UC Berkeley

This dissertation analyzes the decisions of firms that operate in many markets and presents new evidence on how these decisions affect economic activity within and across countries. In Chapter I, I analyze the role of multi-establishment firms’ centralized decisions in shaping the propagation of local shocks across regions of the United States. In particular, I focus on retail chains pricing decisions. As retail chains do not perfectly discriminate prices across locations, local shocks affect not only local prices, but also prices in distant markets where the same retail chains operate. My main empirical finding is that county-level prices are sensitive to shocks in distant counties that happen to be served by the same retail chains. A 10\% drop in house prices in other counties that are served by the same retailers leads, on average, to a 1.4\% decline in the local consumer retail price index. One way of thinking about this is that I quantify how economically connected locations in the U.S. are through the networks of retail chains, above and beyond the linkages that arise from, for instance, proximity in space. In Chapter 2, I analyze the markup responses of Argentinian firms to local cost shocks. My main finding is that in response to a cost shock, a given Argentinian firm adjusts more its markups (and less its prices) in those markets where it has higher market-power. Finally, in Chapter 3, I study the behavior of global firms that operate both as exporters and as importers. I find that exporting to a new destination increases the probability of a firm to start importing from that destination (and not from others) within the lapse of one year. This effect is more likely to occur in distant markets, and in situations where importing involves non-homogeneous and rarely imported goods. Furthermore, new import activities from a new export destination continue regardless of whether the firm remains as an exporter in that market. This evidence emphasizes the influence of export experience on firms' sourcing decisions. The effect of export entry on sourcing costs has implications that go beyond qualitative insights: according to our quantitative exercise, import costs fall 53\% in a given destination after export entry.