Professor Olga Timoshenko has published a new paper titled "Demand Uncertainty, Selection, and Trade" in the International Economic Review. Co-authored with Erick Sager, the paper examines how firm-level demand uncertainty affects trade elasticities, or how strongly trade responds to changes in tariffs and trade costs, using a canonical heterogeneous-firm model.

The study identifies two channels at work: a selection effect, where uncertainty lowers the thresholds for firms to start exporting, and a dispersion effect, where uncertainty narrows the spread of the shocks that determine which firms export. Applying a new methodology to Brazilian firm-level export data, the authors find that uncertainty amplifies trade elasticities on average relative to a complete-information framework, with the largest effects for high-uncertainty, highly substitutable products, the cases most relevant for trade policy analysis.

Congratulations to Professor Timoshenko!