Abstract I study the real effects of centralized derivative markets using the staggered introduction of futures contracts for different steel products in the United States. Employing a difference-in-differences strategy, I find that the arrival of centralized futures markets improves price transparency and risk management in the underlying product market: price dispersion decreases and steel producers increase their hedging activity. Moreover, market share is reallocated toward low-cost producers, while product prices, producers’ profits, and valuations decrease. Overall, the results indicate that centralized futures markets foster competition in the product market.

Abstract We study how U.S. manufacturing firms’ investment responds to tariff reductions in supplier industries. Our estimates, based on tariff reductions following multinational trade agreements, suggest that a hypothetical 10% reduction of all upstream tariffs would increase downstream investment by 4% to 6%. This estimate is not explained by decreasing uncertainty and stems from tariff reductions for homogeneous and low-R&D inputs, consistent with the investment response resulting from cost reductions rather than superior foreign technology embodied in imported inputs. Evidence from an instrumental variable estimation using the sudden increase in Chinese import penetration suggests that import competition also increases downstream investment.