Rowan Shi

I am an Assistant Professor of Economics at Toronto Metropolitan University in Canada.

research interests

International trade, urban/spatial economics, computational methods

contact

E-mail: rowanxshi@torontomu.ca
GitHub: rowanxshi
CV: web or PDF

Research

working papers

Combinatorial discrete choice, with Costas Arkolakis, Fabian Eckert
Revise and Resubmit, American Economic Review

Abstract We introduce a general quantifiable framework to study the location decisions of multinational firms. In the model, firms choose in which locations to pay the fixed costs of setting up production, taking into account potential complementarities among production locations. The firm’s location choice problem is combinatorial because the marginal value of an individual production location depends on its complete set of production sites. We develop a computational method to solve such problems and aggregate optimal decisions across heterogeneous firms. We use our calibrated model to study Brexit and the recent sanctions war with Russia. In both counterfactuals, changes in the location decisions of multinationals are driving real wage responses.

NBER WP, Julia Package and documentation

Non-traded gains from trade: Evidence from Brazil, with Rafael Parente

Abstract We investigate the impact of trade shocks on the labor allocation within industries at the local labor market level. Using the Brazilian import liberalization of the 1990s as the empirical setting, we uncover a novel margin for impact of trade: industrial reorganization among non-traded producers. We begin by showing empirically that local labor markets more exposed to the policy experienced more job reallocation across firms within traded and non-traded industries compared to those less exposed. Moreover, small establishments were less likely to survive compared to large establishments; among survivors, they were less likely to grow. To explain these empirical regularities, we provide reduced-form evidence that non-traded producers select into importing: plants in high exposure regions were more likely to start importing, with new importers originating from the middle of the size distribution but growing the most over the liberalization period. Motivated by these findings, we develop a parsimonious model of heterogeneous producers incorporating this mechanism. The theory is consistent with the empirical findings, and implies that reallocation among non-traded producers is welfare-enhancing. In contrast, in a special case where all non-traded producers make the same importing decision, this reallocation effect disappears. To evaluate the welfare effects of our findings, we extend the model to a quantifiable framework which we discipline with our empirical estimates.

IMF working paper

Solving combinatorial discrete choice problems in heterogeneous agent models: theory and an application to corporate tax harmonization in the European Union, with Kathleen Hu

Abstract This paper develops a solution method for computing optimal decisions to combinatorial discrete choice problems (CDCPs) in heterogeneous agent settings. With an arbitrary type distribution over any number of differentiated characteristics, it quickly computes the policy function mapping the entire type space to corresponding optimal actions. The binary decisions can display either supermodular or submodular interactions. Problems of this structure arise naturally ineconomic settings, especially in international trade and industrial organization. The proposed algorithm is particularly well suited for estimating or computing general equilibrium models incorporating heterogeneous agents solving CDCPs, including choices on plant locations, input sourcing partners, or export market entry. As an illustration of the algorithm in practice, the paper then turns to evaluating the effects of a counterfactual policy equalizing corporate tax rates across the European Union using a quantitative general equilibrium model where heterogeneous firms optimally select a set of countries in which to operate affiliates.

works in progress

Place-based policy for national welfare, with Paula Donaldson, Fabian Trottner

Abstract We provide a novel rationale for national place-based policies based on imperfect competition in local labor markets, and analyze its implications for the spatial welfare effects of such policies. To do so, we develop a multi-region model where heterogeneous market power among firms in both labor and product markets distorts the allocations of resources within and across regions. Industrial productivities and their elasticity to regional density differ endogenously across regions, hinging on how efficiently each region's labor market allocates workers across firms. Solving the planner's problem, we show that place-based industrial policy can improve efficiency, and assess when and how efficiency-based policy interventions change the spatial distribution of living standards. To quantify the importance of our theoretical results, we study the effects on reallocation and welfare across space of place-based policies aimed at eliminating disparities between Western and Eastern Germany.