“Voting on a Trade Agreement: Firm Networks and Attitudes Toward Openness”

with Diana Van Patten

The Review of Economic Studies, accepted

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We exploit a natural experiment to study the extent to which popular attitudes toward trade are driven by economic fundamentals. In 2007, Costa Rica put a free trade agreement (FTA) to a national referendum. With a single question on the ballot, 59% of Costa Rican adult citizens cast a vote on whether they wanted an FTA with the United States to be ratified, or not.  We merge disaggregated referendum results, which break new ground on anonymity-compatible voting data,  with employer-employee, customs, and firm-to-firm transactions data, and data on household composition and expenditures. We document that a firm's exposure to the FTA, directly and via input-output linkages, significantly influences the voting behavior of its employees. This effect dominates that of sector-level exposure and is greater for voters aligned with pro-FTA political candidates.  We also show that citizens considered the expected decrease in consumer prices when exercising their vote. Overall,  economic factors explain 6% of the variation in voting patterns which cannot be accounted for by non-economic factors such as political ideology, and played a pivotal role in this vote.

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“Strategic Complementarities in a Dynamic Model of Technology Adoption: P2P Digital Payments”

with Fernando Alvarez, David Argente, Francesco Lippi, & Diana Van Patten

American Economic Review, revise and resubmit

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This paper develops a dynamic model of technology adoption featuring strategic complementarities: the benefits of usage increase with the number of adopters. We study the diffusion of new means of payments, where such complementarities are pervasive. We show that complementarities give rise to multiple equilibria, suboptimal allocations, and study the planner’s problem. The model generates gradualism in adoption, as individuals optimally wait for others to adopt before doing so. We apply the theory to the adoption of SINPE Móvil, an electronic peer-to-peer (P2P) payment app developed by the Central Bank of Costa Rica. Transaction-level data on the use of SINPE Móvil and several administrative data sets on the network structure allow us to exploit plausibly exogenous variation and to document sizable complementarities. A calibrated version of the model shows that the optimal subsidy pushes the economy to universal adoption.

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Media Coverage: Yale Economic Growth Center

Journal Articles