.

Public Lecture on the Eurozone crisis

University of Mannheim, March 2015 (in German).

TTIP - eine Analyse aus europäischer Perspektive

Policy article on the economic effects of TTIP for the Austrian Society for European Politics (in German). OeGfE Policy Brief, 2015.08, 26 February 2015. Also featured on euractiv.de

Der vorliegene Policy Brief argumentiert, dass die direkten ökonomischen Effekte von TTIP unsicher sind und diese sich erst über einen Zeitraum von 10 bis 20 Jahren einstellen würden. Trotzdem handelt es sich um ein wichtiges strategisches Projekt, da TTIP gleichzeitig die bilateralen Beziehungen zu den USA stärken und neue internationale Standards für Freihandelsabkommen schaffen würde. Damit könnten potentiell Produkt-, Umwelt-, und Investitionsstandards in vielen Teilen der Welt positiv beeinflußt werden.

Nicht blind der EU-Kommission vertrauen

Interview on the consequences of the Transatlantic Trade and Investment Partnership (TTIP) with Austrian newspaper derStandard.at (in German).
derStandard.at, 27 March 2014.

Firm organisation: What we know and why we should care

with Laura Alfaro, Paola Conconi, Patrick Legros and Andrew Newman. www.voxeu.org, 02 December 2012.

Increasingly, people are pointing the finger of blame for economic woe at large firms. This column argues that organisation design is often affected by government trade policy. If firm organisation design has implications for consumer welfare (in terms of prices and quality of product), evidence suggests that governments should make sure that in future, trade policy and corporate governance policy are more complementary.