sharat ganapati's research

After 1980, larger US cities experienced substantially faster wage growth than smaller ones. We show that this urban bias mainly reflected wage growth at large Business Services firms. These firms set themselves apart through high per-worker spending on information technology capital and their disproportionate presence in big cities. We introduce a spatial model of investment-specific technical change that can rationalize these patterns. Using the model as an accounting framework, the observed decline in the investment price of information technology capital explains most urban-biased growth by raising the profits of large Business Services firms.

We measure the role of firm heterogeneity in counterfactual predictions of monopolistic competition trade models without parametric restrictions on the distribution of firm fundamentals. We show that two bilateral elasticity functions are sufficient to nonparametrically compute the counterfactual aggregate impact of trade shocks, and recover changes in economic fundamentals from observed data. These functions are identified from two semiparametric gravity equations governing the impact of bilateral trade costs on the extensive and intensive margins of firm-level exports. Applying our methodology, we estimate elasticity functions that imply an impact of trade costs on trade flows that falls when more firms serve a market because of smaller extensive margin responses. Compared to a baseline where elasticities are constant, firm heterogeneity amplifies both the gains from trade in countries with more exporter firms, and the welfare gains of European market integration in 2003-2012.

Transportation in international trade often involves transshipment by entrep\^{o}t hubs as part of the global hub-and-spoke shipping network. We investigate the returns from being a hub country---the impact of global transshipment activity by these hubs on their own international trade flows and supply chains over a 10-year period. We establish that majority of US imports--especially those from smaller origin countries---are transshipped via a select few hub countries, and transshipment activity is positively correlated with the hub country's total trade, particularly through its exports. We then unpack how transshipment activity contributes to exports. Exploiting the indirect nature of trade, we find that transshipment activity increases the hub country's imports from the origin country and its exports of downstream goods. This novel trade channel from transshipment activity highlights the important link between global value chains and transportation, and a potential venue for developing countries to further participate in global value chains.

The wholesale industry facilitates the trade of over 50% of domestic manufactured goods. However due to data limitations, there has been little research in the linkage between the manufacturing and wholesale trade sectors. I develop an algorithm to link North American Industry Classification System (NAICS) codes for manufactured goods with the NAICS wholesale sectors that trade these goods.

Nearly half of all transactions in the $6 trillion market for manufactured goods in the United States were intermediated by wholesalers in 2012, up from 32 percent in 1992. Seventy percent of this increase is due to the growth of “superstar” firms - the largest one percent of wholesalers. Estimates based on detailed administrative data show that the rise of the largest firms was driven by an intuitive linkage between their sourcing of goods from abroad and an expansion of their domestic distribution network to reach more buyers. Both elements require scale economies and lead to increased wholesaler market shares and markups. Counterfactual analysis shows that despite increases in wholesaler market power and markups, scale has benefits for buyers: through globally sourced varieties, nation-wide distribution networks, lowered marginal costs, and increased quality.

Entrepots are hubs that facilitate trade between various origins and destinations. We study these entrepôts, the network they form, and their impact on international trade. We document novel facts about the global trading network: the trade network is a hub-and-spoke system with 80% of trade shipped indirectly via these hubs using larger ships, suggesting that, by concentrating shipments, entrepôts reduce trade costs through scale economies. We estimate direct and indirect trade costs by building a model of endogenous entrepôt formation incorporating route choice by producers into a Ricardian setting and develop a geography-based instrument to estimate a leg-level scale elasticity. Simulating the counterfactual opening of the Arctic Passage and Brexit, we find that network spillovers—impacts on countries unaffected by direct changes—double baseline welfare gains, with scale economies in shipping further tripling them. Counterfactual infrastructure improvements show that entrepôts are globally pivotal nodes and concentrate network spillovers regionally.

This paper considers the evolution of global transportation usage over the past half century and the implications for supply chains. Transportation usage is increasing in response to falling prices. Participation of emerging economies in world trade and increasing longer-distance trade between countries contribute to this increase, encouraging longer supply chains. We discuss technological advances over this period and their interactions with endogenous responses from transportation costs and supply chain linkages. Supply chains involving more countries and longer distances are more exposed to disruptions, highlighting the importance of considering the interconnectedness of transportation and supply chains in policy and future work.

Pharmaceutical prices are widely dispersed across countries with comparable quality standards. Un- der monopoly, off-patent and generic drug prices are at least four times higher in the United States than comparable English-speaking high income countries. With five or more competitors, off-patent drug prices are similar or lower. Our analysis shows that differential US markups are largely driven by generic supplier market power and not wholesale intermediaries or pharmacies. Furthermore, we show that the traditional mechanism of reducing market power, free entry, is limited as implied entry costs are substantially higher in the US.

Big city economies specialize in business service industries whose workers’ local spending in turn supports a large local consumer service industry. Business service jobs have a high remote work potential. If remote work becomes more prevalent, many business service workers may leave expensive cities and work from elsewhere withdrawing spending from the local non-tradable service industries dependent on their demand. We use the recent COVID-19-induced increase in remote work to test for the strength of this mechanism and find it to be strong. As a result, low-skill service workers in big cities bore most of the pandemic’s economic impact. Our findings have broader implications for the distributional consequences of the US economy’s transition to more remote work.

We develop a general equilibrium model of multi-product firms in international trade to quantify market access costs at the level of firms, their products, and their export destinations. We estimate this framework with a simulated method of moments under rich demand and access cost shocks, using Brazilian firm-product export data. Our estimates quantify the relevance of market access costs and reveal large economies of scope that differ across export destinations. We evaluate a scenario where market access costs for an additional product are reduced to the level of those in nearby countries, generating welfare gains similar to eliminating current tariffs.

Previously titled "Oligopolies, Prices, and Quantities: Has Industry Concentration Increased Price and Restricted Output?"
American industries have grown more concentrated over the last 40 years. In the absence of productivity innovation, this should lead to price hikes and output reductions, decreasing consumer welfare. With US census data from 1972 to 2012, I use price data to disentangle revenue from output. Industry-level estimates show that concentration increases are positively correlated to productivity and real output growth, uncorrelated with price changes and overall payroll, and negatively correlated with labor’s revenue share. I rationalize these results in a simple model of competition. Productive industries (with growing oligopolists) expand real output and hold down prices, raising consumer welfare, while maintaining or reducing their workforces, lowering labor’s share of output.

This paper studies how increases in energy input costs for production are split between consumers and producers via changes in product prices (i.e., pass-through). We show that in markets characterized by imperfect competition, marginal cost pass-through, a demand elasticity, and a price-cost markup are sufficient to characterize the relative change in welfare between producers and consumers due to a change in input costs. We find that increases in energy prices lead to higher plant-level marginal costs and output prices but lower markups.