Working Papers
R&R in JME, JIE, and JMCB
2025
- Aggregate Fluctuations from Firm ComovementNahyeon Bak and Daisoon KimR&R, Journal of Monetary Economics, 2025
This paper shows that correlated idiosyncratic fluctuations within industries are an important source of macroeconomic volatility. Standard methods, such as cross-sectional demeaning, obscure this channel by mechanically driving average pairwise correlations toward zero asymptotically. We develop a non-parametric bounds approach that quantifies the contribution of such clustered comovement directly from firm-level data. Applied to U.S. firms, we find that within-industry comovement explains 10–15% of GDP volatility in normal times, 15–30% in downturns, and up to 45% during the Great Recession, helping account for the Great Moderation. These findings highlight the importance of cross-firm interdependencies in business cycle fluctuations.
@article{BakKim2025, title = {Aggregate Fluctuations from Firm Comovement}, journal = {R\&R, Journal of Monetary Economics}, year = {2025}, author = {Bak, Nahyeon and Kim, Daisoon}, keywords = {Business cycles, idiosyncratic comovements, pairwise correlation.} } - Multinational Investment Activity under Policy Uncertainty in Host and Competing CountriesDaisoon Kim and Sunhyung LeeR&R, Journal of International Economics, 2025
This paper examines how economic policy uncertainty (EPU) in host and competing countries reshapes U.S. multinationals’ greenfield foreign direct investment (FDI). Using firm-destination level data from 2003 to 2021, we show that while host-country EPU deters investment, EPU in competing destinations attracts it through a spillover effect. We document a structural shift around 2015: as global EPU rose unevenly, the spillover effect from competitors became the dominant driver of investment decisions, supplanting the direct effect of host-country uncertainty. Our findings indicate that in an era of heightened global risk, FDI allocation is governed by relative, not just absolute, policy stability.
@article{KimLee2025, title = {Multinational Investment Activity under Policy Uncertainty in Host and Competing Countries}, journal = {R\&R, Journal of International Economics}, year = {2025}, author = {Kim, Daisoon and Lee, Sunhyung}, keywords = {Economic policy uncertainty, Foreign direct investment, Global value chains, Greenfield FDI, Multinational Firms, Offshoring.} } - Global Connectedness and Diversification: Firm-level Evidence from the COVID-19 PandemicJay Hyun, Daisoon Kim, and Seung-Ryong ShinR&R, Journal of Money, Credit, and Banking, 2025
We study how a firm’s global connectedness through supply chains and exports affects its stock market performance during crises, using the COVID-19 pandemic as a natural experiment. While global connectedness can transmit negative foreign shocks, it can also reduce susceptibility to domestic shocks by enabling international diversification. Combining weekly global stock market data with firm-level supply chain, export, and balance sheet information, we document a dual role of global connectedness. While firms’ global supply chain and export networks expose firms to the negative impact of foreign COVID-19 outbreaks, firms with higher global connectedness are also more resilient to domestic exposures. Consistent with a diversification mechanism, the buffering effect arises only when connected foreign economies faced smaller outbreaks than the domestic economy. We further show that this diversification motive led firms to reorganize their supply chains and export networks, reallocating toward less-affected regions to mitigate the negative impact of pandemic shocks.
@article{Jay_et_al2025, title = {Global Connectedness and Diversification: Firm-level Evidence from the COVID-19 Pandemic}, journal = {R\&R, Journal of Money, Credit, and Banking}, year = {2025}, author = {Hyun, Jay and Kim, Daisoon and Shin, Seung-Ryong}, keywords = {COVID-19, Export, Firm Resilience, International Diversification, Global Supply Chain.} } - Parental Leave Policies, Fertility, and Labor SupplyDaisoon Kim and Minchul Yum2025
South Korea faces persistently low fertility rates and large gender gaps in labor supply. Under traditional gender roles, more generous parental leave makes it difficult to narrow gender gaps while increasing fertility. To examine how recent reforms operate beyond these static channels, we develop a dynamic, heterogeneous-household life-cycle model in which couples jointly choose careers, labor supply, savings, childcare, and fertility. The model is calibrated to recent Korean cohorts and incorporates Korea’s segmented labor market, where career-oriented jobs are inflexible and involve high entry costs. Our quantitative results show that generous parental leave benefits can raise fertility and reduce gender gaps in labor supply and wages over the life cycle. These dynamic effects arise because parental leave job protection allows more women to remain in career-oriented jobs during childrearing years, enabling long-term career progression. Without job protection or segmented markets, this career-retention channel weakens and policy effects diminish or reverse.
@techreport{KimYum2025PL, title = {Parental Leave Policies, Fertility, and Labor Supply}, type = {Working Paper}, series = {Working Paper}, year = {2025}, author = {Kim, Daisoon and Yum, Minchul}, keywords = {Parental Leave, Birth Rates, Labor Supply, Gender Gaps, Segmented Labor Market, Job Protection, Inflexible Jobs.} } - Consumer Learning and Package Size in Dynamic Brand ChoiceNahyeon Bak, Daisoon Kim, and Chanheung Cho2025
Why consumers repeatedly purchase the same brand is a central question in consumer choice research. We develop and test a novel identification strategy that uses purchase size dynamics to disentangle consumer learning from other drivers of state dependence, such as switching costs, in brand choice. Our dynamic model predicts that as consumers learn about a brand’s quality, reduced uncertainty and self-selection generate larger purchase sizes within a spell, whereas switching to an untried brand renews uncertainty and results in smaller trial sizes. By contrast, switching cost models predict no systematic or reversed relationships between experience, switching, and size. Using Nielsen scanner data on the U.S. cough drop market—where infrequent, need-based purchase patterns facilitate clean observation of new learning spells—we empirically demonstrate that within-spell experience positively correlates with purchase size, while brand switching negatively correlates. These findings identify consumer learning as a key mechanism underlying state dependence in consumer choice.
@techreport{Bak_et_al2025BrandChoice, title = {Consumer Learning and Package Size in Dynamic Brand Choice}, type = {Working Paper}, series = {Working Paper}, year = {2025}, author = {Bak, Nahyeon and Kim, Daisoon and Cho, Chanheung}, keywords = {Packaged Good, Learning; Size Choice; Quality, State-dependent Brand Choice, Switching Cost.} } - Investment Giants in Emerging MarketsDaisoon Kim, Jee Won Park, and Inhwan So2025
A small group of large institutional investors (investment giants) takes the lion’s share of cross-border equity flows into emerging markets. This paper examines their behavior and market impact through a theoretical framework in which investors consider both market fundamentals and aggregate behavior. In equilibrium, a single investment giant moves first, setting market direction and providing information to a continuum of typical investors. Compared to a simultaneous-move strategy, this directional leadership increases the giant’s ex-ante payoff while establishing the predictability and outsized influence of its decisions. Empirically, we introduce contrarian investment (excess investment growth relative to peers or the market) to isolate the giants’ idiosyncratic influence from the shared macroeconomic fundamentals. Using fund-level data, we find that investor flows, aggregate flows, stock returns, and exchange rates persistently increase following giants’ contrarian flows, demonstrating their predictive power. These findings suggest monitoring giants as early indicators of financial market movements in emerging economies.
@techreport{Kim_et_al2025Giants, title = {Investment Giants in Emerging Markets}, type = {Working Paper}, series = {BOK Working Paper}, year = {2025}, author = {Kim, Daisoon and Park, Jee Won and So, Inhwan}, keywords = {Emerging market, Fund-level data, Global equity flows, Large player, Portfolio management.} } - Public Information on Overseas Buyers for Export PromotionChan Kim and Daisoon Kim2025
Governments widely operate trade promotion organizations (TPOs) to overcome non-tariff barriers in trade, yet their specific mechanisms often remain opaque. This paper evaluates one key intervention: the public dissemination of foreign buyer information. Guided by a search-and-matching model, we use a unique historical archive of buyer contacts from South Korea’s KOTRA magazine to exploit plausibly exogenous variation in information provision. We find that this policy leads to a significant and persistent increase in exports to targeted destination-industries. As predicted by the model, the effect is substantially larger in less concentrated industries, demonstrating that public information is particularly effective at alleviating search frictions that disproportionately hinder smaller firms.
@techreport{KimKim2025TPO, title = {Public Information on Overseas Buyers for Export Promotion}, type = {Working Paper}, series = {Working Paper}, year = {2025}, author = {Kim, Chan and Kim, Daisoon}, keywords = {Buyer search, Export promotion, Non-tariff barrier, Public information.} }
2024
- Industry Characteristics and the Home Market Effect: Evidence from Manufacturing TradeNahyeon Bak, Daisoon Kim, and Mishita Mehra2024
This paper examines how supply-side industry characteristics—particularly returns to scale from non-constant marginal costs—shape home market effects. Using data on narrowly defined industries, we find that industries with stronger returns to scale are more concentrated in larger countries only when non-production activities rely more on non-tradable inputs (labor) than production activities. In such cases, higher labor costs in larger countries deter firm entry, resulting in larger average firm sizes that better exploit scale economies. Consistent with prior research, we also find that industries with higher markups and trade costs tend to concentrate in larger countries.
@techreport{Bak_et_al2024HME, title = {Industry Characteristics and the Home Market Effect: Evidence from Manufacturing Trade}, type = {Working Paper}, series = {Working Paper}, year = {2024}, author = {Bak, Nahyeon and Kim, Daisoon and Mehra, Mishita}, keywords = {Home market effect, Markups, New trade theory, Non-constant marginal costs, Returns to scale, Trade costs.} } - A Model of Entry, Exit, and Endogenous Productivity DispersionDaisoon Kim and Yoonsoo Lee2024
We explore the variability and dynamics of firm behavior over the business cycle, focusing on both the first and second-moment properties of firm heterogeneity. Our static model reveals that when entry costs increase less than fixed operating costs during economic booms, procyclical entry and intensified factor market competition lead to a procyclical productivity cutoff. This effect forces less productive firms out of the market, thereby contributing to the observed countercyclical dispersion of firm productivity. However, this model’s prediction—that low- productivity firms exit during booms and enter during recessions—is contradicted by US data. To resolve this discrepancy, our dynamic model incorporates firm uncertainty and productivity learning mechanisms. This enhancement enables the model to replicate observed empirical patterns across both the first and second-moments: countercyclical firm dispersion, more procyclical entry rates than exit rates, and a countercyclical pattern in the relative productivity of entering versus exiting firms. Our calibrated model successfully explains approximately 19% of the observed countercylical dispersion in firm productivity endogenously, without relying on external shocks to second moments.
@techreport{KimLee2024dispersion, title = {A Model of Entry, Exit, and Endogenous Productivity Dispersion}, type = {Working Paper}, series = {Working Paper}, year = {2024}, author = {Kim, Daisoon and Lee, Yoonsoo}, keywords = {Business cycles, Dispersion, Entry/exit, Firm heterogeneity, Firm learning.} }