Luis Martínez (Alesina Seminar)

See the seminar's full schedule here: Alberto Alesina Seminar on Political Economy

Today's Speaker

Luis Martínez (Emory University), "Losing Venezuela: Trade Collapse and the Performance of Colombian Exporting Firms"

Abstract

How do exporting firms navigate the collapse of a key trade partner? We study this question focusing on Colombian manufacturing firms and their loss of Venezuela as a destination market. This breakdown in bilateral trade began with Hugo Chavez’s trade war against Colombia in 2009 and was exacerbated by Venezuela’s economic collapse after 2013. Using transaction-level customs data linked at the firm level to the Colombian manufacturing census, we implement a difference-in-difference design based on firms’ previous reliance on Venezuela. Our analysis yields four main findings: (i) Exporting firms exposed to Venezuela experienced a sharp and persistent drop in exports, with no recovery to pre-collapse levels. (ii) While they survived the shock, these firms significantly reduced their scale—lowering production, input use, investment, employment, and wages. (iii) Despite these negative effects, we find no significant impact on TFP, suggesting that firms retain their technical capabilities. (iv) Exposed firms adapt by increasing exports to existing markets but failed to expand into new ones or boost domestic sales. These results are suggestive of firms’ resilience but underscore the long-term costs of economic populism.

Co-sponsored by FAS and IQSS, the Alberto Alesina Seminar on Political Economy supports research-related activities that integrate the study of economics and politics, whether by studying economic behavior in the political process or political behavior in the marketplace. In general, positive political economy is concerned with showing how observed differences among institutions affect political and economic outcomes in various social, economic, and political systems and how the institutions themselves change and develop in response to individual and collective beliefs, preferences, and strategies.

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See the seminar's full schedule at the Alesina Seminar page.

All interested faculty and students are invited to attend.