Thomas CHANEY has two upcoming publications in important economic journals

Thomas CHANEY and his co-authors have two forthcoming publications announced in two important peer-reviewed journals : the Journal of International Economics and the Journal of Political Economy.

Professor CHANEY, joined the Department last year, is specialized in international trade, finance and networks. Laureate of a number of important awards, he was one of 2017’s nominees for the prestigious « Prix du meilleur jeune économiste ». 

He was awarded an ERC « Starting Grant » in 2013 for his project « Firm Networks Trade and Growth – FiNET.

The articles to be published reflect his research themes :

1/ In the Journal of International Economics, with Raphael AUER and Philip SAURE : "Quality Pricing-to-Market" (link)

Abstract :
This paper analyzes firm’s pricing-to-market decisions in vertically differentiated industries. We first present a model featuring firms that sell goods of heterogeneous quality levels to consumers who are heterogeneous in their income and thus their marginal willingness to pay for quality increments. We derive closed-form solutions for the unique pricing game under costly international trade. The comparative statics highlight how firms’ pricing-to-market decisions are shaped by the interaction of consumer income and good quality. We derive two testable predictions. First, the relative price of high qualities compared to low qualities increases with the income of the destination market. Second, the rate of cost pass-through into consumer prices falls with quality if destination market income is sufficiently high. We present evidence in support of these two predictions based on a dataset of prices, sales, and product attributes in the European car industry.

2/ In the Journal of Political Economy : « The Gravity Equation in International Trade: An Explanation » (link)

Abstract :
The gravity equation in international trade states bilateral exports are proportional to economic size, and inversely proportional to geographic distance. While the role of size is well understood, that of distance remains mysterious. I offer an explanation for the role of distance: If (i) the distribution of firm sizes is Pareto, (ii) the average squared distance of a firm’s exports is an increasing power function of its size, and (iii) a parameter restriction holds, then the distance elasticity of trade is constant for long distances. When the firm size distribution follows Zipf’s law, trade is inversely proportional to distance.