Davide Suverato

“Fantastic Beasts and Where to Find Them”

This is the title of a CEPR Discussion Paper authored by Davide Suverato and Gianmarco Ottaviano. In this project, the researchers “hunt and find” welfare changes induced by local resource shocks that are invisible in quantitative trade models with Constant Elasticity of Substitution (CES) demand. Specifically, they develop a multi-country, multi-sector general equilibrium trade model with heterogeneous firms, endogenous entry, and monopolistic competition, but with the distinctive feature of demand exhibiting variable elasticity of substitution. Under these circumstances, a local resource shock (e.g., the discovery of oil) triggers the reallocation of labor across sectors and wage changes (in the sector hit by the shock and in all others through general equilibrium linkages). However, the pass-through of efficiency gains on welfare is incomplete, whereas it would be complete under CES preferences. They apply this flexible quantitative trade model to demonstrate that episodes of “immiserizing growth” are relevant in the data, although they would be overlooked with a CES setup.

Mr. Suverato’s research agenda is threefold. With Gianmarco Ottaviano and Marc Melitz, he is working on a novel theoretical and applied open-economy framework in which the equilibrium is not efficient, to study the effect of resource shocks and the role of industrial policy, addressing the debate on resilience, decoupling, national security, and protectionism. Secondly, with Peter Egger and Katharina Erhardt, he has developed a novel methodology to solve dynamic stochastic general equilibrium spatial models and quantify how production location and resource accumulation respond to uncertainty about major trends in technological, natural, and life-science variables. The goal is to contribute to the debate on trade imbalances, technology shocks, climate change, and mass migration. In a third line of research, he is investigating how competition for scarce resources determines firm performance. Ongoing projects in this line of research aim to contribute to the debate on product differentiation, resource misallocation, and strategic investment paths by large firms.

Davide Suverato is Senior Researcher in International Economics at ETH Zurich. He was previously a Postdoctoral Researcher at the Technical University of Munich and before that a Postdoctoral Researcher at the LMU. He holds a PhD in Economics from Bocconi University as well as an MSc in Production Engineering from the Polytechnic of Milan.